Document:

Exhibit 10.22

 

EXECUTION COPY

 

THIS MASTER REPURCHASE AND SECURITIES CONTRACT, dated as of October 28, 2011 (this “Agreement”), is made by and between NRFC WF CMBS, LLC, a Delaware limited liability company (“Seller”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (as more specifically defined below, “Buyer”).  Seller and Buyer (each also a “Party”) hereby agree as follows:

 

ARTICLE 1

 

APPLICABILITY

 

Section 1.01  Applicability.  Subject to the terms and conditions of the Repurchase Documents, from time to time during the Funding Period and at the request of Seller, the Parties may enter into transactions in which Seller agrees to sell, transfer and assign to Buyer certain Assets and all related rights in and interests related to such Assets, against the transfer of funds by Buyer representing the Purchase Price for such Assets, with a simultaneous agreement by Buyer to transfer to Seller and Seller to repurchase such Assets in a repurchase transaction at a date not later than the Facility Termination Date, against the transfer of funds by Seller representing the Repurchase Price for such Assets.

 

ARTICLE 2

 

DEFINITIONS AND INTERPRETATION

 

Section 2.01  Definitions.

 

“Accelerated Repurchase Date”:  Defined in Section 10.02.

 

“Account Control Agreement” means a blocked account agreement providing Buyer with control at all times over the Liquidity Account.

 

“Actual Knowledge”:  With respect to any Person, the actual knowledge of such Person without further inquiry or investigation; provided, that for the avoidance of doubt, such actual knowledge shall include the knowledge of such Person and each of its employees, officers and directors.

 

“Additional Amount”:  The meaning specified in Section 12.06(a).

 

“Additional Purchased Assets”:  The meaning specified in Section 4.01.

 

“Affiliate”:  With respect to Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with, such Person.

 

“Affiliated Hedge Counterparty”:  Buyer, or an Affiliate of Buyer, in its capacity as a party to any Interest Rate Protection Agreement related to a Purchased Asset.

 

“Alternative Rate”:  A per annum rate based on an index approximating the behavior of LIBOR, as determined by Buyer.

 

 

“Anti—Terrorism Laws”:  Any Requirements of Law relating to money laundering or terrorism, including Executive Order 13224 signed into law on September 23, 2001, the regulations promulgated by the Office of Foreign Assets Control of the Treasury Department, and the Patriot Act.

 

“Applicable Percentage”:  Defined in the Fee Letter.

 

“Approved Representation Exception”:  With respect to a Purchased Asset, any representation or warranty that Buyer determines is not applicable to such Purchased Asset.

 

“Asset”:  Any CMBS.

 

“Bankruptcy Code”:  Title 11 of the United States Code, as amended.

 

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

 

“Buyer”:  Wells Fargo Bank, National Association, in its capacity as Buyer under this Agreement and the other Repurchase Documents.

 

“Buyer’s Margin Percentage”:  For any Purchased Asset as of any date, the percentage equivalent of the quotient obtained by dividing one (1) by the Applicable Percentage used to calculate the Purchase Price for such Purchased Asset on the related Purchase Date.

 

“Capital Lease Obligations”:  With respect to any Person, the amount of all obligations of such Person to pay rent or other amounts under a lease of property to the extent and in the amount that such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person.

 

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

 

“Closing Date”:  October 28, 2011.

 

“CMBS”:  Pass-through certificates representing beneficial ownership interests in one or more first lien mortgage loans secured by commercial and/or multifamily properties.

 

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

 

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“Compliance Certificate”:  A true and correct certificate in the form of Exhibit B, executed by a Responsible Officer of Seller and/or Parent, as applicable.

 

“Confirmation”:  A purchase confirmation in the form of Exhibit A, duly completed, executed and delivered by Seller and Buyer in accordance with Section 3.01.

 

“Contingent Liabilities”:  With respect to any Person as of any date, all of the following as of such date: (a) liabilities and obligations (including any Guarantee Obligations) of such Person in respect of “off—balance sheet arrangements” (as defined in the Off—Balance Sheet Rules defined below in this definition), (b) obligations, including Guarantee Obligations, whether or not required to be disclosed in the footnotes to such Person’s financial statements, guaranteeing in whole or in part any Non—Recourse Indebtedness, lease, dividend or other obligation, excluding, however (i) contractual indemnities (including any indemnity or price—adjustment provision relating to the purchase or sale of securities or other assets) and (ii) guarantees of non—monetary obligations that have not yet been called on or quantified, of such Person or any other Person, and (c) forward commitments or obligations to fund or provide proceeds with respect to any loan or other financing that is obligatory and non—discretionary on the part of the lender.  The amount of any Contingent Liabilities described in the preceding clause (b) shall be deemed to be (i) with respect to a guarantee of interest or interest and principal, or operating income guarantee, the sum of all payments required to be made thereunder (which, in the case of an operating income guarantee, shall be deemed to be equal to the debt service for the note secured thereby), through (x) in the case of an interest or interest and principal guarantee, the stated date of maturity of the obligation (and commencing on the date interest could first be payable thereunder), or (y) in the case of an operating income guarantee, the date through which such guarantee will remain in effect, and (ii) with respect to all guarantees not covered by the preceding clause (i), 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 (assuming such Person is required to perform thereunder) as recorded on the balance sheet and in the footnotes to the most recent financial statements of such Person.  “Off—Balance Sheet Rules” means the Disclosure in Management’s Discussion and Analysis About Off—Balance Sheet Arrangements and Aggregate Contractual Obligations, Securities Act Release Nos. 33—8182; 34—47264; FR—67 International Series Release No. 1266 File No. S7—42—02, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified at 17 CFR Parts 228, 229 and 249).

 

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

 

“Control”:  With respect to any Person, the direct or indirect possession of the power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling,” “Controlled” and “under common Control” have correlative meanings.

 

“Custodial Agreement”:  The Custodial Agreement, dated as of the date hereof, among Buyer, Seller and Custodian.

 

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“Custodian”:  Wells Fargo Bank, National Association, or any successor permitted by the Custodial Agreement.

 

“Default”:  Any event that, with the giving of notice or the lapse of time, or both, would become an Event of Default.

 

“Default Rate”:  Defined in the Fee Letter.

 

“Derivatives Contract”:  Any rate swap transaction, basis swap, credit derivative transaction, forward rate transaction, commodity swap, commodity option, forward commodity contract, equity or equity index swap or option, bond or bond price or bond index swap or option or forward bond or forward bond price or forward bond index transaction, interest rate option, forward foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross—currency rate swap transaction, currency option, spot contract, or any other similar transaction or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, including any obligations or liabilities thereunder.

 

“Derivatives Termination Value”:  With respect to any one or more Derivatives Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Derivatives Contracts, (a) for any date on or after the date such Derivatives Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in the preceding clause (a), the amount(s) determined as the mark—to—market value(s) for such Derivatives Contracts, as determined based on one or more mid—market or other readily available quotations provided by any recognized dealer in such Derivatives Contracts (which may include Buyer).

 

“Dollars” and “$”:  Lawful money of the United States of America.

 

“DTC”:  The Depository Trust Company, and its successors and assigns.

 

“Early Repurchase Date”:  Defined in Section 3.04.

 

“Eligible Asset”:  An Asset:

 

(a)                                  that has been approved as a Purchased Asset by Buyer on or before the Purchase Date; and

 

(b)                                 with respect to which no Representation Breach (other than an Approved Representation Exception) exists;

 

provided, that notwithstanding the failure of an Asset or Purchased Asset to conform to the requirements of this definition, Buyer may, subject to such terms, conditions and requirements and Applicable Percentage adjustments as Buyer may require, designate in writing any such non—conforming Asset or Purchased Asset as an Eligible Asset, which designation (1) may include a temporary or permanent waiver of one or more Eligible Asset requirements, and (2) shall not be deemed a waiver of the requirement that all other Assets and Purchased Assets

 

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must be Eligible Assets (including any Assets that are similar or identical to the Asset or Purchased Asset subject to the waiver).

 

“Eligible Assignee”:  Any of the following Persons designated by Buyer for purposes of Section 17.08(c):  (a) any Affiliate of Buyer, and (b) any other Person to which Seller has consented and which is not listed on Schedule 3; provided, that the consent of Seller shall not be unreasonably withheld, delayed or conditioned; provided, further, the foregoing restrictions shall not apply at any time when a Default or Event of Default exists.  Such Person shall provide to Seller such duly executed IRS forms as Seller reasonably requests.

 

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

 

“ERISA”:  The Employee Retirement Income Security Act of 1974.

 

“Event of Default”:  Defined in Section 10.01.

 

“Extension Fee”:  Defined in the Fee Letter.

 

“Facility Termination Date”:  The earliest of (a) October 28, 2013, as such date may be extended pursuant to Section 3.06, (b) any Accelerated Repurchase Date and (c) any date on which the Facility Termination Date shall otherwise occur in accordance with the Repurchase Documents or Requirements of Law.

 

“Fee Letter”:  The fee and pricing letter, dated as of the date hereof, between Buyer and Seller.

 

“Funding Expiration Date”:  The earliest of (a) April 26, 2013 (b) any Accelerated Repurchase Date and (c) any date on which the Funding Expiration Date shall otherwise occur in accordance with Section 12.02.

 

“Funding Period”:  The period from the Closing Date to the Funding Expiration Date.

 

“GAAP”:  Generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

“Governing Documents”:  With respect to any Person, its articles or certificate of incorporation or formation, by-laws, memorandum and articles of association, partnership, limited liability company, operating or trust agreement and/or other organizational, charter or governing documents.

 

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“Governmental Authority”:  Any (a) nation or government, (b) state or local or other political subdivision thereof, (c) central bank or similar monetary or regulatory authority, (d) Person, agency, authority, instrumentality, court, regulatory body, central bank or other body or entity exercising executive, legislative, judicial, taxing, quasi—judicial, quasi—legislative, regulatory or administrative functions or powers of or pertaining to government, (e) court or arbitrator having jurisdiction over such Person, its Affiliates or its assets or properties, (f) stock exchange on which shares of stock of such Person are listed or admitted for trading, (g) accounting board or authority that is responsible for the establishment or interpretation of national or international accounting principles, and (h) supra-national body such as the European Union or the European Central Bank.

 

“Guarantee Agreement”:  The Guarantee Agreement, dated as of the date hereof, made by the Guarantors in favor of Buyer.

 

“Guarantee Default”:  If at any time (a) the obligations of any Guarantor under the Guarantee Agreement shall cease to be in effect, or (b) any Guarantor breaches or violates of any provision set forth in the Guarantee Agreement.

 

“Guarantee Obligation”:  With respect to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of the obligations for which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, Contractual Obligation, Derivatives Contract or other obligations or indebtedness (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation, or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the maximum stated amount of the primary obligation relating to such Guarantee Obligation (or, if less, the maximum stated liability set forth in the instrument embodying such Guarantee Obligation); provided, that in the absence of any such stated amount or stated liability, the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum anticipated liability in respect thereof as reasonably determined by such Person.

 

“Guarantor”:  Any of NorthStar Realty Finance Corp., NorthStar Realty Finance, L.P. and NRFC Sub-REIT Corp., as named in the Guarantee Agreement.

 

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“Hedge Counterparty”:  Either (i) an Affiliated Hedge Counterparty, or (b) any Person (other than an Affiliated Hedge Counterparty) that is a party to any Interest Rate Protection Agreement with Seller and that is reasonably acceptable to Buyer.

 

“Hedge Required Asset”:  A Purchased Asset where the remaining time to the scheduled maturity (as of the effective date of the related Interest Rate Protection Agreement) of such Purchased Asset is greater than 2.15 years.

 

“Income”:  With respect to any Purchased Asset, all of the following (in each case with respect to the entire par amount of the Asset represented by such Purchased Asset and not just with respect to the portion of the par amount represented by the Purchase Price advanced against such Asset):  (a) all Principal Payments, (b) all Interest Payments, (c) all other income, distributions, receipts, payments, collections, prepayments, recoveries, proceeds (including insurance and condemnation proceeds) and other payments or amounts of any kind paid, received, collected, recovered or distributed on, in connection with or in respect of such Purchased Asset, prepayment fees, extension fees, exit fees, defeasance fees, transfer fees, make whole fees, late charges, late fees and all other fees or charges of any kind or nature, premiums, yield maintenance charges, penalties, default interest, dividends, gains, receipts, allocations, rents, interests, profits, payments in kind, returns or repayment of contributions, net sale, foreclosure, liquidation, securitization or other disposition proceeds, insurance payments, settlements and proceeds and (d) all payments received by Seller from an Affiliated Hedge Counterparty pursuant to any Interest Rate Protection Agreement.

 

“Indebtedness”:  With respect to any Person and any date, all of the following with respect to such Person as of such date:  (a) obligations in respect of money borrowed (including principal, interest, assumption fees, prepayment fees, yield maintenance charges, penalties, exit fees, contingent interest and other monetary obligations whether choate or inchoate and whether by loan, the issuance and sale of debt securities or the sale of property or assets to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets, or otherwise), (b) obligations, whether or not for money borrowed (i) represented by notes payable, letters of credit or drafts accepted, in each case representing extensions of credit, (ii) evidenced by bonds, debentures, notes or similar instruments, (iii) constituting purchase money indebtedness, conditional sales contracts, title retention debt instruments or other similar instruments, upon which interest charges are customarily paid or that are issued or assumed as full or partial payment for property or services rendered, or (iv) in connection with the issuance of Preferred Equity or trust preferred securities, (c) Capital Lease Obligations, (d) reimbursement obligations under any letters of credit or acceptances (whether or not the same have been presented for payment), (e) Off—Balance Sheet Obligations, (f) obligations to purchase, redeem, retire, defease or otherwise make any payment in respect of any mandatory redeemable stock issued by such Person or any other Person (inclusive of forward equity contracts), valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (g) as applicable, all obligations of such Person (but not the obligation of others) in respect of any keep well arrangements, credit enhancements, contingent or future funding obligations under any Purchased Asset or any obligation senior to any Purchased Asset, unfunded interest reserve amount under any Purchased Asset or any obligation that is senior to any Purchased Asset, purchase obligation, repurchase obligation, sale/buy—back agreement, takeout commitment or forward equity commitment, in

 

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each case evidenced by a binding agreement (excluding any such obligation to the extent the obligation can be satisfied by the issuance of Equity Interests (other than mandatory redeemable stock)), (h) obligations under any Derivatives Contract not entered into as a hedge against existing indebtedness, in an amount equal to the Derivatives Termination Value thereof, (i) all Non—Recourse Indebtedness, recourse indebtedness and all indebtedness of other Persons that such Person has guaranteed or is otherwise recourse to such Person, (j) all indebtedness of another Person secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien (other than certain Permitted Liens) on property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligation; provided, that if such Person has not assumed or become liable for the payment of such indebtedness, then for the purposes of this definition the amount of such indebtedness shall not exceed the market value of the property subject to such Lien, (k) all Contingent Liabilities, (l) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person or obligations of such Person to pay the deferred purchase or acquisition price of property or assets, including contracts for the deferred purchase price of property or assets that include the procurement of services, (m) indebtedness of general partnerships of which such Person is liable as a general partner (whether secondarily or contingently liable or otherwise), and (n) obligations to fund capital commitments under any Governing Document, subscription agreement or otherwise.

 

“Indemnified Amount”:  Defined in Section 13.01.

 

“Indemnified Person”:  Defined in Section 13.01.

 

“Independent Director” or “Independent Manager”:  An individual who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional Independent Directors or Independent Managers, another nationally recognized company reasonably approved by Buyer, in each case that is not an Affiliate of Seller and that provides professional Independent Directors and Independent Managers and other corporate services in the ordinary course of its business, and which individual is duly appointed as a member of the board of directors or board of managers of such corporation or limited liability company and is not, has never been, and will not while serving as Independent Director or Independent Manager be, any of the following:

 

(a)           a member, partner, equityholder, manager, director, officer or employee of Seller, any of its equityholders or Affiliates (other than (a) as an Independent Manager of Seller and (b) as an Independent Director or Independent Manager of an Affiliate of Seller or any of its single-purpose entity equityholders that is not in the direct chain of ownership of Seller and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such Independent Director or Independent Manager is employed by a company that routinely provides professional Independent Directors or Independent Managers); provided that any Person who owns a de minimis amount of the publicly-traded stock of the Parent (not in excess of 1%) shall not be precluded from being an Independent Director or Manager for purposes of this Agreement;

 

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(b)           a creditor, supplier or service provider (including provider of professional services) to Seller, any single-purpose entity equityholder, or any of their respective equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Directors or Independent Managers and other corporate services to Seller, any single-purpose entity equityholder, or any of their respective equityholders or Affiliates in the ordinary course of business);

 

(c)           a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or

 

(d)           a Person that controls (whether directly, indirectly or otherwise) any of the individuals described in the preceding clauses (a), (b) or (c).

 

An individual who otherwise satisfies the preceding definition other than clause (a) by reason of being the Independent Director or Independent Manager of a “special purpose entity” affiliated with Seller shall not be disqualified from serving as an Independent Manager of Seller if the fees that such individual earns from serving as Independent Directors or Independent Managers of affiliates of Seller in any given year constitute in the aggregate less than 5% of such individual’s annual income for that year.

 

“Insolvency Event”:  With respect to any Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises with respect to such Person or any substantial part of its assets or property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, or ordering the winding—up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) days, (b) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, (c) the consent by such Person to the entry of an order for relief in an involuntary case under any Insolvency Law, (d) the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, (e) the making by such Person of any general assignment for the benefit of creditors, (f) the admission in a legal proceeding of the inability of such Person to pay its debts generally as they become due, (g) the failure by such Person generally to pay its debts as they become due, or (h) the taking of action by such Person in furtherance of any of the foregoing.

 

“Insolvency Action”:  With respect to any Person, the taking by such Person of any action resulting in an Insolvency Event, other than solely under clause (g) of the definition thereof.

 

“Insolvency Laws”:  The Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments and similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

 

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“Insolvency Proceeding”:  Any case, action or proceeding before any court or other Governmental Authority relating to any Insolvency Event.

 

“Interest Payments”:  With respect to any Purchased Asset and any period, all payments of interest, income, receipts, dividends, and any other collections and distributions received from time to time in connection with any such Purchased Asset other than principal payments (but excluding amounts received by Seller under Interest Rate Protection Agreements with a Hedge Counterparty that is not an Affiliated Hedge Counterparty).

 

“Interest Expense”: With respect to any Person and any period, the amount of total interest expense incurred by such Person, including capitalized or accruing interest (but excluding interest funded under a construction loan), all with respect to such period.

 

“Interest Rate Protection Agreement”:  Any futures contract, option contract or related contract, short sale of United States Treasury securities or any interest rate swap, cap, floor or collar agreement, total return swap or any other similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations either generally or under specific contingencies, in each case, (i) with a Hedge Counterparty and (ii) that contains a consent satisfactory to Buyer to the collateral assignment by Seller to Buyer of its rights under an Interest Rate Protection Agreement if the Hedge Counterparty is not an Affiliated Hedge Counterparty and if the relevant Purchased Asset is a Hedge Required Asset.

 

“Internal Control Event”:  Fraud that involves management or other employees who have a significant role in, the internal controls of Seller, any Guarantor or any Affiliate of Seller or any Guarantor over financial reporting.

 

“Investment”: With respect to any Person, any acquisition or investment (whether or not of a controlling interest) by such Person, whether by means of (a) the purchase or other acquisition of any Equity Interest in another Person, (b) a loan, advance or extension of credit to, capital contribution to, guaranty or credit enhancement of Indebtedness of, or purchase or other acquisition of any Indebtedness of, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute the business or a division or operating unit of another Person.  Any binding commitment to make an Investment in any other Person shall constitute an Investment.  Except as expressly provided otherwise, for purposes of determining compliance with any covenant contained in this Agreement, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

“Investment Company Act”:  The Investment Company Act of 1940, as amended, restated or modified from time to time, including all rules and regulations promulgated thereunder.

 

“Irrevocable Redirection Notice”:  A notice in form and substance satisfactory to Buyer sent by Seller, if necessary, to the applicable trustee, master servicer or servicer of the CMBS directing the remittance of Income with respect to a Purchased Asset to the Waterfall Account.

 

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“Knowledge”:  With respect to any Person, means collectively (i) the Actual Knowledge of such Person, (ii) notice of any fact, event, condition or circumstance that would cause a reasonably prudent Person to conduct an inquiry that would give such Person Actual Knowledge, whether or not such Person actually undertook such an inquiry, and (iii) all knowledge that is imputed to a Person under any statute, rule, regulation, ordinance, or official decree or order.

 

“LIBOR”:  For any Pricing Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/100 of 1%) for deposits in Dollars, for a one-month period, that appears on Reuters Screen LIBOR01 (or the successor thereto) as the London interbank offered rate for deposits in Dollars as of 11:00 a.m., London time, on the Pricing Rate Reset Date for such Pricing Period.  If such rate does not appear on Reuters Screen LIBOR01 as of 11:00 a.m., London time, on such Pricing Rate Reset Date, Buyer shall request the principal London office of the Reference Banks selected by Buyer to provide such banks’ offered quotation (expressed as a percentage per annum) to leading banks in the international Eurocurrency market for deposits in Dollars for a one-month period as of 11:00 a.m., London time, on such Pricing Rate Reset Date for amounts of not less than the aggregate Repurchase Price of all Purchased Assets.  If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations.  If fewer than two such quotations are so provided, Buyer shall request any three major banks in New York City selected by Buyer to provide such banks’ rate (expressed as a percentage per annum) for loans in Dollars to leading banks in the international Eurocurrency market for a one-month period as of approximately 11:00 a.m., New York City time on the applicable Pricing Rate Reset Date for amounts of not less than the aggregate Repurchase Price of all Purchased Assets.  If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates.

 

“LIBO Rate”:  For any Pricing Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/100 of 1%) determined for such Pricing Period in accordance with the following formula:

 

	
 
    	
 
    	
LIBOR for such Pricing Period
    	
 
    	
 
    
	
 
    	
 
    	
1 – Reserve Requirement
    	
 
    	
 
    

 

“Lien”:  Any mortgage, statutory or other lien, pledge, charge, right, claim, adverse claim, attachment, levy, hypothecation, assignment, deposit arrangement, security interest, UCC financing statement or encumbrance of any kind on or otherwise relating to any Person’s assets or properties in favor of any other Person or any preference, priority or other security agreement or preferential arrangement of any kind.

 

“Liquidity”:  With respect to Parent and any date, the amount of cash or cash equivalents held by Parent, but only to the extent that the amount of such cash and cash equivalents exceeds the amount necessary to satisfy all of the financial covenants and obligations of Seller under the Repurchase Documents, all on and as of such date.

 

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“Liquidity Account”: The account NRFC Sub-REIT Corp. maintains at Buyer for purposes of maintaining its covenant with respect to unrestricted cash or cash equivalents, as further described in Section 8.10.

 

“Margin Call”:  Defined in Section 4.01.

 

“Margin Deficit”:  Defined in Section 4.01.

 

“Market Disruption Event”:  Any event or events that, in the determination of Buyer, results in (a) the effective absence of a “repo market” or related “lending market” for purchasing (subject to repurchase) or financing debt obligations secured by commercial mortgage loans or securities, (b) Buyer’s not being able to finance Purchased Assets through the “repo market” or “lending market” with traditional counterparties at rates that would have been reasonable prior to the occurrence of such event or events, (c) the effective absence of, or material change since the Closing Date in, the “securities market” for the Purchased Assets or securities similar to the Purchased Assets, or (d) Buyer’s not being able to sell Purchased Assets at prices that would have been reasonable prior to the occurrence of such event or events.

 

“Margin Threshold”:  Defined in the Fee Letter.

 

“Market Value”:  For any Purchased Asset as of any date, the lesser of (a) the outstanding principal amount or par value thereof as of such date and (b) the price at which such Purchased Asset could readily be sold (under the circumstances) as of such date as determined by Buyer; provided, that the Market Value of any Purchased Asset which is not an Eligible Asset shall be zero.  For the avoidance of doubt, in determining the Market Value of any Purchased Asset, Buyer may take into account such other criteria as Buyer deems appropriate, including, without limitation, volatility, current market conditions, current interest rates and spreads and other market conditions, credit quality, liquidity of position, eligibility for inclusion in structured finance or securitization transactions, subordination, delinquency status and aging.

 

“Material Adverse Effect”:  A material adverse effect on or material adverse change in or to (a) the financial condition or credit quality of Seller or any Guarantor, (b) the ability of Seller to pay and perform the Repurchase Obligations, (c) the validity, legality, binding effect or enforceability of any Repurchase Document, Record, Purchased Asset or security interest granted hereunder or thereunder, (d) the rights and remedies of Buyer or any Indemnified Person under any Repurchase Document or Purchased Asset, (e) [reserved], or (f) the perfection or priority of any Lien granted under any Repurchase Document.

 

“Maximum Amount”:  The amount set forth in the Fee Letter, which shall not be reduced upon the repurchase of any Purchased Assets; provided, that on and after the Facility Termination Date, the Maximum Amount on any date shall be the aggregate Repurchase Price outstanding for all Transactions as of such earlier date, as such amount declines over the term hereof as Purchased Assets are repurchased and Margin Deficits are satisfied.

 

“MBS Information”:  The information requested by Buyer and required to be delivered or otherwise provided to Buyer or Custodian, as applicable.  Where this Agreement provides for Seller to provide Buyer with all or any part of any MBS Information, to the extent

 

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information is not publicly available through Bloomberg, Intex or EDGAR, Seller shall provide Buyer with a copy of each such item or provide Buyer with a URL address to any service, internet website or other system where Buyer can obtain such information.

 

“Moody’s”:  Moody’s Investors Service, Inc. or, if Moody’s Investors Service, Inc. is no longer issuing ratings, another nationally recognized rating agency reasonably acceptable to Buyer.

 

“Monthly Report”:  Defined in Section 8.06(a).

 

“Mortgage”:  Any mortgage, deed of trust, assignment of rents, security agreement and fixture filing, or other instruments creating and evidencing a lien on real property and other property and rights incidental thereto.

 

“Mortgage Assets”:  First lien commercial real-estate mortgage loans.

 

“Mortgage-Backed Security”:  Either (i) a certificate issued under a trust agreement representing 100% ownership of a Delaware business trust that has issued bonds secured by a pool of Mortgage Assets; (ii) a subordinated bond issued by a Delaware business trust that has issued bonds under an indenture secured by a pool of Mortgage Assets; or (iii) a certificate issued under a pooling and servicing agreement or note issued under an indenture in each case secured by a pool of Mortgage Assets.

 

“Net Asset Value”:  With respect to any Person, the gross assets of such Person less the aggregate amount of all liabilities of such Person, including, without limitation, all Indebtedness and all absolute and contingent liabilities of any kind, as determined in accordance with GAAP and on a basis consistent with prior periods.

 

“Net Income”:  With respect to any Person for any period, the net income of such Person for such period as determined in accordance with GAAP.

 

“Non—Recourse Indebtedness”:  With respect to any Person and any date, indebtedness of such Person as of such date for borrowed money in respect of which recourse for payment (except for customary exceptions for fraud, misapplication of funds, environmental indemnities, Insolvency Events, non-approved transfers or other events) is contractually limited to specific assets of such Person encumbered by a Lien securing such Indebtedness.

 

“Non—U.S. Person”:  Defined in Section 12.06(b).

 

“Notice Date”:  Defined in Section 3.01(a).

 

“Off—Balance Sheet Obligations”:  With respect to any Person and any date, to the extent not included as a liability on the balance sheet of such Person, all of the following with respect to such Person as of such date: (a) monetary obligations under any financing lease or so—called “synthetic,” tax retention or off—balance sheet lease transaction that, upon the application of any Insolvency Laws, would be characterized as indebtedness, (b) monetary obligations under any sale and leaseback transaction that does not create a liability on the balance sheet of such Person, or (c) any other monetary obligation arising with respect to any other transaction that

 

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(i) is characterized as indebtedness for tax purposes but not for accounting purposes, or (ii) is the functional equivalent of or takes the place of borrowing but that does not constitute a liability on the balance sheet of such Person (for purposes of this clause (c), any transaction structured to provide tax deductibility as interest expense of any dividend, coupon or other periodic payment will be deemed to be the functional equivalent of a borrowing).

 

“Parent”:  NorthStar Realty Finance Corp.

 

“Participant”:  Defined in Section 17.08(b).

 

“Patriot Act”:  The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, modified or replaced from time to time.

 

“Permitted Liens”:  Any of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding has been commenced:  (a) Liens for state, municipal, local or other local taxes not yet due and payable, (b) Liens imposed by Requirements of Law, such as materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s and similar Liens, arising in the ordinary course of business securing obligations that are not overdue for more than thirty (30) days or (c) Liens granted pursuant to or by the Repurchase Documents.

 

“Person”:  An individual, corporation, limited liability company, business trust, partnership, trust, unincorporated organization, joint stock company, sole proprietorship, joint venture, Governmental Authority or any other form of entity.

 

“Preferred Equity”:  A performing current pay preferred equity position (with a put or synthetic maturity date structure replicating a debt instrument) evidenced by a stock share certificate or other similar ownership certificate representing the entire equity ownership interest in entities that own income producing commercial real estate.

 

“Price Differential”:  For any Pricing Period or portion thereof and (a) for any Transaction outstanding, the sum of the products, for each day during such Pricing Period or portion thereof, of (i) 1/360th of the Pricing Rate in effect for each Purchased Asset subject to such Transaction during such Pricing Period, times (ii) the Purchase Price for such Purchased Asset, or (b) for all Transactions outstanding, the sum of the amounts calculated in accordance with the preceding clause (a) for all Transactions.

 

“Pricing Margin”:  Defined in the Fee Letter.

 

“Pricing Period”:  For any Purchased Asset, (a) in the case of the first Remittance Date, the period from the Purchase Date for such Purchased Asset to but excluding such Remittance Date, and (b) in the case of any subsequent Remittance Date, the one-month period commencing on and including the prior Remittance Date and ending on but excluding such Remittance Date; provided, that no Pricing Period for a Purchased Asset shall end after the Repurchase Date for such Purchased Asset.

 

“Pricing Rate”:  For any Pricing Period, the LIBO Rate for such Pricing Period plus the applicable Pricing Margin, which shall be subject to adjustment and/or conversion as

 

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provided in Sections 12.01 and 12.02; provided, that while an Event of Default exists, the Pricing Rate shall be the Default Rate.

 

“Pricing Rate Reset Date”:  (a) In the case of the first Pricing Period for any Purchased Asset, the Purchase Date for such Purchased Asset, and (b) in the case of any subsequent Pricing Period, the Business Day immediately preceding the Remittance Date on which such Pricing Period begins or on any other date as determined by Buyer and communicated to Seller. The failure to communicate shall not impair Buyer’s decision to reset the Pricing Rate on any date.

 

“Principal Payments”:  For any Purchased Asset, all payments and prepayments of principal received and applied as principal toward the Purchase Price for such Purchased Asset, including insurance and condemnation proceeds and recoveries from liquidation or foreclosure.

 

“Purchase Date”:  For any Purchased Asset, the date on which such Purchased Asset is transferred by Seller to Buyer or, as applicable, the date on which Buyer pays an amount of additional Purchase Price to Seller in accordance with this Agreement.

 

“Purchase Price”:  For any Purchased Asset, (a) as of the Purchase Date for such Purchased Asset, an amount equal to the product of the Market Value of such Purchased Asset, times the Applicable Percentage for such Purchased Asset, and (b) as of any other date, the amount described in the preceding clause (a), (i) reduced by any amount of Margin Deficit transferred by Seller to Buyer pursuant to Section 4.01 and applied to the Purchase Price of such Purchased Asset, (ii) reduced by any Principal Payments remitted to the Waterfall Account and which were applied to the Purchase Price of such Purchased Asset by Buyer pursuant to clause fifth of Section 5.02, and (iii) reduced by any payments made by Seller in reduction of the outstanding Purchase Price in each case before or as of such determination date with respect to such Purchased Asset.

 

“Purchased Assets”:  (a) For any Transaction, each Asset sold by Seller to Buyer in such Transaction, (b) for the Transactions in general, all Assets sold by Seller to Buyer, (c) any Additional Purchased Assets transferred to Buyer pursuant to Section 4.01, in each case including, to the extent relating to such Asset or Assets, all of Seller’s right, title and interest in and to (i) amounts and property from time to time on deposit in the Waterfall Account and the Waterfall Account itself, (ii) Income, (iii) Interest Rate Protection Agreements that are entered into with an Affiliated Hedge Counterparty and are related to the Purchased Assets, (iv) supporting obligations of any kind, and (v) any Records, and (d) for purposes of the grant of security interest by Seller to Buyer and the other provisions of Article 11, Purchased Assets shall also include all of the following: general intangibles, accounts, chattel paper, deposit accounts, securities accounts, instruments, securities, financial assets, uncertificated securities, security entitlements and investment property (as such terms are defined in the UCC) and replacements, substitutions, conversions, distributions or proceeds relating to or constituting any of the items described in the preceding clauses (a) through (c).

 

“Rating Agencies”:  Each of Fitch, Inc., Moody’s and S&P.

 

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“Records”:  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 certificates, if any, with respect to any Purchased Asset, the related MBS Information and any other instruments necessary to document or service a Purchased Asset.

 

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

 

“REIT”:  A Person satisfying the conditions and limitations set forth in Section 856(b) and 856(c) of the Code which are necessary to qualify such Person as a “real estate investment trust,” as defined in Section 856(a) of the Code.

 

“Relevant System”:  (i) The Depository Trust Company in New York, New York, or (ii) such other clearing organization or book-entry system as is designated in writing by Buyer.

 

“Remittance Date”:  The 18th day of each month (or if such day is not a Business Day, the next following Business Day, or if such following Business Day would fall in the following month, the next preceding Business Day), or such other day as is mutually agreed to by Seller and Buyer.

 

“Representation Breach”:  Any representation, warranty, certification, statement or affirmation made or deemed made by Seller in any Repurchase Document (including in Schedule 1) or in any certificate, notice, report or other document delivered pursuant to any Repurchase Document is incorrect, false or misleading in any material respect when made or deemed made, without regard to any Knowledge or lack of Knowledge thereof by Seller other than an Approved Representation Breach.

 

“Repurchase Date”:  For any Purchased Asset, the earliest of (a) the Facility Termination Date, (b) any Early Repurchase Date therefor, and (c) the Business Day on which Seller is to repurchase such Purchased Asset as specified by Seller and agreed to by Buyer in the related Confirmation.

 

“Repurchase Documents”:  Collectively, this Agreement, the Custodial Agreement, the Fee Letter, the Guarantee Agreement, the Account Control Agreement, all Interest Rate Protection Agreements, all Confirmations, all UCC financing statements, amendments and continuation statements filed pursuant to any other Repurchase Document, and all additional documents, certificates, agreements or instruments, the execution of which is required, necessary or incidental to or desirable for performing or carrying out any other Repurchase Document.

 

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“Repurchase Obligations”:  All obligations of Seller to pay the Repurchase Price on the Repurchase Date and all other obligations and liabilities of Seller to Buyer and any Affiliated Hedge Counterparty arising under or in connection with the Repurchase Documents (including, for the avoidance of doubt, all Interest Rate Protection Agreements with Affiliated Hedge Counterparties), whether now existing or hereafter arising, and all interest and fees that accrue after the commencement by or against Seller of any Insolvency Proceeding naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding (in each case, whether due or accrued).

 

“Repurchase Price”:  For any Purchased Asset as of any date, an amount equal to the sum of (a) the outstanding Purchase Price as of such date, (b) the accrued and unpaid Price Differential for such Purchased Asset as of such date, (c) all amounts that would be payable by Seller to any Affiliated Hedge Counterparty in connection with the termination of any Interest Rate Protection Agreement with any Affiliated Hedge Counterparty relating to such Purchased Asset if such Interest Rate Protection Agreement were terminated as of such date and (d) all other amounts due and payable as of such date by Seller or any Guarantor to Buyer or any of its Affiliates under this Agreement or any Repurchase Document.

 

“Requirements of Law”:  With respect to any Person or property or assets of such Person and as of any date, all of the following applicable thereto as of such date: all Governing Documents and existing and future laws, statutes, rules, regulations, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by any Governmental Authority, judgments, decrees, injunctions, writs, awards or orders of any court, arbitrator or other Governmental Authority.

 

“Reserve Requirement”:  For any Pricing Period, the aggregate of the rates (expressed as a decimal fraction) of reserve requirements in effect during such Pricing Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board of Governors) maintained by Buyer.

 

“Responsible Officer”:  With respect to any Person, the chief executive officer, the chief financial officer, the chief accounting officer, presidents, co-presidents, general counsel, the treasurer or the chief operating officer of such Person or such other officer designated as an authorized signatory in such Person’s Governing Documents.

 

“S&P”:  Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or, if Standard & Poor’s Ratings Services is no longer issuing ratings, another nationally recognized rating agency reasonably acceptable to Buyer.

 

“Sanctioned Entity”:  (a) A country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country; that (in the case of preceding clauses (a), (b), and (c), and in the case of this clause (d)) is subject to a country sanctions program administered and enforced by the Office of Foreign Assets Control, or

 

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(e) a Person named on the list of Specially Designated Nationals maintained by the Office of Foreign Assets Control.

 

“Seller”:  The Seller named in the preamble of this Agreement.

 

“Servicer”:  One or more servicers appointed pursuant to the securitization documentation for a CMBS.

 

“Servicing Agreement”:  The underlying pooling and servicing agreement, servicing agreement or other similar agreement that governs and provides for, among other things, the servicing by the Servicer of the Mortgage Assets.

 

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

 

“Structuring Fee”: Defined in the Fee Letter.

 

“Subsidiary”: With respect to any Person, any corporation, partnership, limited liability company or other entity (heretofore, now or hereafter established) of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership, limited liability company or other entity (without regard to the occurrence 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, and shall include all Persons the accounts of which are with those of such Person pursuant to GAAP. Single-purpose Vehicles formed for non-recourse debt transactions shall not be deemed “Subsidiaries” for purposes of this Agreement.

 

“Trade Ticket”:  Any third party trade ticket entered into by Seller or its Affiliates with respect to a CMBS to be purchased by, or repurchased from, Buyer in connection with a simultaneous acquisition or sale of such CMBS by Seller.

 

“Transaction”:  With respect to any Asset, the sale and transfer of such Asset from Seller to Buyer pursuant to the Repurchase Documents against the transfer of funds from Buyer to Seller representing the Purchase Price or any additional Purchase Price for such Asset.

 

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“Transaction Request”:  Defined in Section 3.01(a).

 

“UCC”:  The Uniform Commercial Code as in effect in the State of New York; provided, that, if, by reason of Requirements of Law, the perfection or priority of the security interest in any Purchased Asset 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 priority.

 

“Waterfall Account”:  A segregated account established at the Waterfall Account Bank, in the name of, and for the benefit of, Buyer.

 

“Waterfall Account Bank”:  Wells Fargo Bank, National Association, or any other bank approved by Buyer.

 

Section 2.02  Rules of Interpretation.  Headings are for convenience only and do not affect interpretation.  The following rules of this Section 2.02 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 an Article, Section, Subsection, Paragraph, Subparagraph, Clause, Annex, Schedule, Appendix, Attachment, Rider or Exhibit is, unless otherwise specified, a reference to an Article, Section, Subsection, Paragraph, Subparagraph or Clause of, or Annex, Schedule, Appendix, Attachment, Rider or Exhibit to, this Agreement, all of which are hereby incorporated herein by this reference and made a part hereof.  A reference to a party to this Agreement or another agreement or document includes the party’s permitted successors, substitutes or assigns.  A reference to an agreement or document is to the agreement or document as amended, modified, novated, supplemented or replaced, except that such reference shall be deemed to exclude any amendment, modification, novation, supplement or replacement that is prohibited by any Repurchase Document.  A reference to legislation or to a provision of legislation includes a modification, codification, replacement, amendment or re-enactment of it, a legislative provision substituted for it and a rule, regulation or statutory instrument issued under it.  A reference to writing includes a facsimile or electronic transmission and any means of reproducing words in a tangible and permanently visible form.  A reference to conduct includes an omission, statement or undertaking, whether or not in writing.  A Default or an Event of Default exists until it has been cured or 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, unless the context clearly requires or the language provides otherwise.  The word “including” is not limiting and means “including without limitation.”  The word “any” is not limiting and means “any and all” unless the context clearly requires or the language provides otherwise.  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.”  The words “will” and “shall” have the same meaning and effect.  A reference to day or days without further qualification means calendar days.  A reference to any time means New York time.  This Agreement may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their respective terms.  Unless the context

 

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otherwise clearly requires, all accounting terms not expressly defined herein shall be construed in accordance with GAAP, and all accounting determinations, financial computations and financial statements required hereunder shall be made in accordance with GAAP, without duplication of amounts, and on a consolidated basis with all Subsidiaries.  All terms used in Articles 8 and 9 of the UCC, and used but not specifically defined herein, are used herein as defined in such Articles 8 and 9.  A reference to “fiscal year” and “fiscal quarter” means the fiscal periods of the applicable Person referenced therein.  A reference to an agreement includes a security interest, guarantee, agreement or legally enforceable arrangement whether or not in writing.  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.  Whenever a Person is required to provide any document to Buyer under the Repurchase Documents, 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.  The Repurchase Documents are the result of negotiations between the Parties, have been reviewed by counsel to Buyer and counsel to Seller, and are the product of both Parties.  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 the Repurchase Documents or the Repurchase Documents themselves.  Except where otherwise expressly stated, Buyer may give or withhold, or give conditionally, approvals and consents, and may form opinions and make determinations, in its sole and absolute discretion subject in all cases to the implied covenant of good faith and fair dealing.  Reference in any Repurchase Document to Buyer’s discretion shall mean, unless otherwise expressly stated herein or therein, Buyer’s sole and absolute discretion, and the exercise of such discretion shall be final and conclusive subject in all cases to the implied covenant of good faith and fair dealing.  In addition, whenever Buyer has a decision or right of determination, opinion or request, exercises any right given to it to agree, disagree, accept, consent, grant waivers, take action or no action or to approve or disapprove (or any similar language or terms), or any arrangement or term is to be satisfactory or acceptable to or approved by Buyer (or any similar language or terms), the decision of Buyer with respect thereto shall be in the sole and absolute discretion of Buyer, and such decision shall be final and conclusive subject in all cases to the implied covenant of good faith and fair dealing.  Any requirement of 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 or the Purchased Assets.

 

ARTICLE 3

 

THE TRANSACTIONS

 

Section 3.01  Procedures.

 

(a)           From time to time prior to the Facility Termination Date.  Seller may request Buyer to enter into a proposed Transaction by sending Buyer a notice (each such date a “Notice Date” and each such notice, a “Transaction Request”) (i) describing the Transaction and each proposed Asset, including, but not limited to, the CUSIP and notional amount and (ii) specifying which (if any) of the representations and warranties of Seller set forth in this Agreement (including in Schedule 1) Seller will be unable to make with respect to such Asset.  Promptly after receipt thereof, Seller shall transmit to Buyer the Trade Ticket related to each

 

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proposed Asset, if any.  Seller shall promptly transmit to Buyer any applicable MBS Information and any supplemental materials requested at any time by Buyer.  Buyer shall conduct a review of the MBS Information and each such Asset as Buyer determines appropriate.  Buyer shall determine whether or not it is willing to purchase any or all of the proposed Assets, and if so, on what terms and conditions specific to the proposed Transaction.  It is expressly agreed and acknowledged that Buyer is entering into the Transactions on the basis of all such representations and warranties and on the completeness and accuracy of the information contained in the applicable MBS Information, and any incompleteness or inaccuracies in the related MBS Information will only be acceptable to Buyer if disclosed in writing to Buyer by Seller in advance of the related Purchase Date, and then only if Buyer opts to purchase the related Purchased Asset from Seller notwithstanding such incompleteness and inaccuracies.  In the event of a Representation Breach, Seller shall immediately repurchase the related Asset or Assets in accordance with Section 3.04.

 

(b)           Buyer shall communicate to Seller a preliminary non-binding determination of whether or not it is willing to purchase any or all of such Assets, and if so, on what terms and conditions, within two (2) Business Days after each Notice Date or, with respect to a Transaction Request subject to Seller’s acquisition of any of the proposed Assets from a third-party, within one (1) Business Day after the related Notice Date, and if its preliminary determination is favorable, by what date Buyer expects to communicate to Seller a final non-binding indication of its determination.  If Buyer has not communicated its final non-binding indication to Seller by such date, Buyer shall automatically and without further action be deemed to have determined not to purchase any such Asset.

 

(c)           If Buyer communicates to Seller a final non-binding determination that it is willing to purchase any or all of such Assets, Seller shall deliver to Buyer an executed preliminary Confirmation for such Transaction, describing each such Asset and its proposed Purchase Date, Market Value, Applicable Percentage, Purchase Price and such other terms and conditions as Buyer may require.  If Buyer requires changes to the preliminary Confirmation and if such changes are acceptable to Seller, Seller shall make such changes and re-execute the preliminary Confirmation.  If Buyer determines to enter into the Transaction on the terms described in the preliminary Confirmation, Buyer shall promptly execute and return the same to Seller, which shall thereupon become effective as the Confirmation of the Transaction.  Buyer’s approval of the purchase of an Asset on such terms and conditions as Buyer may require shall be evidenced only by its execution and delivery of the related Confirmation.  For the avoidance of doubt, Buyer shall not (i) be bound by any preliminary or final non-binding determination referred to above, (ii) be deemed to have approved the purchase of an Asset by virtue of an Interest Rate Protection Agreement or any other agreement with respect to such Asset, or (iii) be obligated to purchase an Asset notwithstanding a Confirmation executed by the Parties unless and until all applicable conditions precedent in Article 6 have been satisfied or waived by Buyer.

 

(d)           Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction covered thereby, and shall be construed to be cumulative to the extent possible.  If terms in a Confirmation are inconsistent with terms in this Agreement with respect to a particular Transaction, the Confirmation shall prevail.  Whenever the Applicable Percentage, or any other term of a Transaction (other than the Pricing Rate, Market Value and outstanding Purchase Price) with respect to an Asset is revised or adjusted in

 

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accordance with this Agreement, an amended and restated Confirmation reflecting such revision or adjustment and that is otherwise acceptable to the Parties shall be prepared by Seller and executed by the Parties.

 

(e)           The fact that Buyer has conducted or has failed to conduct any partial or complete examination or any other due diligence review of any Asset or Purchased Asset shall in no way affect any rights Buyer may have under the Repurchase Documents or otherwise with respect to any representations or warranties or other rights or remedies thereunder or otherwise, including the right to determine at any time that such Asset or Purchased Asset is not an Eligible Asset.

 

(f)            No Transaction shall be entered into if (i) any Margin Deficit, Default or Event of Default exists or would exist as a result of such Transaction, (ii) the Repurchase Date for the Purchased Assets subject to such Transaction would be later than the Facility Termination Date, (iii) the Funding Period has expired or (iv) after giving effect to such Transaction, the aggregate Repurchase Price of all Purchased Assets subject to Transactions then outstanding would exceed the Maximum Amount.

 

(g)           On each Purchase Date, (I) Seller shall, with respect to Eligible Assets that will be delivered or held in definitive, certificated form, deliver to Buyer or Custodian the original of the relevant certificate with respect to the related Eligible Assets either (i) registered in the name of Buyer or (ii) if Buyer consents thereto, in form suitable for transfer, with accompanying duly executed (with a medallion guarantee with respect to the signatures thereon) instruments of transfer or appropriate instruments of assignment executed in blank, transfer tax stamps, and any other documents or instruments necessary in the opinion of Buyer to effect and perfect a legally valid delivery of such security or other item of investment property to Buyer, (II) with respect to Eligible Assets that will be delivered or held in uncertificated form and the ownership of which is registered on books maintained by the issuer thereof or its transfer agent, Seller shall cause the registration of such security or other item of investment property in the name of Buyer and, at the request of Buyer, shall take such other and further steps, and shall execute and deliver such documents or instruments necessary in the opinion of Buyer, to effect and perfect a legally valid delivery of the relevant interest granted therein to Buyer hereunder and (III) with respect to Eligible Assets that will be delivered through a Relevant System in book entry form and credited to or otherwise held in an account, (i) Seller shall cause the giving of written instructions to the relevant financial institution or other entity, and shall provide a copy thereof to Buyer, sufficient if complied with to effect and perfect a legally valid delivery of the relevant interest granted therein to Buyer hereunder, (ii) in connection with any account to which the Eligible Assets are credited or otherwise held, Seller shall execute and deliver such other and further documents or instruments necessary to effect and perfect a legally valid delivery of the relevant interest granted therein to Buyer hereunder and (iii) any account to which the Eligible Assets are credited or otherwise held shall be designated in accordance with the Custodial Agreement or such variation thereof as Buyer may direct.  Unless otherwise instructed by Buyer, any delivery of a security or other item of investment property in definitive, certificated form shall be made to Buyer or Custodian in accordance with the Custodial Agreement.  Any delivery of a Purchased Asset in accordance with this subsection, or any other method acceptable to Buyer, shall be effected in a manner sufficient to cause Buyer to be the “entitlement holder” (as defined in Section 8-102(a)(7) of the UCC) with respect to the Purchased Assets and, if the

 

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Transaction is recharacterized as a secured financing, to have a perfected first priority security interest therein.  No Purchased Assets, whether certificated or uncertificated, shall (i) remain in the possession of Seller, or (ii) remain in the name of Seller or any of its agents, or in any account in the name of Seller or any of its agents.  In the event Buyer consents to delivery of any certificate representing one or more of the Eligible Assets not registered in the name of Buyer, concurrently with the delivery thereof, (A) Seller shall have (1) notified the applicable trustee in connection with the related securitization transaction of the pledge of the related Eligible Assets hereunder, and (2) instructed the related trustee to pay all amounts payable to the holders of the Eligible Assets to an account specified by Buyer, in the form of Irrevocable Redirection Notice and (B) as a condition precedent to the effectiveness of the related Transaction, the related trustee shall have acknowledged in writing the instructions set forth in clause (A) above, and a copy of the fully executed Irrevocable Redirection Notice shall have been delivered to Buyer.

 

(h)           Buyer may request that as a condition to Buyer’s acceptance of any Purchased Asset, to the extent the information is not publicly available through Bloomberg, Intex or EDGAR, Seller shall deliver to Buyer, or provide Buyer with a URL address to any service, internet website or other system where Buyer can obtain, on or prior to the related Purchase Date:

 

(i)            copies of the documents governing such Purchased Asset, the offering documents related to such Purchased Asset, and any ancillary documents required to be delivered to holders of the related securities;

 

(ii)           copies of all related distribution statements, if any, received by Seller since Seller’s acquisition of such Purchased Asset; and

 

(iii)          any other documents or instruments necessary in the opinion of Buyer to facilitate the delivery of the related MBS Information to Buyer or, if the Transaction is recharacterized as a secured financing, to create and perfect in favor of Buyer a valid perfected first priority security interest in such Purchased Asset.

 

(i)            Buyer shall be entitled to exercise any and all voting and corporate rights with respect to the Purchased Assets, including without limitation the right to direct any servicer of, or related trustee under a Servicing Agreement, relating to, any Purchased Asset; provided, however, that notwithstanding the foregoing clause, Buyer hereby grants Seller a revocable license to (i) direct any Servicer of, or related trustee under a Servicing Agreement relating to, any Purchased Asset or (ii) vote on any matter, subject however to the terms and conditions of this Agreement; provided, further, that such license shall be automatically revoked upon the occurrence and continuance of any Default or Event of Default hereunder. For so long as Seller’s license to (i) direct any Servicer or related trustee or (ii) vote on any matter has not been revoked pursuant to the preceding sentence, in the event that Buyer, as holder of a Purchased Asset, is requested to respond to any request, waiver, consent or amendment with respect to such Purchased Asset, Buyer shall consult with Seller as to how to respond and shall act in accordance with the directions of Seller; provided, however, that no vote shall be cast or right exercised or other action taken that would, as determined by Buyer, impair, reduce the value of or otherwise adversely affect the Purchased Assets or that would be inconsistent with or result in any violation

 

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of any provision of this Agreement, the Guarantee Agreement or any other Repurchase Document.

 

Section 3.02  Transfer of Purchased Assets.  On the Purchase Date for each Purchased Asset, and subject to the satisfaction of all applicable conditions precedent in Article 6, (a) ownership of and title to such Purchased Asset shall be transferred to and vest in Buyer or its designee against the simultaneous transfer of the Purchase Price to the account of Seller specified in Annex 1 (or if not specified therein, in the related Confirmation or as directed by Seller), and (b) Seller hereby sells, transfers, conveys and assigns to Buyer all of Seller’s right, title and interest in and to such Purchased Asset, subject to the repurchase right set forth in this Agreement.  Subject to this Agreement, prior to the Facility Termination Date, Seller may sell to Buyer, repurchase from Buyer and re-sell Eligible Assets to Buyer, but may not substitute other Eligible Assets for Purchased Assets.

 

Section 3.03  Maximum Amount.  The aggregate outstanding Purchase Price for all Purchased Assets as of any date shall not exceed the Maximum Amount.  If such aggregate outstanding Purchase Price exceeds the Maximum Amount, Seller shall pay to Buyer within one (1) Business Day an amount necessary to reduce such aggregate outstanding Purchase Price to an amount equal to or less than the Maximum Amount.

 

Section 3.04  Early Repurchase Date; Mandatory Repurchases.  Seller may terminate any Transaction with respect to any or all Purchased Assets and repurchase such Purchased Assets on any date prior to the Repurchase Date (an “Early Repurchase Date”); provided, that (a) Seller irrevocably notifies Buyer and any Affiliated Hedge Counterparty (x) with respect to a repurchase notice submitted subject to Seller’s sale of the related Purchased Assets to a third party, by 12:00 a.m. on the next Business Day following the related trade date of such sale or (y) by 12:00 a.m. at least three (3) Business Days (or such shorter period as the Buyer may agree to in writing) before the proposed Early Repurchase Date, in each case identifying the Purchased Asset(s) to be repurchased and the Repurchase Price thereof, and providing the CUSIP, notional amount, and any Trade Tickets related to each such Purchased Asset, (b) Seller delivers a certificate from a Responsible Officer of Seller in form and substance satisfactory to Buyer certifying that no Margin Deficit, Default or Event of Default exists or would exist as a result of such repurchase and there are no other Liens on the Purchased Assets or Pledged Collateral other than Buyer’s Lien, (c) if the Early Repurchase Date is not a Remittance Date, Seller pays to Buyer any amount due under Section 12.03 and pays all amounts due to any Affiliated Hedge Counterparty under the related Interest Rate Protection Agreement, and (d) Seller thereafter complies with Section 3.05.

 

In addition to other rights and remedies of Buyer under any Repurchase Document, Seller shall repurchase within three (3) Business Days of notice thereof any Purchased Asset that no longer qualifies as an Eligible Asset, as determined by Buyer.

 

Section 3.05  Repurchase.  On the Repurchase Date for each Purchased Asset, Seller shall transfer to Buyer the Repurchase Price (as of such date) for such Purchased Asset and related Records (if any) and all amounts payable by Seller to any Affiliated Hedge Counterparty under the related Interest Rate Protection Agreement with such Affiliated Hedge Counterparty relating to such Purchased Asset, and Buyer shall transfer to Seller such Purchased

 

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Asset, whereupon the Transaction with respect to such Purchased Asset shall terminate. Buyer shall be deemed to have simultaneously released its security interest in such Purchased Asset and, to the extent any UCC financing statement filed against Seller specifically identifies such Purchased Asset, Buyer shall deliver an amendment thereto or termination thereof evidencing the release of such Purchased Asset from Buyer’s security interest therein.  Any such transfer or release shall be without recourse to Buyer and without representation or warranty by Buyer, except that Buyer shall represent to Seller that, to the extent that good title was transferred and assigned by Seller to Buyer hereunder on the related Purchase Date, that Buyer is the sole owner of such Purchased Asset, free and clear of any other interests or Liens caused by Buyer’s actions or inactions. Any Income with respect to such Purchased Asset received by Buyer or Waterfall Account Bank after payment of the Repurchase Price therefor shall be remitted to Seller.  Notwithstanding the foregoing, on or before the Facility Termination Date, Seller shall repurchase all Purchased Assets by paying to Buyer the outstanding Repurchase Price therefor and all other outstanding Repurchase Obligations.  The portion of all such net proceeds received by Buyer in excess of the then-current Repurchase Price of the related Purchased Asset shall be applied by Buyer to reduce any other amounts due and payable to Buyer under this Agreement.

 

Section 3.06  Extension of the Facility Termination Date.  At the request of Seller delivered to Buyer no earlier than ninety (90) or later than thirty (30) days before the Facility Termination Date, Buyer shall grant an one-time extension of the Facility Termination Date for a period of 364 days following such Facility Termination Date (the “Extended Facility Termination Date”) provided each of the following conditions are met:  (i) no Default or Event of Default existing on the date of the request to extend or the current Facility Termination Date, (ii) no Margin Deficit being outstanding, (iii) all Purchased Assets qualifying as Eligible Assets, and (iv) the payment by Seller to Buyer of the Extension Fee on or before the current Facility Termination Date.

 

Section 3.07  Payment of Price Differential and Fees.

 

(a)           Notwithstanding that Buyer and Seller intend that the Transactions hereunder be sales to Buyer of the Purchased Assets, Seller shall pay to Buyer the accrued value of the Price Differential for each Purchased Asset on each Remittance Date.  Buyer shall give Seller notice of the Price Differential and any fees and other amounts due under the Repurchase Documents on or prior to the second (2nd) Business Day preceding each Remittance Date; provided, that Buyer’s failure to deliver such notice shall not affect Seller’s obligation to pay such amounts.  If the Price Differential includes any estimated Price Differential, Buyer shall recalculate such Price Differential after the Remittance Date and, if necessary, make adjustments to the Price Differential amount due on the following Remittance Date.

 

(b)           Seller shall pay to Buyer all fees and other amounts as and when due as set forth in the Fee Letter.

 

Section 3.08  Payment, Transfer and Custody.

 

(a)           Unless otherwise expressly provided herein, all amounts required to be paid or deposited by Seller hereunder shall be paid or deposited in accordance with the terms hereof no later than 3:00 p.m. on the day when due, in immediately available Dollars and without

 

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deduction, setoff or counterclaim, and if not received before such time shall be deemed to be received on the next Business Day.  Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next following Business Day, and such extension of time shall in such case be included in the computation of such payment.  Seller shall, to the extent permitted by Requirements of Law, pay to Buyer on demand a late payment fee reasonably specified by Buyer in connection with any amounts not paid when due under the Repurchase Documents, plus interest on such amounts as provided in Section 17.16 until all such amounts are received in full by Buyer.  Amounts payable to Buyer and not otherwise required to be deposited into the Waterfall Account shall be deposited into an account of Buyer.  Seller shall have no rights in, rights of withdrawal from, or rights to give notices or instructions regarding Buyer’s account or the Waterfall Account.

 

(b)           Seller will maintain Records in its possession, if any, not delivered to Buyer or Custodian, in a manner consistent with industry practice.  Such Records, if any, are and shall be held in trust by Seller or its agent for the benefit of Buyer as the owner thereof.  Seller or its agent shall maintain a copy of the Records and the originals of the Records, if any, not delivered to Buyer or Custodian.  The possession of Records, if any, by Seller or its agent is in a custodial capacity only at the will of Buyer.  Each Record retained or held by Seller or its agent, if any, shall be segregated on Seller’s books and records from the other assets of Seller or its agent (or shall contain an electronic notation to reflect the sale to Buyer), and the books and records of Seller or its agent shall be marked to reflect clearly the sale of the related Purchased Asset to Buyer.  Seller or its agent shall release its custody of the Records, if any, only in accordance with written instructions from Buyer, unless such release is required in connection with a repurchase of any Purchased Asset by Seller, in each case in accordance with the Custodial Agreement.

 

Section 3.09  Repurchase Obligations Absolute.  All amounts payable by Seller under the Repurchase Documents shall be paid without notice, demand, counterclaim, setoff, deduction or defense (as to any Person and for any reason whatsoever) and without abatement, suspension, deferment, diminution or reduction (as to any Person and for any reason whatsoever), and the Repurchase Obligations shall not be released, discharged or otherwise affected, except as expressly provided herein, by reason of:  (a) any damage to, destruction of, taking of, restriction or prevention of the use of, interference with the use of, title defect in, or encumbrance on any Purchased Asset or Record, (b) any Insolvency Proceeding relating to Seller or any action taken with respect to any Repurchase Document or Record by any trustee or receiver of Seller or by any court in any such proceeding, (c) any claim that Seller has or might have against Buyer or any Affiliated Hedge Counterparty under any Repurchase Document or otherwise, (d) any default or failure on the part of Buyer to perform or comply with any Repurchase Document or other agreement with Seller, (e) the invalidity or unenforceability of any Purchased Asset, Repurchase Document or Record, or (f) any other occurrence whatsoever, whether or not similar to any of the foregoing, and whether or not Seller has notice or Knowledge of any of the foregoing.  The Repurchase Obligations shall be full recourse to Seller.  This Section 3.09 shall survive the termination of the Repurchase Documents and the payment in full of the Repurchase Obligations.

 

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ARTICLE 4

 

MARGIN MAINTENANCE

 

Section 4.01  Margin Deficit.

 

(a)           If on any date (i) the Market Value of all Purchased Assets that are Eligible Assets (and including, for avoidance of doubt, any related Interest Rate Protection Agreement with an Affiliated Hedge Counterparty) is less than (ii) the sum of the products for each Purchased Asset of (A) Buyer’s Margin Percentage for such Purchased Asset times (B) the outstanding Repurchase Price for such Purchased Asset as of such date, plus an amount equal to the estimated amount that Seller would be entitled to receive on the next Remittance Date pursuant to clause seventh of Section 5.02 or clause sixth of Section 5.03, as determined by Buyer (the excess, if any, of (ii) over (i), a “Margin Deficit”) and such Margin Deficit equals to or exceeds the Margin Threshold, Seller shall, upon notice from Buyer (such notice, a “Margin Call”) transfer to Buyer cash, or if Seller and Buyer mutually agree, transfer to Buyer or Custodian for no additional consideration additional Eligible Assets (“Additional Purchased Assets”), so that after giving effect to such transfers and payments, the Margin Deficit has been reduced to zero.  Buyer shall apply the funds or Additional Purchased Assets received in satisfaction of a Margin Deficit to the Repurchase Obligations in such manner as Buyer determines.  Notice of a Margin Deficit may be given by any means provided in this Agreement. Any notice received before 11:00 a.m. New York City time on a Business Day shall be met with payment of cash or transfer of Additional Purchased Assets, and the related Margin Call satisfied, no later than 5:00 p.m. New York City time on the following Business Day; notice received after 11:00 a.m. New York City time on a Business Day shall be met with payment of cash or transfer of Additional Purchased Assets, and the related Margin Call satisfied, no later than 5:00 p.m. New York City time two (2) Business Days following the date of such notice.

 

(b)           Buyer’s election not to deliver a Margin Call at any time there is a Margin Deficit shall not waive the Margin Deficit or in any way limit or impair Buyer’s right to deliver a Margin Call at any time when the same or any other Margin Deficit exists.  Buyer’s rights under this Section 4.01 are in addition to and not in lieu of any other rights of Buyer under the Repurchase Documents or Requirements of Law.

 

(c)           All cash transferred to Buyer pursuant to this Section 4.01 with respect to a Purchased Asset shall be deposited into the Waterfall Account and, notwithstanding the provisions of Section 5.02, shall be applied to reduce the Purchase Price of such Purchased Asset.

 

ARTICLE 5

 

APPLICATION OF INCOME

 

Section 5.01  Waterfall Account.  The Waterfall Account shall be established at Waterfall Account Bank.  Buyer shall have sole dominion and control (including, without limitation, “control” within the meaning of Section 9-104(a) of the UCC) over the Waterfall Account.  Neither Seller nor any Person claiming through or under Seller shall have any claim to

 

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or interest in the Waterfall Account.  All Income received by Seller, Buyer or Waterfall Account Bank in respect of the Purchased Assets, as well as any interest received from the reinvestment of such Income, shall be deposited directly into the Waterfall Account and shall be applied to and remitted by Waterfall Account Bank in accordance with this Article 5.

 

Section 5.02  Before a Default or an Event of Default.  If no Default or Event of Default exists, all Income described in Section 5.01 and deposited into the Waterfall Account during each Pricing Period shall be applied by Waterfall Account Bank by no later than the next following Remittance Date (except as set forth below) in the following order of priority:

 

first, on a pari passu basis, (i) to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased Assets as of such Remittance Date and (ii) to pay any Affiliated Hedge Counterparty an amount equal to all amounts payable with respect to each related Interest Rate Protection Agreement (other than termination payments);

 

second, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Seller and other applicable Persons to Buyer under the Repurchase Documents;

 

third, to pay any custodial fees and expenses due and payable under the Custodial Agreement;

 

fourth, to pay to Buyer an amount sufficient to eliminate any outstanding Margin Deficit (without limiting Seller’s obligation to satisfy a Margin Deficit in a timely manner as required by Section 4.01);

 

fifth, on a pari passu basis, (i) to pay to Buyer the Applicable Percentage of any Principal Payments (to the extent actually deposited into the Waterfall Account), to be applied to reduce the outstanding Purchase Price of Purchased Assets, as Buyer shall determine and (ii) to pay to any Affiliated Hedge Counterparty an amount equal to all amounts payable with respect to each related Interest Rate Protection Agreement but only to the extent that such payments constitute termination payments;

 

sixth, to pay to Buyer any other amounts due and payable from Seller to Buyer and other applicable Persons under the Repurchase Documents; and

 

seventh, to pay to Seller any remainder for its own account subject, however, to the covenants and other requirements of the Repurchase Documents.

 

Section 5.03  After Default or Event of Default.  If a Default or Event of Default exists and in the event that the Buyer has not elected to exercise the remedy of a “deemed sale” in accordance with Section 10.02(a)(ii), all Income deposited into the Waterfall Account in respect of the Purchased Assets shall be applied by Waterfall Account Bank, on the Business Day next following the Business Day on which each amount of Income is so deposited, in the following order of priority:

 

first, on a pari passu basis, (i) to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased Assets as of such date and (ii) to pay to any Affiliated

 

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Hedge Counterparty an amount equal to all amounts payable with respect to each related Interest Rate Protection Agreement (other than termination payments);

 

second, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Seller and other applicable Persons to Buyer under the Repurchase Documents;

 

third, to pay any custodial fees and expenses due and payable under the Custodial Agreement;

 

fourth, on a pari passu basis, (i) to pay to Buyer an amount equal to the aggregate Repurchase Price of all Purchased Assets (to be applied in such order and in such amounts as determined by Buyer, until such Purchase Price has been reduced to zero) and (ii) to pay to any Affiliated Hedge Counterparty an amount equal to all amounts payable with respect to each related Interest Rate Protection Agreement, but only to the extent that such payments are termination payments;

 

fifth, to pay to Buyer all other Repurchase Obligations due to Buyer; and

 

sixth, to pay Seller any remainder for its own account subject, however, to the covenants and other requirements of the Repurchase Documents.

 

Section 5.04  Seller to Remain Liable.  If the amounts remitted to Buyer as provided in Sections 5.02 and 5.03 are insufficient to pay all amounts due and payable from Seller to Buyer or any Affiliated Hedge Counterparty under this Agreement or any Repurchase Document on a Remittance Date or a Repurchase Date, upon the occurrence of an Event of Default or otherwise, Seller shall nevertheless remain liable for and shall pay to Buyer and such Affiliated Hedge Counterparty when due all such amounts.

 

ARTICLE 6

 

CONDITIONS PRECEDENT

 

Section 6.01  Conditions Precedent to Initial Transaction.  Buyer shall not be obligated to enter into any Transaction or purchase any Asset until the following conditions have been satisfied or waived by Buyer, on and as of the Closing Date and the initial Purchase Date:

 

(a)           Buyer has received the following documents, each dated the Closing Date or as of the Closing Date unless otherwise specified:  (i) each Repurchase Document duly executed and delivered by the parties thereto, (ii) an official good standing certificate dated a recent date with respect to Seller and each Guarantor (iii) certificates of the secretary or an assistant secretary of Seller with respect to attached copies of the Governing Documents and applicable resolutions of Seller and each Guarantor, and the incumbencies and signatures of officers of Seller and each Guarantor executing the Repurchase Documents to which each is a party, evidencing the authority of Seller and each Guarantor with respect to the execution, delivery and performance thereof, (iv)  such opinions from counsel to Seller as Buyer may require, including with respect to corporate matters, enforceability, non-contravention, no consents or approvals required other than those that have been obtained, perfected security

 

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interests in the Purchased Assets and any other collateral pledged pursuant to the Repurchase Documents, Investment Company Act matters and the applicability of Bankruptcy Code safe harbors and (v) all other documents, certificates, information, financial statements, reports, approvals and opinions of counsel as it may require;

 

(b)           (i) UCC financing statements have been filed against Seller and NRFC Sub-REIT Corp. in all filing offices required by Buyer, (ii) Buyer has received such searches of UCC filings, tax liens, judgments, pending litigation and other matters relating to Seller, NRFC Sub-REIT Corp. and the Purchased Assets as Buyer may require, and (iii) the results of such searches are satisfactory to Buyer;

 

(c)           Buyer has received payment from Seller of all fees and expenses then payable under the Fee Letter and the other Repurchase Documents, as contemplated by Section 13.02, including, without limitation, payment of the Structuring Fee; and

 

(d)           Buyer has completed to its satisfaction such due diligence and modeling as it may require.

 

Section 6.02  Conditions Precedent to All Transactions.  Buyer shall not be obligated to enter into any Transaction, purchase any Asset, or be obligated to take, fulfill or perform any other action hereunder, until the following additional conditions have been satisfied or waived by Buyer, with respect to each Asset on and as of the Purchase Date therefor:

 

(a)           Buyer has received the following documents:  (i) a Transaction Request, (ii) the related MBS Information, (iii) a Confirmation executed by Buyer and Seller, (iv) Irrevocable Redirection Notices, if any, (v) any Trade Tickets related to such Asset and (vi) all other documents, certificates, information, financial statements, reports, approvals and opinions of counsel as Buyer may require;

 

(b)           immediately before such Transaction and after giving effect thereto and to the intended use thereof, no Representation Breach (including with respect to any Purchased Asset), Default, Event of Default, Margin Deficit, Material Adverse Effect or Market Disruption Event exists;

 

(c)           Buyer has completed its due diligence review of the MBS Information, Records (if any) and such other documents, records and information as Buyer deems appropriate, and the results of such reviews are satisfactory to Buyer;

 

(d)           Buyer has (i) determined that such Asset is an Eligible Asset, (ii) approved the purchase of such Asset, (iii) obtained all necessary internal credit and other approvals for such Transaction, and (iv) executed the Confirmation;

 

(e)           the aggregate outstanding Purchase Price of all Transactions does not exceed the Maximum Amount after giving effect to such Transaction;

 

(f)            the Purchase Date is not later than the Funding Expiration Date and the Repurchase Date as specified in the related Confirmation is not later than the Facility Termination Date;

 

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(g)           Seller and Custodian have satisfied all requirements and conditions and have performed all covenants, duties, obligations and agreements contained in the Repurchase Documents to be performed by such Person on or before the Purchase Date;

 

(h)           The definitive certificate representing ownership of such Purchased Assets that are subject to such Transaction in the name of Buyer or, if such Purchased Assets that are subject to such Transaction are registered on DTC or similar depository, evidence satisfactory to Buyer that the records of DTC or such depository show Buyer as the beneficial owner of such Purchased Assets that are subject to such Transaction; and

 

(i)            (x) With respect to any Hedge Required Asset, Buyer has received a copy of any Interest Rate Protection Agreement with an Affiliated Hedge Counterparty with respect to such Hedge Required Asset, (y) Seller has collaterally assigned to Buyer all of Seller’s rights (but none of its obligations) under such Interest Rate Protection Agreement (if any) and related documents (if any), if required under Section 8.12, and (z) no termination event, default or event of default (however defined) on the part of Seller exists under the related Interest Protection Agreement.

 

Each Confirmation delivered by Seller shall constitute a certification by Seller that all of the conditions precedent in this Article 6 (excluding clauses (c), (d) and, insofar as it relates to Custodian, (g) above) have been satisfied (or waived by Buyer).

 

The failure of Seller to satisfy any of the conditions precedent in this Article 6 (excluding clauses (c), (d) and, insofar as it relates to Custodian, (g) above) with respect to any Transaction or Purchased Asset shall, unless such failure was waived in writing by Buyer on or before the related Purchase Date, give rise to the right of Buyer at any time to rescind the related Transaction, whereupon Seller shall immediately pay to (i) Buyer the Repurchase Price of such Purchased Asset and (ii) any Affiliated Hedge Counterparty any amounts owed with respect to the termination of any Interest Rate Protection Agreement related to such Purchased Asset.

 

ARTICLE 7

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants, on and as of the date of this Agreement, each Purchase Date, and at all times when any Repurchase Document or Transaction is in full force and effect as follows:

 

Section 7.01  Seller.  Seller has been duly organized and validly exists in good standing as a corporation, limited liability company or limited partnership, as applicable, under the laws of the jurisdiction of its incorporation, organization or formation.  Seller (a) has all requisite power, authority, legal right, licenses and franchises, except where the failure to have obtained such requisite power, authority, legal right, licenses and franchises shall not have a Material Adverse Effect, (b) is duly qualified to do business in all jurisdictions necessary, except where failure to be so qualified shall not have a Material Adverse Effect and (c) has been duly authorized by all necessary action, to (w) own, lease and operate its properties and assets, (x) conduct its business as presently conducted, (y) execute, deliver and perform its obligations

 

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under the Repurchase Documents to which it is a party, and (z) acquire, own, sell, assign, pledge and repurchase the Purchased Assets, except where failure to have obtained such authorization shall not have a Material Adverse Effect.  Seller’s exact legal name is set forth in the preamble and signature pages of this Agreement.  Seller’s location (within the meaning of Article 9 of the UCC), and the office where Seller keeps all records (within the meaning of Article 9 of the UCC) relating to the Purchased Assets is at the address of Seller referred to in Annex 1.  Seller has not changed its name or location within the past twelve (12) months.  Seller’s organizational identification number is 5051164 and its tax identification number is 02-0732285.  Seller has no Subsidiaries.  Seller is a wholly owned indirect Subsidiary of Parent.  The fiscal year of Seller is the calendar year.  Seller has no Indebtedness, Contractual Obligations or Investments other than (a) ordinary trade payables, (b) in connection with Assets acquired or originated for the Transactions, and (c) the Repurchase Documents.  Seller has no Guarantee Obligations.

 

Section 7.02  Repurchase Documents.  Each Repurchase Document to which Seller is a party has been duly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as such enforceability may be limited by Insolvency Laws and general principles of equity. The execution, delivery and performance by Seller of each Repurchase Document to which it is a party do not and will not (a) conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under, any (i) Governing Document, Indebtedness, Guarantee Obligation or Contractual Obligation applicable to Seller or any of its properties or assets, (ii) Requirements of Law, or (iii) approval, consent, judgment, decree, order or demand of any Governmental Authority, or (b) result in the creation of any Lien (other than Permitted Liens) on any of the properties or assets of Seller, except with respect to Liens the creation of which shall not have a Material Adverse Effect.  All approvals, authorizations, consents, orders, filings, notices or other actions of any Person or Governmental Authority required for the execution, delivery and performance by Seller of the Repurchase Documents to which it is a party and the sale of and grant of a security interest in each Purchased Asset to Buyer, have been obtained, effected, waived or given and are in full force and effect except for any failure to obtain such approvals, authorizations, consents, orders, filings or other actions that would not have a Material Adverse Effect.  The execution, delivery and performance of the Repurchase Documents do not require compliance by Seller with any “bulk sales” or similar law.  Except as previously disclosed to Buyer and as listed on Schedule 2 hereto, there is no material litigation, proceeding or investigation pending or, to the Knowledge of Seller threatened, against Seller, any Guarantor or any Affiliate of Seller or any Guarantor before any Governmental Authority (a) asserting the invalidity of any Repurchase Document, (b) seeking to prevent the consummation of any Transaction, or (c) seeking any determination or ruling that could reasonably be expected to have a Material Adverse Effect.

 

Section 7.03  Solvency.  Neither Seller nor any Guarantor is or has ever been the subject of an Insolvency Proceeding.  Seller and each Guarantor is Solvent and the Transactions do not and will not render Seller or any Guarantor not Solvent.  Seller is not entering into the Repurchase Documents or any Transaction with the intent to hinder, delay or defraud any creditor of Seller, any Guarantor or any Affiliate of Seller or any Guarantor.  Seller has received or will receive reasonably equivalent value for the Repurchase Documents and each Transaction.  Seller has adequate capital for the normal obligations reasonably foreseeable in a business of its

 

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size and character and in light of its contemplated business operations.  Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due.

 

Section 7.04  Taxes.  Seller and each Guarantor have each filed all required federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by them and have paid all income, franchise and other material taxes (including mortgage recording taxes), assessments, fees, and other governmental charges payable by them, or with respect to any of their properties or assets, which have become due, and except for those taxes that are being contested in good faith by appropriate proceedings diligently conducted and for which appropriate reserves have been established in accordance with GAAP.  Seller and each Guarantor have each paid, or have provided adequate reserves for the payment of, all such taxes for all prior fiscal years and for the current fiscal year to date.  There is no material action, suit, proceeding, investigation, audit or claim relating to any such taxes now pending or, to the Knowledge of Seller, threatened by any Governmental Authority which is not being contested in good faith as provided above.  None of Seller nor any Guarantor has entered into any agreement or waiver or been requested to enter into any agreement or waiver extending any statute of limitations relating to the payment or collection of taxes, or is aware of any circumstances that would cause the taxable years or other taxable periods of Seller or such Guarantor not to be subject to the normally applicable statute of limitations.  No tax liens have been filed against any assets of Seller or any Guarantor.  Seller does not intend to treat any Transaction as being a “reportable transaction” as defined in Treasury Regulation Section 1.6011—4.  If Seller determines to take any action inconsistent with such intention, it will promptly notify Buyer, in which case Buyer may treat each Transaction as subject to Treasury Regulation Section 301.6112—1 and will maintain the lists and other records required thereunder.

 

Section 7.05  Financial Condition.  The (i) audited consolidated financial statements of Parent as at the fiscal year most recently ended, including, but not limited to, the related audited balance sheet, the related audited statements of stockholders’ equity and cash flows, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification arising out of the audit conducted by Parent’s independent certified public accountants, and (ii) unaudited balance sheet of Parent as at the most recent quarter end and the related unaudited statements of operations and stockholders’ equity and of cash flows for the fiscal quarter and year to date quarters then ended, setting forth in each case in comparative form the figures for the previous year, copies of which have been delivered to Buyer, in each case, are complete and correct and present fairly the financial condition of Parent as of such date and the results of its operations and cash flows for the fiscal year then ended.  All such financial statements, including related schedules and notes, were prepared in accordance with GAAP except as disclosed therein.  Parent does not have any material contingent liability or liability for taxes or any long term lease or unusual forward or long term commitment, including any Derivative Contract, which is not reflected in the foregoing statements or notes.  Since the date of the financial statements and other information delivered to Buyer prior to the Closing Date, Parent has not sold, transferred or otherwise disposed of any material part of its property or assets (except pursuant to the Repurchase Documents) or acquired any property or assets (including Equity Interests of any other Person) that are material in relation to the financial condition of Parent or Seller.

 

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Section 7.06  True and Complete Disclosure.  The information, reports, certificates, documents, financial statements, operating statements, forecasts, books, records, files, exhibits and schedules furnished by or on behalf of Seller to Buyer in connection with the Repurchase Documents and the Transactions, 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 Seller to Buyer in connection with the Repurchase Documents and the Transactions will be true, correct and complete in all material respects or, in the case of projections, will be based on reasonable estimates prepared and presented in good faith, on the date as of which such information is stated or certified.

 

Section 7.07  Compliance with Laws.  Seller has complied in all material respects with all Requirements of Laws, and no Purchased Asset contravenes any Requirements of Laws.  None of Seller, any Guarantor or any Affiliate of Seller or any Guarantor (a) is an “enemy” or an “ally of the enemy” as defined in the Trading with the Enemy Act of 1917, (b) is in violation of any Anti-Terrorism Laws, (c) is a blocked person described in Section 1 of Executive Order 13224 or to its Knowledge engages in any dealings or transactions or is otherwise associated with any such blocked person, (d) is in violation of any country or list based economic and trade sanction administered and enforced by the Office of Foreign Assets Control, (e) is a Sanctioned Entity, (f) has more than 10% of its assets located in Sanctioned Entities, or (g) derives more than 10% of its operating income from investments in or transactions with Sanctioned Entities.  The proceeds of any Transaction have not been and will not be used to fund any operations in, finance any investments or activities in or make any payments to a Sanctioned Entity.  Seller is a “qualified purchaser” as defined in the Investment Company Act.  None of Seller, any Guarantor or any Affiliate of Seller or any Guarantor (a) is (i) required to register as an investment company as defined in the Investment Company Act or (ii) is controlled by an “investment company” as defined in the Investment Company Act, (b) other than with respect to NRF Capital Markets, LLC, is a “broker” or “dealer” as defined in, or could be subject to a liquidation proceeding under, the Securities Investor Protection Act of 1970, or (c) is subject to regulation by any Governmental Authority limiting its ability to incur the Repurchase Obligations.  Seller, each Guarantor and all of their respective Affiliates are in compliance with the Foreign Corrupt Practices Act of 1977 and any foreign counterpart thereto.  None of Seller, any Guarantor or any Affiliate of Seller or any Guarantor has made, offered, promised or authorized a payment of money or anything else of value (a) in order to assist in obtaining or retaining business for or with, or directing business to, any foreign official, foreign political party, party official or candidate for foreign political office, (b) to any foreign official, foreign political party, party official or candidate for foreign political office, or (c) with the intent to induce the recipient to misuse his or her official position to direct business wrongfully to Seller, such Guarantor, any Affiliate of Seller or such Guarantor or any other Person, in violation of the Foreign Corrupt Practices Act.

 

Section 7.08  No Default or Material Adverse Effect.  No Default or Event of Default exists. No default or event of default (however defined) exists under any Indebtedness, Guarantee Obligations or Contractual Obligations of Seller.  Seller believes that it is and will be able to pay and perform each agreement, duty, obligation and covenant contained in the Repurchase Documents to which it is a party, and that it is not subject to any agreement,

 

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obligation, restriction or Requirements of Law which would unduly burden its ability to do so or could reasonably be expected to have a Material Adverse Effect.  Seller has no Knowledge of any actual or prospective development, event or other fact that could reasonably be expected to have a Material Adverse Effect.  No Internal Control Event has occurred.

 

Section 7.09  Purchased Assets.  Each Purchased Asset is an Eligible Asset.  Each representation and warranty of Seller set forth in the Repurchase Documents (including in Schedule 1 with respect to each Purchased Asset, except with respect to the Approved Representation Exceptions true and correct.  The review and inquiries made on behalf of Seller in connection with the previous sentence have been made by Persons having the requisite expertise, knowledge and background to verify such representations and warranties. Seller has complied with all requirements of the Custodial Agreement with respect to each Purchased Asset. Seller has no Knowledge of any fact that could reasonably lead it to expect that any Purchased Asset will not be paid in full.  The purchase of each proposed Purchased Asset was underwritten in accordance with and satisfies applicable standards established by Seller or a Guarantor.

 

Section 7.10  Transfer and Security Interest.  The Repurchase Documents constitute a valid and effective transfer to Buyer of all right, title and interest of Seller in, to and under all Purchased Assets, free and clear of any Liens (other than Permitted Liens) subject to the terms of this Agreement. With respect to the protective security interest granted by Seller in Section 11.01, upon delivery of the Confirmations and the filing of the UCC financing statements as provided herein, such security interest shall be a valid first priority perfected security interest to the extent such security interest can be perfected by possession, filing or control under the UCC, subject only to Permitted Liens.  The Purchased Assets constitute one or more of the following, as defined in the UCC: a general intangible, instrument, investment property, security, deposit account, financial asset, uncertificated security, securities account or security entitlements.  Seller has not sold, assigned, pledged, encumbered or otherwise conveyed any of the Purchased Assets to any Person other than pursuant to the Repurchase Documents.  Seller has not authorized the filing of and is not aware of any UCC financing statements filed against Seller as debtor that include the Purchased Assets, other than any financing statement that has been terminated or filed pursuant to this Agreement.

 

Section 7.11  No Broker.  Neither Seller nor any Affiliate of Seller has dealt with any broker, investment banker, agent or other Person, except for Buyer or an Affiliate of Buyer, who may be entitled to any commission or compensation in connection with any Transaction.

 

Section 7.12  Investment Company Act.  None of Seller, any Guarantor or any Affiliate of Seller or any Guarantor is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act.

 

Section 7.13  Location of Books and Records.  The location where Seller keeps its books and records, including all computer tapes and records relating to the Purchased Assets is its chief executive office.

 

Section 7.14  Chief Executive Office; Jurisdiction of Organization.  On the Effective Date, Seller’s chief executive office, is, and has been, located at 399 Park Avenue, 18th

 

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Floor, New York, New York 10022.  On the Effective Date, Seller’s jurisdiction of organization is Delaware.  Seller’s shall provide Buyer with thirty (30) days advance notice of any change in such Seller’s principal office or place of business or jurisdiction.  Seller does not, and has not had, a trade name.  During the preceding five (5) years, none of Seller nor any Guarantor has been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.

 

Section 7.15  Interest Rate Protection Agreements.  (a) Seller has entered into all Interest Rate Protection Agreements required under Section 8.12, (b) each such Interest Rate Protection Agreement is in full force and effect and (c) Seller has collaterally assigned to Buyer all of Seller’s rights (but none of its obligations) under each such Interest Rate Protection Agreement as required under Section 8.12.

 

Section 7.16  REIT Status.  Parent has not engaged in any material “prohibited transactions” as defined in Section 857(b)(6)(B)(iii) and (C) of the Code.  Parent for its current “tax year” (as defined in the Code) is entitled to a dividends paid deduction under the requirements of Section 857 of the Code with respect to any dividends paid by it with respect to each such year for which it claims a deduction in its Form 1120-REIT filed with the United States Internal Revenue Service for such year.

 

ARTICLE 8

 

COVENANTS OF SELLER

 

From the date hereof until the Repurchase Obligations are paid in full and the Repurchase Documents are terminated, Seller shall perform and observe the following covenants, which (a) shall be given independent effect (so that if a particular action or condition is prohibited by any covenant, the fact that it would be permitted by an exception to or be otherwise within the limitations of another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists), and (b) shall also apply to all subsidiaries of Seller:

 

Section 8.01  Existence; Governing Documents; Conduct of Business.  Seller shall (a) preserve and maintain its legal existence, (b) qualify and remain qualified in good standing in each jurisdiction where the failure to be so qualified would have a Material Adverse Effect, and (c) not modify or amend without Buyer’s prior written consent (such consent not to be unreasonably withheld) in a manner which would have a Material Adverse Effect or terminate its Governing Documents.  Seller shall not change its name, organizational number, tax identification number, fiscal year, method of accounting, identity, structure or jurisdiction of organization (or have more than one such jurisdiction), move the location of its principal place of business, registered office or chief executive office (as defined in the UCC) from the location referred to in Section 7.01, unless in each case Seller has given at least thirty (30) days prior notice to Buyer and has taken all actions required under the UCC to continue the first priority perfected security interest of Buyer in the Purchased Assets.

 

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Section 8.02  Compliance with Laws, Contractual Obligations and Repurchase Documents.  Seller shall comply in all material respects with all Requirements of Laws, including those relating to any Purchased Asset.  No part of the proceeds of any Transaction shall be used for any purpose that violates Regulation T, U or X of the Board of Governors of the Federal Reserve System.  Seller shall conduct the requisite due diligence in connection with the acquisition of each Asset for purposes of complying with Anti Terrorism Laws.  Seller shall maintain the Custodial Agreement in full force and effect.  Seller shall not directly or indirectly enter into any agreement that would be violated or breached by any Transaction or the performance by Seller of any Repurchase Document.

 

Section 8.03  Protection of Buyer’s Interest in Purchased Assets.  With respect to each Purchased Asset, Seller shall take all action necessary or required by the Repurchase Documents, Records or Requirements of Law, or requested by Buyer, to perfect, protect and more fully evidence Buyer’s and any Affiliated Hedge Counterparty’s ownership of and first priority perfected security interest in such Purchased Asset, including executing or causing to be executed such other instruments or notices as may be necessary or appropriate and filing and maintaining effective UCC financing statements, continuation statements and assignments and amendments thereto.  Seller shall comply with all requirements of the Custodial Agreement with respect to each Purchased Asset.  Seller shall (a) not assign, sell, transfer, pledge, hypothecate, grant, create, incur, assume or suffer or permit to exist any security interest in or Lien (other than Permitted Liens) on any Purchased Asset to or in favor of any Person other than Buyer, (b) defend Buyer’s interest in such Purchased Asset against, and take such action as is necessary to remove, any such Lien, and (c) defend the right, title and interest of Buyer in and to all Purchased Assets against the claims and demands of all Persons whomsoever.  Notwithstanding the foregoing, if Seller grants a Lien on any Purchased Asset in violation of this Section 8.03 or any other Repurchase Document, Seller shall be deemed to have simultaneously granted an equal and ratable Lien on such Purchased Asset in favor of Buyer to the extent such Lien has not already been granted to Buyer and any Affiliated Hedge Counterparty; provided, that such equal and ratable Lien shall not cure any resulting Event of Default.  Seller shall not, nor shall it permit any Servicer to, extend, amend, waive, terminate, rescind, cancel, release or otherwise modify the material terms of or any collateral, guaranty or indemnity for, or exercise any material right or remedy of a holder (including all lending, corporate and voting rights, remedies, consents, approvals and waivers) of, any Purchased Asset.  Seller shall maintain copies of all Confirmations.  Seller shall not take any action to cause any Purchased Asset that is not evidenced by an instrument or chattel paper (as defined in the UCC) to be so evidenced. If a Purchased Asset becomes evidenced by an instrument or chattel paper, the same shall be immediately delivered to Custodian on behalf of Buyer, together with endorsements required by Buyer.

 

Section 8.04  Actions of Seller Relating to Distributions, Indebtedness, Guarantee Obligations, Contractual Obligations, Investments and Liens.  Upon the occurrence of a Default or Event of Default, Seller shall not declare or make any payment on account of, or set apart assets for, a sinking or similar fund for the purchase, redemption, defeasance, retirement or other acquisition of any Equity Interest of Seller, any Guarantor or any Affiliate of Seller or any Guarantor, 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 Seller, any Guarantor or any Affiliate of Seller or any Guarantor.  Seller shall not contract, create, incur,

 

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assume or permit to exist any Indebtedness, Guarantee Obligations, Contractual Obligations or Investments, except to the extent incurred to originate, acquire or repurchase the Repurchase Assets.  Seller shall not (a) contract, create, incur, assume or permit to exist any Lien on or with respect to any of its property or assets (including the Purchased Assets) of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, except for Permitted Liens, or (b) except as provided in the preceding clause (a), grant, allow or enter into any agreement or arrangement with any Person that prohibits or restricts or purports to prohibit or restrict the granting of any Lien on any of the foregoing.  In making any payments described in this Section 8.04, Seller shall observe all organizational formalities and covenants contained in Article 9 hereof.

 

Section 8.05  Delivery of Income.  Seller shall send Irrevocable Direction Notices and cause all applicable Persons to deposit all Income in respect of the Purchased Assets into the Waterfall Account in accordance with Section 5.01 hereof on the day the related payments are due.  Seller (a) shall comply with and enforce each Irrevocable Redirection Notice, (b) shall not amend, modify, waive, terminate or revoke any Irrevocable Redirection Notice without Buyer’s consent, and (c) shall take all reasonable steps to enforce each Irrevocable Redirection Notice.  In connection with each principal payment or prepayment under a Purchased Asset, Seller shall provide or cause to be provided to Buyer and Custodian sufficient detail to enable Buyer and Custodian to identify the Purchased Asset to which such payment applies.  If Seller receives any rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any Purchased Assets, or otherwise in respect thereof, Seller shall accept the same as Buyer’s agent, hold the same in trust for Buyer and immediately deliver the same to Buyer or its designee in the exact form received, together with duly executed instruments of transfer, stock powers or assignment in blank and such other documentation as Buyer shall reasonably request.  If any Income is received by Seller, any Guarantor or any Affiliate of Seller or any Guarantor, Seller shall pay or deliver such Income to Buyer or Custodian on behalf of Buyer within two (2) Business Days after receipt, and, until so paid or delivered, hold such Income in trust for Buyer, segregated from other funds of Seller.

 

Section 8.06  Delivery of Financial Statements and Other Information.  Seller shall deliver the following to Buyer and any Affiliated Hedge Counterparty, as soon as available and in any event within the time periods specified (in each case, except to the extent filed with the United States Securities and Exchange Commission and available publicly).  Notwithstanding the requirements below, the requirement to deliver financial statements will be satisfied at any such time as such financial statements are publicly posted on the official website of Parent or appropriately filed with the United States Securities and Exchange Commission and available publicly:

 

(a)           within forty (45) days after the end of each fiscal quarter of Parent, (1) the unaudited balance sheets of Parent as at the end of such period, (2) the related unaudited statements of operations, stockholders’ equity and cash flows for such period and the portion of the fiscal year through the end of such period, setting forth in each case in comparative form the figures for the previous year, and (3) a Compliance Certificate with respect to the financial information provided in this Section 8.06(a);

 

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(b)           within ninety (90) days after the end of each fiscal year of Parent, (i) the publicly filed audited balance sheets of each of Parent as at the end of such fiscal year, (ii) the publicly filed related statements of operations, stockholders’ equity and cash flows for such year, (iii) a publicly filed opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said financial statements fairly present the financial condition and results of operations of Parent as at the end of and for such fiscal year in accordance with GAAP, (iv) in the event that Parent is not a publicly traded company, a publicly filed certification from such accountants that, in making the examination necessary therefor, no information was obtained of any Default or Event of Default except as specified therein, and (v) a Compliance Certificate;

 

(c)           any management letter commenting on Seller’s internal controls submitted to Seller or Guarantor by independent certified public accountants in connection with each annual, interim or special audit of the books and records of Seller made by such accountants;

 

(d)           all financial statements, reports, notices and other documents that Seller sends to holders of its Equity Interests or makes to or files with any Governmental Authority, promptly after the delivery or filing thereof;

 

(e)           any other material agreements, correspondence, documents or other information not previously provided to Buyer which is related to Seller or the Purchased Assets, as soon as possible after the discovery thereof by Seller or any Affiliate of Seller; and

 

(f)            such other information regarding the financial condition, operations or business of Seller as Buyer may reasonably request.

 

Section 8.07  Delivery of Notices.  Seller shall promptly notify Buyer and any Affiliated Hedge Counterparty of the occurrence of any of the following of which Seller has Knowledge together with a certificate of a Responsible Officer of Seller setting forth details of such occurrence and any action Seller has taken or proposes to take with respect thereto:

 

(a)           a Representation Breach;

 

(b)           any of the following:  (i) with respect to any Purchased Asset: material change in Market Value, and (ii) with respect to Seller:  violation of Requirements of Law, material decline in the value of Seller’s assets or properties, an Internal Control Event or other event or circumstance that could reasonably be expected to have a Material Adverse Effect;

 

(c)           the existence of any Default, Event of Default or material default under or related to a Purchased Asset, Indebtedness, Guarantee Obligation or Contractual Obligation of Seller;

 

(d)           the resignation or termination of any Servicer under any Servicing Agreement with respect to any Purchased Asset;

 

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(e)           the establishment of a rating by any Rating Agency applicable to Seller or any Guarantor or any Affiliate of Seller or any Guarantor and any downgrade in or withdrawal of such rating once established; and

 

(f)            the commencement of, settlement of or material judgment in any litigation, action, suit, arbitration, investigation or other legal or arbitrable proceedings before any Governmental Authority that (i) affects Seller, any Guarantor or any Affiliate of Seller or any Guarantor, or any Purchased Asset (but not with respect to underlying mortgage loans associated with a Purchased Asset), (ii) questions or challenges the validity or enforceability of any Repurchase Document, Transaction or Purchased Asset, or (iii) individually or in the aggregate, if adversely determined, could reasonably be likely to have a Material Adverse Effect.

 

Section 8.08  Guarantee Agreement.  Seller and the Guarantors shall not take any action in violation of the provisions of the Guarantee Agreement and shall maintain the Guarantee Agreement in full force and effect.

 

Section 8.09  Margin Calls under other Agreements.  In the event of a margin call (however defined or described in the applicable underlying Indebtedness documents) or other similar event occurs pursuant to which a lender or buyer requires any of Seller or any Guarantor or any Affiliate of Seller or any Guarantor pursuant to another facility to post additional cash or assets in connection with any Indebtedness and the sum of all such margin calls or other similar requests made or outstanding on such day or during the previous five (5) Business Day period in the aggregate (such period to include such date of determination) is equal to or greater than $2,000,000, Seller shall promptly (and in no event later than two (2) Business Days after any such margin call or request) provide Buyer notice of any such margin call or request which details (A) the amount of such margin call, (B) the time period for such margin call to be satisfied, (C) whether cash or other assets were used to satisfy the margin call, (D) the name of the counterparty and (E) any other information reasonably requested by Buyer.

 

Section 8.10  Unrestricted Cash.  At all times on and after the initial Transaction, NRFC Sub-REIT Corp. shall maintain at least $35,000,000 in unrestricted cash or cash equivalents in the Liquidity Account, which shall at all times be subject to the Account Control Agreement.  Seller shall provide Buyer with prompt written notice should the balance of the Liquidity Account equal an amount less than $35,000,000.  Upon the occurrence of an Event of Default or Default, Buyer shall have sole access to and control over all amounts or other property in the Liquidity Account.

 

Section 8.11  [Reserved.]

 

Section 8.12  Hedging.  With respect to each Purchased Asset that is a Hedge Required Asset, during the term of this Agreement, the Seller shall enter into one or more Interest Rate Protection Agreements in a form reasonably acceptable to Buyer.  Seller shall take such actions as Buyer deems necessary to perfect the security interest granted in each Interest Rate Protection Agreement pursuant to Section 11.01, and, if the Hedge Counterparty is not an Affiliated Hedge Counterparty, shall collaterally assign to Buyer, which assignment shall be consented to in writing by each Hedge Counterparty, all of Seller’s rights in, to and under each such Interest Rate Protection Agreement.

 

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Section 8.13  REIT Status.  Parent shall at all times continue to be (i) qualified as a REIT as defined in Section 856 of the Code without giving any effect to any cure or corrective periods or allowances, (ii) entitled to a dividends paid deduction under Section 857 of the Code with respect to dividends paid by it with respect to each taxable year for which it claims a deduction on its Form 1120 REIT filed with the United States Internal Revenue Service for such year, or the entering into by it of any material “prohibited transactions” as defined in Sections 857(b) and 856(c) of the Code, and (iii) a publicly traded company listed, quoted or traded on and in good standing in respect of any stock exchange.

 

ARTICLE 9

 

SINGLE PURPOSE ENTITY

 

Section 9.01  Covenants Applicable to Seller.  Seller shall (a) own no assets, and shall not engage in any business, other than the assets and transactions specifically contemplated by this Agreement and any other Repurchase Document, (b) not incur any Indebtedness or other obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than as permitted under Section 8.04 or as otherwise permitted under this Agreement, (c) not make any loans or advances to any Affiliate or third party and shall not acquire obligations or securities of its Affiliates, in each case other than in connection with the origination or acquisition of Assets for purchase under the Repurchase Documents, (d) pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) only from its own assets, (e) comply with the provisions of its Governing Documents, (f) do all things necessary to observe organizational formalities and to preserve its existence, and shall not amend, modify, waive provisions of or otherwise change its Governing Documents without the consent of the Buyer, (g) maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates (except that such financial statements may be consolidated to the extent consolidation is required under GAAP or as a matter of Requirements of Law; provided, that (i) appropriate notation shall be made on such financial statements to indicate the separateness of the Seller from such Affiliate and to indicate that the Seller’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (ii) such assets shall also be listed on the Seller’s own separate balance sheet) and file its own tax returns (except to the extent consolidation is required or permitted under Requirements of Law), (h) be, and at all times shall hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, and shall not identify itself or any of its Affiliates as a division of the other, (i) maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and shall remain Solvent, (j) not engage in or suffer any change of Control, dissolution, winding up, liquidation, consolidation or merger in whole or in part or convey or transfer all or substantially all of its properties and assets to any Person (except as contemplated herein), (k) not commingle its funds or other assets with those of any Affiliate or any other Person and shall maintain its properties and assets in such a manner that it would not be costly or difficult to identify, segregate or ascertain its properties and assets from those of others, (l) maintain its properties,

 

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assets and accounts separate from those of any Affiliate or any other Person, (m) not hold itself out to be responsible for the debts or obligations of any other Person, (n) not, without the prior unanimous written consent of all of its Independent Managers, take any Insolvency Action, (o) (i) have at all times at least one Independent Manager (or such greater number as required by Buyer or any Rating Agency) and (ii) provide Buyer with up-to-date contact information for each such Independent Director and a copy of the agreement pursuant to which such Independent Director consents to and as an “Independent Manager” for Seller, (p) the Governing Documents for Seller shall provide (i) that Buyer be given at least two (2) Business Days prior notice of the removal and/or replacement of any Independent Manager, together with the name and contact information of the replacement Independent Manager and evidence of the replacement’s satisfaction of the definition of Independent Manager and (ii) to the extent permitted by Requirements of Law, that any Independent Manager of Seller shall not have any fiduciary duty to anyone including the holders of the Equity Interest in Seller and any Affiliates of Seller except Seller and the creditors of Seller with respect to taking of, or otherwise voting on, the Insolvency Action; provided, that the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing, (q) not enter into any transaction with an Affiliate of the Seller except on commercially reasonable terms similar to those available to unaffiliated parties in an arm’s-length transaction, (r) use separate stationary, invoices and checks bearing its own name, (s) allocate fairly and reasonably any overhead for shared office space and for services performed by an employee of an affiliate, (t) not pledge its assets to secure the obligations of any other Person, and (u) not form, acquire or hold any Subsidiary or own any Equity Interest in any other entity.

 

Section 9.02  Covenant Applicable to Parent.  Parent, or any Subsidiary thereof, shall, at all times, own 100% of the membership interest in Seller.

 

Section 9.03  Additional Covenant Applicable to Seller.  As a single-member limited liability company, Seller (i) shall be a Delaware limited liability company, (ii) shall have at least one or Independent Manager serving as manager of such company, (iii) shall not take any Insolvency Action and shall not cause or permit the members or managers of such entity to take any Insolvency Action all of its Independent Managers then serving as managers of the company shall have consented in writing to such action, and (iv) shall have either (A) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (B) two natural persons or one entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the resignation or dissolution of the last remaining member of the company.

 

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ARTICLE 10

 

EVENTS OF DEFAULT AND REMEDIES

 

Section 10.01  Events of Default.  Each of the following events shall be an “Event of Default”:

 

(a)           Seller fails to make a payment of (i) Margin Deficit or Repurchase Price (other than Price Differential) when due, or amount due to an Affiliated Hedge Counterparty with respect to the termination of any Interest Rate Protection Agreement, in each case, whether by acceleration or otherwise, (ii) Price Differential within one (1) Business Day of when due, or (iii) any other amount within three (3) Business Days of when due, in each case under the Repurchase Documents; provided, however, that Seller shall not be in breach solely of this clause (a) if Seller’s failure to make a payment arises (x) out of a wire transfer problem or an operation or administrative error or omission (so long as the required funds or property required to make that payment or delivery were otherwise available to that party) or (y) from general unavailability of the relevant currency due to the imposition of new exchange controls or other similar governmental action, but in each case only if the payment or delivery is made within one (1) Business Day after the problem has been corrected, the error or omission has been discovered or the currency becomes generally available, but in no event later than five (5) calendar days after such payment is due, and Seller certifies and reasonably demonstrates to Buyer’s satisfaction that an event described in (x) or (y) above has occurred;

 

(b)           Seller fails to observe or perform in any material respect any other Repurchase Obligation of Seller under the Repurchase Documents to which Seller is a party, and (except in the case of a failure to perform or observe the Repurchase Obligations of Seller under Section 8.03 and Section 17.08(a)) such failure continues unremedied for five (5) Business Days after the earlier of receipt of notice thereof from Buyer or the discovery of such failure by Seller;

 

(c)           any Representation Breach (excluding the asset-level representations and warranties set forth in Section 7.09 and on Schedule 1) or breach of any covenant exists and continues unremedied for five (5) Business Days after the earlier of receipt of notice thereof from Buyer or the discovery of such failure by Seller;

 

(d)           Seller or any Guarantor defaults beyond any applicable grace period in paying any amount or performing any obligation under any Indebtedness, Guarantee Obligation or Contractual Obligation with respect to Seller or any Indebtedness, Guarantee Obligation or Contractual Obligation with an outstanding amount of at least $5,000,000 with respect to each Guarantor, and the effect of such default is to permit the acceleration thereof (regardless of whether such default is waived or such acceleration occurs);

 

(e)           Seller or any Guarantor defaults beyond any applicable grace period in paying any amount or performing any obligation due to Buyer or any Affiliate of Buyer under any other financing, hedging, warehouse, security or other agreement (other than under this Agreement, any Interest Rate Protection Agreement or any Non-Recourse Indebtedness) between Seller or any Guarantor and Buyer or any Affiliate of Buyer including, without limitation the commercial real estate loan warehouse facility with Buyer or any Affiliate of Buyer;

 

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(f)            an Insolvency Event occurs with respect to Seller or any Guarantor;

 

(g)           a final judgment or judgments for the payment of money with respect to Seller or a final judgment or judgment for the payment of money in excess of $5,000,000 with respect to any Guarantor that is not insured against is entered against Seller or any Guarantor by one or more Governmental Authorities and the same is not satisfied, discharged (or provision has not been made for such discharge) or bonded, or a stay of execution thereof has not been procured, within thirty (30) days from the date of entry thereof;

 

(h)           a Governmental Authority takes any action to (i) condemn, seize or appropriate, or assume custody or control of, all or any substantial part of the property of Seller, (ii) displace the management of Seller or curtail its authority in the conduct of the business of Seller, (iii) terminate the activities of Seller as contemplated by the Repurchase Documents, or (iv) remove, limit or restrict the approval of Seller of the foregoing as a buyer or a seller of securities, and in each case such action is not discontinued or stayed within thirty (30) days;

 

(i)            any provision of the Repurchase Documents, any right or remedy of Buyer or obligation, covenant, agreement or duty of Seller thereunder, or any Lien, security interest or control granted under or in connection with the Repurchase Documents or Purchased Assets terminates, is declared null and void, ceases to be valid and effective, ceases to be the legal, valid, binding and enforceable obligation of Seller or any other Person, or the validity, effectiveness, binding nature or enforceability thereof is contested, challenged, denied or repudiated by Seller or any other Person, in each case directly, indirectly, in whole or in part;

 

(j)            Buyer ceases for any reason to have a valid and perfected first priority security interest in any Purchased Asset other than as a result of Buyer’s actions;

 

(k)           Seller is required to register as an “investment company” (as defined in the Investment Company Act) or the arrangements contemplated by the Repurchase Documents shall require registration of Seller as an “investment company”;

 

(l)            Seller engages in any conduct or action where Buyer’s prior consent is required by any Repurchase Document and Seller fails to obtain such consent;

 

(m)          Seller fails to deposit, or fails to direct a third-party to deposit, to the Waterfall Account all Income and other amounts as required by Section 5.01 and other provisions of this Agreement within two (2) Business Days of when due;

 

(n)           a Guarantee Default occurs or

 

(o)           a breach by NRFC Sub-REIT Corp. of the covenant set forth in Section 8.10;

 

(p)           Parent fails (i) to qualify as a REIT (without giving any effect to any cure or corrective periods or allowances), or (ii) to continue to be entitled to a dividend paid deduction under Section 857 of the Code with respect to dividends paid by it with respect to each taxable year for which it claims a deduction on its Form 1120- REIT filed with the United States Internal Revenue Service for such year, or the entering into by Parent of “prohibited

 

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transactions” as defined in Sections 857(b)(6)(B)(iii) of the Code (taking into account Sections 857(b)(6)(C), 857(b)(6)(D) and 857(b)(6)(E) of the Code) or (iii) to satisfy any of the income or asset tests required to be satisfied by a REIT;

 

(q)           Seller or any Guarantor admits in writing that it is not Solvent or is not able or not willing to perform any of its Repurchase Obligations, Contractual Obligations, Guarantee Obligations, Capital Lease Obligations or Off-Balance Sheet Obligations;

 

(r)            Parent’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein are qualified or limited by reference to the status of Parent as a “going concern” or a reference of similar import, other than a qualification or limitation expressly related to Buyers’ rights in the Purchased Assets; or

 

(s)            any condition or circumstance exists which causes, constitutes or may cause or constitute a Material Adverse Effect, as determined by Buyer.

 

Section 10.02  Remedies of Buyer as Owner of the Purchased Assets.  If an Event of Default exists, at the option of Buyer, exercised by notice to Seller with a copy to each Affiliated Hedge Counterparty (which option shall be deemed to be exercised, even if no notice is given, automatically and immediately upon the occurrence of an Event of Default under Sections 10.01 (f) or (q)), the Repurchase Date for all Purchased Assets shall be deemed automatically and immediately to occur (the date on which such option is exercised or deemed to be exercised, the “Accelerated Repurchase Date”).  If Buyer exercises or is deemed to have exercised the foregoing option:

 

(a)           All Repurchase Obligations shall become immediately due and payable on and as of the Accelerated Repurchase Date.

 

(b)           All amounts in the Waterfall Account and all Income paid after the Accelerated Repurchase Date shall be retained by Buyer and applied in accordance with Article 5.

 

(c)           To the extent not already completed and recorded, Buyer may complete any assignments, allonges, endorsements, powers or other documents or instruments executed in blank and otherwise obtain physical possession of all Records then held by Custodian under the Custodial Agreement.  Buyer may obtain physical possession of all Records of Seller.  Seller shall deliver to Buyer such assignments and other documents with respect thereto as Buyer shall request.

 

(d)           Buyer may immediately, at any time and from time to time, exercise either of the following remedies with respect to any or all of the Purchased Assets:  (i) sell such Purchased Assets without providing any representations and warranties on an “as-is where is” basis in a recognized market and by means of a public or private sale at such price or prices as Buyer accepts, and apply the net proceeds thereof in accordance with Article 5, or (ii) retain such Purchased Assets and give Seller credit against the Repurchase Price for such Purchased Assets (or if the amount of such credit exceeds the Repurchase Price for such Purchased Assets, credit against other Repurchase Obligations due and any other amounts then owing to Buyer by any

 

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other Person pursuant to any Repurchase Document, in such order and in such amounts as determined by Buyer), in an amount equal to the Market Value of such Purchased Assets.  Until such time as Buyer exercises either such remedy with respect to a Purchased Asset, Buyer may hold such Purchased Asset for its own account and retain all Income with respect thereto and apply such Income in accordance with the provisions of Article 5 hereof.

 

(e)           The Parties agree that the Purchased Assets are of such a nature that they may decline rapidly in value, and may not have a ready or liquid market.  Accordingly, Buyer shall not be required to sell more than one Purchased Asset on a particular Business Day, to the same purchaser or in the same manner.  Buyer may determine whether, when and in what manner a Purchased Asset shall be sold, it being agreed that both a good faith public and a good faith private sale shall be deemed to be commercially reasonable.  Buyer shall endeavor to give notice to Seller or any other Person prior to exercising any remedy in respect of an Event of Default; provided, however, that Buyer’s failure to provide such notice shall not impair or prejudice any right of Buyer or invalidate Buyer’s exercise of any remedy in respect of an Event of Default.  If no prior notice is given, Buyer shall give notice to Seller of the remedies exercised by Buyer promptly thereafter.

 

(f)            Seller shall be liable to Buyer and any Affiliated Hedge Counterparty for (i) any amount by which the Repurchase Obligations due to Buyer exceed the aggregate of the net proceeds and credits referred to in the preceding clause (d), (ii) the amount of all actual out-of-pocket expenses, including reasonable legal fees and expenses, actually incurred by Buyer or any Affiliated Hedge Counterparty in connection with or as a consequence of an Event of Default, (iii) any costs and losses payable under Section 12.03, and (iv) any other actual loss, damage, cost or expense resulting from the occurrence of an Event of Default.

 

(g)           Buyer shall be entitled to seek an injunction, an order of specific performance or other equitable relief to compel Seller to fulfill any of its obligations as set forth in the Repurchase Documents, including this Article 10, if Seller fails or refuses to perform its obligations as set forth herein or therein.

 

(h)           Seller hereby appoints Buyer as attorney-in-fact of Seller for purposes of carrying out the Repurchase Documents, including executing, endorsing and recording any instruments or documents and taking any other actions that Buyer deems necessary or advisable to accomplish such purposes, which appointment is coupled with an interest and is irrevocable.

 

(i)            Buyer may, without prior notice to Seller, exercise any or all of its set-off rights including those set forth in Section 17.17.  This Section 10.02(i) shall be without prejudice and in addition to any right of set-off, combination of accounts, Lien or other rights to which any Party is at any time otherwise entitled.

 

(j)            All rights and remedies of Buyer and Affiliated Hedge Counterparties under the Repurchase Documents, including those set forth in Section 17.17, are cumulative and not exclusive of any other rights or remedies that Buyer or Affiliated Hedge Counterparties may have and may be exercised at any time when an Event of Default exists.  Such rights and remedies may be enforced without prior judicial process or hearing.  Seller agrees that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial

 

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necessity and are the result of a bargain at arm’s-length.  Seller hereby expressly waives any defenses Seller might have to require Buyer or Affiliated Hedge Counterparties to enforce its rights by judicial process or otherwise arising from the use of nonjudicial process, disposition of any or all of the Purchased Assets, or any other election of remedies.

 

ARTICLE 11

 

SECURITY INTEREST

 

Section 11.01  Grant.  Buyer and Seller intend that all Transactions shall be sales to Buyer of the Purchased Assets and not loans from Buyer to Seller secured by the Purchased Assets.  However, to preserve and protect Buyer’s and any Affiliated Hedge Counterparty’s rights with respect to the Purchased Assets and under the Repurchase Documents in the event that any Governmental Authority recharacterizes the Transactions as other than sales, and as security for Seller’s performance of the Repurchase Obligations, Seller hereby grants to Buyer and each Affiliated Hedge Counterparty on a pari passu basis a Lien on and security interest in all of the right, title and interest of Seller in, to and under (i) the Purchased Assets (which for this purpose shall be deemed to include the items described in the proviso in the definition thereof), and (ii) each Interest Rate Protection Agreement that is entered into with each Affiliated Hedge Counterparty relating to each Purchased Asset and any Interest Rate Protection Agreement which is subject to a collateral assignment by Seller to Buyer pursuant to Section 8.12, and the transfers of the Purchased Assets to Buyer and each Affiliated Hedge Counterparty shall be deemed to constitute and confirm such grant, to secure the payment and performance of the Repurchase Obligations (including the obligation of Seller to pay the Repurchase Price, or if the Transactions are recharacterized as loans, to repay such loans for the Repurchase Price).  Seller hereby authorizes the filing by, or on behalf of, the Buyer of UCC financing statements, continuation statements and amendments that describe the Purchased Assets and Interest Rate Protection Agreements as collateral and that contain any information required by Part 5 of Article 9 of the UCC for the sufficiency or filing acceptance of any financing statement, continuation statement or amendment.

 

Section 11.02  Effect of Grant.

 

(a)           If any circumstance described in Section 11.01 occurs, (i) this Agreement shall also be deemed to be a security agreement as defined in the UCC, (ii) Buyer and each Affiliated Hedge Counterparty shall have all of the rights and remedies provided to a secured party by Requirements of Law (including the rights and remedies of a secured party under the UCC and the right to set-off any mutual debt and claim) and under any other agreement between Buyer and Seller or between an Affiliated Hedge Counterparty and Seller, (iii) without limiting the generality of the foregoing, Buyer shall be entitled to set-off the proceeds of the liquidation of the Purchased Assets against all of the Repurchase Obligations, without prejudice to Buyer’s right to recover any deficiency, (iv) the possession by Buyer or any of its agents, including Custodian, of the Records, the Purchased Assets and such other items of property as constitute instruments, money, negotiable documents, securities or chattel paper shall be deemed to be possession by the secured party for purposes of perfecting such security interest under the UCC and Requirements of Law, and (v) notifications to Persons (other than Buyer) holding such property, and acknowledgments, receipts or confirmations from Persons (other than Buyer)

 

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holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, securities intermediaries, bailees or agents (as applicable) of the secured party for the purpose of perfecting such security interest under the UCC and Requirements of Law.  The security interest of Buyer and any Affiliated Hedge Counterparty granted herein shall be, and Seller hereby represents and warrants to Buyer and each Affiliated Hedge Counterparty that it is, a first priority perfected security interest.  For the avoidance of doubt, (x) each Purchased Asset and each Interest Rate Protection Agreement relating to the Repurchase Obligations secures the Repurchase Obligations of Seller with respect to all other Transactions and all other Purchased Assets, including any Purchased Assets that are junior in priority to the Purchased Asset in question, and (y) if an Event of Default exists, no Purchased Asset relating to a Purchased Asset or Interest Rate Protection Agreement will be released from Buyer’s and any Affiliated Hedge Counterparty’s Lien or transferred to Seller until the Repurchase Obligations are indefeasibly paid in full.  Notwithstanding the foregoing, the Repurchase Obligations shall be full recourse to Seller.

 

(b)           Buyer and Seller agree that Buyer is expressly designated as the agent for and on behalf of each Affiliated Hedge Counterparty with respect to the security interest granted hereby to secure the obligations owing to each Affiliated Hedge Counterparty under any Interest Rate Protection Agreement, including with respect to the Purchased Assets held by Custodian pursuant to the Custodial Agreement.

 

Section 11.03  Seller to Remain Liable.  Buyer and Seller agree that the grant of a security interest under this Article 11 shall not constitute or result in the creation or assumption by Buyer or any Affiliated Hedge Counterparty of any obligation of Seller or any other Person in connection with any Purchased Asset or any Interest Rate Protection Agreement whether or not Buyer exercises any right with respect thereto.  Seller shall remain liable under the Purchased Assets and each Interest Rate Protection Agreement to perform all of Seller’s duties and obligations thereunder to the same extent as if the Repurchase Documents had not been executed.

 

Section 11.04  Waiver of Certain Laws.  Seller agrees, to the extent permitted by Requirements of Law, that neither it nor anyone claiming through or under it will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force in any locality where any Purchased Assets may be situated in order to prevent, hinder or delay the enforcement or foreclosure of this Agreement, or the absolute sale of any of the Purchased Assets or Interest Rate Protection Agreement with an Affiliated Hedge Counterparty relating to a Purchased Asset or any part thereof, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereof, and Seller, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may be lawful so to do, the benefit of all such laws and any and all right to have any of the properties or assets constituting the Purchased Assets or Interest Rate Protection Agreement with an Affiliated Hedge Counterparty relating to a Purchased Asset marshaled upon any such sale, and agrees that Buyer or any court having jurisdiction to foreclose the security interests granted in this Agreement may sell the Purchased Assets and each Interest Rate Protection Agreement with an Affiliated Hedge Counterparty relating to a Purchased Asset as an entirety or in such parcels as Buyer or such court may determine.

 

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ARTICLE 12

 

INCREASED COSTS; CAPITAL ADEQUACY

 

Section 12.01  Market Disruption.  If prior to any Pricing Period, Buyer determines that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Pricing Period, Buyer shall give prompt notice thereof to Seller, whereupon the Pricing Rate for such Pricing Period, and for all subsequent Pricing Periods until such notice has been withdrawn by Buyer, shall be the Alternative Rate.

 

Section 12.02  Illegality.  If the adoption of or any change in any Requirements of Law or in the interpretation or application thereof after the date hereof shall make it unlawful for Buyer to effect or continue Transactions as contemplated by the Repurchase Documents, (a) any commitment of Buyer hereunder to enter into new Transactions shall be terminated, (b) the Pricing Rate shall be converted automatically to the Alternative Rate on the last day of the then current Pricing Period or within such earlier period as may be required by Requirements of Law, and (c) if required by such adoption or change, the Facility Termination Date and the Funding Expiration Date shall be deemed to have occurred.

 

Section 12.03  Breakfunding.  Seller shall indemnify Buyer and hold Buyer harmless from any loss, cost or expense which Buyer may sustain or incur arising from (a) any payment to Buyer on account of the outstanding Repurchase Price, including a payment made pursuant to Section 3.04 but excluding a payment made pursuant to Section 5.02, on any day other than a Remittance Date (based on the assumption that Buyer funded its commitment with respect to the Transaction in the London Interbank Eurodollar market and using any reasonable attribution or averaging methods that Buyer deems appropriate and practical) or (b) any conversion of the Pricing Rate to the Alternative Rate because the LIBO Rate is not available for any reason on a day that is not the last day of the then current Pricing Period.

 

Section 12.04  Increased Costs.  If the adoption of or any change in any Requirements of Law or in the interpretation or application thereof by any Governmental Authority or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority having jurisdiction over Buyer made after the date of this Agreement (a) shall subject Buyer to any tax or increased tax of any kind whatsoever with respect to the Repurchase Documents, any Purchased Asset or any Transaction, or change the basis of taxation of payments to Buyer in respect thereof (except for income taxes and any changes in the rate of tax on Buyer’s overall net income), (b) shall impose, modify or hold applicable any increase in reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of Buyer, or (c) shall impose on Buyer any other condition; and the result of any of the preceding clauses (a), (b) and (c) is to increase the cost to Buyer, by an amount that Buyer deems to be material, of entering into, continuing or maintaining Transactions, or to reduce any amount receivable under the Repurchase Documents in respect thereof, then, in any such case Seller shall pay to Buyer such additional amount or amounts as reasonably necessary to fully compensate Buyer for such increased cost or reduced amount receivable.  In determining any additional

 

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amounts due under this Section 12.04, Buyer shall treat Seller in the same manner it treats other similarly situated sellers in facilities with substantially similar collateral. Buyer will provide Seller with no less than thirty (30) days prior notice of the implementation of any change or event pursuant to which additional amounts are due or will become due under this Section 12.04.

 

Section 12.05  Capital Adequacy.  If Buyer determines that the adoption of or any change in any Requirements of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation Controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made after the date of this Agreement has or shall have the effect of reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then, in any such case, Seller shall pay to Buyer such additional amount or amounts as reasonably necessary to fully compensate Buyer for such reduction.  In determining any additional amounts due under this Section 12.05, Buyer shall treat Seller in the same manner it treats other similarly situated sellers in facilities with substantially similar collateral.

 

Section 12.06  Withholding Taxes.

 

(a)           All payments made by Seller to Buyer or any other Indemnified Person under the Repurchase Documents and by underlying obligors with respect to the Purchased Assets 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 therewith or thereon, excluding income taxes, branch profits taxes, franchise taxes or any other tax imposed on net income by the United States, a state or a foreign jurisdiction under the laws of which Buyer or such other Indemnified Person is organized or of its applicable lending office, or a state or foreign jurisdiction with respect to which Buyer or such other Indemnified Person has a present or former connection, or any political subdivision thereof (collectively, “Taxes”), all of which shall be paid by Seller for its own account not later than the date when due.  If any taxes are required to be deducted or withheld from any amounts payable to Buyer and/or any other Indemnified Person, then Seller shall (x) make such deduction or withholding, (y) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due; and (z) pay to Buyer or other Indemnified Person such additional amounts as may be necessary so that every net payment made under this Agreement after deduction or withholding for or on account of any Taxes (including any Taxes on such increase and any penalties) is not less than the amount that would have been paid absent such deduction or withholding (the amounts described in this clause (z), the “Additional Amount”).  The foregoing obligation to pay Additional Amounts, however, will not apply with respect to (i) net income or franchise taxes, imposed on Buyer and/or any other Indemnified Person, with respect to payments required to be made by Seller under the Repurchase Documents, by a taxing jurisdiction in which Buyer and/or any other Indemnified Person is organized, conducts business or is paying taxes (as the case may be) or (ii) any U.S. federal withholding tax imposed on “withholdable payments” made after December 31, 2012 on a Transaction made after March 18, 2012, if the Buyer is a “foreign financial institution” that fails

 

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to comply with the requirements of section 1471(b) of the Code or a “non-financial foreign entity” that fails to comply with section 1472(b) of the Code, each as in effect on the date hereof, or Treasury regulations or administrative guidance promulgated thereunder. Promptly after Seller pays any taxes referred to in this Section 12.06, Seller will send Buyer appropriate evidence of such payment.

 

(b)                                 In addition, 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 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)                                  Seller agrees to indemnify 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 12.06(c), and any liability (including penalties, interest and expenses arising thereon or with respect thereto) arising therefrom or with respect thereto, provided that Buyer shall have provided Seller with evidence, reasonably satisfactory to Seller, of payment of Taxes or Other Taxes, as the case may be.

 

(d)                                 If a Person acquires any of the rights and obligations of Buyer as an Eligible Assignee under this Agreement, and such Person is not organized under the laws of the United States, any state thereof or the District of Columbia (a “Non-U.S. Person”), such Non-U.S. Person shall deliver to Seller on or before the date on which such Person becomes a party to this Agreement, two duly completed and executed copies of, as applicable, IRS Form W-8BEN or IRS Form W-8ECI or any successor forms thereto designated as such by the IRS.  If the Non-U.S. Person is eligible for and wishes to claim exemption from or reduction in U.S. federal withholding tax through benefit of a treaty, such Person shall deliver a Form W-8ECI.  If the Non-U.S. Person is eligible for and wishes to claim exemption from U.S. federal withholding tax under Section 871(h) or Section 881(c) of the Code with respect to payments of “portfolio interest,” such Person shall deliver both the Form W-8BEN and a statement certifying that such Person is not a bank, a “10 percent shareholder” or a “controlled foreign corporation” within the meaning of Section 881(c)(3) of the Code.  If any previously delivered form or statement becomes inaccurate with respect to the Non-U.S. Person that delivered it, the Non-U.S. Person shall promptly notify Seller of this fact.

 

(e)                                  Without prejudice to the survival or any other agreement of Seller hereunder, the agreements and obligations of Seller contained in this Section 12.06 shall survive the termination of this Agreement.  Nothing contained in this Section 12.06 shall require Buyer to make available any of their tax returns or other information that it deems to be confidential or proprietary.

 

Section 12.07  Payment and Survival of Repurchase Obligations.  Buyer may at any time send Seller a notice showing the calculation of any amounts payable pursuant to this Article 12, and Seller shall pay such amounts to Buyer within ten (10) Business Days after Seller

 

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receives such notice.  The obligations of Seller under this Article 12 shall apply to Eligible Assignees and Participants and survive the termination of the Repurchase Documents.

 

ARTICLE 13

 

INDEMNITY AND EXPENSES

 

Section 13.01  Indemnity.

 

(a)                                  Seller shall release, defend, indemnify and hold harmless Buyer, Affiliates of Buyer, each Affiliated Hedge Counterparty and its and their respective officers, directors, shareholders, partners, members, owners, employees, agents, attorneys, Affiliates and advisors (each an “Indemnified Person” and collectively the “Indemnified Persons”), on a net after-tax basis, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (other than income taxes and franchise taxes of Buyer), fees, costs, expenses (including reasonable legal fees and expenses), penalties or fines of any kind that may be imposed on, incurred by or asserted against such Indemnified Person (collectively, the “Indemnified Amounts”) in any way relating to, arising out of or resulting from or in connection with (i) the Repurchase Documents, the Records, the Purchased Assets, the Transactions, any action taken or omitted to be taken by any Indemnified Person in connection with or under any of the foregoing, or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of any Repurchase Document) any Transaction, or any Purchased Asset (ii)  ownership of, Liens on, security interests in or the exercise of rights or remedies under any of the items referred to in the preceding clause (i), (iii) any failure by Seller to perform or comply with any Repurchase Document, Record or Purchased Asset, (iv) any claim by brokers, finders or similar Persons claiming to be entitled to a commission in connection with any transaction involving any Repurchase Document or Purchased Asset, (v) any taxes attributable to the execution, delivery, filing or recording of any Repurchase Document, Record or any memorandum of any of the foregoing, (vi) any Lien or claim arising on or against any Purchased Asset under any Requirements of Law or any liability asserted against Buyer or any Indemnified Person with respect thereto, (vii) any misrepresentation by Seller or failure by Seller to perform any obligations pursuant to any Repurchase Document relating to environmental matters in any way, (viii) any term sheet related to the transactions hereunder or any business communications or dealings between the Parties relating thereto, or (ix) Seller’s conduct, activities, actions and/or inactions in connection with, relating to or arising out of any of the foregoing clauses of this Section 13.01, that, in each case, results from anything whatsoever other than any Indemnified Person’s gross negligence or intentional misconduct, as determined by a court of competent jurisdiction pursuant to a final, non—appealable judgment.  In any suit, proceeding or action brought by an Indemnified Person in connection with any Purchased Asset for any sum owing thereunder, or to enforce any provisions of any Purchased Asset, Seller shall defend, indemnify and hold such Indemnified Person harmless from and against all out-of-pocket expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the account debtor arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor from Seller.  In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 13.01 applies, such indemnity shall be

 

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effective whether or not such investigation, litigation or proceeding is brought by Seller, an Indemnified Person or any other Person or any Indemnified Person is otherwise a party thereto and whether or not any Transaction is entered into.

 

(b)                                 If for any reason the indemnification provided in this Section 13.01 is unavailable to the Indemnified Person or is insufficient to hold an Indemnified Person harmless, even though such Indemnified Person is entitled to indemnification under the express terms hereof, then Seller shall contribute to the amount paid or payable by such Indemnified Person as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative benefits received by such Indemnified Person on the one hand and Seller on the other hand, the relative fault of such Indemnified Person, and any other relevant equitable considerations.

 

(c)                                  An Indemnified Person may at any time send Seller a notice showing the calculation of Indemnified Amounts, and Seller shall pay such Indemnified Amounts to such Indemnified Person within ten (10) Business Days after Seller receives such notice.  The obligations of Seller under this Section 13.01 shall apply to Eligible Assignees and Participants and survive the termination of this Agreement.

 

(d)                                 Seller may settle any litigation on behalf of the Indemnified Parties with the written consent of the Indemnified Persons in their sole discretion and provided the Indemnified Person receive a full, complete and unconditional release.

 

Section 13.02  Expenses.  Seller shall promptly on demand pay to or as directed by Buyer all third-party out-of-pocket costs and expenses (including reasonable legal, accounting and advisory fees and expenses) incurred by Buyer in connection with (a) the development, evaluation, preparation, negotiation, execution, consummation, delivery and administration of, and any amendment, supplement or modification to, or extension, renewal or waiver of, the Repurchase Documents and the Transactions, (b) any Asset or Purchased Asset, including due diligence, inspection, testing, review, recording, registration, travel, custody, care, insurance or preservation, (c) the enforcement of the Repurchase Documents or the payment or performance by Seller of any Repurchase Obligations, and (d) any actual or attempted sale, exchange, enforcement, collection, compromise or settlement relating to the Purchased Assets.

 

ARTICLE 14

 

INTENT

 

Section 14.01  Intention of Parties with respect to Transactions.  The Parties intend (a) for each Transaction to qualify for the safe harbor treatment provided by the Bankruptcy Code and for Buyer to be entitled to all of the rights, benefits and protections afforded to Persons under the Bankruptcy Code with respect to a “repurchase agreement” as defined in Section 101(47) of the Bankruptcy Code and a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and that payments under this Agreement are deemed “margin payments” or “settlement payments,” as defined in Section 101 of the Bankruptcy Code, (b) for the grant of a security interest set forth in Article 11 to also be a “securities contract” as defined in Section 741(7)(A)(xi) of the Bankruptcy Code and a “repurchase agreement” as that

 

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term is defined in Section 101(47)(A)(v) of the Bankruptcy Code, and (c) that Buyer (for so long as Buyer is a “financial institution,” “financial participant” or other entity listed in Section 555, 559 or 362(b)(6) of the Bankruptcy Code) shall be entitled to the “safe harbor” benefits and protections afforded under the Bankruptcy Code with respect to a “repurchase agreement” and a “securities contract,” including (x) the rights, set forth in Article 10 and in Section 555, 559 and 561 of the Bankruptcy Code, to liquidate the Purchased Assets and terminate this Agreement, and (y) the right to offset or net out as set forth in Article 10 and Section 17.17 and in Section 362(b)(6) of the Bankruptcy Code.

 

Section 14.02  Liquidation of Purchased Assets.  The Parties acknowledge and agree that (a) Buyer’s right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Articles 10 and 11 and as otherwise provided in the Repurchase Documents is a contractual right to liquidate such Transactions as described in Section 555, 559 and 561 of the Bankruptcy Code.

 

Section 14.03  Insured Depository Institution.  The Parties acknowledge and agree that if a Party is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

 

Section 14.04  Netting Contract.  The Parties acknowledge and agree that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation,” respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

 

Section 14.05  Master Netting Agreement.  The Parties expressly represent, warrant, acknowledge and agree that this Agreement constitutes a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code.

 

ARTICLE 15

 

DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

 

The Parties acknowledge that they have been advised and understand that:

 

(a)                                  in the case of Transactions in which one of the Parties is a broker or dealer registered with the United States Securities and Exchange Commission under Section 14 of the Securities Exchange Act of 1934, the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 do not protect the other Party with respect to any Transaction;

 

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(b)                                 in the case of Transactions in which one of the Parties is a government securities broker or a government securities dealer registered with the United States Securities and Exchange Commission under Section 14C of the Securities Exchange Act of 1934, the Securities Investor Protection Act of 1970 will not provide protection to the other Party with respect to any Transaction;

 

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

 

(d)                                 in the case of Transactions in which one of the Parties is an “insured depository institution” as that term is defined in Section 1813(c)(2) of Title 12 of the United States Code, funds held by the financial institution pursuant to a Transaction are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund or the Bank Insurance Fund, as applicable.

 

ARTICLE 16

 

NO RELIANCE

 

Each Party acknowledges, represents and warrants to the other Party that, in connection with the negotiation of, entering into, and performance under, the Repurchase Documents and each Transaction:

 

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

 

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

 

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

 

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

 

(e)                                  It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other Party and has not given the other Party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits

 

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(either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Repurchase Documents or any Transaction; and

 

(f)                                    No partnership or joint venture exists or will exist as a result of the Transactions or entering into and performing the Repurchase Documents.

 

ARTICLE 17

 

MISCELLANEOUS

 

Section 17.01  Governing Law.  This Agreement and any claim, controversy or dispute arising under or related to or in connection with this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Section 5-1401 of the New York General Obligations Law.

 

Section 17.02  Submission to Jurisdiction; Service of Process.  Each of the Parties hereto irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of New York sitting in the Borough of Manhattan and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to the Repurchase Documents, or for recognition or enforcement of any judgment, and each Party irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such State court or, to the fullest extent permitted by applicable law, in such Federal court.  Each Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or the other Repurchase Documents shall affect any right that either party may otherwise have to bring any action or proceeding arising out of or relating to the Repurchase Documents against the other party or its properties in the courts of any jurisdiction.  Each of the Parties hereto irrevocably and unconditionally waives, to the fullest extent permitted by Requirements of Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to the Repurchase Documents in any court referred to above, and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.  Each Party irrevocably consents to service of process in the manner provided for notices in Section 17.12.  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

 

Section 17.03  IMPORTANT WAIVERS.

 

(a)                                  SELLER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY BUYER OR ANY INDEMNIFIED PERSON.

 

(b)                                 TO THE EXTENT PERMITTED BY REQUIREMENTS OF LAW, EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY

 

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WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE BETWEEN THEM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH OR RELATED TO THE REPURCHASE DOCUMENTS, THE PURCHASED ASSETS, THE TRANSACTIONS, ANY DEALINGS OR COURSE OF CONDUCT BETWEEN THEM, OR ANY STATEMENTS (WRITTEN OR ORAL) OR OTHER ACTIONS OF EITHER PARTY. NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

 

(c)                                  TO THE EXTENT PERMITTED BY REQUIREMENTS OF LAW, SELLER HEREBY WAIVES ANY RIGHT TO CLAIM OR RECOVER IN ANY LITIGATION WHATSOEVER INVOLVING ANY INDEMNIFIED PERSON, ANY SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, WHETHER SUCH WAIVED DAMAGES ARE BASED ON STATUTE, CONTRACT, TORT, COMMON LAW OR ANY OTHER LEGAL THEORY, WHETHER THE LIKELIHOOD OF SUCH DAMAGES WAS KNOWN AND REGARDLESS OF THE FORM OF THE CLAIM OF ACTION.  NO INDEMNIFIED PERSON SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH ANY REPURCHASE DOCUMENT OR THE TRANSACTIONS.

 

(d)                                 SELLER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BUYER OR AN INDEMNIFIED PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BUYER OR AN INDEMNIFIED PERSON WOULD NOT SEEK TO ENFORCE ANY OF THE WAIVERS IN THIS SECTION 17.03 IN THE EVENT OF LITIGATION OR OTHER CIRCUMSTANCES.  THE SCOPE OF SUCH WAIVERS IS INTENDED TO BE ALL—ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE REPURCHASE DOCUMENTS, REGARDLESS OF THEIR LEGAL THEORY.

 

(e)                                  EACH PARTY ACKNOWLEDGES THAT THE WAIVERS IN THIS SECTION 17.03 ARE A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT SUCH PARTY HAS ALREADY RELIED ON SUCH WAIVERS IN ENTERING INTO THE REPURCHASE DOCUMENTS, AND THAT SUCH PARTY WILL CONTINUE TO RELY ON SUCH WAIVERS IN THEIR RELATED FUTURE DEALINGS UNDER THE REPURCHASE DOCUMENTS.  EACH PARTY FURTHER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED SUCH WAIVERS WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO A JURY TRIAL AND OTHER RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

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(f)                                    THE WAIVERS IN THIS SECTION 17.03 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO ANY OF THE REPURCHASE DOCUMENTS.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(g)                                 THE PROVISIONS OF THIS SECTION 17.03 SHALL SURVIVE TERMINATION OF THE REPURCHASE DOCUMENTS AND THE PAYMENT IN FULL OF THE REPURCHASE OBLIGATIONS.

 

Section 17.04  Integration.  The Repurchase Documents supersede and integrate all previous negotiations, contracts, agreements and understandings (whether written or oral) between the Parties relating to a sale and repurchase of Purchased Assets and the other matters addressed by the Repurchase Documents, and contain the entire final agreement of the Parties relating to the subject matter thereof.

 

Section 17.05  Single Agreement.  Seller agrees that (a) each Transaction is in consideration of and in reliance on the fact that all Transactions constitute a single business and contractual relationship, and that each Transaction has been entered into in consideration of the other Transactions, (b) a default by it in the payment or performance of any its obligations under a Transaction shall constitute a default by it with respect to all Transactions, (c) Buyer may set-off claims and apply properties and assets held by or on behalf of Buyer with respect to any Transaction against the Repurchase Obligations owing to Buyer with respect to other Transactions; provided, however, that neither Buyer nor any Affiliated Hedge Counterparty shall exercise any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer unless an Event of Default has occurred; and, provided, further, that any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer is limited to an amount not to exceed $35,000,000, and (d) payments, deliveries and other transfers made by or on behalf of Seller with respect to any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers with respect to all Transactions, and the obligations of Seller to make any such payments, deliveries and other transfers may be applied against each other and netted.

 

Section 17.06  Use of Employee Plan Assets.  No assets of an employee benefit plan subject to any provision of ERISA shall be used by either Party in a Transaction.

 

Section 17.07  Survival and Benefit of Seller’s Agreements.  The Repurchase Documents and all Transactions shall be binding on and shall inure to the benefit of the Parties and their successors and permitted assigns.  All of Seller’s indemnities in the Repurchase Documents shall survive the termination of the Repurchase Documents and the payment in full of the Repurchase Obligations, and shall apply to and benefit Eligible Assignees and Participants.  No other Person shall be entitled to any benefit, right, power, remedy or claim under the Repurchase Documents.

 

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Section 17.08  Assignments and Participations.

 

(a)                                  Seller shall not sell, assign or transfer any of its rights or the Repurchase Obligations or delegate its duties or obligations under this Agreement or any other Repurchase Document without the prior written consent of Buyer, and any attempt by Seller to do so without such consent shall be null and void.

 

(b)                                 Buyer may at any time, without the consent of or notice to Seller, sell participations to any Person (other than a natural person or Seller, any Guarantor or any Affiliate of Seller or any Guarantor) (a “Participant”) in all or any portion of Buyer’s rights and/or obligations under the Repurchase Documents; provided, that (i) Buyer’s obligations under the Repurchase Documents shall remain unchanged, (ii) Buyer shall remain solely responsible to Seller for the performance of such obligations, and (iii) Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under the Repurchase Documents.  No Participant shall have any right to approve any amendment, waiver or consent with respect to any Repurchase Document, except to the extent that the Repurchase Price or Price Differential of any Purchased Asset would be reduced or the Repurchase Date of any Purchased Asset would be postponed.  Each Participant shall be entitled to the benefits of Article 12 to the same extent as if it had acquired its interest by assignment pursuant to Section 17.08(c), but shall not be entitled to receive any greater payment thereunder than Buyer would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Seller’s prior written consent.  To the extent permitted by Requirements of Law, each Participant shall be entitled to the benefits of Sections 10.02(j) and 17.17 to the same extent as if it had acquired its interest by assignment pursuant to Section 17.08(c).

 

(c)                                  Buyer may at any time, without consent of Seller but upon notice to Seller, sell and assign to any Eligible Assignee all or any portion of all of the rights and obligations of Buyer under the Repurchase Documents; provided, however, so long as no Default or Event of Default has occurred and is continuing, such assignment will be at the sole expense and cost of Buyer.  Each such assignment shall be made pursuant to an Assignment and Acceptance substantially in the form of Exhibit C (an “Assignment and Acceptance”). From and after the effective date of such Assignment and Acceptance, (i) such Eligible Assignee shall be a Party and, to the extent provided therein, have the rights and obligations of Buyer under the Repurchase Documents with respect to the percentage and amount of the Repurchase Price allocated to it, (ii) Buyer shall, to the extent provided therein, be released from such obligations (and, in the case of an Assignment and Acceptance covering all or the remaining portion of Buyer’s rights and obligations under the Repurchase Documents, Buyer shall cease to be a Party), (iii) the obligations of Buyer shall be deemed to be so reduced, and (iv) Buyer will give prompt written notice thereof (including identification of the Eligible Assignee and the amount of Repurchase Price allocated to it) to each Party (but Buyer shall not have any liability for any failure to timely provide such notice).  Any sale or assignment by Buyer of rights or obligations under the Repurchase Documents that does not comply with this Section 17.08(c) shall be treated for purposes of the Repurchase Documents as a sale by such Buyer of a participation in such rights and obligations in accordance with Section 17.08(b).

 

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(d)                                 Seller shall cooperate with Buyer in connection with any such sale and assignment of participations or assignments and shall enter into such restatements of, and amendments, supplements and other modifications to, the Repurchase Documents to give effect to any such sale or assignment; provided, that none of the foregoing shall change any economic or other material term of the Repurchase Documents in a manner adverse to Seller without the consent of Seller.

 

(e)                                  Buyer shall have the right to partially or completely syndicate and or all of its rights under the Agreement and the other Repurchase Documents to any Eligible Assignee.

 

Section 17.09  Ownership and Hypothecation of Purchased Assets.  Title to all Purchased Assets shall pass to and vest in Buyer on the applicable Purchase Dates and, subject to the terms of the Repurchase Documents, Buyer or its designee shall have free and unrestricted use of all Purchased Assets and be entitled to exercise all rights, privileges and options relating to the Purchased Assets as the owner thereof, including rights of subscription, conversion, exchange, substitution, voting, consent and approval, and to direct any servicer or trustee.  Buyer or its designee may engage in repurchase transactions with the Purchased Assets or otherwise sell, pledge, repledge, transfer, hypothecate, or rehypothecate the Purchased Assets, all on terms that Buyer may determine; provided, that no such transaction shall affect the obligations of Buyer to transfer the Purchased Assets to Seller on the applicable Repurchase Dates free and clear of any pledge, Lien, security interest, encumbrance, charge or other adverse claim.  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 herein and the remedies for breach thereof, as they relate to the Purchased Assets that are subject to such repurchase transaction.

 

Section 17.10  Confidentiality.  All information regarding the terms set forth in any of the Repurchase Documents or the Transactions shall be kept confidential and shall not be disclosed by either Party to any Person except (a) to the Affiliates of such Party or its or their respective directors, officers, employees, agents, attorneys, advisors and other representatives who are informed of the confidential nature of such information and instructed to keep it confidential, (b) to the extent requested by any regulatory authority or required by Requirements of Law, (c) to the extent required to be included in the financial statements of either Party or an Affiliate thereof, including to the extent required for filings with the New York Stock Exchange or the United States Securities and Exchange Commission, (d) to the extent required to exercise any rights or remedies under the Repurchase Documents or Purchased Assets, (e) to the extent required to consummate and administer a Transaction, (f) to any actual or prospective Participant or Eligible Assignee or Hedge Counterparty which agrees to comply with this Section 17.10 and (g) to the extent required in connection with any litigation between the Parties hereto in connection with any Repurchase Documents; provided, that no such disclosure made with respect to any Repurchase Document shall include a copy of such Repurchase Document to the extent that a summary would suffice, but if it is necessary for a copy of any Repurchase Document to be disclosed, all pricing and other economic terms set forth therein shall be redacted before disclosure.

 

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Section 17.11  No Implied Waivers.  No failure on the part of Buyer or any Affiliated Hedge Counterparty to exercise, or delay in exercising, any right or remedy under the Repurchase Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy thereunder preclude any further exercise thereof or the exercise of any other right.  The rights and remedies in the Repurchase Documents are cumulative and not exclusive of any rights and remedies provided by law.  Application of the Default Rate after an Event of Default shall not be deemed to constitute a waiver of any Event of Default or Buyer’s or any Affiliated Hedge Counterparty’s rights and remedies with respect thereto, or a consent to any extension of time for the payment or performance of any obligation with respect to which the Default Rate is applied.  Except as otherwise expressly provided in the Repurchase Documents, no amendment, waiver or other modification of any provision of the Repurchase Documents shall be effective without the signed agreement of Seller and Buyer, and any amendment to this Agreement shall be subject to the prior written consent of each Affiliated Hedge Counterparty.  Any waiver or consent under the Repurchase Documents shall be effective only if it is in writing and only in the specific instance and for the specific purpose for which given.

 

Section 17.12  Notices and Other Communications.  Unless otherwise provided in this Agreement, all notices, consents, approvals, requests and other communications required or permitted to be given to a Party hereunder shall be in writing and sent prepaid by hand delivery, by certified or registered mail, by expedited commercial or postal delivery service, or by facsimile or email if also sent by one of the foregoing, to the address for such Party specified in Annex 1 or such other address as such Party shall specify from time to time in a notice to the other Party.  Any of the foregoing communications shall be effective when delivered or upon the first attempted delivery on a Business Day.  A Party receiving a notice that does not comply with the technical requirements of this Section 17.12 may elect to waive any deficiencies and treat the notice as having been properly given.

 

Section 17.13  Counterparts; Electronic Transmission.  Any Repurchase Document may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall together constitute but one and the same instrument.  Delivery of an executed counterpart of any Repurchase Documents by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of such Repurchase Document.

 

Section 17.14  No Personal Liability.  No administrator, incorporator, Affiliate, owner, member, partner, stockholder, officer, director, employee, agent or attorney of Buyer, any Indemnified Person, Seller or any Guarantor, as such, shall be subject to any recourse or personal liability under or with respect to any obligation of Buyer, Seller or any Guarantor under the Repurchase Documents, whether by the enforcement of any assessment, by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed that the obligations of Buyer, Seller or any Guarantor under the Repurchase Documents are solely their respective corporate, limited liability company or partnership obligations, as applicable, and that any such recourse or personal liability is hereby expressly waived.  This Section 17.14 shall survive the termination of the Repurchase Documents and the payment in full of the Repurchase Obligations.

 

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Section 17.15  Protection of Buyer’s Interests in the Purchased Assets; Further Assurances.

 

(a)           Seller shall take such action as requested by Buyer or as necessary to cause the Repurchase Documents and/or all financing statements and continuation statements and any other necessary documents covering the right, title and interest of Buyer and any Affiliated Hedge Counterparty to the Purchased Assets to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect such right, title and interest.  Seller shall deliver to Buyer file—stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing.  Seller shall execute any and all documents reasonably required to fulfill the intent of this Section 17.15.

 

(b)           Seller will promptly at its expense execute and deliver such instruments and documents and take such other actions as Buyer may reasonably request from time to time in order to perfect, protect, evidence, exercise and enforce Buyer’s and any Affiliated Hedge Counterparty’s rights and remedies under and with respect to the Repurchase Documents, the Transactions and the Purchased Assets.

 

(c)           If Seller fails to perform any of its Repurchase Obligations, Buyer may (but shall not be required to) perform or cause to be performed such Repurchase Obligation, and the costs and expenses incurred by Buyer in connection therewith shall be payable by Seller.  Without limiting the generality of the foregoing, Seller authorizes Buyer, at the option of Buyer and the expense of Seller, at any time and from time to time, to take all actions and pay all amounts that Buyer deems necessary or appropriate to protect, enforce, preserve, insure, service, administer, manage, perform, maintain, safeguard, collect or realize on the Purchased Assets and Buyer’s Liens and interests therein or thereon and to give effect to the intent of the Repurchase Documents.  No Default or Event of Default shall be cured by the payment or performance of any Repurchase Obligation by Buyer on behalf of Seller.  Buyer may make any such payment in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax Lien, title or claim except to the extent such payment is being contested in good faith by Seller in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.

 

(d)           Without limiting the generality of the foregoing, Seller will no earlier than six (6) or later than three (3) months before the fifth (5th) anniversary of the date of filing of each UCC financing statement filed in connection with to any Repurchase Document or any Transaction, (i) deliver and file or cause to be filed an appropriate continuation statement with respect to such financing statement and (ii) deliver or cause to be delivered to Buyer an opinion of counsel, in form and substance reasonably satisfactory to Buyer, confirming and updating the opinion delivered pursuant to Section 6.01(a) with respect to perfection and otherwise to the effect that the security interests hereunder continue to be enforceable and perfected security interests, subject to no other Liens of record except as provided herein or otherwise permitted hereunder, which opinion may contain usual and customary assumptions, limitations and exceptions.

 

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(e)           Except as provided in the Repurchase Documents, the sole duty of Buyer, Custodian or any other designee or agent of Buyer with respect to the Purchased Assets shall be to use reasonable care in the custody, use, operation and preservation of the Purchased Assets in its possession or control.  Buyer shall incur no liability to Seller or any other Person for any act of Governmental Authority, act of God or other destruction in whole or in part or negligence or wrongful act of custodians or agents selected by Buyer with reasonable care, or Buyer’s failure to provide adequate protection or insurance for the Purchased Assets.  Buyer shall have no obligation to take any action to preserve any rights of Seller in any Purchased Asset against prior parties, and Seller hereby agrees to take such action.  Buyer shall have no obligation to realize upon any Purchased Asset except through proper application of any distributions with respect to the Purchased Assets made directly to Buyer or its agent(s).  So long as Buyer and Custodian shall act in good faith in their handling of the Purchased Assets, Seller waives or is deemed to have waived the defense of impairment of the Purchased Assets by Buyer and Custodian.

 

Section 17.16  Default Rate.  To the extent permitted by Requirements of Law, Seller shall pay interest at the Default Rate on the amount of all Repurchase Obligations not paid when due under the Repurchase Documents until such Repurchase Obligations are paid or satisfied in full.

 

Section 17.17  Set—off.  In addition to any rights now or hereafter granted under the Repurchase Documents, Requirements of Law or otherwise, Seller and each Guarantor each hereby grants to Buyer and each Indemnified Person, to secure repayment of the Repurchase Obligations, a right of set-off upon any and all of the following: monies, securities, collateral or other property of Seller and each Guarantor and any proceeds from the foregoing, now or hereafter held or received by Buyer, any Affiliate of Buyer or any Indemnified Person, for the account of Seller or such Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general, specified, special, time, demand, provisional or final) and credits, claims or Indebtedness of Seller or any Guarantor at any time existing, and any obligation owed by Buyer or any Affiliate of Buyer to Seller or any Guarantor and to set—off against any Repurchase Obligations or Indebtedness owed by Seller or any Guarantor and any Indebtedness owed by Buyer or any Affiliate of Buyer to Seller or any Guarantor, in each case whether direct or indirect, absolute or contingent, matured or unmatured, whether or not arising under the Repurchase Documents and irrespective of the currency, place of payment or booking office of the amount or obligation and in each case at any time held or owing by Buyer, any Affiliate of Buyer or any Indemnified Person to or for the credit of any of Seller or any Guarantor, without prejudice to Buyer’s right to recover any deficiency; provided, however, that neither Buyer nor any Affiliated Hedge Counterparty shall exercise any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer unless an Event of Default has occurred; and, provided, further, that any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer is limited to an amount not to exceed $35,000,000.  Each of Buyer, each Affiliate of Buyer and each Indemnified Person is hereby authorized upon any amount becoming due and payable by Seller or any Guarantor to Buyer or any Indemnified Person under the Repurchase Documents, the Repurchase Obligations or otherwise or upon the occurrence of an Event of Default, without notice to Seller or any Guarantor, any such notice being expressly waived by Seller and each Guarantor to the extent permitted by any Requirements of Law, to set—off, appropriate, apply and enforce such right of set—off against any and all items hereinabove referred to against any amounts owing to Buyer or

 

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any Indemnified Person by Seller or any Guarantor under the Repurchase Documents and the Repurchase Obligations, irrespective of whether Buyer, any Affiliate of Buyer or any Indemnified Person shall have made any demand under the Repurchase Documents and regardless of any other collateral securing such amounts, and in all cases without waiver or prejudice of Buyer’s rights to recover a deficiency; provided, however, that neither Buyer nor any Affiliated Hedge Counterparty shall exercise any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer unless an Event of Default has occurred; and, provided, further, that any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer is limited to an amount not to exceed $35,000,000.  Seller and each Guarantor shall be deemed directly indebted to Buyer and the other Indemnified Persons in the full amount of all amounts owing to Buyer and the other Indemnified Parties by Seller and Guarantors under the Repurchase Documents and the Repurchase Obligations, and Buyer and the other Indemnified Persons shall be entitled to exercise the rights of set—off provided for above.  ANY AND ALL RIGHTS TO REQUIRE BUYER OR OTHER INDEMNIFIED PERSONS TO EXERCISE THEIR RIGHTS OR REMEDIES WITH RESPECT TO THE PURCHASED ASSETS OR OTHER INDEMNIFIED PERSONS UNDER THE REPURCHASE DOCUMENTS, PRIOR TO EXERCISING THE FOREGOING RIGHT OF SET—OFF, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY SELLER AND EACH GUARANTOR.

 

Buyer or any Indemnified Person shall promptly notify the affected Seller or the affected Guarantor, as appropriate, after any such set—off and application made by Buyer or such Indemnified Person, provided that the failure to give such notice shall not affect the validity of such set—off and application.  If an amount or obligation is unascertained, Buyer may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant Party accounting to the other Party when the amount or obligation is ascertained.  Nothing in this Section 17.17 shall be effective to create a charge or other security interest.  This Section 17.17 shall be without prejudice and in addition to any right of set-off, combination of accounts, Lien or other rights to which any Party is at any time otherwise entitled.

 

Section 17.18  Seller’s Waiver of Setoff.  Seller hereby waives any right of setoff it may have or to which it may be or become entitled under the Repurchase Documents or otherwise against Buyer, any Affiliate of Buyer, any Indemnified Person or their respective assets or properties.

 

Section 17.19  Power of Attorney.  Seller hereby authorizes Buyer to file such financing statement or statements relating to the Purchased Assets without Seller’s signature thereon as Buyer, at its option, may deem appropriate.  Seller hereby appoints Buyer as Seller’s agent and 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 its ownership interest in and/or the security interest granted hereby, if applicable, and to protect, preserve and realize upon the Purchased Assets, including, but not limited to, the right to endorse notes, complete blanks in documents, transfer servicing (including, but not limited, to sending “good-bye letters” on behalf of Seller, and sign assignments on behalf of Seller as its agent and attorney in fact.  This agency and power of attorney is coupled with an interest and is irrevocable without Buyer’s consent.  Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 17.19.  In addition, Seller shall execute and deliver

 

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to Buyer a power of attorney in form and substance satisfactory to Buyer (“Seller’s Power of Attorney”).

 

Section 17.20  Periodic Due Diligence Review.  At Seller’s expense, Buyer may perform continuing due diligence reviews with respect to the Purchased Assets, Seller, each Guarantor or any Affiliate of Seller or each Guarantor, including ordering new third party reports, for purposes of, among other things, verifying compliance with the representations, warranties, covenants, agreements, duties, obligations and specifications made under the Repurchase Documents or otherwise; provided, however, any costs and expenses incurred by the Buyer and reimbursable to Buyer by Seller in connection with the foregoing shall not to exceed $25,000 annually. Upon reasonable prior notice to Seller, unless a Default or an Event of Default exists, in which case no notice is required, Buyer or its representatives may during normal business hours inspect any properties and examine, inspect and make copies of the books and records of Seller, each Guarantor or any Affiliate of Seller or each Guarantor, and the Records in the possession of Seller, each Guarantor or any Affiliate of Seller or each Guarantor.  Seller shall make available to Buyer one or more knowledgeable financial or accounting officers and representatives of the independent certified public accountants of Seller and each Guarantor for the purpose of answering questions of Buyer concerning any of the foregoing.  Buyer may purchase Purchased Assets from Seller based solely on the information provided by Seller to Buyer and the representations, warranties, duties, obligations and covenants contained herein, and Buyer may at any time conduct a partial or complete due diligence review on some or all of the Purchased Assets including re-generating the information used to originate and underwrite such Purchased Assets.  Buyer may underwrite such Purchased Assets itself or engage a mutually acceptable third-party underwriter to do so.

 

Section 17.21  Time of the Essence.  Time is of the essence with respect to all obligations, duties, covenants, agreements, notices or actions or inactions of the Parties under the Repurchase Documents.

 

Section 17.22  Patriot Act Notice.  Buyer hereby notifies Seller that Buyer is required by the Patriot Act to obtain, verify and record information that identifies Seller.

 

Section 17.23  Successors and Assigns; No Third Party Beneficiaries.  Subject to the foregoing, the Repurchase Documents and any Transactions shall be binding upon and shall inure to the benefit of the Parties and their successors and permitted assigns.  Nothing in the Repurchase Documents, express or implied, shall give to any Person other than the Parties any benefit or any legal or equitable right, power, remedy or claim under the Repurchase Documents; provided, however, each Affiliated Hedge Counterparty shall be a third party beneficiary of this Agreement.

 

[ONE OR MORE UNNUMBERED SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.

 

	
SELLER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
NRFC WF CMBS, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Albert Tylis
    	
 
    
	
Name:
    	
Albert   Tylis
    	
 
    
	
Title:   
    	
Co-President &   Chief Operating Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
BUYER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
WELLS FARGO BANK, NATIONAL ASSOCIATION
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   John Rhee
    	
 
    
	
Name:   
    	
John   Rhee
    	
 
    
	
Title:   
    	
Vice   President
    	
 
    

 

[Signatures Continue]

 

 [Signature page to Master Repurchase and Securities Contract]

 

 

	
ACKNOWLEDGED AND AGREED
    	
 
    
	
 
    	
 
    
	
GUARANTOR:
    	
 
    
	
 
    	
 
    
	
NORTHSTAR REALTY FINANCE CORP.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Albert Tylis
    	
 
    
	
Name:   
    	
Albert   Tylis
    	
 
    
	
Title:   
    	
Co-President &   Chief Operating Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
GUARANTOR:
    	
 
    
	
 
    	
 
    
	
NORTHSTAR REALTY FINANCE, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Albert Tylis
    	
 
    
	
Name:   
    	
Albert   Tylis
    	
 
    
	
Title:
    	
 Co-President & Chief Operating   Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
GUARANTOR:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
NRFC SUB-REIT CORP.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Albert Tylis
    	
 
    
	
Name:   
    	
Albert   Tylis
    	
 
    
	
Title:   
    	
Co-President &   Chief Operating Officer
    	
 
    

 

[End of Signatures]

 

 [Signature page to Master Repurchase and Securities Contract]Exhibit 10.23

 

EXECUTION COPY

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT (as amended, modified or supplemented from time to time, the “Guaranty”), made as of October 28, 2011 (the “Effective Date”), by NorthStar Realty Finance Corp., a Maryland corporation (“NRFC”), NorthStar Realty Finance, L.P., a Delaware limited partnership (“NRFLP”), and NRFC Sub-REIT Corp., a Maryland corporation (“NSRC” and, together with NRFC and NRFLP, the “Guarantors” and each a “Guarantor”), jointly and severally in favor of Wells Fargo Bank, National Association (the “Buyer”).

 

RECITALS

 

Pursuant to that certain master repurchase and securities contract (the “Master Repurchase Agreement”) of even date herewith between the Buyer and NRFC WF CMBS, LLC, a Delaware limited liability company (the “Seller”), the Buyer has agreed from time to time to enter into transactions in which the Seller agrees to transfer to Buyer Assets (as defined in the Repurchase Agreement) in exchange for the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Assets at a date certain or on demand, in exchange for the transfer of funds by Seller to Buyer.  Each such transaction shall be referred to herein as a “Transaction”.  The Guarantors are receiving a benefit either directly or indirectly from the Seller for entering into this Guaranty. NSRC is the sole member and sole managing member of the Seller, NRFLP is the sole common shareholder of NRSC, and NRFC is the general partner NRFLP.  It is a condition precedent, among others, to the obligation of the Buyer to enter into Transactions under the Master Repurchase Agreement that the Guarantors shall have executed and delivered this Guaranty to the Buyer.

 

NOW, THEREFORE, in consideration of the foregoing premises, to induce the Buyer to enter into the Master Repurchase Agreement and to enter into Transactions thereunder, the Guarantors hereby agree with the Buyer, as follows:

 

1.  Defined Terms.  (a)   Unless otherwise defined herein, terms which are defined in the Master Repurchase Agreement and used herein are so used as so defined.

 

(b)  “Guarantor Obligations” shall mean all Repurchase Obligations, including, without limitation, the obligations and liabilities of Seller to the Buyer, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, or out of or in connection with the Master Repurchase Agreement and any other Repurchase Documents and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, reasonable, actual, out-of-pocket costs, expenses (including, without limitation, all fees and disbursements of counsel to the Buyer that are required to be paid by a party to the Transaction pursuant to the terms of the Repurchase Documents and costs of enforcement of this Guaranty) or otherwise.

 

 

(c)  “Material Adverse Effect”:  A material adverse effect on or material adverse change in or to (a) the financial condition or credit quality of any Guarantor, (b) the ability of any Guarantor to pay and perform the Guarantor Obligations, (c) the validity, legality, binding effect or enforceability of any Repurchase Document, Record, Purchased Asset or security interest granted hereunder or thereunder, (d) the rights and remedies of Buyer or any Indemnified Person under any Repurchase Document or Purchased Asset, (e) [reserved], or (f) the perfection or priority of any Lien granted under any Repurchase Document.

 

2.  Guaranty.  (a)  Each of the Guarantors hereby unconditionally and irrevocably guarantees to the Buyer the prompt and complete payment and performance by Seller when due (whether at the stated maturity, by acceleration or otherwise) of the Guarantor Obligations.  Each of the Guarantors hereby acknowledges and agrees that such Guarantor is jointly and severally liable to Buyer for all of the Guarantor Obligations.

 

(b)  Each of the Guarantors further agrees to pay any and all actual, out-of-pocket and reasonable expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Buyer in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Guarantor Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantors under this Guaranty.  This Guaranty shall remain in full force and effect until the Guarantor Obligations are paid in full, notwithstanding that from time to time prior thereto Seller may be free from any Guarantor Obligations.

 

(c)  No payment or payments made by Seller or any other Person or received or collected by the Buyer from Seller or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Guarantor Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantors hereunder which shall, notwithstanding any such payment or payments, remain liable for the amount of the Guarantor Obligations until the Guarantor Obligations are paid in full.

 

(d)  Each of the Guarantors agrees that whenever, at any time, or from time to time, such Guarantor shall make any payment to the Buyer on account of such Guarantor’s liability hereunder, such Guarantor will notify the Buyer in writing that such payment is made under this Guaranty for such purpose.

 

(e)  As security for NSRC’s performance of the Guarantor Obligations, NSRC hereby grants to Buyer and each Affiliated Hedge Counterparty on a pari passu basis a Lien on and security interest in all of the right, title and interest of NSRC in, to and under the Liquidity Account and all amounts and property from time to time on deposit in the Liquidity Account.  NSRC hereby authorizes the filing by, or on behalf of, the Buyer of UCC financing statements, continuation statements and amendments that describe the aforementioned collateral and that contain any information required by Part 5 of Article 9 of the UCC for the sufficiency or filing acceptance of any financing statement, continuation statement or amendment.

 

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3.  Right of Set-off. In addition to any rights now or hereafter granted under the Repurchase Documents, each of the Guarantors hereby grants to Buyer and each Indemnified Person, to secure repayment of the Guarantor Obligations, a right of set-off upon any and all of the following: monies, securities, collateral or other property of such Guarantor and any proceeds from the foregoing, now or hereafter held or received by Buyer, any Affiliate of Buyer or any Indemnified Person, for the account of such Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general, specified, special, time, demand, provisional or final) and credits, claims or Indebtedness of such Guarantor at any time existing, and any obligation owed by Buyer or any Affiliate of Buyer to such Guarantor and to set—off against any Guarantor Obligations or Indebtedness owed by any Guarantor and any Indebtedness owed by Buyer or any Affiliate of Buyer to any Guarantor, in each case whether direct or indirect, absolute or contingent, matured or unmatured, whether or not arising under the Repurchase Documents and irrespective of the currency, place of payment or booking office of the amount or obligation and in each case at any time held or owing by Buyer, any Affiliate of Buyer or any Indemnified Person to or for the credit of any Guarantor, without prejudice to Buyer’s right to recover any deficiency; provided, however, that neither Buyer nor any Affiliated Hedge Counterparty shall exercise any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer unless an Event of Default has occurred; and, provided, further, that any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer is limited to an amount not to exceed $35,000,000.  Each of Buyer, each Affiliate of Buyer and each Indemnified Person is hereby authorized upon any amount becoming due and payable by any Guarantor to Buyer or any Indemnified Person under the Repurchase Documents, the Guarantor Obligations or otherwise or upon the occurrence of an Event of Default, to set—off, appropriate, apply and enforce such right of set—off against any and all items hereinabove referred to against any amounts owing to Buyer or any Indemnified Person by any Guarantor under the Repurchase Documents and the Guarantor Obligations, irrespective of whether Buyer, any Affiliate of Buyer or any Indemnified Person shall have made any demand under the Repurchase Documents and regardless of any other collateral securing such amounts, and in all cases without waiver or prejudice of Buyer’s rights to recover a deficiency; provided, however, that neither Buyer nor any Affiliated Hedge Counterparty shall exercise any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer unless an Event of Default has occurred; and, provided, further, that any such right to set-off under any Repurchase Document with respect to amounts on deposit at Buyer is limited to an amount not to exceed $35,000,000. ANY AND ALL RIGHTS TO REQUIRE BUYER, ANY AFFILIATE OF BUYER OR OTHER INDEMNIFIED PERSONS TO EXERCISE THEIR RIGHTS OR REMEDIES UNDER THE REPURCHASE DOCUMENTS, PRIOR TO EXERCISING THE FOREGOING RIGHT OF SET—OFF, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY EACH OF THE GUARANTORS.

 

Buyer or any Indemnified Person shall promptly notify the related Guarantor of any such set—off and application made by Buyer or such Indemnified Person, provided that the failure to give such notice shall not affect the validity of such set—off and application.  If an amount or obligation is unascertained, Buyer may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other party when the amount or obligation is ascertained.  Nothing in this Section 3 shall be effective to create a charge or other

 

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security interest.  This Section 3 shall be without prejudice and in addition to any right of set-off, combination of accounts, Lien or other rights to which any party is at any time otherwise entitled.

 

4.  Subrogation.  Notwithstanding any payment or payments made by the Guarantors hereunder or any set-off or application of funds of the Guarantors by the Buyer, the Guarantors shall not be entitled to be subrograted to any of the rights of the Buyer against Seller or any other guarantor or any collateral security or guarantee or right of offset held by the Buyer for the payment of the Guarantor Obligations, nor shall the Guarantors seek or be entitled to seek any contribution or reimbursement from Seller or any other guarantor in respect of payments made by either of the Guarantors hereunder, until all amounts owing to the Buyer by Seller on account of the Guarantor Obligations are paid in full.  If any amount shall be paid to either of the Guarantors on account of such subrogation rights at any time when all of the Guarantor Obligations shall not have been paid in full, such amounts shall be held by the related Guarantor in trust for the Buyer, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Buyer in the exact form received by such Guarantor (duly indorsed by the related Guarantor to the Buyer, if required), to be applied against the Guarantor Obligations, whether matured or unmatured, in such order as the Buyer may determine.

 

5.  Amendments, etc. with Respect to the Guarantor Obligations.  Each of the Guarantors shall remain obligated hereunder notwithstanding that, without any reservation of rights against such Guarantor, and without notice to or further assent by such Guarantor, any demand for payment of any of the Guarantor Obligations made by the Buyer may be rescinded by the Buyer, and any of the Guarantor Obligations continued, and the Guarantor Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Buyer, and the Master Repurchase Agreement, and the other Repurchase Documents and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Buyer may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time, held by the Buyer for the payment of the Guarantor Obligations may be sold, exchanged, waived, surrendered or released.  The Buyer shall have no obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Guarantor Obligations or for this Guaranty or any property subject thereto.  When making any demand hereunder against any Guarantor, the Buyer may, but shall be under no obligation to, make a similar demand on Seller and any other Guarantor and any failure by the Buyer to make any such demand or to collect any payments from Seller or any other Guarantor or any release of Seller or any other Guarantor shall not relieve such Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Buyer against such Guarantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings and any written or oral notification transmitted to any Guarantor or Seller for such Guarantor to perform its obligations hereunder.

 

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6.  Guaranty Absolute and Unconditional.  (a)   Each of the Guarantors waives any and all notice of the creation, renewal, extension or accrual of any of the Guarantor Obligations and notice of or, proof of reliance by the Buyer upon this Guaranty or acceptance of this Guaranty; the Guarantor Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived in reliance upon this Guaranty; and all dealings between Seller or the Guarantors, on the one hand, and the Buyer, on the other, shall, likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty.  Each of the Guarantors waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Seller or the Guarantors with respect to the Guarantor Obligations.  This Guaranty shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (i) the validity or enforceability of the Master Repurchase Agreement, the other Repurchase Documents, any of the Guarantor Obligations, or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Buyer, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by Seller against the Buyer, or (iii) any other, circumstance whatsoever (with or without notice to or knowledge of Seller or the Guarantors) which constitutes, or might be construed to constitute, an equitable or legal discharge of Seller for the Guarantor Obligations, or either of the Guarantors under this Guaranty, in bankruptcy or in any other instance.  When pursuing its rights and remedies hereunder against any Guarantor, the Buyer may, but shall be under no obligation, to pursue such rights and remedies that they may have against Seller, any other Guarantor or any other Person or against any collateral security or guarantee for the Guarantor Obligations or any right of offset with respect thereto, and any failure by the Buyer to pursue such other rights or remedies or to collect any payments from Seller, any other Guarantor or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of Seller or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Buyer against such Guarantor.  This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and their successors and assigns thereof, and shall inure to the benefit of the Buyer, and successors, indorsees, transferees and assigns, until all the Guarantor Obligations and the obligations of the Guarantors under this Guaranty shall have been satisfied by payment in full, notwithstanding that from time to time during the term of the Master Repurchase Agreement Seller may be free from any Guarantor Obligations.

 

(b)  Without limiting the generality of the foregoing, each of the Guarantors hereby agrees, acknowledges, and represents and warrants to the Buyer as follows:

 

(i)  Each of the Guarantors hereby waives any defense arising by reason of, and any and all right to assert against the Buyer any claim or defense based upon, an election of remedies by the Buyer which in any manner impairs, affects, reduces, releases, destroys and/or extinguishes such Guarantor’s subrogation rights, rights to proceed against the Seller or any other guarantor for reimbursement or contribution, and/or any other rights of such Guarantor to proceed against the Seller, against any other guarantor, or against any other person or security;

 

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(ii)  Each of the Guarantors is presently informed of the financial condition of the Seller and of all other circumstances which diligent inquiry would reveal and which bear upon the risk of nonpayment of the Guarantor Obligations.  Each of the Guarantors hereby covenants that it will make its own investigation and will continue to keep itself informed of the Seller’s financial condition, the status of other guarantors, if any, of all other circumstances which bear upon the risk of nonpayment and that it will continue to rely upon sources other than the Buyer for such information and will not rely upon the Buyer for any such information.  Absent a written request for such information by such Guarantor to the Buyer, such Guarantor hereby waives its right, if any, to require the Buyer to disclose to such Guarantor any information which the Buyer may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of or revocation by any other guarantor; and

 

(iii)  Each of the Guarantors has independently reviewed the Master Repurchase Agreement, the Repurchase Documents and related agreements and has made an independent determination as to the validity and enforceability thereof, and in executing and delivering this Guaranty to the Buyer, such Guarantor is not in any manner relying upon the validity, and/or enforceability, and/or attachment, and/or perfection of any Liens or security interests of any kind or nature granted by the Seller or any other guarantor to the Buyer, now or at any time and from time to time in the future.

 

7.  Reinstatement.  This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Guarantor Obligations is rescinded or must otherwise be restored or returned by the Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Seller or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Seller or any substantial part of its property, or otherwise, all as though such payments had not been made.

 

8.  Payments.  Each of the Guarantors hereby agrees that the Guarantor Obligations will be paid to the Buyer without set-off or counterclaim in U.S. Dollars.

 

9.  Representations and Warranties.  Each of the Guarantors hereby represents and warrants that:

 

(a)  it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the power and authority and the legal right to own and operate its property, except where failure to obtain such power, authority and legal right shall not have a Material Adverse Effect, to lease the property it operates as lessee and to conduct the business in which it is currently engaged;

 

(b)  it has the power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty and has taken all necessary action to authorize its execution, delivery and performance of this Guaranty;

 

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(c)  this Guaranty has been duly executed and delivered by such Guarantor and constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as enforceability, may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general, principles of equity (whether enforcement is sought in proceedings in equity or at law);

 

(d)  the execution, delivery and performance of this Guaranty will not violate any provision of the charter, by-laws or other organizational documents of such Guarantor, or any law, treaty, rule or regulation or determination of an arbitrator, a court or other governmental authority, applicable to or binding upon such Guarantor or any of its property or to which the Guarantor or any of its property is subject (“Requirement of Law”), or any provision of any security issued by such Guarantor or of any agreement, instrument or other undertaking to which such Guarantor is a party or by which it or any of its property is bound (“Contractual Obligation”), and will not result in or require the creation or imposition of any Lien on any of the properties or revenues of such Guarantor pursuant to any Requirement of Law or Contractual Obligation of such Guarantor, except with respect to Liens, the creation of which shall not have a Material Adverse Effect;

 

(e)  no consent or authorization of, filing with, notice to, or other act by or in respect of, any Governmental Authority or any other Person (including, without limitation, any stockholder or creditor of such Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty, except for any failure to obtain such consent, authorization, filings, notice or any other actions that would not have a Material Adverse Effect;

 

(f)  Except as previously disclosed to Buyer and as listed on Schedule 2 of the Master Repurchase Agreement, no material litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against any of such Guarantor’s properties or revenues (i) with respect to this Guaranty or any of the transactions contemplated hereby, or (ii) which could reasonably be expected to have a Material Adverse Effect;

 

(g)  such Guarantor has filed or caused to be filed all tax returns which, to the knowledge of such Guarantor, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of such Guarantor’s property and all other taxes, fees or other charges imposed on it or any of such Guarantor’s property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which applicable reserves have been provided on the books of such Guarantor); no tax Lien has been filed, and, to the knowledge of such Guarantor, no claim is being asserted, with respect to any such tax, fee or other charge; and

 

(h)  all financial statements and any tax returns of the Guarantors, copies of which have been furnished to Buyer, (i) are, as of the dates and for the periods referred to

 

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therein, complete and correct in all material respects, (ii) present fairly the financial condition and the results of operations of the Guarantors as of the dates and for the periods indicated in all material respects and (iii) with respect to financial statements, have been prepared in accordance with GAAP consistently applied, except as noted therein; and since the date of the most recent financial statements furnished to Buyer, there is no Material Adverse Effect with respect to any Guarantor.

 

Each of the Guarantors agrees that the foregoing representations and warranties shall be deemed to have been made by such Guarantor on the date of each Transaction under the Master Repurchase Agreement on and as of such Purchase Date and at all times any Asset is subject to a Transaction.

 

10.  Covenants.

 

(a)           Each of the Guarantors covenants and agrees that such Guarantor will not change its legal name or principal place of business without having provided to the Buyer prior written notice of any such change.

 

(b)           Each of the Guarantors covenants and agrees that it will promptly, and in any event within five (5) days after service of process on any of the following, give to Buyer notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are threatened in writing or pending) or other legal or arbitrable proceedings affecting such Guarantor or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Repurchase Documents or any action to be taken in connection with the transactions contemplated thereby, (ii) makes a claim in an individual or aggregate amount greater than $5,000,000, or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect.

 

(c)           At all times on and after the initial Transaction, NSRC hereby covenants and agrees that it shall maintain at least $35,000,000 in unrestricted cash or cash equivalents in the Liquidity Account, which shall at all times be subject to the Account Control Agreement.  NRSC shall provide Buyer with prompt written notice should the balance of the Liquidity Account equal an amount less than $35,000,000.  Upon the occurrence of an Event of Default or Default, NRSC hereby acknowledges and agrees that Buyer shall have sole access to and control over all amounts or other property in the Liquidity Account.

 

11.  [Reserved]

 

12.  Event of Default; Remedies.  If at any time (a) the obligations of any Guarantor under this Guaranty shall cease to be in effect, or (b) any Guarantor breaches or violates of any provision set forth in the Guaranty (including, without limitation, the covenant set forth in Section 10(c)) and the same is not cured within one (1) Business Day after notice, such event shall constitute a “Guarantee Default” and an Event of Default under the Master Repurchase Agreement.

 

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(b)  If an Event of Default under the Master Repurchase Agreement shall have occurred and be continuing, or in the event of a Guarantee Default, each of the Guarantors agrees that, as between such Guarantor and Buyer, the Guarantor Obligations may be declared to be due for purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any such declaration as against Seller and that, in the event of any such declaration (or attempted declaration), such Guarantor Obligations shall forthwith become due by such Guarantor for purposes of this Guaranty.

 

13.  [Reserved.]

 

14.  Severability.  Any provision of this Guaranty which is, prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

15.  Headings.  The paragraph headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

 

16.  No Waiver; Cumulative Remedies.  The Buyer shall not by any act (except by a written instrument pursuant to paragraph 17 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising, on the part of the Buyer, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Buyer of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Buyer would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

 

17.  Waivers and Amendments; Successors and Assigns.  None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Guarantors and the Buyer, provided that any provision of this Guaranty may be waived by the Buyer in a letter or agreement executed by the Buyer and delivered either by facsimile or electronic transmission from the Buyer.  This Guaranty shall be binding, upon the heirs, personal representatives, successors and assigns of the Guarantors and shall inure to the benefit of the Buyer and its respective successors and assigns.

 

18.  Notices.  Notices to any of the parties hereunder shall be in writing and sent prepaid by hand delivery, by certified or registered mail, by expedited commercial or postal delivery service, or by facsimile or email if also sent by one of the foregoing, addressed as follows:

 

If to NorthStar Realty Finance Corp.:

 

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399 Park Avenue, 18th Floor

New York, NY  10022

Attn:  General Counsel

 

If to NorthStar Realty Finance, L.P.:

 

399 Park Avenue, 18th Floor

New York, NY  10022

Attn:  General Counsel

 

If to NRFC Sub-REIT Corp..:

 

399 Park Avenue, 18th Floor

New York, NY  10022

Attn:  General Counsel

 

If to Wells Fargo Bank, National Association:

 

Wells Fargo Bank, National Association

c/o Wells Fargo Securities LLC

375 Park Ave, 2nd Floor

New York, NY 10152

Attn: Darren Esser; John Rhee; Jin Fu

 

Any of the foregoing communications shall be effective when delivered or upon the first attempted delivery on a Business Day.

 

19.  Jurisdiction.

 

(a)  THIS GUARANTY AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS GUARANTY, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)  EACH OF THE GUARANTORS AND BUYER HEREBY WAIVES TRIAL BY JURY.  EACH OF THE GUARANTORS AND BUYER HEREBY IRREVOCABLY CONSENTS TO THE 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 REPURCHASE DOCUMENTS IN ANY ACTION OR PROCEEDING.  EACH OF THE GUARANTORS AND BUYER HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, 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

 

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RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE REPURCHASE DOCUMENTS.

 

(c)  [Reserved.]

 

20.  Integration.  This Guaranty represents the agreement of the Guarantors with respect to the subject matter hereof and there are no promises or representations by the Buyer relative to the subject matter hereof not reflected herein.

 

21.  Acknowledgments.  Each of the Guarantors hereby acknowledges that:

 

(a)  Such Guarantor has been advised by counsel in the negotiation, execution and delivery of this Guaranty; and

 

(b)  the execution of this Guaranty does not create a fiduciary relationship between such Guarantor and the Buyer, and (i) the relationship between the Buyer and such Guarantor is solely that of surety and creditor and (ii) no joint venture exists between the Buyer and such Guarantor or among the Buyer, Seller and such Guarantor.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.

 

	
 
    	
NORTHSTAR   REALTY FINANCE CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Albert Tylis
    
	
 
    	
Name:   Albert Tylis
    
	
 
    	
Title:   Co-President & Chief Operating Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NORTHSTAR   REALTY FINANCE, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   NorthStar Realty Finance Corp., its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Albert Tylis
    
	
 
    	
Name:   Albert Tylis
    
	
 
    	
Title:   Co-President & Chief Operating Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NRFC   SUB-REIT CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Albert Tylis
    
	
 
    	
Name:   Albert Tylis
    
	
 
    	
Title:   Co-President & Chief Operating Officer
    

 

[Signature page to Guaranty Agreement - NorthStar]

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