Document:

Exhibit

Execution Version

PURCHASE AND SALE AGREEMENT
by and among
CNX MIDSTREAM PARTNERS LP
CNX MIDSTREAM DEVCO I LP
CNX MIDSTREAM DEVCO III LP
and
CNX GATHERING LLC

and for purposes of Section 5.2 only,
CNX MIDSTREAM DEVCO I GP LLC, CNX MIDSTREAM DEVCO III GP LLC and
CNX MIDSTREAM OPERATING COMPANY LLC

dated as of
February 7, 2018

TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS; RULES OF CONSTRUCTION2
1.1Definitions    2
1.2References and Rules of Construction    2
ARTICLE II. PURCHASE AND SALE; CONSIDERATION; ACKNOWLEDGEMENTS3
2.1Purchase and Sale    3
2.2Purchase Price    3
2.3Purchase Price Adjustments    3
2.4Assumed Liabilities    4
2.5Transaction Taxes    5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CNX GATHERING5
3.1Organization and Existence    5
3.2Authority and Approval; Enforceability    5
3.3No Conflict    5
3.4Consents    6
3.5Proceedings; Laws and Regulations    6
3.6Management Projections and Budgets    7
3.7Title to Interests    7
3.8Brokerage Arrangements    8
3.9No Preferential Rights    8
3.10Real Property; Rights-of-Way.    8
3.11Environmental Matters    9
3.12Shirley-Penns Assets    9
3.13Permits.    9
3.14Contracts.    10
3.15Insurance    10
3.16Taxes    10
3.17No Other Representations or Warranties    11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP PARTIES11
4.1Organization and Existence    11
4.2Authority and Approval; Enforceability    11
4.3No Conflict    11
4.4Consents    12
4.5Laws and Regulations; Litigation    12
4.6Delivery of Fairness Opinion    12
4.7Brokerage Arrangements    13
4.8No Other Representations or Warranties    13
ARTICLE V. COVENANTS AND AGREEMENTS13
5.1Interim Operation of the Shirley-Penns Assets    13
5.2Reorganization    13
5.3Consents    14
5.4HSR Act    15
5.5Further Assurances    15
5.6Financing Cooperation    15
5.7Tax Covenants    16
ARTICLE VI. CONDITIONS TO CLOSING16
6.1Conditions to the Obligations of Each Party    16
6.2Conditions to the Obligations of the Partnership Parties    17
6.3Conditions to the Obligations of CNX Gathering    17
ARTICLE VII. CLOSING18
7.1Closing    18
7.2Deliveries by CNX Gathering    18
7.3Deliveries by the Partnership Parties    18
ARTICLE VIII. INDEMNIFICATION19
8.1Indemnification of CNX Gathering    19
8.2Indemnification of the Partnership Parties    19
8.3Demands    19
8.4Right to Contest and Defend    19
8.5Cooperation    20
8.6Right to Participate    20
8.7Payment of Damages    20
8.8Limitations on Indemnification    20
8.9Survival    21
8.10Sole Remedy    21
8.11Express Negligence Rule    22
8.12Knowledge    22
ARTICLE IX. TERMINATION22
9.1Events of Termination    22
9.2Effect of Termination    22
ARTICLE X. MISCELLANEOUS23
10.1Expenses    23
10.2Right of Offset    23
10.3Notices    23
10.4Governing Law    24
10.5Public Statements    24
10.6Form of Payment    24
10.7Entire Agreement; Amendments and Waivers    24
10.8Binding Effect and Assignment    25
10.9Severability    25
10.10Interpretation    25
10.11Counterparts    25

APPENDICES AND EXHIBITS
		
	Appendix I
	Definitions

		
	Exhibit A-1
	Form of SP Holdings Assignment

		
	Exhibit A-2
	Form of CNX Assignment 

		
	Exhibit A-3
	Form of DevCo Assignment 

		
	Exhibit B
	Form of First Amendment to CNX GGA

		
	Exhibit C-1
	Shirley-Penns System Maps 

		
	Exhibit C-2
	Gathering System

		
	Exhibit C-3
	Real Property Interests

		
	Exhibit D-1
	CNX Gathering Shirley-Penns Assets 

		
	Exhibit D-2
	CNX Gathering Shirley-Penns Contracts

PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this “Agreement”) is made and entered into as of February 7, 2018 by and among CNX Midstream Partners LP, a Delaware limited partnership (the “Partnership”), CNX Midstream DevCo I LP, a Delaware limited partnership (“DevCo I LP”), CNX Midstream DevCo III LP, a Delaware limited partnership (“DevCo III LP”), and CNX Gathering LLC, a Delaware limited liability company (“CNX Gathering”), and for purposes of Section 5.2 only, CNX Midstream DevCo I GP LLC, a Delaware limited liability company (“GP I”), CNX Midstream DevCo III GP LLC, a Delaware limited liability company (“GP III”), and CNX Midstream Operating Company LLC, a Delaware limited liability company (“OpCo”). The Partnership, DevCo I LP, DevCo III LP and CNX Gathering are sometimes referred to in this Agreement individually as a “Party” and collectively as the “Parties.” 
RECITALS:
WHEREAS, CNX Gas Company LLC, a Virginia limited liability company (“CNX”), owns 100% of the membership interests in CNX Gathering, which owns (a) 100% of the membership interests in CNX Midstream GP LLC, a Delaware limited liability company (the “General Partner”), and general partner of the Partnership, (b) a 95% limited partner interest in DevCo III LP, which owns the DevCo Shirley-Penns Assets (as defined below) and (c) the CNX Shirley-Penns Assets (as defined below);
WHEREAS, the Partnership owns 100% of the membership interests in OpCo, which owns (a) 100% of the membership interests in GP I, which owns a 75% general partner interest in DevCo I LP, (b) a 25% limited partner interest in DevCo I LP and (c) 100% of the membership interests in GP III, which owns a 5% general partner interest in DevCo III LP;
WHEREAS, DevCo III LP has funded the acquisition and all other costs associated with the real property included in the CNX Shirley-Penns Assets and administers the contracts included in the CNX Shirley-Penns Assets;
WHEREAS, CNX, as shipper, and OpCo, DevCo I LP, CNX Midstream DevCo II LP, a Delaware limited partnership, and DevCo III LP, collectively, as gatherer, are parties to that certain Second Amended and Restated Gas Gathering Agreement, dated as of January 3, 2018 (the “CNX GGA”);
WHEREAS, in accordance with the terms of this Agreement (collectively, the “Transaction”):
(a)prior to the Closing (as defined below), (i) DevCo III LP shall form a wholly-owned limited liability company (“SP Holdings”) and contribute, assign, transfer, convey and deliver to SP Holdings the DevCo Shirley-Penns Assets, (ii) CNX Gathering shall assign, transfer, convey and deliver to SP Holdings the CNX Shirley-Penns Assets; and (iii) following such contribution from DevCo III LP and assignment from CNX Gathering, DevCo III LP shall distribute 95% of the membership interests in SP Holdings (the “CNX Interests”) to CNX Gathering and 5% of the membership interests in SP Holdings (the “DevCo Interests”) to GP III;
(b)in connection with the Closing, (i) CNX Gathering shall assign, transfer, convey and deliver to DevCo I LP, as designee of the Partnership, and DevCo I LP, as the Partnership’s designee, will receive, accept and acquire from CNX Gathering, the CNX Interests in exchange for the Purchase Price (as defined below) and (ii) GP III shall assign, transfer, convey and deliver to DevCo I LP, as designee of the Partnership, and DevCo I LP, as the Partnership’s designee, will receive, accept and acquire from GP III, the DevCo Interests; and 
(c)in connection with the Closing, the Partnership and CNX desire to amend (or cause to be amended) the CNX GGA to reflect the transactions contemplated by this Agreement as set forth in that certain First Amendment to CNX GGA substantially in the form attached as Exhibit B (the “CNX GGA Amendment”);
WHEREAS, the Conflicts Committee (the “Conflicts Committee”) of the Board of Directors of the General Partner (the “Board of Directors”) has previously:
(a)received an opinion (the “Fairness Opinion”) of Evercore Group L.L.C., the financial advisor to the Conflicts Committee (the “Financial Advisor”), to the effect that, as of the date of such opinion, and based upon and subject to the assumptions, qualifications, limitations and other matters set forth therein, the Purchase Price (as defined below) to be paid by the Partnership pursuant to this Agreement is fair, from a financial point of view, to the Partnership and to the holders of common units representing limited partner interests in the Partnership, other than the General Partner and CNX Resources Corporation, a Delaware corporation, and their respective Affiliates (collectively, the “Public Unitholders”);
(b)after an evaluation of, among other things, the Transaction, the Fairness Opinion and the proposed terms and conditions of this Agreement and the other Transaction Documents (as defined below), determined in good faith that the Transaction, including this Agreement and the other Transaction Documents, are in the best interests of the Partnership and the Public Unitholders; 
(c)unanimously approved the Transaction, the Transaction Documents and the transactions contemplated thereby upon the terms and conditions set forth in the Transaction Documents, such approval constituting (i) “Special Approval” for purposes of the Partnership Agreement (as defined below) and (ii) approval of the Board of Directors, without necessity of further approval or action by the Board; and 
(d)unanimously approved the entry into the Transaction Documents and the consummation of the Transaction upon the terms and conditions set forth in the Transaction Documents by the Partnership or its designee(s);
WHEREAS, the respective Parties have taken or caused to be taken all limited liability company and limited partnership action, as the case may be, required to approve the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

Article I. 
DEFINITIONS; RULES OF CONSTRUCTION

1.1    Definitions.  For purposes this Agreement, the capitalized terms used herein and not otherwise defined have the meanings set forth in Appendix I.

1.2    References and Rules of Construction.  All references in this Agreement to Appendices, Exhibits, Articles, Sections, subsections and other subdivisions refer to the corresponding Appendices, Exhibits, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise.  Titles appearing at the beginning of any Appendices, Exhibits, Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement and shall be disregarded in construing the language hereof.  The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular Appendix, Exhibit, Article, Section, subsection or other subdivision unless expressly so limited.  The word “including” (in its various forms) means “including without limitation.”  All references to “$” or “dollars” shall be deemed references to United States dollars.  Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.  References to any law means such law as it may be amended from time to time.

Article II.     
PURCHASE AND SALE; CONSIDERATION; ACKNOWLEDGEMENTS

2.1    Purchase and Sale.  Upon the terms and subject to the conditions set forth in this Agreement and in the DevCo Assignment, at the Closing, CNX Gathering shall sell, transfer, assign, convey and deliver, and DevCo I LP, as designee of the Partnership, agrees to purchase and pay for the CNX Interests.  

2.2    Purchase Price.  At the Closing, in consideration for the sale of the CNX Interests, the Partnership shall pay to CNX Gathering an amount of cash equal to $265,000,000 (as adjusted pursuant to Section 2.3, the “Purchase Price”).

2.3    Purchase Price Adjustments.  
(a)Adjustments.  The Purchase Price shall be adjusted as follows: 
(i)    upwards by an amount equal to 95% of the revenues associated with the Shirley-Penns Assets and attributable to the period prior to the Effective Time to the extent that such proceeds have not been received by CNX Gathering;
(ii)    upwards by an amount equal to 95% of the capital and/or operating expenditures related to the development, engineering, permitting, design, procurement, construction, installation and operation of the Shirley-Penns Assets (the “Asset Expenses”) paid by CNX Gathering and attributable to the period from and after the Effective Time;
(iii)    downwards by an amount equal to 95% of the revenues associated with the Shirley-Penns Assets and attributable to the period from and after the Effective Time to the extent that such proceeds have been received by CNX Gathering; and
(iv)    downwards by an amount equal to 95% of the Asset Expenses paid by the Partnership Parties and not reimbursed by CNX Gathering and attributable to the period prior to the Effective Time.
(b)Revenue and Expense Allocation.  CNX Gathering shall be entitled to all of the rights of ownership attributable to 95% of the Shirley-Penns Assets and shall remain responsible for 95% of the Asset Expenses, in each case, attributable to the period of time prior to the Effective Time.  Subject to the occurrence of Closing, the Partnership Parties shall be entitled to all of the rights of ownership attributable to the Shirley-Penns Assets (including the right to all production, proceeds of production and other proceeds), and shall be responsible for all Asset Expenses, in each case, from and after the Effective Time.  Subject to Section 2.5, (i) 95% of all Asset Expenses that are incurred with respect to operations conducted or production prior to the Effective Time shall be paid by or allocated to CNX Gathering and (ii) all Asset Expenses that are incurred with respect to operations conducted or production from and after the Effective Time shall be paid by or allocated to DevCo I LP or SP Holdings. 
(c)Purchase Price Statements.  Not less than one day prior to the Closing, CNX Gathering shall prepare and deliver to the Partnership a statement setting forth the Purchase Price (using the information available to CNX Gathering at such time, including its good faith estimates where actual adjustments are not available) and providing reasonable supporting documentation used to determine the adjustments set forth in Section 2.3(a).  Not less than 120 days following Closing, CNX Gathering shall prepare and deliver to the Partnership a statement setting forth the Purchase Price based on actual revenues and expenses during the period from and after the Effective Time until Closing and which takes into account all final adjustments made to the Purchase Price and shows the resulting final Purchase Price.  Within 30 days following receipt of the final statement, the Partnership may deliver to CNX Gathering a notice setting forth any proposed changes to the final adjustments to the Purchase Price.  Following such delivery, CNX Gathering and the Partnership shall use their commercially reasonable efforts to agree on all final adjustments to the Purchase Price no later than 90 days after delivery of the CNX Gathering’s statement.
(d)In the event that the Parties cannot reach agreement within such period of time, either Party may refer the remaining matters in dispute to the Pittsburgh, Pennsylvania office of a nationally recognized accounting firm that is mutually agreeable to the Parties for review and final determination by arbitration. The accounting firm shall conduct the arbitration proceedings in Pittsburgh, Pennsylvania in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section 2.3. The Parties shall instruct the accounting firm to deliver to the Parties a written determination within 30 days after submission of the matters in dispute, which shall be final and binding on both Parties, without right of appeal. In determining the proper amount of any adjustment to the Purchase Price, the accounting firm shall not increase the Purchase Price more than the increase proposed by CNX Gathering nor decrease the Purchase Price more than the decrease proposed by the Partnership, as applicable. The accounting firm shall act as an independent neutral expert for the limited purpose of determining the specific disputed matters submitted by the Parties and may not award damages, interest or penalties to the Parties with respect to any matter. CNX Gathering and the Partnership shall each bear its own legal fees and other costs of presenting its case. CNX Gathering shall bear one-half and the Partnership shall bear one-half of the costs and expenses of the accounting firm. Within ten days after the earlier of (i) the expiration of the Partnership’s 30-day review period without delivery of any written report by the Partnership and (ii) the date on which the Parties finally determine the Purchase Price, as adjusted, or the accounting firm finally determines the disputed matters submitted to it, as applicable, (A) the Partnership shall pay to CNX Gathering the amount by which the final adjusted Purchase Price exceeds the amount paid to CNX Gathering at the Closing or (B) CNX Gathering shall pay to the Partnership the amount by which the amount paid to CNX Gathering at the Closing exceeds the final adjusted Purchase Price, as applicable. Any post-closing payment pursuant to this Section 2.3 shall bear interest from the Closing Date to the date of payment at the Prime Rate.

2.4    Assumed Liabilities.  Subject to the indemnification rights provided in Section 8.2, from and after the Closing, the Partnership Group agrees to assume and to pay, discharge and perform as and when due, all Liabilities that first accrue, are caused by, arise out of, are associated with, are in respect of, or are incurred, in each case, at any time prior to, on or after the Effective Time, in connection with the ownership of the CNX Interests and/or the Shirley-Penns Assets or other activities occurring in connection with and attributable to the ownership of the CNX Interests and/or the Shirley-Penns Assets (collectively, the “Assumed Liabilities”). 

2.5    Transaction Taxes.  All sales, use, transfer, filing, registration, business and occupation and similar Taxes arising from or associated with the transactions contemplated by this Agreement other than Taxes based on income (“Transaction Taxes”) shall be borne fifty percent (50%) by CNX Gathering and fifty percent (50%) by the Partnership.  To the extent under applicable law the transferee is responsible for filing Tax Returns in respect of Transaction Taxes, the Partnership shall prepare and file all such Tax Returns.  The Parties shall provide such certificates and other information and otherwise cooperate to the extent reasonably required to minimize Transaction Taxes.  The Party that is not responsible under applicable law for paying the Transaction Taxes shall pay its share of the Transaction Taxes to the responsible Party prior to the due date of such Taxes.  

Article III.     
REPRESENTATIONS AND WARRANTIES OF CNX GATHERING
CNX Gathering hereby represents and warrants to the Partnership Parties that:

3.1    Organization and Existence.  SP Holdings and each CNX Party has been (or will be once formed) duly formed and is (or will be once formed) validly existing as a limited partnership or limited liability company and is in good standing under the laws of its state of formation, with full power and authority to own, lease and operate its properties and to conduct its business as and where such properties are owned, leased and operated and such business is conducted as of the date of this Agreement.  SP Holdings and each CNX Party is (or will be once formed) duly qualified as a foreign limited partnership or limited liability company to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Effect.   

3.2    Authority and Approval; Enforceability.  Each CNX Party has the power and authority to execute and deliver this Agreement and any other Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it.  The execution and delivery by each CNX Party of this Agreement and any other Transaction Document to which it is or will be a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite limited partnership or limited liability company action of such CNX Party.  Each of this Agreement and any other Transaction Document to which each CNX Party is or will be a party constitutes or will constitute, upon execution and delivery by such CNX Party, the valid and binding obligation of such CNX Party, enforceable against such CNX Party in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

3.3    No Conflict.  Each of this Agreement, the other Transaction Documents to which a CNX Party is or will be a party and the execution and delivery hereof and thereof by such CNX Party does not, and the fulfilment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not:  
(a)    conflict with any of the provisions of the certificate of formation or limited partnership agreement or limited liability company agreement of such CNX Party;
(b)    conflict with any provision of any law or administrative regulation or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to such CNX Party; 
(c)    conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which such CNX Party is a party or by which it is bound or to which the CNX Interests are subject;
(d)    result in the creation of, or afford any Person the right to obtain, any Lien on the CNX Interests under any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which such CNX Party is a party or by which it is bound or to which any of the CNX Interests are subject; or 
(e)    result in the revocation, cancellation, suspension or modification of any Consent possessed by such CNX Party that is necessary or desirable for the ownership, lease or operation of its properties and other assets in the conduct of its business as now conducted; 
except, in the case of clauses (b), (c), (d) and (e), as would not have, individually or in the aggregate, a Material Adverse Effect.

3.4    Consents.  Except with respect to any approvals required under the HSR Act, no consent, approval, license, permit, order, waiver, or authorization of, or registration, declaration, or filing with any Governmental Authority or other Person (each a “Consent”) is required to be obtained or made by or with respect to any CNX Party or the CNX Interests in connection with:  
(a)    the execution, delivery, and performance of this Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby and thereby; or
(b)    the enforcement against such CNX Party of its obligations hereunder and thereunder; 
except, in each case, as would not have, individually or in the aggregate, a Material Adverse Effect.

3.5    Proceedings; Laws and Regulations.  
(a)    There are no pending or, to the Knowledge of CNX Gathering, threatened claims, fines, actions, suits, demands, investigations or proceedings or any arbitration or binding dispute resolution proceeding (collectively, “Proceedings”) against CNX Gathering or against or affecting the CNX Interests or the CNX Shirley-Penns Assets, at law or in equity, that would individually, or in the aggregate, have a Material Adverse Effect. Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Proceedings are pending or, to the Knowledge of CNX Gathering, threatened to which CNX Gathering is or may become a party that questions or involves the validity or enforceability of any of its obligations under this Agreement or seeks to prevent or delay, or damages in connection with, the consummation of the transactions contemplated hereby. To the Knowledge of CNX Gathering, there are no pending or threatened Proceedings against DevCo III LP or against or affecting the DevCo Interests or the DevCo Shirley-Penns Assets, at law or in equity, that would individually, or in the aggregate, have a Material Adverse Effect.  
(b)    Except as would not, individually or in the aggregate, have a Material Adverse Effect, CNX Gathering is not in violation of, or default under, any law, regulation or any order of any Governmental Authority.  Except as would not, individually or in the aggregate, have a Material Adverse Effect, to the Knowledge of CNX Gathering, DevCo III LP is not in violation of, or default under, any law, regulation or order of any Governmental Authority with respect to the DevCo Shirley-Penns Assets.

3.6    Management Projections and Budgets.  Over the course of the negotiation and review of the Transaction, CNX Gathering and representatives of certain of its Affiliates have provided various materials to the Conflicts Committee (including those provided to the Financial Advisor) as part of the Conflicts Committee’s review of the Transaction and the CNX Interests, including various presentations, budgets and financial models and including all updates and revisions to such materials (all such materials, collectively, the “Conflicts Committee Information”).  With respect to the Conflicts Committee Information:
(a)    the projections, budgets and other forward-looking information included in the Conflicts Committee Information, when considering all updates and revisions provided as a part thereof, have a reasonable basis, were prepared in good faith and are consistent with the current expectations of the management of CNX Gathering and its Affiliates; and
(b)    to the Knowledge of CNX Gathering, the Conflicts Committee Information (considering all updates and revisions provided as a part thereof) does not contain any misstatement of a material fact or any omission of a material fact necessary to make the Conflicts Committee Information, taken as a whole and in the light of the circumstances under which it was made, not misleading.

3.7    Title to Interests. 
(a)    The CNX Interests (i) represent a 95% member interest in SP Holdings and (ii) were duly authorized and validly issued and are fully paid and non-assessable.  The CNX Interests are not subject to and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of local or state law applicable to the CNX Interests or any contract, arrangement or agreement to which CNX Gathering or any of its Affiliates is a party or to which it or any of their respective properties or assets is otherwise bound.
(b)    The DevCo Interests (i) represent a 5% member interest in SP Holdings and (ii) were duly authorized and validly issued and are fully paid and non-assessable.  The DevCo Interests are not subject to and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of local or state law applicable to the DevCo Interests or any contract, arrangement or agreement to which CNX Gathering or any of its Affiliates is a party or to which it or any of their respective properties or assets is otherwise bound.
(c)    CNX Gathering has good and valid record and beneficial title to the CNX Interests, free and clear of any and all Liens (other than restrictions on transfer under applicable federal and state securities laws and any Lien under the CNX Credit Facility), and, except as provided or created by the organizational documents of SP Holdings, the Securities Act or applicable securities laws, the CNX Interests are free and clear of any restrictions on transfer, Taxes or claims.  There are no options, warrants, purchase rights, contracts, commitments or other securities exercisable or exchangeable for the CNX Interests, or for the repurchase or redemption of the CNX Interests.  Immediately after the Closing, the Partnership will have good and valid record and beneficial title to the CNX Interests, free and clear of any Liens (other than restrictions on transfer under applicable federal and state securities laws).
(d)    DevCo III LP has good and valid record and beneficial title to the DevCo Interests, free and clear of any and all Liens (other than restrictions on transfer under applicable federal and state securities laws and any Lien under the CNX Credit Facility), and, except as provided or created by the organizational documents of SP Holdings, the Securities Act or applicable securities laws, the DevCo Interests are free and clear of any restrictions on transfer, Taxes or claims.  There are no options, warrants, purchase rights, contracts, commitments or other securities exercisable or exchangeable for the DevCo Interests, or for the repurchase or redemption of the DevCo Interests.  Immediately after the Closing, DevCo I LP will have good and valid record and beneficial title to the DevCo Interests, free and clear of any Liens (other than restrictions on transfer under applicable federal and state securities laws).

3.8    Brokerage Arrangements.  None of CNX Gathering or any of its Affiliates has entered, directly or indirectly, into any agreement with any person, firm or corporation that would obligate any Group Member to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the transactions contemplated hereby.

3.9    No Preferential Rights.  Neither the CNX Interests nor the DevCo Interests are subject to any right or agreement (other than this Agreement) that enables any Person to purchase or acquire, including by way of a right of first refusal, right of first offer, or similar right, the CNX Interests or the DevCo Interests or any portion of or interest in the CNX Interests or the DevCo Interests, in each case, as a result of or in connection with (a) the assignment or other transfer of the CNX Interests or the DevCo Interests, as applicable, (b) the execution, delivery or performance of this Agreement or (c) the consummation of the transactions contemplated hereby.  

3.10    Real Property; Rights-of-Way.  
(a)    Except as would not reasonably be expected to have a Material Adverse Effect, CNX Gathering or DevCo III LP has, and immediately after the Closing, SP Holdings will have, in each case, to the extent and only to the extent related to the Shirley-Penns Assets, (i) good and marketable title to all real property CNX Gathering or DevCo III LP owns in fee simple and the improvements located thereon (the “Owned Real Property”), (ii) valid leasehold estate in all real property and buildings held under lease by CNX Gathering or DevCo III LP (the “Leased Real Property”) and (iii) good title to all tangible personal property, in each case, free and clear of all Liens except Permitted Liens (or with respect to CNX Gathering, Liens pursuant to the CNX Credit Facility) provided, that, with respect to any real property and buildings held under lease by CNX Gathering or DevCo III LP, such real property and buildings are held under valid and subsisting and enforceable leases with such exceptions as do not materially interfere with the use of the properties of CNX Gathering or DevCo III LP, respectively, taken as a whole as they have been used consistent with past practice of CNX Gathering or DevCo III, LP, as applicable.  With respect to the Leased Real Property all leases and subleases are in full force and effect with respect to CNX Gathering or DevCo III LP, as applicable, and neither CNX Gathering nor DevCo III LP has received any written notice of a breach or default thereunder, whether actual or alleged and, to the Knowledge of CNX Gathering, no event has occurred that, with notice or lapse of time or both, would constitute a breach or default under any such lease or sublease, except for any such failures, breaches or defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
(b)    CNX Gathering or DevCo III LP has, and immediately after the Closing, SP Holdings will have, such consents, easements, rights-of-way, permits and licenses from each Person, including Governmental Authorities (collectively, the “Rights-of-Way” and together with the Owned Real Property and Leased Real Property, the “Real Property”) as are sufficient to operate the Shirley-Penns Assets in the ordinary course of business consistent with past practice and in material compliance with applicable laws, except for such Rights-of-Way the absence of which have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  With respect to the Rights-of-Way, (i) CNX Gathering or DevCo III LP, as applicable, has fulfilled and performed all its material obligations thereunder and no default or other event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any of the Rights-of-Way, except for such revocations, terminations and impairments that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and (ii) none of the Rights-of-Way contains any restriction on CNX Gathering or DevCo III LP, as applicable, except for such restrictions, taken as a whole, that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

3.11    Environmental Matters.  Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (a) the Shirley-Penns Assets are in compliance with applicable Environmental Laws; (b) to the Knowledge of CNX Gathering, no circumstances exist with respect to the Shirley-Penns Assets that give rise to an obligation by CNX Gathering or DevCo III LP, as applicable, to investigate, remediate, monitor or otherwise address the presence, on-site or offsite, of Hazardous Materials under any applicable Environmental Laws; (c) the Shirley-Penns Assets are not subject to any pending or, to the Knowledge of CNX Gathering, threatened in writing, claim, action, suit, investigation, inquiry or proceeding under any Environmental Law (including designation as potentially responsible party under the United States Comprehensive Environmental Response, Compensation, and Liability Act, or a similar designation under similar laws); (d) all notices, permits, permit exemptions, licenses or similar authorizations, if any, required to be obtained or filed by CNX Gathering or DevCo III LP under any Environmental Law in connection with the Shirley-Penns Assets as now being operated have been duly obtained or filed and are valid and currently in effect; and (e) there has been no release of any Hazardous Material into the environment by the Shirley-Penns Assets except in compliance with applicable Environmental Law. 

3.12    Shirley-Penns Assets.  
(a)    The CNX Shirley-Penns Assets include all of the assets and properties owned or held by CNX Gathering or any of its Affiliates that primarily relate to the Gathering System.  Assuming the Partnership Parties take no actions with respect to the DevCo Shirley-Penns Assets other than as contemplated by Section 5.2, the DevCo Shirley-Penns Assets include all of the assets and properties owned or held by DevCo III LP that primarily relate to the Gathering System. 
(b)    To the Knowledge of CNX Gathering, during the period from and after January 1, 2017 through the date of this Agreement, the Shirley-Penns Assets have been operated by DevCo III LP in the ordinary course of business consistent with past practices and in material compliance with applicable laws.  During the period from the adoption of the CNX GGA through the date of this Agreement, the Shirley-Penns Assets have been operated by DevCo III LP in material compliance with the CNX GGA.

3.13    Permits.  
(a)    As of the date of this Agreement, CNX Gathering, the Partnership or one of its wholly-owned subsidiaries has all licenses, permits and authorizations issued or granted or waived by Governmental Authorities that are necessary for the operation of the Shirley-Penns Assets in the ordinary course of business consistent with past practice and in material compliance with applicable laws (collectively, “Permits”), except, in each case, for such items for which the failure to obtain or have waived would not result in a Material Adverse Effect.
(b)    All Permits are validly held by CNX Gathering, the Partnership or one of its wholly-owned subsidiaries and are in full force and effect, except as would not reasonably be expected to have a Material Adverse Effect.
(c)    CNX Gathering, the Partnership or one of its wholly-owned subsidiaries, as applicable, has complied with all terms and conditions of the Permits, except as would not reasonably be expected to have a Material Adverse Effect.
(d)    The Permits (including such Permits that are not customarily obtained prior to the Closing and are reasonably expected to be obtained in the ordinary course of business following the Closing) will not be subject to suspension, modification, revocation or non-renewal as a result of the execution and delivery of this Agreement and the Transaction Documents or the consummation of the transactions contemplated hereby or thereby, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(e)    No proceeding is pending or, to the Knowledge of CNX Gathering, threatened in writing with respect to any alleged failure by CNX Gathering, the Partnership or one of its wholly-owned subsidiaries to have any material Permit necessary for the operation of the Shirley-Penns Assets.
(f)    No representation or warranty is made in this Section 3.13 with respect to compliance with Environmental Laws, which are addressed exclusively in Section 3.11.

3.14    Contracts.
(a)    Exhibit D-2 contains a true and complete listing of the material contracts and other agreements with respect to the Shirley-Penns Assets, operations and business, to which CNX Gathering is a party (each such contract or agreement being referred to herein as a “Material Contract”).  DevCo III LP is not a party to any material contract with respect to the Shirley-Penns Assets other than the CNX GGA.
(b)    CNX Gathering has made available to the Partnership Parties a correct and complete copy of each Material Contract.
(c)    (i) CNX Gathering is not in breach or default; and (ii) to the Knowledge of CNX Gathering, no other party to any Material Contract is in breach or default, nor has any other party repudiated any provision of the Material Contract, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

3.15    Insurance.  The Shirley-Penns Assets are covered by, and immediately after the Closing will be insured under, insurance policies underwritten by reputable insurers that include coverages and related limits and deductibles that are customary for companies of similar size and complexity as DevCo III LP in the same industry, and consistent with past practice.  All such insurance policies are in full force and effect, and all premiums due and payable on such policies will be paid through the date of Closing.  No notice of cancellation of, or indication of an intention not to renew, any such insurance policy has been received by DevCo III LP other than in the ordinary course of business.

3.16    Taxes.  Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (a) all Tax Returns required to be filed by or with respect to the Shirley-Penns Assets or operations have been filed on a timely basis (taking into account all extensions of due dates); (b) all Taxes owed with respect to the Shirley-Penns Assets or operations, which are or have become due, have been timely paid in full; (c) there are no Liens on any of the Shirley-Penns Assets that arose in connection with any failure (or alleged failure) to pay any Tax on any of the Shirley-Penns Assets or operations, other than Liens for Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings for which an adequate reserve has been established therefor; (d) prior to the transactions described in Section 5.2(d), SP Holdings is disregarded as an entity separate from its owner for United States federal income tax purposes; and (e) there is no pending action, proceeding, audit or investigation for assessment or collection of Taxes, and no Tax assessment, deficiency or adjustment has been asserted or proposed, with respect to the Shirley-Penns Assets or operations.  

3.17    No Other Representations or Warranties.  Except for the representations and warranties made in this Article III, CNX Gathering makes no other express or implied representation or warranty with respect to the CNX Interests, the Shirley-Penns Assets and/or the transactions contemplated by this Agreement or any Transaction Documents and disclaims any other representations or warranties. 

Article IV.     
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP PARTIES
The Partnership Parties hereby, jointly and severally, represent and warrant to CNX Gathering that:  

4.1    Organization and Existence.  Each Partnership Party has been duly formed and is validly existing as a limited liability company or limited partnership, as the case may be, and is in good standing under the laws of the State of Delaware, with full limited liability company power or limited partnership power, as the case may be, and authority to own, lease and operate its properties and to conduct its business as and where such properties are owned, leased and operated and such business is conducted as of the date of this Agreement.  Each Partnership Party is duly qualified as a foreign limited liability company or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Effect.

4.2    Authority and Approval; Enforceability.  Each Partnership Party has the limited liability company power or limited partnership power, as the case may be, and authority to execute and deliver this Agreement and any other Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it.  The execution and delivery by each Partnership Party of this Agreement and any other Transaction Document to which it is or will be a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite limited liability company or limited partnership, as the case may be, action of such Partnership Party.  Each of this Agreement and any other Transaction Document to which each Partnership Party is or will be a party constitutes or will constitute, upon execution and delivery by such Partnership Party, the valid and binding obligation of such Partnership Party, enforceable against such Partnership Party in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity). 

4.3    No Conflict.  Each of this Agreement, the other Transaction Documents to which each Partnership Party is or will be a party and the execution and delivery hereof and thereof by such Partnership Party do not, and the fulfilment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not: 
(a)    conflict with any of the provisions of the certificate of formation, limited liability company agreement, certificate of limited partnership, partnership agreement or other organizational document of such Partnership Party;
(b)    conflict with any provision of any law or administrative regulation or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to such Partnership Party; 
(c)    conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which such Partnership Party is a party or by which it is bound; or
(d)    result in the revocation, cancellation, suspension or modification of any Consent possessed by such Partnership Party that is necessary or desirable for the ownership, lease or operation of its properties and other assets in the conduct of its business as now conducted; 
except, in the case of clauses (b), (c), and (d), as would not have, individually or in the aggregate, a Material Adverse Effect.

4.4    Consents.  Except with respect to any approvals required under the HSR Act, no Consent is required to be obtained or made by or with respect to any Partnership Party in connection with:
(a)    the execution, delivery, and performance of this Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby and thereby; or
(b)    the enforcement against such Partnership Party of its obligations hereunder and thereunder; 
except, in each case, as would not have, individually or in the aggregate, a Material Adverse Effect.

4.5    Laws and Regulations; Litigation.  There are no pending or, to the knowledge of the Partnership Parties, threatened Proceedings against any Partnership Party that would individually, or in the aggregate, have a Material Adverse Effect.  Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Partnership Party is the subject of any violation of or default under any law or regulation or under any order of any Governmental Authority.  Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Proceedings are pending or, to the knowledge of the Partnership Parties, threatened to which any Partnership Party is or may become a party that questions or involves the validity or enforceability of any of its obligations under this Agreement or seeks to prevent or delay, or damages in connection with, the consummation of the transactions contemplated hereby.  

4.6    Delivery of Fairness Opinion.  The Financial Advisor has delivered an opinion to the Conflicts Committee to the effect that, as of the date of such opinion, and based upon and subject to the assumptions, qualifications, limitations and other matters set forth therein, the Purchase Price to be paid by the Partnership pursuant to this Agreement is fair, from a financial point of view, to the Partnership and to the Public Unitholders.

4.7    Brokerage Arrangements.  None of the Partnership or any of its Affiliates has entered, directly or indirectly, into any agreement with any person, firm or corporation that would obligate CNX Gathering or its Affiliates to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the transactions contemplated hereby.

4.8    No Other Representations or Warranties.  Except for the representations and warranties made in this Article IV, the Partnership Parties make no other express or implied representation or warranty with respect to the transactions contemplated by this Agreement or the other Transaction Documents and disclaim any other representations or warranties.

Article V.     
COVENANTS AND AGREEMENTS

5.1    Interim Operation of the Shirley-Penns Assets.  Except as provided by this Agreement or consented to by the Partnership, each of CNX Gathering and DevCo III LP covenants and agrees that, from and after the execution of this Agreement until the Closing, it will (or will cause SP Holdings to):
(a)    subject to interruptions resulting from force majeure, mechanical breakdown and planned maintenance, in each case, operate the Shirley-Penns Assets in the usual, regular and ordinary manner consistent with past practice, in material compliance with applicable laws and in compliance with the CNX GGA, including any expansion of the Shirley Station (as such station is identified in the CNX GGA);
(b)    give prompt notice to the Partnership of any emergency requiring immediate action, or any emergency action taken, in the event of serious risk to life, property or the environment (including prevention of environmental contamination);
(c)    not sell, transfer, assign, convey or otherwise dispose of any of the Shirley-Penns Assets other than sales of equipment that is no longer necessary in the operation of the Shirley-Penns Assets or for which replacement equipment has been obtained; and
(d)    not permit any Lien to be imposed on the Shirley-Penns Assets other than Permitted Liens.

5.2    Reorganization.  
(a)    Prior to the Closing Date, but in no event later than the second business day prior to the Closing Date, DevCo III LP shall form SP Holdings by (i) filing with the Secretary of State of the State of Delaware a certification of formation for limited liability company and (ii) adopting a limited liability company agreement of SP Holdings, in each case, in form reasonably acceptable to CNX Gathering and the Partnership.  DevCo III LP shall not transfer or convey any of the membership interests in SP Holdings (the “SP Holdings Interests”) prior to the SP Holdings Distribution.
(b)    Prior to the Closing Date, but in no event later than the first business day prior the Closing Date, but effective for all purposes as of the Effective Time, DevCo III LP shall contribute, assign, transfer, convey and deliver to SP Holdings, and DevCo III LP shall cause SP Holdings to receive and accept, the DevCo Shirley-Penns Assets.  DevCo III LP shall reserve and retain, and the DevCo Shirley-Penns Assets shall not include, the Excluded Assets.  To effect such contribution and assignment, DevCo III LP shall, and shall cause SP Holdings to, execute, acknowledge and deliver sufficient counterparts of the DevCo Assignment to facilitate recording of the DevCo Assignment in the applicable counties.  
(c)    Prior to the Closing Date, but in no event later than the first business day prior the Closing Date, but effective for all purposes as of the Effective Time, CNX Gathering shall assign, transfer, convey and deliver to SP Holdings, and DevCo III LP shall cause SP Holdings to receive and accept, the CNX Shirley-Penns Assets.  To effect such contribution and assignment, CNX Gathering shall, and DevCo III LP shall cause SP Holdings to, execute, acknowledge and deliver sufficient counterparts of the CNX Assignment to facilitate recording of the CNX Assignment in the applicable counties.  
(d)    On the Closing Date immediately prior to the Closing, and for the avoidance of doubt following the transactions contemplated by Section 5.2(a), Section 5.2(b) and Section 5.2(c), (such distributions and conveyances contemplated by this Section 5.2(d), the “SP Holdings Distribution”):
(i)    DevCo III LP hereby (A) distributes all of the membership interests in and to SP Holdings to its partners pro rata in accordance with their ownership interests in DevCo III LP, with the DevCo Interests being distributed to GP III and the CNX Interests being distributed to CNX Gathering, in each case, free and clear of all Liens (other than restrictions under securities laws) and (B) designates GP III as the managing member of SP Holdings;
(ii)    following such distribution from DevCo III LP as contemplated in Section 5.2(d)(i), GP III distributes the DevCo Interests to OpCo, free and clear of all Liens (other than restrictions under securities laws), and OpCo receives, accepts and acquires the DevCo Interests;
(iii)    following such distribution from GP III as contemplated in Section 5.2(d)(ii), OpCo contributes, transfers, assigns and conveys the DevCo Interests to GP I, free and clear of all Liens (other than restrictions under securities laws) and GP I receives, accepts and acquires the DevCo Interests; and
(iv)    following such contribution from OpCo as contemplated in Section 5.2(d)(iii), GP I contributes, transfers, assigns and conveys the DevCo Interests to DevCo I LP, free and clear of all Liens (other than restrictions under securities laws) and DevCo I LP receives, accepts and acquires the DevCo Interests. 
(e)    To the extent required and permitted by applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of the transfers related to the SP Holdings Distribution.
(f)    The Partnership understands and acknowledges that (i) the bonds, letters of credit, guarantees, deposits and other pre-payments, if any, posted by DevCo III LP or CNX Gathering, as applicable, with any Governmental Authorities or any other third parties and (ii) certain permits held by DevCo III LP or CNX Gathering, as applicable, in each case, relating to the Shirley-Penns Assets may not be transferable to SP Holdings.  As soon as reasonably practicable, the Partnership shall obtain, or cause SP Holdings or DevCo I LP to obtain, any bonds, guarantees, deposits and other pre-payments or permits required by any Governmental Authority to own or operate the Shirley-Penns Assets. 

5.3    Consents.  With respect to each Consent applicable to the transfer of any of the Shirley-Penns Assets, if any, prior to the Reorganization, DevCo III LP or CNX Gathering, as applicable, shall send to the holder of each such Consent (other than a customary post-closing consent) a notice seeking such holder’s consent to the transactions contemplated hereby.  DevCo III LP or CNX Gathering, as applicable, shall use its commercially reasonable efforts, with reasonable assistance from the Partnership (including the Partnership providing assurances of financial condition and operator qualifications as reasonably requested), to obtain all Consents.
(a)    If DevCo III LP or CNX Gathering, as applicable, fails to obtain a Hard Consent prior to the Reorganization then, in each case, the Shirley-Penns Asset (or portion thereof) affected by such un-obtained Hard Consent shall be excluded from the Shirley-Penns Assets to be assigned to SP Holdings and shall be deemed to be an Excluded Asset until such time as such affected Shirley-Penns Asset is assigned to SP Holdings.  In the event that any such Hard Consent (with respect to a Shirley-Penns Asset excluded pursuant to this Section 5.3 that was not obtained prior to the Reorganization) is obtained following the Reorganization, then DevCo III LP or CNX Gathering, as applicable, shall promptly assign such Shirley-Penns Asset (or portion thereof) that was so excluded as a result of such previously un-obtained Hard Consent to SP Holdings, pursuant to an instrument in substantially the same form as the DevCo Assignment or CNX Assignment, with such assignment being effective as of the Effective Time.  Until any such Hard Consent is obtained or waived, the Parties shall cooperate with each other in any reasonable and lawful arrangements designed to provide to the Partnership the benefit of the Shirley-Penns Assets and the burdens of the Assumed Liabilities with respect to the Shirley-Penns Assets subject to such un-obtained Hard Consent.
(b)    If DevCo III LP or CNX Gathering, as applicable, fails to obtain a Consent that is not a Hard Consent, then the Shirley-Penns Asset (or portion thereof) subject to such un-obtained Consent shall nevertheless be assigned by DevCo III LP or CNX Gathering, as applicable, to SP Holdings as part of the Shirley-Penns Assets.

5.4    HSR Act.  If applicable, within 14 days following the execution by the Parties of this Agreement, each Party shall prepare and simultaneously file with the applicable Governmental Authorities the notification and report form required for the transactions contemplated by this Agreement by the HSR Act and request early termination of the waiting period thereunder.  The Parties agree to respond promptly to any inquiries from any Governmental Authority concerning such filings and to comply in all material respects with the filing requirements of the HSR Act.  The Parties shall cooperate with each other and shall promptly furnish all information to the other Party that is necessary in connection with such Party’s compliance with the HSR Act.  Each Party shall keep the other fully advised with respect to any requests from or communications with the any Governmental Authority concerning such filings and shall consult with each other with respect to all responses thereto.  Each of the Parties shall use its commercially reasonable efforts to take all actions reasonably necessary and appropriate in connection with any HSR Act filing to consummate the transactions consummated hereby.

5.5    Further Assurances.  On and after the Closing Date, the Parties shall cooperate and use their respective commercially reasonable efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to make effective the transactions contemplated hereby, including the execution of any additional assignment or similar documents or instruments of transfer of any kind, the obtaining of consents which may be reasonably necessary or appropriate to carry out any of the provisions hereof and the taking of all such other actions as such Party may reasonably be requested to take by the other Party from to time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and transactions contemplated hereby.

5.6    Financing Cooperation.  From and after the execution of this Agreement, CNX Gathering shall, and shall cause its Affiliates to, use commercially reasonable efforts to provide all customary cooperation as reasonably requested by the Partnership (including causing its and their representatives and auditors to so cooperate) to assist the Partnership in the arrangement of any capital markets debt or equity financing, any bank debt, or any other financing arrangement necessary or desirable to fund the Purchase Price and any other amounts required to be paid in connection with the consummation of the transactions contemplated by this Agreement, including any necessary offering documents related thereto (the “Financing”). 

5.7    Tax Covenants. 
(a)    The Parties agree that the income related to the CNX Interests for the period up to and including the Closing Date will be reflected on the federal income Tax Return of CNX Gathering and that the members of CNX Gathering shall bear the liability for any Taxes associated with such income.  The Parties further agree that the income related to the CNX Interests for the period after the Closing Date will be reflected on the federal income Tax Return of the Partnership and that the partners of the Partnership shall bear the liability for any Taxes associated with such income.
(b)    The Parties shall cooperate fully, and cause their Affiliates to cooperate fully, as and to the extent reasonably requested by the other Party, to accomplish the purposes of this Section 5.7, requests for the provision of any information or documentation within the knowledge or possession of the other Party as reasonably necessary to facilitate compliance with financial reporting obligations arising under ASC 740 (formerly FASB Statement No. 109) (including compliance with FIN 48) promulgated by the Financial Accounting Standards Board, and any audit, litigation or other proceeding (each a “Tax Proceeding”) with respect to Taxes.  Such cooperation shall include access to, the retention and (upon the other Party’s request) the provision of records and information which are reasonably relevant to any Tax Return or Tax Proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Partnership and the CNX Gathering will use their respective commercially reasonable efforts to retain all books and records with respect to Tax matters pertinent to the CNX Interests relating to any taxable period beginning before the Closing Date until the later of six years after the Closing Date or the expiration of the applicable statute of limitations of the respective taxable periods (including any extensions thereof), and to abide by all record retention agreements entered into with any Tax Authority.  The Partnership and CNX Gathering each agree, upon request, to use their respective commercially reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

Article VI.     
CONDITIONS TO CLOSING

6.1    Conditions to the Obligations of Each Party.  The respective obligation of each Party to proceed with the Closing is subject to the satisfaction or waiver by each of the Parties (subject to applicable laws) on or prior to the Closing Date of all of the following conditions:
(a)    if applicable, (i) the waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired, (ii) notice of early termination shall have been received, or (iii) a consent order shall have been issued by or from the applicable Governmental Authorities and any other necessary filings with and consents of any Governmental Authority required for the consummation of the transactions contemplated by this Agreement shall have been made and obtained; provided, however, that, prior to invoking this condition, the invoking Party shall have used commercially reasonable efforts to make or obtain such filings and consents; and
(b)    no Party shall be subject to any decree, order or injunction of a court of competent jurisdiction that prohibits the consummation of the transactions contemplated hereby and no statute, rule, regulation, order, decree or injunction enacted, entered, or issued by any Governmental Authority, or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement, shall be in effect.

6.2    Conditions to the Obligations of the Partnership Parties.  The obligation of the Partnership Parties to proceed with the Closing is subject to the satisfaction or waiver by the Partnership Parties on or prior to the Closing Date of the following conditions: 
(a)    CNX Gathering shall have performed in all material respects the covenants and agreements contained in this Agreement required to be performed by it on or prior to the Closing Date;
(b)    (i) the Fundamental Representations shall be true and correct in all respects as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), and (ii) the other representations and warranties of CNX Gathering made in this Agreement shall be true and correct in all respects (without regard to qualifications as to materiality or Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (ii) where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Material Adverse Effect; 
(c)    CNX Gathering shall have delivered to the Partnership a certificate dated the Closing Date and signed by an authorized officer of CNX Gathering confirming the foregoing matters set forth in clauses (a) and (b) of this Section 6.2 (the “CNX Closing Certificate”); 
(d)    CNX Gathering shall have delivered or be ready, willing and able to deliver to the Partnership the Closing deliverables set forth in Section 7.2;  
(e)    between the date of this Agreement and the Closing Date, there shall not have been a Material Adverse Effect with respect to CNX Gathering; and
(f)    the Partnership shall have received sufficient proceeds in the Financing, on terms and conditions that are reasonably satisfactory to the Partnership, to fulfill its obligations required for funding the Purchase Price.  

6.3    Conditions to the Obligations of CNX Gathering.  The obligation of CNX Gathering to proceed with the Closing is subject to the satisfaction or waiver by CNX Gathering on or prior to the Closing Date of the following conditions: 
(a)    the Partnership Parties shall have performed in all material respects the covenants and agreements contained in this Agreement required to be performed by them on or prior to the Closing Date;
(b)    the representations and warranties of the Partnership Parties made in this Agreement shall be true and correct in all respects (without regard to qualifications as to materiality or Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Material Adverse Effect;
(c)    the Partnership shall have delivered to CNX Gathering a certificate dated the Closing Date and signed by an authorized officer of the General Partner confirming the foregoing matters set forth in clauses (a) and (b) of this Section 6.3 (the “Partnership Closing Certificate”); 
(d)    the Partnership Parties shall have delivered or be ready, willing and able to deliver the Closing deliverables set forth in Section 7.3; and
(e)    between the date of this Agreement and the Closing Date, there shall not have been a Material Adverse Effect with respect to any Partnership Party.

Article VII.     
CLOSING

7.1    Closing.  Subject to the terms and conditions of this Agreement and unless otherwise agreed in writing by the Parties, the closing (the “Closing”) of the transactions contemplated by this Agreement will be held at the offices of Latham & Watkins LLP, 811 Main Street, 37th Floor, Houston, Texas at 9:00 a.m., Houston, Texas time on the second business day following the satisfaction or waiver of the conditions to Closing set forth in Article VI (other than those conditions that, by their nature, are not capable of being satisfied until the Closing), or such other time and date mutually agreed to by the Parties in writing.  The date on which the Closing occurs is referred to as the “Closing Date.”  The Closing will be deemed effective at 12:01 a.m., Houston, Texas time on the Closing Date. 

7.2    Deliveries by CNX Gathering.  At the Closing, CNX Gathering will deliver (or cause to be delivered) to the Partnership the following: 
(a)    a counterpart to the CNX GGA Amendment, duly executed by CNX.
(b)    a counterpart to the SP Holding Assignment, duly executed by CNX Gathering;
(c)    the CNX Closing Certificate, duly executed by an officer of CNX Gathering; 
(d)    documentation evidencing a release of Lien under the CNX Credit Facility with respect to the CNX Interests; and
(e)    such other documents, certificates and other instruments as may be reasonably requested by the Partnership Parties prior to the Closing Date to carry out the intent and purposes of this Agreement.

7.3    Deliveries by the Partnership Parties.  At the Closing, the Partnership Parties will deliver (or cause to be delivered) to CNX Gathering the following:
(a)    the Purchase Price, by wire transfer of immediately available funds to an account specified in writing by CNX Gathering;
(b)    a counterpart to the CNX GGA Amendment, duly executed by the Partnership Parties;
(c)    a counterpart to the SP Holding Assignment, duly executed by DevCo I LP;
(d)    the Partnership Closing Certificate, duly executed by an officer of the General Partner; and
(e)    such other documents, certificates and other instruments as may be reasonably requested by CNX Gathering prior to the Closing Date to carry out the intent and purposes of this Agreement.

Article VIII.     
INDEMNIFICATION

8.1    Indemnification of CNX Gathering.  Solely for the purpose of indemnification in this Section 8.1, the representations and warranties of the Partnership Parties in this Agreement shall be deemed to have been made without regard to any materiality or Material Adverse Effect.  From and after the Closing Date, subject to the other provisions of this Article VIII, the Partnership Parties shall, jointly and severally, indemnify and hold CNX Gathering and its Affiliates, directors, officers, employees, agents and representatives (together with CNX Gathering, the “CNX Indemnitees ”) harmless from and against any and all damages (including exemplary damages and penalties), losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including reasonable counsel fees and reasonable expenses of investigation, defending and prosecuting litigation (collectively, the “Damages”), suffered by the CNX Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of the Partnership Parties contained in this Agreement, (a) any breach of any agreement or covenant contained in this Agreement on the part of the Partnership Parties or (a) any of the Assumed Liabilities.

8.2    Indemnification of the Partnership Parties.  Solely for the purpose of indemnification in this Section 8.2, the representations and warranties of CNX Gathering in this Agreement shall be deemed to have been made without regard to any materiality or Material Adverse Effect.  From and after the Closing Date, subject to the other provisions of this Article VIII, CNX Gathering shall indemnify and hold the Partnership Parties and their respective Affiliates, directors, officers, employees, agents and representatives, and the directors, officers, employees, agents and representatives of the General Partner (together with the Partnership Parties, the “Partnership Indemnitees”) harmless from and against any and all Damages suffered by the Partnership Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of CNX Gathering contained in this Agreement or (a) any breach of any agreement or covenant contained in this Agreement on the part of CNX Gathering. 

8.3    Demands.  Each indemnified party agrees that promptly upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being collectively referred to herein as the “Indemnity Claim”), with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party, together with a statement of such information respecting any of the foregoing as it shall have.  Such notice shall include a formal demand for indemnification under this Agreement.  The indemnifying party shall not be obligated to indemnify the indemnified party with respect to any Indemnity Claim if the indemnified party knowingly failed to notify the indemnifying party thereof in accordance with the provisions of this Agreement to the extent that knowing failure to notify actually results in material prejudice or damage to the indemnifying party.

8.4    Right to Contest and Defend.
(a)    The indemnifying party shall be entitled at its cost and expense to contest and defend by all appropriate legal proceedings any Indemnity Claim with respect to which it is called upon to indemnify the indemnified party under the provisions of this Agreement; provided, however, that notice of the intention to so contest shall be delivered by the indemnifying party to the indemnified party within 20 days from the date of receipt by the indemnifying party of notice by the indemnified party of the assertion of the Indemnity Claim.  Any such contest may be conducted in the name and on behalf of the indemnifying party or the indemnified party as may be appropriate.  Such contest shall be conducted and prosecuted diligently to a final conclusion or settled in accordance with this Section 8.4(a) by reputable counsel employed by the indemnifying party and not reasonably objected to by the indemnified party, but the indemnified party shall have the right but not the obligation to participate in such proceedings and to be represented by counsel of its own choosing at its sole cost and expense.  The indemnifying party shall have full authority to determine all action to be taken with respect thereto; provided, however, that the indemnifying party will not have the authority to subject the indemnified party to any obligation whatsoever, other than the performance of purely ministerial tasks or obligations not involving material expense.  If the indemnifying party does not elect to contest any such Indemnity Claim or elects to contest such Indemnity Claim but fails diligently and promptly to prosecute or settle such claim, the indemnifying party shall be bound by the result obtained with respect thereto by the indemnified party.  If the indemnifying party shall have assumed the defense of an Indemnity Claim, the indemnified party shall agree to any settlement, compromise or discharge of an Indemnity Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Indemnity Claim, which releases the indemnified party completely in connection with such Indemnity Claim and which would not otherwise adversely affect the indemnified party.
(b)    Notwithstanding the foregoing, the indemnifying party shall not be entitled to assume the defense of any Indemnity Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the indemnified party in defending such Indemnity Claim) if the Indemnity Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the indemnified party which the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages.  If such equitable relief or other relief portion of the Indemnity Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages.

8.5    Cooperation.  If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any Indemnity Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the Indemnity Claim, or any cross-complaint against any person, and the indemnifying party will reimburse the indemnified party for any expenses incurred by it in so cooperating.  At no cost or expense to the indemnified party, the indemnifying party shall cooperate with the indemnified party and its counsel in contesting any Indemnity Claim.

8.6    Right to Participate.  The indemnified party agrees to afford the indemnifying party and its counsel the opportunity to be present at, and to participate in, conferences with all persons, including Governmental Authorities, asserting any Indemnity Claim against the indemnified party or conferences with representatives of or counsel for such persons.

8.7    Payment of Damages.  The indemnification required hereunder shall be made by periodic payments of the amount thereof during the course of the investigation or defense, within 10 days as and when reasonably specific bills are received or loss, liability, claim, damage or expense is incurred and reasonable evidence thereof is delivered.  In calculating any amount to be paid by an indemnifying party by reason of the provisions of this Agreement, the amount shall be reduced by all reimbursements (including insurance proceeds) credited to or received by the other party related to the Damages.

8.8    Limitations on Indemnification.  
(a)    To the extent the Partnership Indemnitees are entitled to indemnification for Damages pursuant to Section 8.2(a) (but not including Damages for breaches of Fundamental Representations), CNX Gathering shall not be liable for those Damages unless the aggregate amount of Damages exceeds $2,650,000 (the “Deductible”), and then only to the extent of any such excess; provided, however, that CNX Gathering shall not be liable for Damages pursuant to Section 8.2(a) (but not including Damages for breaches of Fundamental Representations) that exceed, in the aggregate, $39,750,000 (the “Cap”) less the Deductible. 
(b)    Notwithstanding Section 8.8(a), to the extent the Partnership Indemnitees are entitled to indemnification for Damages for claims arising from fraud or related to or arising from Taxes, CNX Gathering shall be fully liable for such Damages without regard to the Deductible or the Cap.  For the avoidance of doubt, CNX Gathering shall be fully liable for Damages pursuant to Section 8.2(b) and for breaches of Fundamental Representations without regard to the Deductible or the Cap.
(c)    To the extent the CNX Indemnitees are entitled to indemnification for Damages pursuant to Section 8.1(a), the Partnership Parties shall not be liable for those Damages unless the aggregate amount of Damages exceeds, in the aggregate, the Deductible, and then only to the extent of any such excess; provided, however, that the Partnership Parties shall not be liable for Damages that exceed, in the aggregate, the Cap less the Deductible. 
(d)    Notwithstanding Section 8.8(c), to the extent the CNX Indemnitees are entitled to indemnification for Damages for claims arising from fraud, the Partnership Parties shall be fully liable for such Damages without regard to the Deductible or the Cap.  For the avoidance of doubt, the Partnership Parties shall be fully liable for Damages pursuant to Section 8.1(b) or Section 8.1(c) without regard to the Deductible or the Cap.

8.9    Survival.
(a)    The liability of CNX Gathering for the breach of any of the representations and warranties of CNX Gathering set forth in Section 3.1, Section 3.2, Section 3.3(a), Section 3.7 and Section 3.8 (the “Fundamental Representations”) shall be limited to claims for which the Partnership Parties deliver written notice to CNX Gathering on or before the date that is three years after the Closing Date.  The liability of CNX Gathering for the breach of any of the representations and warranties of CNX Gathering set forth in Article III other than the Fundamental Representations shall be limited to claims for which the Partnership Parties deliver written notice to CNX Gathering on or before the date that is 18 months after the Closing Date; provided, however, that the liability of CNX Gathering for Damages for claims related to or arising from Taxes shall be limited to claims for which the Partnership Parties deliver written notice to CNX Gathering on or before the date that is 90 days after the expiration of the applicable statute of limitations for assessment of the applicable Tax.
(b)    The liability of the Partnership Parties for the breach of any of the representations and warranties of the Partnership Parties set forth in Section 4.1, Section 4.2, Section 4.3(a), and Section 4.7 shall be limited to claims for which CNX Gathering delivers written notice to the Partnership Parties on or before the date that is three years after the Closing Date.  The liability of the Partnership Parties for the breach of any of the representations and warranties of the Partnership Parties set forth in Article IV other than the representations and warranties set forth in Section 4.1, Section 4.2, Section 4.3(a), and Section 4.7 shall be limited to claims for which CNX Gathering delivers written notice to the Partnership Parties on or before the date that is 18 months after the Closing Date.  

8.10    Sole Remedy.  After the Closing, no Party shall have liability under this Agreement or the transactions contemplated hereby except as is provided in this Article VIII (other than claims or causes of action arising from fraud, and other than claims for specific performance or claims arising under any Transaction Documents (which claims shall be subject to the liability provisions of such Transaction Documents)).  

8.11    Express Negligence Rule.  THE INDEMNIFICATION AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED PARTY.  THE PARTIES ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE.  NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

8.12    Knowledge.  The Partnership Indemnitees’ and the CNX Indemnitees’ rights under this Agreement or otherwise shall not be diminished by any investigation performed or knowledge acquired or capable of being acquired, whether before or after the date of this Agreement, regarding the accuracy or inaccuracy of any representation or warranty or the performance or non-performance of any covenant.

Article IX.     
TERMINATION

9.1    Events of Termination.  This Agreement may be terminated at any time prior to the Closing Date:
(a)    by mutual written consent of CNX Gathering and the Partnership;
(b)    by either CNX Gathering or the Partnership in writing after June 1, 2018, if the Closing has not occurred by that date, provided that as of such date the terminating Party is not in default under this Agreement;
(c)    by either CNX Gathering or the Partnership in writing without prejudice to other rights and remedies the terminating Party or its Affiliates may have (provided the terminating Party and its Affiliates are not otherwise in material default or breach of this Agreement, or have not failed or refused to close without justification hereunder), if the other Party or its Affiliates shall have (i) materially failed to perform its covenants or agreements contained herein required to be performed by such Party or its Affiliates on or prior to the Closing Date or (ii) materially breached any of its representations or warranties contained herein; provided, however, that in the case of clauses (i) or (ii), the defaulting Party shall have a period of 30 days following written notice from the non-defaulting Party to cure any breach of this Agreement if the breach is curable; or
(d)    by either CNX Gathering or the Partnership in writing, without liability, if there shall be any order, writ, injunction or decree of any Governmental Authority binding on the Parties that prohibits or restrains any Party from consummating the transactions contemplated hereby; provided, however, that the applicable Party shall have used its reasonable best efforts to have any such order, writ, injunction or decree removed but it shall not have been removed within 30 days after entry by the Governmental Authority.

9.2    Effect of Termination.  In the event of the termination of this Agreement by a Party as provided in Section 9.1, this Agreement shall thereafter become void except for this Section 9.2, Section 10.1, Section 10.3 and Section 10.4.  Nothing in this Section 9.2 shall be deemed to release any Party from any liability for any breach by such Party of the terms and provisions of this Agreement or to impair any rights of any Party under this Agreement.  If this Agreement is terminated by a Party pursuant to Section 9.1(c), then the other Party shall reimburse such Party for its out-of-pocket expenses incurred in connection with the negotiation, execution and performance of this Agreement (including, if applicable, legal fees and fees paid to the Financial Advisor, in either case, incurred by the Partnership or the Conflicts Committee). 

Article X.     
MISCELLANEOUS

10.1    Expenses.  Unless otherwise specifically provided in this Agreement, each of the Parties shall pay its own expenses incident to (a) this Agreement and the other Transaction Documents and (b) all action taken in preparation for effecting the provisions of this Agreement and the other Transaction Documents.

10.2    Right of Offset.  Each Party agrees that, in addition to, and without limitation of, any right of set-off, lien or counterclaim a Party may otherwise have, each Party shall have the right and be entitled, at its option, to offset (a) balances held by it or by any of its Affiliates for the account of any other Party at any of its offices and (b) other obligations at any time owing by such Party in connection with any obligations to or for the credit or account of the other Party, against any principal of or interest on any of such other Party’s indebtedness or any other amount due and payable to such other Party hereunder that is not paid when due.

10.3    Notices.  Unless otherwise specifically provided in this Agreement, any notice, request, instruction, correspondence or other document to be given under or in relation to this Agreement shall be made in writing and shall be deemed to have been properly given if:  (i) personally delivered (with written confirmation of receipt), (ii) delivered by a recognized overnight delivery service (delivery fees prepaid) or (iii) sent by electronic mail with a PDF of the notice or other communication attached (provided that any such electronic mail is confirmed by written confirmation), in each case to the appropriate address set forth below:
If to CNX Gathering, addressed to:
CNX Gathering LLC
1000 CONSOL Energy Drive 
Canonsburg, Pennsylvania 15317
Attention: General Counsel

with copies (which shall not constitute notice) to:
CNX Resources Inc. 
1000 CONSOL Energy Drive 
Canonsburg, Pennsylvania 15317 
Attention: General Counsel 

If to any of the Partnership Parties, addressed to:
CNX Midstream Partners LP
c/o CNX Midstream GP LLC
1000 CONSOL Energy Drive 
Canonsburg, Pennsylvania 15317
Attention: General Counsel

Any Party may change any address to which notice is to be given to it by giving notice as provided above of such change of address.

10.4    Governing Law.  This Agreement shall be subject to and governed by the laws of the State of Delaware, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state. EACH OF THE PARTIES AGREES THAT THIS AGREEMENT INVOLVES AT LEAST U.S. $100,000.00 AND THAT THIS AGREEMENT HAS BEEN ENTERED INTO IN EXPRESS RELIANCE UPON 6 Del. C. § 2708. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY AGREES (i) TO BE SUBJECT TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE AND (ii) TO THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF DELAWARE, TO APPOINT AND MAINTAIN AN AGENT IN THE STATE OF DELAWARE AS SUCH PARTY’S AGENT FOR ACCEPTANCE OF LEGAL PROCESS AND TO NOTIFY THE OTHER PARTIES OF THE NAME AND ADDRESS OF SUCH AGENT. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

10.5    Public Statements.  The Parties shall consult with each other with respect to public announcements or statements, and no Party shall issue any public announcement or statement with respect to the transactions contemplated hereby without the consent of the other Parties, which shall not be unreasonably withheld or delayed, unless the Party desiring to make such announcement or statement, after seeking such consent from the other Parties, obtains advice from legal counsel that a public announcement or statement is required by applicable law or securities exchange regulations.

10.6    Form of Payment.  All payments hereunder shall be made in United States dollars and, unless the Parties making and receiving such payments shall agree otherwise or the provisions hereof provide otherwise, shall be made by wire or interbank transfer of immediately available funds on the date such payment is due to such account as the Party receiving payment may designate at least three business days prior to the proposed date of payment. 

10.7    Entire Agreement; Amendments and Waivers.  This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits hereto, (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof and (b) are not intended to confer upon any other Person or entity any rights or remedies hereunder except as Article VIII or Article X contemplates or except as otherwise expressly provided herein or therein.  Each Party agrees that (i) no other Party (including its agents and representatives) has made any representation, warranty, covenant or agreement to or with such Party relating to this Agreement or the transactions contemplated hereby, other than those expressly set forth in the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits hereto, and (ii) such Party has not relied upon any representation, warranty, covenant or agreement relating to this Agreement or the transactions contemplated hereby other than those referred to in clause (i) above.  No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by all of the Parties or if such supplement, modification or waiver is with respect to Section 5.6, executed in writing by all of the Parties.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.  Any amendment or waiver of this Agreement by the Partnership Parties made prior to the Closing shall be approved in advance by the Conflicts Committee.  

10.8    Binding Effect and Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns, but neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned, by operation of law or otherwise, by any Party or CNX without the prior written consent of the other parties hereto. 

10.9    Severability.  If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, the Parties shall meet promptly and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect and will not be affected or impaired in any way thereby.

10.10    Interpretation.  The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

10.11    Counterparts.  This Agreement may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party or other Person executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

[signature page follows]

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above.
	
	
	CNX MIDSTREAM PARTNERS LP

By:    CNX Midstream GP LLC, its general partner 
   

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer

	

CNX MIDSTREAM DEVCO I LP

By:    CNX Midstream DevCo I GP LLC, its general partner 
   

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer

	

CNX MIDSTREAM DEVCO III LP

By:    CNX Midstream DevCo III GP LLC, its general partner 

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer

	

CNX GATHERING LLC

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer

FOR PURPOSES OF SECTION 5.2 ONLY:
	
	
	

CNX MIDSTREAM DEVCO I GP LLC

   

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer   

	

CNX MIDSTREAM DEVCO III GP LLC

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer 

	

CNX MIDSTREAM OPERATING COMPANY LLC

By:   /s/ Timothy C. Dugan      
Name:   Timothy C. Dugan
Title:   Chief Operating Officer

APPENDIX I

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such specified Person through one or more intermediaries or otherwise; provided, however, that (a) with respect to CNX Gathering and the General Partner, the term “Affiliate” shall not include any Group Member and (b) with respect to the Partnership Group, the term “Affiliate” shall not include CNX Gathering, the General Partner or any of their subsidiaries (other than a Group Member).
“Agreement” has the meaning set forth in the preamble to this Agreement.
“Applicable Contracts” means all contracts, instruments and agreements, in each case, whether written or oral, to which DevCo III LP is a party and by which any Shirley-Penns Asset is bound and that will be binding on SP Holdings after the Reorganization, including gathering, transportation and marketing agreements; hydrocarbon storage agreements; operating agreements; balancing agreements; processing agreements; crossing agreements; facilities or equipment leases; and other similar contracts and agreements held by DevCo III LP and relating to the Shirley-Penns Assets.  
“Asset Expenses” has the meaning set forth in Section 2.3(a)(ii).
“Assumed Liabilities” has the meaning set forth in Section 2.4. 
“Board of Directors” has the meaning set forth in the recitals to this Agreement.
“Cap” has the meaning set forth in Section 8.8(a).
“Closing” has the meaning set forth in Section 7.1.
“Closing Date” has the meaning set forth in Section 7.1.
“CNX” has the meaning set forth in the recitals to this Agreement. 
“CNX Assignment” means that certain Assignment and Bill of Sale substantially in the form attached as Exhibit A-2.
“CNX Closing Certificate” has the meaning set forth in Section 6.2(c).
“CNX Credit Facility” means that certain Amended and Restated Credit Agreement, dated as of June 18, 2014, by and among CNX Resources Corporation, the guarantors party thereto from time to time, the lenders and agents party thereto from time to time and PNC Bank, National Association, as administrative agent, as amended, amended and restated, supplemented or otherwise modified from time to time.
“CNX Gathering” has the meaning set forth in the preamble to this Agreement.
“CNX GGA” has the meaning set forth in the recitals to this Agreement.
“CNX GGA Amendment” has the meaning set forth in the recitals to this Agreement.
“CNX Indemnitees ” has the meaning set forth in Section 8.1.
“CNX Interests” has the meaning set forth in the recitals to this Agreement.
“CNX Parties” means CNX Gathering and DevCo III LP.
“CNX Shirley-Penns Assets” means all of CNX Gathering’s right, title and interest in and to (a) all surface fee interests, surface leases, easements, rights-of-way and other similar surface rights set forth on Exhibit D-1 and (b) the contracts listed on Exhibit D-2.
“Conflicts Committee” has the meaning set forth in the recitals to this Agreement.
“Conflicts Committee Information” has the meaning set forth in Section 3.6.
“Consent” has the meaning set forth in Section 3.4.
“Control” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” have correlative meanings. 
“Damages” has the meaning set forth in Section 8.1.
“Deductible” has the meaning set forth in Section 8.8(a).
“DevCo Assignment” means that certain Assignment and Bill of Sale substantially in the form attached as Exhibit A-3.
“DevCo I LP” has the meaning set forth in the preamble to this Agreement.
“DevCo III LP” has the meaning set forth in the preamble to this Agreement.
“DevCo Interests” has the meaning set forth in the recitals to this Agreement.
“DevCo Shirley-Penns Assets” means all of DevCo III LP’s right, title and interest in and to the following, less and except the Excluded Assets: 
(a)    the existing gas gathering pipelines and related facilities set forth on Exhibit C-2 (the “Gathering System”), together with all other equipment, machinery, fixtures, inventory and supplies and other real, personal and mixed property, operational or nonoperational, primarily used or held for use in connection with the Gathering System, including tubing, pumps, pipes, spare parts, valves, meters, motors, compression equipment, scrubbers, dehydration units, tanks, traps, cathodic protection units, processing and separation facilities, structures and materials (the “Personal Property”);
(b)    all surface fee interests, surface leases, easements, rights-of-way and other similar surface rights located within the area covered by the Shirley-Penns System Maps, including those described on Exhibit C-3, to the extent, and only to the extent, (i) used or held for use in connection with the Gathering System and (ii) necessary to operate the Gathering System as the Gathering System was operated on the Closing Date;
(c)    to the extent assignable, all permits, licenses, orders, approvals, variances, waivers, franchises, rights and other authorizations issued by any Governmental Authority relating to the Gathering System and/or Personal Property; 
(d)    all Applicable Contracts;
(e)    to the extent in DevCo III LP’s possession: (i) land and title records (including abstracts of title, title opinions); (ii) contract files; (iii) correspondence; (iv) maps, operations, environmental, production and accounting records; (v) facility and engineering/well files; (vi) environmental files; and (vii) permitting files, but excluding any of the foregoing items that are primarily used in connection with the ownership or operation of the Excluded Assets;
(f)    to the extent assignable, all claims and causes of action of DevCo III LP arising under or with respect to any Applicable Contracts (including claims for adjustments or refunds);
(g)    all audit rights arising under any of the Applicable Contracts to the extent and only to the extent pertaining to periods from and after the Closing; and 
(h)    to the extent assignable, all rights of DevCo III LP to manufacturers’ and contractors warranties and indemnities with respect to any of the other DevCo Shirley-Penns Assets. 
“Effective Time” means 12:01 a.m. local time in Pittsburgh, Pennsylvania on January 1, 2018.
“Environmental Laws” means, as in effect as of the Closing Date, all federal, provincial, state or local statutes, laws, ordinances, rules, regulations, orders, codes, decisions, injunctions or decrees that regulate or otherwise pertain to the protection of human health, safety or the environment, including, but not limited to, the management, control, discharge, emission, treatment, containment, handling, removal, use, generation, permitting, migration, storage, release, transportation, disposal, remediation, manufacture, processing or distribution of Hazardous Materials that are or may present a threat to human health or the environment. 
“Excluded Assets” means all of DevCo III LP’s right, title and interest in and to any assets and properties located outside of the area identified as the “Shirley-Penns Area” on the Shirley-Penns System Maps and not related to the Gathering System.
“Fairness Opinion” has the meaning set forth in the recitals to this Agreement.
“Financial Advisor” has the meaning set forth in the recitals to this Agreement.
“Financing” has the meaning set forth in Section 5.6.
“Fundamental Representations” has the meaning set forth in Section 8.9(a).
“Gathering System” has the meaning set forth in the definition of DevCo Shirley-Penns Assets.
“General Partner” has the meaning set forth in the recitals to this Agreement.
“Governmental Authority” means (a) the United States of America or any state or political subdivision thereof within the United States of America and (b) any court or any governmental or administrative department, commission, board, bureau or agency of the United States of America or of any state or political subdivision thereof within the United States of America.
“GP I” has the meaning set forth in the preamble to this Agreement.
“GP III” has the meaning set forth in the preamble to this Agreement.
“Group Member” has the meaning set forth in the Partnership Agreement.
“Hard Consent” means any Consent, (a) for which the failure to obtain such Consent would cause (i) the assignment of the Shirley-Penns Assets affected thereby to the Partnership to be void or (ii) the termination of a Shirley-Penns Asset under the express terms thereof or (b) that is required from a Governmental Authority (other than a customary post-closing consent).
“Hazardous Materials” means any substance, whether solid, liquid or gaseous: (i) which is listed, defined or regulated as a “hazardous material,” “hazardous waste,” “solid waste,” “hazardous substance,” “toxic substance,” “pollutant” or “contaminant,” or words of similar meaning or import found in any applicable Environmental Law; or (ii) which is or contains asbestos, polychlorinated biphenyls, radon, urea formaldehyde foam insulation, explosives, or radioactive materials; or (iii) any petroleum, petroleum hydrocarbons, petroleum substances, petroleum or petrochemical products, natural gas, crude oil and any components, fractions, or derivatives thereof, any oil or gas exploration or production waste, and any natural gas, synthetic gas and any mixtures thereof; or (iv) radioactive material, waste and pollutants, radiation, radionuclides and their progeny, or nuclear waste including used nuclear fuel; or (v) which causes or poses a threat to cause contamination or nuisance on any properties, or any adjacent property or a hazard to the environment or to the health or safety of persons on or about any properties. 
“HSR Act” shall mean the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.
“Indemnity Claim” has the meaning set forth in Section 8.3.
“Knowledge of CNX Gathering” shall mean the actual (and not any constructive or imputed) knowledge of Nicholas Deluliis, Timothy Dugan, Joseph Fink, Stephen Johnson or Donald Rush.
“Leased Real Property” has the meaning set forth in Section 3.10(a).
“Liability” or “Liabilities” means any direct or indirect liability, indebtedness, obligation, cost, expense, claim, loss, damage, deficiency, guaranty or endorsement of or by any Person, absolute or contingent, matured or unmatured, asserted or unasserted, accrued or unaccrued, due or to become due, liquidated or unliquidated.
“Lien” means any security interest, lien, deed of trust, mortgage, pledge, charge, claim, restriction, easement, encumbrance or other similar interest or right.
“Material Adverse Effect” means, with respect to any Party, any change, circumstance, effect or condition that materially adversely affects, delays or prohibits, or could reasonably be expected to materially adversely affect, delay or prohibit, the business, financial condition, assets, liabilities or results of operations of a Party, taken as a whole, such Party’s ability to satisfy its obligations under the Transaction Documents or to consummate the transactions contemplated by the Transaction Documents. 
“Material Contract” has the meaning set forth in Section 3.14(a).
“OpCo” has the meaning set forth in the preamble to this Agreement.
“Owned Real Property” has the meaning set forth in Section 3.10(a).
“Partnership” has the meaning set forth in the preamble to this Agreement.
“Partnership Agreement” means that certain Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of January 3, 2018, as the same may be amended from time to time. 
“Partnership Closing Certificate” has the meaning set forth in Section 6.3(c).
“Partnership Group” has the meaning set forth in the Partnership Agreement.
“Partnership Indemnitees” has the meaning set forth in Section 8.2.
“Partnership Parties” means the Partnership and DevCo I LP.
“Party” and “Parties” have the meanings set forth in the preamble to this Agreement.
“Permits” has the meaning set forth in Section 3.13(a).
“Permitted Lien” means any Liens that, individually or in the aggregate, would not (or would not be reasonably expected to) prevent or substantially impair the ownership, operation or use of any of the Shirley-Penns Assets in the ordinary course of business consistent with past practices and in material compliance with applicable laws.
“Personal Property” has the meaning set forth in the definition of DevCo Shirley-Penns Assets.
“Person” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.
“Prime Rate” means the rate of interest published from time to time as the “Prime Rate” in the “Money Rates” section of The Wall Street Journal.
“Proceedings” has the meaning set forth in Section 3.5.
“Public Unitholders” has the meaning set forth in the recitals to this Agreement.
“Purchase Price” has the meaning set forth in Section 2.1.
“Real Property” has the meaning set forth in Section 3.10(b).
“Reorganization” means the transactions contemplated by Section 5.2(a), Section 5.2(b) and Section 5.2(c).
“Rights-of-Way” has the meaning set forth in Section 3.10(b).
“Securities Act” means the Securities Act of 1933, as amended.
“Shirley-Penns Assets” means, collectively, the DevCo Shirley-Penns Assets and the CNX Shirley-Penns Assets.
“Shirley-Penns System Maps” means the maps set forth on Exhibit C-1. 
“SP Holdings” has the meaning set forth in the recitals to this Agreement.
“SP Holdings Assignment” means that certain Membership Interest Assignment substantially in the form attached as Exhibit A-1.
“SP Holdings Distribution” has the meaning set forth in Section 5.2(d).
“SP Holdings Interests” has the meaning set forth in Section 5.2(a).
“Tax” or “Taxes” means any federal, state, local or foreign income tax, ad valorem tax, excise tax, sales tax, use tax, franchise tax, real or personal property tax, transfer tax, gross receipts tax or other tax, assessment, duty, fee, levy or other governmental charge, together with and including, any and all interest, fines, penalties, assessments, and additions to Tax resulting from, relating to, or incurred in connection with any of those or any contest or dispute thereof.
“Tax Authority” means any Governmental Authority having jurisdiction over the payment or reporting of any Tax.
“Tax Proceeding” has the meaning set forth in Section 5.7(b).
“Tax Return” means any report, statement, form, return or other document or information required to be supplied to a Tax Authority in connection with Taxes.
“Transaction” has the meaning set forth in the recitals to this Agreement.
“Transaction Documents” means this Agreement, the SP Holdings Assignment, the CNX Assignment, the DevCo Assignment and any other document delivered pursuant to Section 7.2 or Section 7.3 of this Agreement.   
“Transaction Taxes” has the meaning set forth in Section 2.5. 

US-DOCS\98173696.8
36892784.8pmt-ex101_7.htm

Exhibit 10.1

EXECUTION COPY

 

 

 

LOAN AND SECURITY AGREEMENT

dated as of February 1, 2018

 

among

 

Pennymac Corp., 

as a Borrower,

 

PENNYMAC HOLDINGS, LLC,
as a Borrower,

 

 

PENNYMAC MORTGAGE INVESTMENT TRUST, 

as Guarantor,

 

and

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,
as Lender 

 

TABLE OF CONTENTS 

Page

ARTICLE I

 

DEFINITIONS AND ACCOUNTING MATTERS

 

	
Section 1.01
	
Definitions; Construction
	
1

	
Section 1.02
	
Accounting Matters
	
2

	
 

	
ARTICLE II

	
 
	
 
	
 

	
LOANS, BORROWING, PREPAYMENT

	
 
	
 
	
 

	
Section 2.01
	
Loans
	
2

	
Section 2.02
	
Note
	
2

	
Section 2.03
	
Borrower Electronic Files and Funding Requests
	
2

	
Section 2.04
	
Borrowing Base Reports
	
3

	
Section 2.05
	
Interest
	
3

	
Section 2.06
	
Increased Capital Costs
	
4

	
Section 2.07
	
Alternate Rate of Interest
	
4

	
Section 2.08
	
Mandatory Repayment of Loans
	
4

	
Section 2.09
	
Optional Prepayment
	
5

	
 

	
ARTICLE III

	
 
	
 
	
 

	
PAYMENTS; COMPUTATIONS; TAXES; FEES

	
 

	
Section 3.01
	
Payments and Computations, Etc
	
5

	
Section 3.02
	
Taxes
	
6

	
Section 3.03
	
Fees and Expenses
	
7

	
 

	
ARTICLE IV

	
 
	
 
	
 

	
SECURITY INTEREST

	
 
	
 
	
 

	
Section 4.01
	
Security Interest
	
8

	
Section 4.02
	
Provisions Regarding Pledge of Freddie Mac Servicing Rights to Be

   Included In Financing Statements
	
8

	
Section 4.03
	
Authorization of Financing Statements
	
9

	
Section 4.04
	
Lender’s Appointment as Attorney In Fact
	
9

	
Section 4.05
	
Release of Security Interest
	
10

	
 

	
ARTICLE V

	
 

	
CONDITIONS PRECEDENT

	
 
	
 
	
 

	
Section 5.01
	
Conditions Precedent
	
10

	
Section 5.02
	
Further Conditions Precedent
	
11

	
 

 

	
ARTICLE VI

	
 
	
 
	
 

	
REPRESENTATIONS AND WARRANTIES

	
 
	
 
	
 

	
Section 6.01
	
Representations and Warranties of each Borrower
	
11

	
Section 6.02
	
Representations Concerning the Collateral
	
15

	
 

	
ARTICLE VII

	
 
	
 
	
 

	
COVENANTS

	
 
	
 
	
 

	
Section 7.01
	
Covenants of each Borrower
	
17

	
Section 7.02
	
Notice of Certain Occurrences
	
24

	
 

	
ARTICLE VIII

	
 
	
 
	
 

	
EVENTS OF DEFAULT

	
 
	
 
	
 

	
Section 8.01
	
Events of Default
	
26

	
Section 8.02
	
Remedies
	
29

	
Section 8.03
	
Application of Proceeds
	
30

	
 

	
ARTICLE IX

	
 
	
 
	
 

	
ASSIGNMENT

	
 
	
 
	
 

	
Section 9.01
	
Restrictions on Assignments
	
30

	
Section 9.02
	
Evidence of Assignment; Endorsement on Note
	
31

	
Section 9.03
	
Rights of Assignee
	
31

	
Section 9.04
	
Permitted Participants; Effect
	
31

	
Section 9.05
	
Voting Rights of Participants
	
32

	
 

	
ARTICLE X

	
 
	
 
	
 

	
INDEMNIFICATION

	
 
	
 
	
 

	
Section 10.01
	
Indemnities by the Borrowers
	
32

	
Section 10.02
	
General Provisions
	
33

	
 

	
ARTICLE XI

	
 
	
 
	
 

	
MISCELLANEOUS

	
 
	
 
	
 

	
Section 11.01
	
Amendments, Etc
	
34

	
Section 11.02
	
Notices, Etc
	
34

	
Section 11.03
	
No Waiver; Remedies
	
34

	
Section 11.04
	
Binding Effect; Assignability
	
34

	
Section 11.05
	
GOVERNING LAW; SUBMISSION TO JURISDICTION
	
34

	
Section 11.06
	
Entire Agreement
	
35

	
Section 11.07
	
Acknowledgement
	
35

	
Section 11.08
	
Captions and Cross References
	
35

	
Section 11.09
	
Execution in Counterparts
	
35

 

	
Section 11.10
	
Confidentiality
	
35

	
Section 11.11
	
Survival
	
36

	
Section 11.12
	
Set-Off
	
36

	
Section 11.13
	
Guaranty
	
37

	
Section 11.14
	
Joint and Several Liability of the Borrowers
	
39

	
Section 11.15
	
Provisions Applicable to Freddie Mac and the Freddie Mac Collateral
	
39

 

Schedules

	
Schedule I
	
Definitions

	
Schedule 5.01
	
Conditions Precedent to the Effectiveness of this Agreement

	
Schedule 5.02
	
Conditions Precedent to each Loan

	
Schedule 6.01(s) 
	
Borrower’s Existing Financing Facilities

	
Schedule 6.02
	
Eligibility Criteria with respect to the Mortgage Loans

	
Schedule 7.01(cc)
	
Credit Suisse AG, Cayman Islands Branch Required Investor Reports

	
Schedule 11.02
	
Notices

Exhibits

	
Exhibit 2.02(a)
	
Form of Note

	
Exhibit 2.03
	
Form of Borrower Funding Request

	
Exhibit 2.08(a)
	
Form of Repayment Notice

	
Exhibit 2.08(b)
	
Form of Prepayment Notice

 

 

 

This LOAN AND SECURITY AGREEMENT (as amended or supplemented from time to time, this “Agreement”) dated as of February 1, 2018, is among Pennymac Corp. (“PMC”), PENNYMAC HOLDINGS, LLC (“Holdings” and, together with PMC, each a “Borrower” and collectively, the “Borrowers”), PENNYMAC MORTGAGE INVESTMENT TRUST (the “Guarantor”), and CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (the “Lender”).

BACKGROUND

The Borrowers wish to obtain financing from time to time to provide funding for the origination or acquisition of certain Eligible Servicing Rights (as defined herein), which Eligible Servicing Rights shall secure Loans (as defined herein) to be made by the Lender hereunder.

The Lender has agreed, subject to the terms and conditions of this Agreement, to provide such financing to the Borrowers. 

Accordingly, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01Definitions; Construction.

(a)Capitalized terms used herein and not otherwise defined herein shall have the meanings specified in Schedule I.

(b)All terms used in Article 9 of the UCC, and not specifically defined herein, are used herein as defined in such Article 9.

(c)Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”.

(d)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.

(e)Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.

(f)The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”.

(g)Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications 

1

set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, and (v) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

Section 1.02Accounting Matters. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared in accordance with GAAP.

ARTICLE II

LOANS, BORROWING, PREPAYMENT

Section 2.01Loans. On the terms and subject to the conditions set forth in this Agreement, the Lender shall make loans in an aggregate amount not to exceed the Available Facility Amount (each such loan, a “Loan”) to the Borrowers from time to time. The Lender shall distribute the proceeds of such Loan to the related Borrower no later than 1:00 p.m. (New York City time) on the related Funding Date in accordance with Section 2.03.

Section 2.02Note.

(a)The Loans made by the Lender shall be evidenced by a single promissory note of the Borrowers substantially in the form of Exhibit 2.02(a) hereto (the “Note”), dated the date hereof, payable to the Lender in a principal amount not to exceed an amount equal to the Available Facility Amount as originally in effect and otherwise duly completed.

(b)The date, amount, and interest rate of each Loan made by the Lender to the Borrowers, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of the Note, noted by the Lender on the grid attached to the Note or any continuation thereof, provided, that failure of the Lender to make any such recordation or notation shall not affect the obligations of the Borrowers to make payments when due of any amount hereunder or under the Note in respect of the Loans.

(c)Notwithstanding the pledge of Collateral, the Borrowers hereby acknowledge, admit and agree that the Borrowers’ Obligations under the Note are joint and several recourse obligations of the Borrowers.

Section 2.03Borrower Electronic Files and Funding Requests.

(a)On any Funding Notice Date prior to the Wind Down Date, the Borrowers may request the Lender to make a Loan on the Funding Date specified in the related Borrower Funding Request by delivering to the Lender an irrevocable Borrower Funding Request no later than 3:00 p.m. (New York City time) on such Funding Notice Date. The amount of any Loan 

2

requested pursuant to a Borrower Funding Request shall be not greater than the related Available Loan Amount and, with respect to the Initial Borrower Funding Request, shall not be less than $5 million. The Borrowers may request a Funding Date on any Business Day; provided, however, a Funding Date that involves the addition of new Collateral may not fall on any of the five (5) last Business Days in any calendar month unless otherwise agreed by Lender. Any Borrower Funding Request that relates to the addition of new Collateral shall include an Electronic File describing all Eligible Servicing Rights that constitute the Collateral hereunder. 

(b)Regardless whether the Borrowers intend to deliver a Borrower Funding Request during any calendar month, the Borrowers shall deliver to the Lender on the fifteenth (15th) calendar day of each month (or, if such day is not a Business Day, the following Business Day) (any such day, a “Collateral Reporting Date”), an Electronic File with respect to all Eligible Servicing Rights that constitute the Collateral hereunder, which shall include all updates to the Collateral since the date of the preceding Electronic File.

(c)In Lender’s determination of Collateral Value for any of the Servicing Rights hereunder, it shall apply the MSR Value of the Servicing Rights in a related Borrowing Base Report. Any excess of the amount funded on such Loan over the Collateral Value shall result in a Borrowing Base Deficiency as set forth in Section 2.08(b). Notwithstanding anything to the contrary contained in this Section 2.03, the Lender shall have the right to determine MSR Value at any time in its sole discretion. 

(d)By delivering a Borrower Funding Request, the Borrowers represent and warrant to the Lender that, after taking into account the amount of the requested Loan, all conditions precedent to such Loan specified in Section 5.02 have been satisfied.

Section 2.04Borrowing Base Reports. With respect to each Funding Date, the Lender shall determine the MSR Value of the Eligible Servicing Rights to be pledged as security for a Loan on such Funding Date and shall communicate such determination by providing the Borrowers with a Borrowing Base Report prior to such Funding Date. For purposes of preparing each Borrowing Base Report, the Lender shall calculate the Collateral Value of the Eligible Servicing Rights described in the Relevant Electronic File.

Section 2.05Interest. Interest shall accrue on each Loan for each day during a related Interest Period at a per annum rate equal to the product of (x) the outstanding principal balance of such Loan on such day, multiplied by (y) the sum of (i) the applicable LIBOR Rate for such day and (ii) the Applicable Margin. Interest shall be payable on each Monthly Settlement Date in arrears with respect to each Loan through the final day of each Interest Period (regardless whether such day is a Business Day), such amount to be payable on each Monthly Settlement Date. The Lender shall determine the LIBOR Rate for each Loan, which may be reset on a daily basis, as set forth in the definition of “LIBOR Rate” and provide notice of such determination to the Borrowers. The Lender shall also calculate the amount of interest or other amounts due to be paid by the Borrowers from time to time hereunder (including in connection with any prepayment or repayment of Loans permitted hereunder) and shall provide a written statement thereof to the Borrowers at least two Business Days prior to the due date of such payments (or the relevant repayment or prepayment after having received a notice thereof); provided, that failure to provide such statements on a timely basis shall not relieve the Borrowers of the obligation to pay any 

3

interest and principal due on the applicable payment date (based upon its good faith calculation of the amount due, such amount to be promptly reconciled after receipt of a subsequent statement from the Lender) and other such amounts hereunder promptly upon receipt of such statement.

Section 2.06Increased Capital Costs. If Lender determines in its sole discretion that any Change in Law or any change in accounting rules regarding capital requirements has the effect of reducing the rate of return on Lender’s capital under this Agreement as a consequence of such Change in Law or change in accounting rules, then from time to time Borrowers will compensate Lender for such reduced rate of return suffered as a consequence of such Change in Law or change in accounting rules on terms similar to those imposed by Lender. Further, if due to the introduction of, any change in, or the compliance by Lender with (i) any eurocurrency reserve requirement, or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority whether or not having the force of law, there shall be an increase in the cost to Lender as a consequence of the Loans or other advances of funds made by Lender pursuant to this Agreement or any of the Facility Documents relating to fundings or commitments under this Agreement, then Borrowers shall, from time to time and upon demand by Lender, compensate Lender for such increased costs, and such amounts shall be deemed a part of the Obligations hereunder. Lender shall provide Borrowers with notice as to any such Change in Law, change in accounting rules or change in compliance promptly following Lender’s receipt of actual knowledge thereof.

Section 2.07Alternate Rate of Interest. If on any Business Day, the Lender determines (which determination shall be conclusive absent manifest error) (a) that adequate and reasonable means do not exist for ascertaining the LIBOR Rate; or (b) that the LIBOR Rate will not adequately and fairly reflect the cost to the Lender of making or maintaining its Loan; or (c) that it has become unlawful for it to honor its obligation to make or maintain Loans hereunder using the LIBOR Rate, or maintaining its Loans (or its Loan) included in any advance, then the Lender shall give notice thereof to the Borrowers by telephone, facsimile, or other electronic means as promptly as practicable thereafter and, until the Lender notifies the Borrowers that the circumstances giving rise to such notice no longer exist, any Borrower Funding Request that requests that Lender make a new Loan, subject to the timely approval of the Borrowers after receipt of notice of such revised rate, at a rate per annum that the Lender determines in its reasonable discretion adequately reflects the cost to the Lender of making or maintaining the Loan.

Section 2.08Mandatory Repayment of Loans.

(a)On each Loan Repayment Date (or, if such day is not a Business Day, the following Business Day) from and after the Wind Down Date, and continuing until the Outstanding Aggregate Loan Amount shall be reduced to zero, the Borrowers shall repay an amount equal to at least one-twelfth (1/12) of the Outstanding Aggregate Loan Amount as of the Wind Down Date with respect to all Loans and all other amounts due under this Agreement. Loans may be prepaid in accordance with the terms of Section 2.09 hereof and, to the extent prepaid, provided the Wind Down Date shall not have occurred, may be re-borrowed hereunder in accordance with the terms hereof (including satisfaction of all conditions precedent contained in Section 5.02). Notwithstanding the foregoing, all amounts owing under the Facility shall be immediately due and payable on the Termination Date.

4

(b)If, on any Business Day (a “Borrowing Base Shortfall Day”), the Lender provides written notice to the Borrowers that the Lender has determined in its sole reasonable discretion based on the Borrowing Base Report most recently delivered by the Lender pursuant to Section 2.04 that the Outstanding Aggregate Loan Amount on such day exceeds the lesser of (i) the Borrowing Base and (ii) the Available Facility Amount on such day (such circumstance, a “Borrowing Base Deficiency”), the Borrowers (i) on the same day if the Lender notifies Borrowers by 11:00 a.m. (New York time) of such Borrowing Base Deficiency, or (ii) if the notice is received later than 11:00 a.m. (New York time), then within one (1) Business Day after the Borrowing Base Shortfall Day, shall repay outstanding Loans (including accrued interest thereon), in an amount equal to the amount of the Borrowing Base Deficiency specified in the notice provided to the Borrowers by the Lender (such requirement a “Margin Call”).

Section 2.09Optional Prepayment. The Borrowers may, at their option, prepay any Loan advanced hereunder in full or in part on any date, but not more than once per month; provided, however, that the Borrowers shall be permitted at any time, without limitation, to prepay any Loan in connection with a Margin Call (any such date, an “Optional Prepayment Date”). Any such prepayment received by the Lender by 3:00 p.m. (New York City time) on such Optional Prepayment Date shall be applied by the Lender on such Business Day. Any such prepayment received by the Lender after 3:00 p.m. (New York City time) on such Optional Prepayment Date shall be applied by the Lender on the following Business Day. For the avoidance of doubt, any optional prepayment in full shall not result in the termination of this Agreement unless such termination is declared in writing by the Borrowers, acting in their discretion.

ARTICLE III

PAYMENTS; COMPUTATIONS; TAXES; FEES

Section 3.01Payments and Computations, Etc.

(a)Unless otherwise expressly stated herein, all amounts to be paid or deposited hereunder shall be paid or deposited in accordance with the terms hereof no later than 4:00 p.m. (New York City time) on the day when due in lawful money of the United States of America in same day funds.

(b)The Borrowers shall, to the extent permitted by law, pay interest on all amounts (including principal, interest and fees) due but not paid on the date such payment is due hereunder as provided herein, for the period from, and including, such due date until, but excluding, the date paid, at the applicable Default Rate, payable on demand; provided, however that such interest rate shall not at any time exceed the maximum rate permitted by applicable law.

(c)All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which payable.

(d)The Borrowers agree that the principal of and interest on the Loans shall be recourse obligations of the Borrowers.

5

(e)All payments made by the Borrowers under this Agreement shall be made without set-off or counterclaim.

Section 3.02Taxes.

(a)All payments made by Borrowers under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto imposed by any Governmental Authority 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 the Lender is organized or of its applicable lending office, or a state or foreign jurisdiction with respect to which Lender has a present or former connection (other than any connection arising from executing, delivering, being party to, engaging in any transaction pursuant to, performing its obligations under or enforcing any Facility Document), or any political subdivision thereof (collectively, such non-excluded taxes are hereinafter called “Taxes”), all of which shall be paid by Borrowers for their own account not later than the date when due. If a Borrower is required by law or regulation to deduct or withhold any Taxes from or in respect of any amount payable hereunder, it shall: (a) make such deduction or withholding, (b) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due, (c) deliver to the Lender, promptly, original tax receipts and other evidence satisfactory to Lender of the payment when due of the full amount of such Taxes; and (d) except as otherwise expressly provided in Section 3.02(d) below, pay to the Lender such additional amounts (including all taxes imposed by any Governmental Authority on such additional amounts) as may be necessary so that the Lender receives, free and clear of all Taxes, a net amount equal to the amount it would have received under this Agreement, as if no such deduction or withholding had been made. 

(b)In addition, each Borrower 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 any taxing authority 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)Each Borrower agrees to indemnify Lender 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 3, and any liability (including penalties, interest and expenses arising thereon or with respect thereto) arising therefrom or with respect thereto, provided that Lender shall have provided Borrowers with evidence, reasonably satisfactory to Borrower, of payment of Taxes or Other Taxes, as the case may be.

(d)Any Lender that either (i) is not incorporated under the laws of the United States, any State thereof, or the District of Columbia or (ii) whose name does not include “Incorporated,” “Inc.,” “Corporation,” “Corp.,” “P.C.,” “insurance company,” or “assurance company” (a “Foreign Purchaser”) shall provide Borrowers with original properly completed and duly executed United States Internal Revenue Service (“IRS”) Forms W-8BEN, W-8BEN-E or 

6

W-8ECI or any successor form prescribed by the IRS, certifying that such Person is either (1) entitled to benefits under an income tax treaty to which the United States is a party which eliminates or (2) otherwise fully exempt from United States withholding tax under Sections 1441 through 1442 of the Code on payments to it on or prior to the date upon which each such Foreign Lender becomes a Lender. Each Foreign Lender will resubmit the appropriate form eliminating withholding tax on payments to it on the earliest of (A) the third anniversary of the prior submission, or (B) on or before the expiration of thirty (30) days after there is a “change in circumstances” with respect to such Person as defined in Treas. Reg. Section 1.1441-1(e)(4)(ii)(D). For any period with respect to which the Foreign Lender has failed to provide Borrowers with the appropriate form or other relevant document (x) as expressly required under this Section 3(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided, under the first sentence of this Section 3(d)) or (y) otherwise as required to establish exemption from United States withholding under FATCA, by such Person or by such Person’s assignor or transferor, such Person shall not be entitled to “gross-up” of Taxes under Section 3(d) or indemnification under Section 3(c) with respect to Taxes imposed by the United States which are imposed because of such failure; provided, however that should a Foreign Lender, which is otherwise exempt from a withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Borrowers shall take such steps as such Foreign Lender shall reasonably request to assist such Foreign Lender to recover such Taxes.

(e)Without prejudice to the survival or any other agreement of Borrowers hereunder, the agreements and obligations of Borrowers contained in this Section 3.02 shall survive the termination of this Agreement. Nothing contained in this Section 3.02 shall require Lender to make available any of their tax returns or other information that it deems to be confidential or proprietary.

(f)The Lender shall (A) promptly notify the Borrowers of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) cooperate, in its reasonable discretion and at Borrowers’ expense, with Borrowers to mitigate any requirement of Applicable Law of any jurisdiction in which the Borrowers may be required to withhold or deduct any taxes from amounts payable to Lender hereunder.

Section 3.03Fees and Expenses. The Borrowers agree to pay to the Lender all reasonable and documented out-of-pocket costs and expenses (including reasonable and documented fees and expenses of Lender’s counsel not to exceed $25,000.00) incurred in connection with the execution of this Agreement and the Facility Documents; provided that such limitation on fees and expenses of Lender’s counsel shall not apply to (i) any amendment or renewal of, or waiver of any provision of, this Agreement or any other Facility Document or (ii) any document executed after the Closing Date in connection with the transactions contemplated by this Agreement.

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ARTICLE IV

SECURITY INTEREST

Section 4.01Security Interest. 

(a)As security for the prompt payment and performance of all of its Obligations, PMC hereby assigns and pledges to the Lender, and grants a security interest, subject to the interests of Freddie Mac as set forth in Section 4.02 and in the Freddie Mac Acknowledgment Agreement, to the Lender, all of PMC’s right, title and interest, in, to, and under, whether now owned or hereafter acquired, in all of the following, whether now or hereafter existing and wherever located: (i) the Pledged Servicing Rights whether or not yet accrued, earned due or payable as well as all other present and future rights and interests of PMC in such Pledged Servicing Rights, (ii) all books and records, including computer disks and other records or physical or virtual data or information, related to the foregoing (but excluding computer programs) and (iii) all monies due or to become due with respect to the foregoing and all proceeds of the foregoing, but with respect to items (i) - (iii) above specifically excluding the Excluded Collateral (collectively, the “PMC Collateral”); provided that PMC does not assign or pledge to the Lender, or grant a security interest in any of PMC’s right, title and interest, in, to or under PMC’s rights to reimbursement for any Advances related to mortgage servicing rights subject to the Freddie Mac Servicing Contract. 

(b)As security for the prompt payment and performance of all of its Obligations, Holdings hereby assigns and pledges to the Lender, and grants a security interest, subject to the interests of Freddie Mac as set forth in Section 4.02 and in the Freddie Mac Acknowledgment Agreement, to the Lender, all of Holdings’ right, title and interest, in, to, and under, whether now owned or hereafter acquired, in all of the following, whether now or hereafter existing and wherever located: (i) any Excess Servicing Fees sold by PMC to Holdings pursuant to the terms of the Master Spread Acquisition and MSR Servicing Agreement, (ii) all books and records, including computer disks and other records or physical or virtual data or information, related to the foregoing (but excluding computer programs) and (iii) all monies due or to become due with respect to the foregoing and all proceeds of the foregoing (collectively, the “Holdings Collateral” and together with the PMC Collateral, the “Collateral”). 

Section 4.02Provisions Regarding Pledge of Freddie Mac Servicing Rights to Be Included In Financing Statements.  Notwithstanding anything to the contrary in the Agreement or any of the other Facility Documents (other than the Freddie Mac Acknowledgment Agreement), the security interest of the Lender created hereby with respect to the Pledged Servicing Rights is subject to the following provisions to be included in each financing statement filed in respect hereof (or any variation required by Freddie Mac): 

“Notwithstanding anything herein to the contrary, the security interest publicized or perfected by this financing statement is subject and subordinate in each and every respect (a) to all rights, powers and prerogatives of the Federal Home Loan Mortgage Corporation (“Freddie Mac”) under and in connection with the Purchase Documents, as that term is defined in the Freddie Mac Single-Family Seller/Servicer Guide, which rights include, without limitation, the right of Freddie 

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Mac to disqualify (in whole or in part) PennyMac Corp. as an approved Freddie Mac Seller/Servicer, with or without cause, and the right to terminate (in whole or in part) the unitary, indivisible master servicing contract and to transfer and sell all or any portion of said servicing contract rights, as provided in the Purchase Documents; and (b) to all claims of Freddie Mac arising out of or relating to any and all breaches, defaults and outstanding obligations of PennyMac Corp. to Freddie Mac.”

Section 4.03Authorization of Financing Statements.  The Borrowers hereby authorize the Lender to file any financing or continuation statements required to perfect, protect, or more fully evidence the Lender’s security interest in the Collateral granted hereunder. The Lender will notify the Borrowers of any such filing (but the failure to deliver such notice shall not prejudice any rights of the Lender under this Section 4.03).

Section 4.04Lender’s Appointment as Attorney In Fact.

(a)Each Borrower hereby irrevocably constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney‐in‐fact with full irrevocable power and authority in the place and stead of such Borrower and in the name of such Borrower or in its own name, from time to time in the Lender’s discretion, if an Event of Default shall have occurred and be continuing, for the limited purpose of carrying out the terms of this Agreement (or any Servicing Contracts to the extent permitted pursuant to the Freddie Mac Acknowledgment Agreement), to take any action on behalf of such Borrower pursuant to the Freddie Mac Acknowledgment Agreement and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement (or any Servicing Contracts to the extent permitted pursuant to the Freddie Mac Acknowledgment Agreement) solely to the extent such actions are expressly permitted to be taken by the Lender under the Freddie Mac Acknowledgment Agreement or the Freddie Mac Servicing Contract, and, without limiting the generality of the foregoing, each Borrower hereby gives the Lender the power and right, on behalf of such Borrower, without assent by, but with notice to, the Borrowers, if an Event of Default shall have occurred and be continuing, to do the following solely to the extent expressly permitted in the Freddie Mac Acknowledgment Agreement and the Freddie Mac Servicing Contract:

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

(ii)(A) to direct any party liable for any payment under any Collateral to make payment of any and all moneys due or to become due thereunder directly to the Lender or as the Lender shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, 

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assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (E) in connection with the above, to give such discharges or releases as the Lender may deem appropriate; and (F) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and to do, at the Lender’s option and the Borrowers’ expense, at any time, or from time to time, all acts and things which the Lender deems necessary to protect, preserve or realize upon the Collateral and the Lender’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as the Borrowers might do;

(iii)in connection with the preservation of the security interest granted hereunder in favor of Lender, perform or cause to be performed, the Borrowers’ obligations under any Servicing Contract to the extent permitted by the Freddie Mac Acknowledgment Agreement.

Each Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. The power of attorney is a power coupled with an interest and shall be irrevocable but shall terminate upon release of the Lender’s security interest as provided in Section 4.05.

(b)Each Borrower also authorizes the Lender, at any time and from time to time, to execute, in connection with the sale provided for in Section 8.02(c) hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; provided that the exercise of such powers are in accordance with the Freddie Mac Acknowledgment Agreement.

(c)The powers conferred on the Lender are solely to protect the Lender’s interest in the Collateral and shall not impose any duty upon the Lender to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Lender nor any of its officers, directors, or employees shall be responsible to a Borrower for any act or failure to act hereunder, except for its own gross negligence or willful misconduct; provided that the Lender shall exercise such powers only to the extent expressly permitted in the Freddie Mac Acknowledgment Agreement.

Section 4.05Release of Security Interest. Upon termination of this Agreement and repayment to the Lender of all Obligations and the performance of all obligations under the Facility Documents, the Lender shall release its security interest in any remaining Collateral; provided that if any payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of a Borrower, or upon or as a result of the appointment of a receiver, intervener or conservator of, or a trustee or similar officer for a Borrower or any substantial part of its Property, or otherwise, this Agreement, all rights hereunder and the Liens created hereby shall continue to be effective, or be reinstated, until such payments have been made.

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ARTICLE V
CONDITIONS PRECEDENT

Section 5.01Conditions Precedent. The effectiveness of this Agreement is subject to the condition precedent that the Lender shall have received each of the items set forth in Schedule 5.01 (unless otherwise indicated) dated such date, and in such form and substance, as is satisfactory to the Lender.

Section 5.02Further Conditions Precedent. The funding of each Loan hereunder, shall in all events be subject to satisfaction of the further conditions precedent set forth in Schedule 5.02 as of the making of such Loan.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

Section 6.01Representations and Warranties of each Borrower. Each Borrower ando Guarantor, as applicable, represents and warrants to the Lender that throughout the term of this Agreement (except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case, such representation or warranty shall have been true or correct as of such date): 

(a)Borrower Party Existence. PMC has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware. Holdings has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware. Guarantor has been duly organized and is validly existing as a real estate investment trust in good standing under the laws of the State of Maryland.

(b)Licenses. Each Borrower Party is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect and is not in default of such state’s applicable laws, rules and regulations.  Each Borrower Party has the requisite power and authority, legal right and necessary licenses to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of each Facility Document.  

(c)Power. Each Borrower Party has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect. 

(d)Due Authorization. Each Borrower Party has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Facility Documents, as applicable. Each Facility Document has been (or, in the case of Facility Documents not yet executed, will be) duly authorized, executed and delivered by each Borrower Party, all requisite or other corporate action having been taken, and each is valid, binding and 

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enforceable against each Borrower Party in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity. 

(e)Financial Statements. The financial statements of each Borrower Party, copies of which have been furnished to Lender, (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of the related Borrower Party as of the dates and for the periods indicated and (iii) have been prepared in accordance with GAAP consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent financial statements, there has been no material adverse change in the consolidated business, operations or financial condition of any Borrower Party from that set forth in said financial statements nor is any Borrower Party aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change.. Except as disclosed in such financial statements or pursuant to Section 7.01 hereof, no Borrower Party is subject to any liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans. 

(f)Event of Default. There exists no Event of Default under Section 8.01(e) hereof, which default gives rise to a right to accelerate indebtedness as referenced in Section 8.01(e) hereof. 

(g)Solvency. Each Borrower Party is solvent and will not be rendered insolvent by any Loan hereunder and, after giving effect to each such Loan, will not be left with an unreasonably small amount of capital with which to engage in its business. No Borrower Party intends to incur, nor believes that it has incurred, debts beyond their ability to pay such debts as they mature and are not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets. The amount of consideration being received by the Borrowers after giving effect to each Loan by the Lender constitutes reasonably equivalent value and fair consideration for such Loan. No Borrower is pledging any Collateral with any intent to hinder, delay or defraud any of its creditors. The Agreement and the Facility Documents, any other document contemplated hereby or thereby and each transaction have not been entered into fraudulently by any Borrower Party hereunder, or with the intent to hinder, delay or defraud any creditor or Lender.

(h)No Conflicts. The execution, delivery and performance by each Borrower Party of each Facility Document does not conflict with, result in the breach of or violate any provision of the organizational documents of the related Borrower Party or result in the breach of any provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any agreement, indenture, loan or credit agreement or other instrument to which a Borrower Party, the Collateral or any of a Borrower Party’s Property is or may be subject to, or result in the violation of any law, rule, regulation, order, judgment, writ, injunction or decree to which a Borrower Party, the Collateral or a Borrower Party’s Property is subject, which conflict would have a Material Adverse Effect. 

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(i)True and Complete Disclosure. All information, reports, exhibits, schedules, financial statements or certificates relating to any Borrower Party that any Borrower Party has delivered or caused to be delivered to Lender in connection with the initial or any ongoing due diligence of any Borrower Party and the negotiation, preparation, or delivery of the Facility Documents, are true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. 

(j)Approvals. No consent, approval, authorization or order of, registration or filing with, or notice to any Governmental Authority or court is required under applicable law in connection with the execution, delivery and performance by any Borrower Party of each Facility Document except for (i) consents that have been obtained in connection with transactions contemplated by the Facility Documents, (ii) filings to perfect the security interest created by this Agreement, and (iii) authorizations, consents, approvals, filings, notices, or other actions the failure to make could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.  For the avoidance of doubt, the parties acknowledge that certain details, excluding pricing details, of the Facility Documents will be filed in the Guarantor’s 8-K filing.

(k)Litigation. There is no action, proceeding or investigation pending with respect to which any Borrower Party has received service of process or, to the best of any Borrower Party’s knowledge, threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of any Facility Document, (B) seeking to prevent the consummation of any of the transactions contemplated by any Facility Document, (C) making a claim individually or in the aggregate in an amount greater than $10,000,000 against any Borrower Party, (D) which requires filing with the Securities and Exchange Commission in accordance with the 1934 Act or any rules thereunder, (E) which has resulted in the voluntary or involuntary suspension of a license, a cease and desist order, or such other action as could adversely impact any Borrower Party’s business or (F) which might materially and adversely affect the validity of the Collateral or the performance by it of its obligations under, or the validity or enforceability of any Facility Document. 

(l)Taxes. Each Borrower Party and their Subsidiaries is a U.S. Person and has timely filed all tax returns that are required to be filed by them and have paid all taxes, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of each Borrower Party and their Subsidiaries in respect of taxes and other governmental charges are, in the opinion of each Borrower or Guarantor, as applicable, adequate. 

(m)Investment Company. None of Borrowers, the Guarantor nor any of their Subsidiaries is required to be registered as an “investment company” as defined under the Investment Company Act or is an entity “controlled by” an entity required to be registered as an “investment company” as defined under the Investment Company Act; provided, however, that any entity that is under the management of PNMAC Capital Management LLC in its capacity as an “investment adviser” within the meaning of the Investment Company Act and is otherwise not directly or indirectly owned or controlled by a Borrower shall not be deemed a “Subsidiary” for the purposes of this Section 6.01(m).

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(n)Chief Executive Office; Jurisdiction of Organization. Each Borrower’s chief executive office on the date hereof is located at 3043 Townsgate Road, Westlake Village, CA 91361. Each Borrower’s jurisdiction of organization is the State of Delaware. Borrowers shall provide Lender with thirty days advance notice of any change in any Borrower’s principal office or place of business or jurisdiction. No Borrower has a trade name. During the preceding five years, no Borrower 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. 

(o)Location of Books and Records. The location where each Borrower keeps its books and records, including all computer tapes and records relating to the Collateral is its chief executive office or in the custody of the Subservicer. 

(p)Adjusted Tangible Net Worth. On the Closing Date, each Borrower Party’s Adjusted Tangible Net Worth are not less than the amounts set forth in Section 7.01(w)(i) hereof. 

(q)ERISA. Each Plan to which each Borrower Party or their Subsidiaries make direct contributions, and, to the knowledge of Borrower Party, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other federal or state law. 

(r)Agreements. No Borrower nor any Subsidiary of any Borrower is a party to any agreement, instrument, or indenture or subject to any restriction materially and adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements described in Section 6.01(e) hereof. No Borrower nor any Subsidiary of any Borrower is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument, or indenture which default could have a material adverse effect on the business, operations, properties, or financial condition of any Borrower as a whole. No holder of any indebtedness of any Borrower or of any of its Subsidiaries has given notice of any asserted default thereunder.

(s)Other Indebtedness. Each Borrower’s financing facilities currently in place for the financing of any mortgage servicing rights or servicing advances owned by such Borrower is listed in detail in Schedule 6.01(s) attached hereto. Each Borrower shall provide any updates to Schedule 6.01(s) to the Lender at the time it delivers each Compliance Certificate hereunder.

(t)Agency Approvals. Each of PMC and Subservicer is a seller/servicer approved by Fannie Mae and Freddie Mac, an issuer approved by Ginnie Mae and a lender approved by HUD. Each of PMC and Subservicer is in good standing to service mortgages for Fannie Mae, Freddie Mac, Ginnie Mae, HUD and Freddie Mac, as applicable.  Neither PMC nor Subservicer has been suspended as a seller/servicer by Fannie Mae, Freddie Mac, Ginnie Mae or HUD on and after the date on which PMC first obtained such approval from Fannie Mae, Ginnie Mae, HUD or Freddie Mac, as applicable. No Borrower Party is, and/or Subservicer is not, under review or investigation outside of due course and does not have knowledge of imminent or future investigation outside of due course, by Fannie Mae, Ginnie Mae, HUD or Freddie Mac on and 

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after the date on which PMC or Subservicer, as applicable, became a Fannie Mae, Ginnie Mae, HUD or Freddie Mac approved seller/servicer or lender, as the context may require.

(u)No Reliance. Each Borrower Party has made its own independent decisions to enter into the Facility Documents, as applicable, and as to whether each Loan is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary. No Borrower Party is relying upon any advice from Lender as to any aspect of the Loans, including without limitation, the legal, accounting or tax treatment of such Loans. 

(v)Plan Assets. No Borrower Party is an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Collateral does not constitute “plan assets” within the meaning of 29 CFR §2510.3 101 as amended by Section 3(42) of ERISA, in any Borrower Party’s hands, and transactions by or with a Borrower Party are not subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA. 

(w)No Prohibited Persons. Neither Borrowers nor Guarantor, or any of their Affiliates, officers, directors, partners or members, is an entity or person (or to the Borrowers’ or Guarantor’s knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “Prohibited Person”). 

(x)Servicing. Borrowers have adequate financial standing and PMC, through the Subservicing Agreement, access to adequate servicing facilities, procedures and experienced personnel necessary for the sound servicing of the Mortgage Loans subject to this Agreement and in accordance with Accepted Servicing Practices. 

(y)Real Estate Investment Trust. Guarantor is a REIT. 

(z)Subservicer Power and Authority. The Subservicer (a) is a limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed, (b) has all necessary power and authority and legal right to service the Mortgage Loans subject to this Agreement, and (c) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary.

Section 6.02Representations Concerning the Collateral. Each Borrower represents and warrants to the Lender that as of each day that a Loan is outstanding pursuant to this Agreement:

(a)Such Borrower has not assigned, pledged, conveyed, or encumbered any Collateral to any other Person or any right to any Collateral to any Person (including without 

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limitation any right to control or transfer or otherwise effectuate any remedy relating to any Collateral), and immediately prior to the pledge of any such Collateral, such Borrower was the sole owner of such Collateral and had good and marketable title thereto (subject to the rights of Freddie Mac with respect to the related Servicing Rights), free and clear of all Liens (subject only to the rights and interests of Freddie Mac), and no Person, other than the Lender has any Lien on any Collateral (subject only to the rights and interests of Freddie Mac). No Eligible Servicing Rights are related to Mortgage Loans owned or financed by a third-party (including without limitation any Affiliate of such Borrower) other than Freddie Mac pursuant to a Freddie Mac Acknowledgment Agreement, and no Person has any interest in any Eligible Servicing Rights or any related Mortgage Loans, other than Lender, such Borrower (or both Borrowers in the case where any Excess Servicing Fees have been sold by PMC to Holdings pursuant to the terms of the Master Spread Acquisition and MSR Servicing Agreement), or Freddie Mac pursuant to the applicable Freddie Mac Acknowledgment Agreement (including without limitation any right to control or transfer or otherwise effectuate any remedy relating to any Eligible Servicing Rights). 

(b)The provisions of this Agreement are effective to create in favor of the Lender a valid security interest in all right, title, and interest of the Borrowers in, to and under the Collateral, subject only to the rights and interests of Freddie Mac and the Freddie Mac Acknowledgment Agreement.

(c)All Recourse Servicing Obligations as of the applicable date of the most recent Electronic File have been identified as such in a monthly summary report delivered to the Lender. All information concerning all Servicing Rights set forth on the Electronic File pursuant to which such Servicing Rights were, are or will be (as applicable) pledged to the Lender will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date of such Electronic File.

(d)Upon the filing of financing statements on Form UCC-1 naming the Lender as “Secured Party” and each Borrower as a “Debtor”, and describing the Collateral, in the appropriate jurisdictions, the Lender has a duly perfected first priority security interest under the UCC in all right, title, and interest of each Borrower in, to and under, subject to the rights and interests of Freddie Mac and the Freddie Mac Acknowledgment Agreement.

(e)The Facility Documents create in favor of the Lender a valid and, together with such filings and other actions, perfected first priority security interest in the Collateral, securing the payment of the Obligations, and all filings and other actions necessary to perfect such security interest have been duly taken. Subject to the rights of Freddie Mac as set forth in Section 4.02 and in the Freddie Mac Acknowledgment Agreement, the Borrowers are the legal and beneficial owners of the applicable Collateral free and clear of any Lien, except for the Liens created or permitted under the Facility Documents.

(f)Subject only to the terms of the Freddie Mac Acknowledgment Agreement and the Freddie Mac Servicing Agreement, each Borrower has and will continue to have the full right, power and authority, to pledge the applicable Collateral, and the pledge of such Collateral may be further assigned without any requirement, except as may be specified in the Freddie Mac Servicing Contract and the Freddie Mac Acknowledgment Agreement.

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(g)In connection with any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds entered into by a Borrower or any of its Affiliates on the one hand and any third party (including an Affiliate of a Borrower or any of its Affiliates but excluding the Lender or any Affiliate of Lender) on the other, including without limitation, any other facility for the funding of Advances, no such third party has the right pursuant to the terms of such repurchase agreement, loan and security agreement or similar credit facility or agreement, to cause such Borrower to terminate, rescind, cancel, pledge, hypothecate, liquidate or transfer any of the Collateral.

ARTICLE VII

COVENANTS

Section 7.01Covenants of each Borrower. Each Borrower covenants and agrees with the Lender that, so long as any Loan is outstanding and until all Obligations have been paid in full: 

(a)Litigation. Each Borrower Party, as applicable, will promptly, and in any event within ten (10) days after service of process on any of the following, give to Lender notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting the Borrower Party or any of its Subsidiaries 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 Facility Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually or in the aggregate in an amount greater than $10,000,000, or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect. Each Borrower Party, as applicable, will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.

(b)Prohibition of Fundamental Changes. No Borrower Party shall enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided, that such Borrower Party may merge or consolidate with (a) any wholly owned subsidiary of such Borrower Party, or (b) any other Person if such Borrower Party is the surviving corporation; and provided further, that if after giving effect thereto, no Default would exist hereunder.

(c)Servicing. No Borrower shall cause the Mortgage Loans to be serviced by any servicer other than Subservicer or an Eligible Subservicer without the consent of the Lender, which consent shall not be unreasonably withheld, subject to the rights and interests of the Agencies; provided, however, that the consent of Lender shall not be required if either (i) Freddie Mac terminates PMC or the Subservicer, as servicer or subservicer, as applicable, or (ii) Freddie Mac directs the PMC or the Subservicer to cause the Mortgage Loans to be serviced by another servicer, and in each case, such successor servicer shall be an approved servicer under the guidelines of Freddie Mac.

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(d)Insurance. The Borrowers shall, and shall cause Guarantor and Subservicer to keep all property useful and necessary in its business in good working order and condition. The Borrowers shall and shall cause Subservicer to maintain a fidelity bond and be covered by insurance (including, without limitation, errors and omissions insurance) of the kinds and in the amounts customarily maintained by such similarly situated entities in the same jurisdiction and industry as the Borrowers, in amounts acceptable to the Agencies, and no Borrower or Subservicer shall reduce such coverage without the written consent of Lender, and shall also maintain such other insurance with financially sound and reputable insurance companies, and with respect to property and risks of a character usually maintained by entities engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such entities.

(e)No Adverse Claims. Each Borrower warrants and will defend the right, title and interest of the Lender in and to the Collateral pledged to the Lender against the claims and demands of all Persons whomsoever, subject to the restrictions imposed by the Freddie Mac Acknowledgment Agreement and the Freddie Mac Servicing Contract. 

(f)Assignment. Except as permitted herein, no Borrower shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Facility Documents), any of the Collateral or any interest therein subject to the Freddie Mac Servicing Contract and/or the Freddie Mac Acknowledgment Agreement, except (x) the security interest granted hereunder in favor of the Lender and (y) the rights of Freddie Mac under the Freddie Mac Servicing Contract.

(g)Security Interest. Each Borrower shall do all things necessary to preserve the Collateral so that it remains subject to a first priority perfected security interest hereunder subject to the rights of Freddie Mac under the Freddie Mac Servicing Contract and the Freddie Mac Acknowledgment Agreement. Without limiting the foregoing, the Borrowers will comply with all rules, regulations and other laws of any Governmental Authority and cause the Collateral to comply with all applicable rules, regulations and other laws. Each Borrower Party and the Subservicer shall diligently fulfill its duties and obligations under the Freddie Mac Servicing Contract and the Subservicing Agreement in all material respects and shall not default in any material respect under the Freddie Mac Subservicing Agreement and/or the Freddie Mac Acknowledgment Agreement; provided that it shall not be a breach of this covenant if: (a) Freddie Mac shall terminate a Borrower’s rights under any Freddie Mac Servicing Contract and such Borrower shall repay (without duplication of payment) to the Lender an amount equal to the excess of the sum of the Loans then outstanding over the sum of the Borrowing Base of all the Servicing Rights then pledged to the Lender within the time periods set forth in Section 2.08(b) or (b) the Freddie Mac Servicing Contract expires in accordance with its terms and without renewal or (c) a default declared by an Agency in respect of the Freddie Mac Servicing Contract arose from a failure of the portfolio of serviced Mortgage Loans to perform as required by the Freddie Mac Servicing Contract and Freddie Mac has elected in writing to continue to use PMC as servicer of both that portfolio and other pools of Mortgage Loans and individual Mortgage Loans and Freddie Mac has not rescinded or revoked such election.

(h)Records.

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(i)
	
Borrowers shall collect and maintain or cause to be collected and maintained all records relating to the Collateral in accordance with industry custom and practice for assets similar to the Collateral, and all such records shall be in each Borrower’s or the Subservicer’s possession unless Lender otherwise approves. Borrowers or the Subservicer will maintain all such records in good and complete condition in accordance with industry practices for assets similar to the Collateral and preserve them against loss.

	
 
	
(ii)
	
Upon reasonable advance notice from Lender, Borrowers shall (x) make any and all records relating to the Pledged Servicing Rights and the Subservicer, any Borrower Party and the other Collateral in the possession of the Borrowers or Subservicer available to Lender to reasonably examine during normal business hours, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit Lender or its authorized agents to discuss the affairs, finances and accounts of the Borrower Parties with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of the Borrower Parties with its independent certified public accountants; provided, however, the foregoing shall not apply with respect to any information that the Borrowers or Subservicer are required by an Agency to keep confidential.

(i)Books. Each Borrower Party shall keep or cause to be kept in reasonable detail records and books of account of its assets and business, in which complete entries will be made in accordance with GAAP consistently applied.

(j)Approvals. Except as would not be reasonably likely to have a Material Adverse Effect or would have a material adverse effect on the Collateral or Lender’s interest therein, each Borrower Party shall maintain all licenses, permits or other approvals necessary for such Borrower Party to conduct its business and to perform its obligations under the Facility Documents, and such Borrower Party shall conduct its business in all material respects in accordance with applicable law.

(k)Material Change in Business. No Borrower Party shall make any material change in the nature of its business as carried on at the date hereof.

(l)Distributions. If an Event of Default has occurred and has not been waived by the Lender in accordance herewith, no Borrower Party shall make any Restricted Payments.

(m)Applicable Law. Each Borrower Party shall comply with all applicable Requirements of Law if the failure to comply with such Requirements of Law could reasonably be expected to have a Material Adverse Effect.

(n)Existence. Each Borrower Party shall preserve and maintain their legal existence and all of their material rights, privileges, licenses and franchises.

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(o)Chief Executive Office; Jurisdiction of Organization. No Borrower shall move its chief executive office from the address referred to in Section 6.01(n) or change its jurisdiction of organization from the jurisdiction referred to in Section 6.01(a) unless it shall have provided Lender thirty (30) days’ prior written notice of such change.

(p)Taxes. Each Borrower Party is a U.S. Person and shall timely file all tax returns that are required to be filed by them and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.

(q)Transactions with Affiliates. No Borrower will enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under the Facility Documents and will not result in a Default hereunder, (b) in the ordinary course of such Borrower’s business and (c) upon fair and reasonable terms no less favorable to such Borrower than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section to any Affiliate.

(r)Guarantees. No Borrower shall create, incur, assume or suffer to exist any Guarantees, except (i) to the extent reflected in such Borrower’s financial statements or notes thereto or (ii) to the extent set forth in the Freddie Mac Acknowledgment Agreement.

(s)Indebtedness. No Borrower shall incur any additional material Indebtedness (other than (i) the Indebtedness specified on Schedule 6.01(r) hereto; (ii) usual and customary accounts payable for a mortgage company; (iii) Indebtedness incurred in connection with new or existing secured lending facilities; and (iv) Indebtedness incurred in connection with an intercompany lending agreement) without the prior written consent of Lender.  No Borrower shall enter into any other financing facility with a lender other than the Lender to provide for the financing of Freddie Mac Servicing Rights.

(t)True and Correct Information. All information, reports, exhibits, schedules, financial statements or certificates relating to any Borrower Party that any Borrower Party has furnished to Lender hereunder and during Lender’s diligence of each Borrower Party are and will be true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by each Borrower Party to Lender pursuant to this Agreement shall be prepared in accordance with GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.

(u)Agency Approvals. Each Borrower Party, as applicable, shall maintain its status with Fannie Mae as an approved lender and Freddie Mac as an approved seller/servicer, in each case in good standing (“Agency Approvals”). Each Borrower shall cause Subservicer to service all Mortgage Loans in accordance with the applicable Agency Guide. Each Borrower shall maintain, and cause Subservicer to take all necessary action to maintain, as applicable, all of its 

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applicable Agency Approvals at all times during the term of this Agreement and each outstanding Loan.

(v)Plan Assets. No Borrower Party shall be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and the Borrowers shall not use “plan assets” within the meaning of 29 CFR §2510.3 101, as amended by Section 3(42) of ERISA to engage in this Agreement. Transactions by or with a Borrower or the Guarantor shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

(w)Financial Covenants. Each Borrower and the Guarantor shall at all times comply with all financial covenants and/or financial ratios set forth below:

	
 
	
(i)
	
Adjusted Tangible Net Worth. (A) PMC shall maintain an Adjusted Tangible Net Worth of at least $150,000,000, (B) Holdings shall maintain an Adjusted Tangible Net Worth of at least $250,000,000, and (C) Guarantor shall maintain an Adjusted Tangible Net Worth of at least $860,000,000.

	
 
	
(ii)
	
Indebtedness to Adjusted Tangible Net Worth Ratio. PMC’s ratio of Indebtedness (on and off balance sheet and excluding (A) Non-Recourse Debt, including any securitization debt, and (B) any intercompany debt eliminated in consolidation) to Adjusted Tangible Net Worth shall not exceed 10:1. Holdings’ ratio of Indebtedness (on and off balance sheet and excluding (A) Non-Recourse Debt, including any securitization debt, and (B) any intercompany debt eliminated in consolidation) to Adjusted Tangible Net Worth shall not exceed 10:1. Guarantor’s ratio of Indebtedness (on and off balance sheet) to Adjusted Tangible Net Worth shall not exceed 5:1.

	
 
	
(iii)
	
Maintenance of Profitability. Guarantor shall maintain profitability of at least $1.00 in Net Income for at least one of the two prior Test Periods.

	
 
	
(iv)
	
Maintenance of Liquidity. Holdings, PMC and Guarantor shall ensure that, as of the end of each calendar month, they have consolidated cash and Cash Equivalents other than Restricted Cash in amounts not less than (i) with respect to Holdings, $10,000,000, (ii) with respect to PMC, $10,000,000, (iii) with respect Holdings and the PMC, $25,000,000 in the aggregate and (iv) with respect to Guarantor, $40,000,000.

(x)Changes in Servicing Contracts. The Borrowers shall provide written notice to the Lender of any changes in any Servicing Contracts that may materially affect the Servicing Rights within three (3) Business Days after a Borrower receives notice thereof.

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(y)Monthly Third Party Valuation Reports. As soon as possible and in any event no later than the twenty-third (23rd) calendar day of each calendar month (or, if such day is not a Business Day, the following Business Day), such Borrower shall provide to Lender a report provided by a third party valuation agent acceptable to the Lender setting forth such agent’s determination of the value of all of such Borrower’s servicing rights (including servicing rights not subject to this Agreement) and cash flows, along with the appropriate certificate required under Section 7.01(z)(iii).

(z)Financial Statements. Each Borrower shall deliver to the Lender, in each case, to the extent not publicly filed:

	
 
	
(i)
	
Within forty (40) days after the end of each month, consolidated unaudited balance sheets and consolidated statements of income and changes in equity and unaudited statement of cash flows, all to be in a form acceptable to Lender, showing the financial condition and results of operations of such Borrower and its consolidated Subsidiaries on a consolidated basis as of the end of each such month and for the then elapsed portion of the fiscal year, setting forth, certified by a financial officer of such Borrower (acceptable to Lender) as presenting fairly the financial position and results of operations of such Borrower and its consolidated Subsidiaries and as having been prepared in accordance with GAAP consistently applied, in each case, subject to normal year-end audit adjustments;

	
 
	
(ii)
	
Within ninety (90) days after the end of each fiscal year of each Borrower, the consolidated audited balance sheets of such Borrower and its consolidated Subsidiaries, which will be in conformity with GAAP, and the related consolidated audited statements of income and changes in equity showing the financial condition of such Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of operations during such year, and consolidated audited statements of cash flows, as of the close of such fiscal year, setting forth, in each case, in comparative form the corresponding figures for the preceding year. The foregoing consolidated financial statements are to be reported on by, and to carry the unqualified report (acceptable in form and content to Lender) of, an independent public accountant of national standing acceptable to Lender and are to be accompanied by a letter of management in form and substance acceptable to Lender; and

	
 
	
(iii)
	
Together with each set of the financial statements delivered pursuant to clause (i) above, a certificate of a Responsible Officer of such Borrower in the form attached as Exhibit A to the Pricing Side Letter.

(aa)Notice of Disposal of Servicing Rights. In the event that a Borrower sells or otherwise disposes of any of the Pledged Servicing Rights, it shall give the Lender ten (10) 

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Business Days’ prior written notice of such sale or disposition (together with a list of the affected loans and other information helpful to the Lender in assessing the related Collateral Value), during which time the Lender shall recalculate the Collateral Value for the Collateral remaining after such sale or disposition. 

(bb)Requests for Information. The Borrowers shall furnish to the Lender within five (5) Business Days after the Lender’s request, any information, documents, records or reports with respect to the servicing or subservicing of the Collateral, any Borrower Party’s or Subservicer’s business or its relationship with any Agency, as the Lender may from time to time reasonably request.

(cc)Monthly Reports. No later than the time set forth in Section 7.01(z)(i), Borrowers shall provide to Lender (i) reports of information related to (x) any claims or compensatory fees actually paid by a Borrower or Guarantor to each Agency related to enforcement by such Agency of its rights under the related Agency Guide (or to trusts under non-agency securitizations) that are not reimbursed from a predecessor originator/servicer, (y) a summary report of claims for repurchases or indemnity made by Agencies, insurers or trusts in non-agency securitizations, including the current status or resolution of such repurchase and indemnification demands; (z) the Collateral as detailed in Schedule 7.01(cc); (ii) a report provided by Borrowers setting forth Borrowers’ determination of the value of all of Borrowers’ servicing rights (including servicing rights not subject to this Agreement) and cash flows, along with the appropriate certificate required under Section 7.01(z)(iii); and (iii) copies of all notices it receives from any Agency that materially affect the Eligible Servicing Rights.

(dd)Subservicer Acknowledgement Letter. The Borrowers shall cause the Subservicer to acknowledge the Lender’s rights hereunder and agree to follow all instructions of Lender upon the occurrence of a default hereunder, which side letter shall be acceptable to Lender in form and substance (each such side letter, a “Subservicer Acknowledgment Letter”) and prior to permitting any other subservicer to service any Mortgage Loans related to the Eligible Servicing Rights pledged hereunder, the Borrowers shall cause such subservicer to become a party to a Subservicer Acknowledgment Letter.

(ee)Master Spread Acquisition and MSR Servicing Agreement. For so long as Lender has an interest in or lien on the Collateral, (i) no Borrower Party shall amend, supplement or otherwise modify the Master Spread Acquisition and MSR Servicing Agreement without prior written consent of the Lender; and (ii) Holdings shall not sell one or more participations in the Excess Servicing Fees or enter into any other arrangement whereby one or more Persons have rights through, or with, Holdings with respect to the Excess Servicing Fees without the prior written consent of Lender, such consent to be given at the sole reasonable discretion of the Lender.

Section 7.02Notice of Certain Occurrences. Each Borrower covenants and agrees with the Lender that, so long as any Loan is outstanding and until all Obligations have been paid in full:

(a)Defaults. Each Borrower shall promptly, and in any event within one (1) Business Day of knowledge thereof by a Responsible Officer of such Borrower, inform Lender in writing of any Default or Event of Default by such Borrower or any other Person (other than Lender or Lender’s Affiliates) of any material obligation under any Facility Document, or the 

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occurrence or existence of any event or circumstance that such Borrower reasonably expects will with the passage of time become a Default or Event of Default by such Borrower or any other Person.

(b)Litigation. Each Borrower shall promptly inform Lender in writing of the commencement of, or any determination in, any dispute, litigation, investigation, proceeding, sanctions or suspension between such Borrower, on the one hand, and any Governmental Authority (or any other Person, on the other, with an amount in controversy equal to or greater than $10,000,000). 

(c)Material Adverse Effect on Collateral. As soon as possible, each Borrower shall inform Lender in writing upon such Borrower becoming aware of any default related to any Collateral which should reasonably be expected to have a Material Adverse Effect.

(d)Reserved. 

(e)Credit Default. Unless otherwise disclosed by Guarantor on Form 8-K with separate notice by the Borrowers to Lender of the filing of such Form 8-K, upon, and in any event within five (5) Business Days after, the Borrowers shall furnish the Lender notice of the involuntary termination, acceleration, maturity of or reduction in the amount available for borrowing under any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds entered into by a Borrower Party and any third party to the extent that such agreement or facility, prior to the effectiveness of such termination, acceleration, maturity or reduction in the amount available for borrowing, provides for a minimum amount available for borrowing by such Borrower Party equal to or greater than $10,000,000.

(f)Servicing Contract Transfer. As soon as possible, each Borrower shall inform Lender in writing of the transfer, expiration without renewal, termination or other loss of all or any part of any Servicing Contract (or the termination or replacement of such Borrower thereunder), the reason for such transfer, loss or replacement, if known to it and the effects that such transfer, loss or replacement will have (or will likely have) on the prospects for full and timely collection of all amounts owing to the Borrower under or in respect of the Borrower’s Servicing Contracts.

(g)Agency Notices. Each Borrower shall promptly furnish the Lender copies of all notices it receives from Fannie Mae, Freddie Mac, HUD or Ginnie Mae indicating any adverse fact or circumstance in respect of the Borrower with respect to which adverse fact or circumstance Fannie Mae, Freddie Mac, HUD or Ginnie Mae, respectively, announces its intention to terminate or threatens to terminate such Borrower or the Subservicer with cause or with respect to which Fannie Mae, Freddie Mac, HUD or Ginnie Mae, announces its intention to conduct any inspection or investigation of such Borrower or Subservicer, or either of their files or facilities outside of the ordinary course.

(h)Servicing Rights Notices. Each Borrower shall provide copies of (i) all notices it receives from Freddie Mac that materially affect the Eligible Servicing Rights, and (ii) any demand by an Agency or an insurer for the repurchase of or indemnification with respect to a mortgage loan and the reason for such repurchase or indemnification within three (3) Business 

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Days after such Borrower or Subservicer receives notice thereof, if such demand would likely cause a Material Adverse Effect.

(i)Subservicer Rating. Each Borrower shall provide written notice to the Lender within two (2) Business Days of receipt of notice of any decrease in any servicer rating of Subservicer below (i) “SQ3”, as rated by Moody’s or (ii) “Average”, as rated by S&P.

(j)Other. Each Borrower shall furnish, or cause to be furnished, upon the request of Lender, such other information or reports as the Lender may from time to time reasonably request.

(k)Agency Requirements. Each Borrower shall provide written notice of any change in any Agency’s requirements regarding such Borrower’s or Subservicer’s minimum consolidated tangible net worth or any change in such Agency’s requirements regarding such Borrower’s or Subservicer’s consolidated liquidity within five (5) Business Days after such Borrower or Subservicer receives notice thereof.

(l)Amendment to any Servicing Contract or the Subservicing Agreement. Each Borrower shall provide written notice to the Lender within five (5) Business Days after such Borrower or the Subservicer enters into any amendment to the terms of the Freddie Mac Servicing Contract or the Subservicing Agreement; provided, that such Borrower shall not allow Subservicer to enter into any amendment to the Subservicing Agreement or the Freddie Mac Servicing Contract that would affect Subservicer's servicing of the Mortgage Loans subject to this Agreement without the prior written consent of Lender and subject to the rights and interests of Freddie Mac, the Freddie Mac Servicing Contract, and the Freddie Mac Acknowledgment Agreement; provided, however, any amendment approved by Freddie Mac shall be deemed approved by Lender. 

(m)Subservicer Termination. Each Borrower shall provide written notice to Lender within one (1) Business Day following the occurrence of a Subservicer Termination Event.

ARTICLE VIII

EVENTS OF DEFAULT

Section 8.01Events of Default. The following events shall be “Events of Default”:

(a)A Borrower or Guarantor shall fail to (a) make any payment or deposit to be made by it under Article II, Section 3.01 or Section 8.02(d) when due (whether of principal or interest at stated maturity, upon acceleration, or at mandatory prepayments due to Borrowing Base Deficiencies or otherwise) or (b) make any other payment or deposit to be made by it hereunder when due and, solely with respect to this clause (b), such failure (other than with respect to payment of principal) shall continue unremedied for a period of two (2) Business Days;

(b)A Borrower Party shall fail to comply with the requirements of Sections 7.01(n), 7.01(i), 7.01(g), 7.01(ee) or 7.02(f) and such default shall continue unremedied for a period of one (1) Business Day; or a Borrower Party shall otherwise fail to observe or perform any other agreement contained in this Agreement or any other Facility Document and such failure 

25

to observe or perform shall continue unremedied for a period of five (5) Business Days following a Borrower Party obtaining knowledge thereof; 

(c)Any representation, warranty or certification made or deemed made herein or in any other Facility Document by a Borrower Party or any certificate furnished to Lender pursuant to the provisions thereof, shall prove to have been false or misleading in any material respect as of the time made or furnished (other than the representations and warranties set forth in Section 6.02 which shall be considered solely for the purpose of determining the MSR Value of the Eligible Servicing Rights; unless (i) Borrower Party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made or (ii) any such representations and warranties have been determined by Lender in its reasonable discretion to be materially false or misleading on a regular basis);

(d)(1) The failure of PMC to be an approved servicer under the guidelines of an Agency with respect to which any Eligible Servicing Rights pledged under this Agreement relate, (2) PMC fails to service or subservice, as applicable, in accordance with the Agency Guides and the Lender determines in its good faith discretion that such failure may have a Material Adverse Effect, (3) PMC is terminated as servicer or subservicer, as applicable, with respect to any Eligible Servicing Rights by Freddie Mac (except if the provisions of Section 7.01(g)(a)-(c) are met), (4) PMC shall at any time be terminated, revoked or suspended as servicer or subservicer, as applicable, with respect to any whole loan servicing or subservicing rights that make up a material portion of PMC’s servicing portfolio or subservicing portfolio, (5) PMC shall cease to be approved by or its approval shall be revoked, suspended, rescinded, halted, eliminated, withdrawn, annulled, repealed, voided or terminated by an Agency as an approved seller/servicer or lender, (6) all or a portion of a Borrower Party’s servicing or subservicing portfolio consisting of Agency loans is seized, (7) any Agency shall at any time cease to accept delivery of any loan or loans from PMC under any program or notifies PMC that the Agency shall cease accepting loan deliveries from such Borrower, (8) receipt by a Borrower Party of a notice from any Agency indicating material breach, default or material non-compliance by such Borrower Party which the Lender reasonably determines may entitle such Agency to terminate such Borrower Party, as applicable, which notice has not been rescinded or nullified within three (3) Business Days of its receipt by such Borrower Party or such lesser time as Lender believes is necessary to protect its interest and provides the Borrowers with written notice thereof, as the case may be, and (9) the Subservicing Agreement is amended without the prior written consent of Lender and, notwithstanding the provisions of Section 7.02(l), the Lender determines in its good faith discretion that such amendment may have a Material Adverse Effect;  

(e)Any “event of default” which constitutes a payment default shall have occurred and shall be continuing beyond the expiration of any applicable grace period under the terms of any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds entered into by such Borrower or any of its Affiliates on the one hand and any third party (including an Affiliate of such Borrower but excluding the Lender or any Affiliate of Lender), which relates to the Indebtedness of such Borrower or any of its Affiliates in an amount individually or in the aggregate greater than $10,000,000 which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by such third party;

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(f)The Lender does not, or ceases to, have a first priority perfected security interest in the Collateral or any material part thereof, subject only to the interests of Freddie Mac pursuant to the Freddie Mac Servicing Contract and the Freddie Mac Acknowledgment Agreement, other than as a result of a release of such security interest by the Lender and such default continues unremedied for a period of one (1) Business Day after the earlier of (i) a Responsible Officer of a Borrower or the Guarantor having actual knowledge thereof and (ii) written notice of such default from the Lender;

(g)A Change of Control of a Borrower or the Guarantor occurs;

(h)(A) PMC ceases to be (1) a HUD approved mortgagee pursuant to Section 203 of the National Housing Act or (2) a Freddie Mac approved seller/servicer or HUD, Freddie Mac or Freddie Mac, as applicable, suspends, rescinds, halts, eliminates, withdraws, annuls, repeals, voids or terminates the status of PMC as either (1) a HUD approved mortgagee pursuant to Section 203 of the National Housing Act or (2) a Freddie Mac or Freddie Mac approved servicer or (B) PMC receives notice that HUD, Freddie Mac or Freddie Mac may take such action set forth in clause (A);

(i)[Reserved];

(j)Guarantor shall fail at any time to maintain its status as a REIT or shall fail to satisfy all of the conditions set forth in Section 856(c)(2), (3) and (4) of the Code and any Treasury Regulations promulgated thereunder;

(k)PMC or Guarantor shall fail to comply with the financial covenants set forth in Section 7.01(w) hereto; 

(l)The failure of PMC to maintain any Agency’s net worth requirements;

(m)Any judgment or order for the payment of money in excess of $5,000,000 shall be rendered against a Borrower or any of its Affiliates, by a court, administrative tribunal or other body having jurisdiction over them and the same shall not be satisfied or discharged (or provisions shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within sixty (60) days from the date of entry thereof or, if a stay of execution is procured, sixty (60) days from the date such stay is lifted;

(n)(1) A Borrower or any of its Affiliates files a voluntary petition in bankruptcy, seeks relief under any provision of any Insolvency Law or consents to the filing of any petition against it under any such law; (2) a proceeding shall have been instituted by any Affiliate of a Borrower in a court having jurisdiction in the premises seeking a decree or order for relief in respect of such Borrower or such Affiliate in an involuntary case under any applicable Insolvency Law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Borrower or such Affiliate, or for any substantial part of its Property, or for the winding-up or liquidation of its affairs, (3) a proceeding shall have been instituted by any Person (other than an Affiliate of a Borrower) in a court having jurisdiction in the premises seeking a decree or order for relief in respect of a Borrower or any of its Affiliates in an involuntary case under any applicable Insolvency Law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar 

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official of such Borrower or such Affiliate, or for any substantial part of its Property, or for the winding-up or liquidation of its affairs and such Borrower or such Affiliate shall have failed to obtain a relief (including, without limitation, a dismissal) or a stay of such involuntary proceeding within sixty (60) days, (4) the admission in writing by a Borrower or any of its Affiliates of its inability to pay its debts as they become due, (5) a Borrower or any of its Affiliates consents to the appointment of or taking possession by a custodian, receiver, conservator, trustee, liquidator, sequestrator or similar official, of all or any part of its Property or any custodian, receiver, conservator, trustee, liquidator, sequestrator or similar official takes possession of all or any part of the Property of such Borrower or any of its Affiliates; (6) a Borrower or any of its Affiliates makes an assignment for the benefit of any of its creditors; or (7) a Borrower or any of its Affiliates generally fails to pay its debts as they become due; 

(o)Any Governmental Authority or any Person, agency or entity acting or purporting to act under Governmental Authority (including any Agency) shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of the Borrower or any of its Affiliates, or shall have taken any action to displace the management of any of the Borrower or any of its Affiliates or to curtail the Borrower’s, or any of its Affiliates’ authority in the conduct of its business; 

(p)The Guarantor repudiates, revokes or attempts to revoke in writing the guaranty of the Guarantor set forth in Section 11.13 of this Agreement, in whole or in part; or

(q)the occurrence of a Subservicer Termination Event.

Section 8.02Remedies.

(a)Optional Acceleration. Upon the occurrence of an Event of Default (other than an Event of Default described in Section 8.01(n)), the Lender may by written notice to the Borrowers, terminate the Facility and declare all Loans and all other Obligations to be immediately due and payable.

(b)Automatic Acceleration. Upon the occurrence of an Event of Default described in Section 8.01(n), the Facility shall be automatically terminated and the Loans and all other Obligations shall be immediately due and payable upon the occurrence of such event, without demand or notice of any kind.

(c)Remedies. Upon any acceleration of the Loans pursuant to this Section 8.02, the Lender, in addition to all other rights and remedies under this Agreement or otherwise, shall have all other rights and remedies provided under the UCC of each applicable jurisdiction and other applicable laws, which rights shall be cumulative. The Borrowers agree, upon the occurrence of an Event of Default and notice from the Lender, to assemble, at their expense, all of the Collateral that is in their possession (whether by return, repossession, or otherwise) at a place designated by the Lender. All out-of-pocket costs incurred by the Lender in the collection of all Obligations, and the enforcement of its rights hereunder, including reasonable attorneys’ fees and legal expenses, shall be paid out of the Collateral. Without limiting the foregoing, upon the occurrence of an Event of Default and the acceleration of the Loans pursuant to this Section 8.02, the Lender may, to the fullest extent permitted by applicable law, without notice, advertisement, 

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hearing or process of law of any kind, (i) enter upon any premises where any of the Collateral which is in the possession of a Borrower (whether by return, repossession, or otherwise) may be located and take possession of and remove such Collateral, (ii) sell any or all of such Collateral, free of all rights and claims of any Borrower therein and thereto, at any public or private sale, and (iii) bid for and purchase any or all of such Collateral at any such sale. Any such sale shall be conducted in a commercially reasonable manner and in accordance with applicable law. Each Borrower hereby expressly waives, to the fullest extent permitted by applicable law, any and all notices, advertisements, hearings or process of law in connection with the exercise by the Lender of any of its rights and remedies upon the occurrence of an Event of Default. Each of the Lender and the Borrowers shall have the right (but not the obligation) to bid for and purchase any or all Collateral at any public or private sale. Each Borrower hereby agrees that in any sale of any of the Collateral, the Lender is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority, and each Borrower further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner. The Lender shall not be liable for any sale, private or public, conducted in accordance with this Section 8.02(c). If an Event of Default occurs, and upon acceleration of the Loans hereunder, the Loans and all other Obligations shall be immediately due and payable, and collections on the Collateral shall be used to pay the Obligations.  Notwithstanding anything herein to the contrary, to the extent any provision of this Section 8.02 conflicts with the Lender’s rights and remedies set forth in the Freddie Mac Acknowledgment Agreement, the Freddie Mac Acknowledgment Agreement shall control.

(d)In the event a Borrower receives a notice from an Agency indicating a material breach, material default or material non-compliance by such Borrower that the Lender reasonably determines may entitle such Agency to terminate such Borrower, which breach, default or non-compliance has not been satisfactorily cured or remedied within ten (10) Business Days of the receipt by such Borrower of such notice, or such lesser time as Lender believes is necessary to protect its interest and provides Borrowers with written notice thereof, as the case may be, the Lender may by written notice to the Borrowers, terminate the Facility and declare all Loans and all other Obligations to be immediately due and payable.

Section 8.03Application of Proceeds.

(a)Reserved. 

(b)Reserved.  

(c)Reserved.  

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(d)On each Business Day during which an Event of Default has occurred and is continuing hereunder, the Lender shall apply Collections in the following order to pay:

(i)to the Lender, any fees due pursuant to the terms hereof;

(ii)to the Lender or any Indemnified Party an amount equal to any other amounts (including the Outstanding Aggregate Loan Amount) then due to such Persons pursuant to this Agreement that have not been paid by the Borrowers (and to the extent that there are insufficient funds to pay all of the foregoing amounts, such amount shall be distributed to the foregoing parties, pro rata in accordance with the amounts due to such parties); and

(iii)any remaining amounts to the Borrowers by transferring such amount to the account specified in writing by the Borrowers.

ARTICLE IX

ASSIGNMENT

Section 9.01Restrictions on Assignments. No Borrower shall assign its rights hereunder or any interest herein without the prior written consent of the Lender. The Lender may assign any or all of its rights and, its obligations, under this Agreement, under any Loan pursuant to this Agreement or under the other Facility Documents, (i) without consent of the Borrowers, to (a) any Affiliate of Lender or a conduit or other entity supported by the Lender or an Affiliate of Lender or (b) following an Event of Default, and (ii) with the Borrower’s prior written consent (not to be unreasonably withheld or delayed), to any other entity; provided, that notwithstanding anything herein to the contrary, no Borrower shall be subject to any increased costs or expenses as a result of such assignment made without Borrowers’ consent; provided, further that, if Lender assigns its rights and obligations to a conduit or other entity supported by the Lender or an Affiliate of Lender, Borrowers agree to cooperate in good faith with Lender to make changes to the Facility Documents to facilitate such assignment. Notwithstanding anything to the contrary in this Article IX, the parties acknowledge and agree that the Freddie Mac Acknowledgment Agreement does not permit any assignments of, or any parties rights, obligations, or interest in, the Freddie Mac Acknowledgment Agreement, except pursuant to the express provisions of the Freddie Mac Acknowledgment Agreement.

Section 9.02Evidence of Assignment; Endorsement on Note. The Lender hereby agrees that it shall endorse the Note to reflect any assignments made pursuant to this Article IX or otherwise.

Section 9.03Rights of Assignee. Upon Lender’s assignment of all of its rights and obligations hereunder, under the Note and under the other Facility Documents to an assignee in accordance with Section 9.01, such assignee shall have all such rights and obligations of the Lender as set forth in such assignment or delegation, as applicable, and all references to the Lender in this Agreement or any Facility Document shall be deemed to apply to such assignee to the extent of such interest. If any interest in any Facility Document is transferred to any assignee which is organized under the laws of any jurisdiction other than the United States or any state thereof, the 

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transferor Lender shall cause such assignee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.02.

Section 9.04Permitted Participants; Effect. 

(a)The Lender may, in the ordinary course of its business and in accordance with applicable law, at any time (and from time to time) assign, pledge, hedge, hypothecate or otherwise sell to one or more banks or other entities (each a “Participant”) all or a portion of participating interests in any Loan owing to the Lender, any Note held by the Lender, any Available Facility Amount of the Lender, or any other interest of the Lender under this Agreement or the other Facility Documents. In the event of any such assignment, pledge, hedge, hypothecation or sale by the Lender of a participating interest to a Participant, (i) the Lender’s obligations hereunder and under the other Facility Documents shall remain unchanged; (ii) the Lender shall remain solely responsible to the Borrowers for the performance of such obligations; and (iii) the Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for the purposes under the Facility Documents. All amounts payable by the Borrowers under this Agreement shall be determined as if the Lender had not assigned, pledged, hedged, hypothecated or otherwise sold such participating interests. The Borrowers and the Lender shall continue to deal solely and directly with each other in connection with the Lender’s rights and obligations under the Facility Documents.

(b)Any agreement or instrument pursuant to which Lender sells such a participation shall provide that Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in Section 11.01 that affects such Participant.  The Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.06, 3.02 and 10.1 (subject to the requirements and limitations therein, including the requirements under Section 3.02(d) (it being understood that the documentation required under Section 3.02(d) shall be delivered to Lender)) to the same extent as if it were the Lender and had acquired its interest by assignment pursuant to Section 9.01; provided that such Participant shall not be entitled to receive any greater payment under Sections 2.06 or 3.02 with respect to any participation than Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.12 as though it were the Lender. Lender shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the interest in the Loans or other obligations under the Facility Documents (the “Participant Register”); provided that Lender shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Facility Documents) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Department regulations.  The entries in the Participant Registrar shall be conclusive absent manifest error, and Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

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Section 9.05Voting Rights of Participants. The Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Facility Documents other than any amendment, modification, or waiver with respect to any Loan or Available Facility Amount in which such Participant has an interest which forgives principal, interest, or fees or reduces the interest rate or fees payable with respect to any such Loan or Available Facility Amount, extends the Wind Down Date, postpones any date fixed for any regularly scheduled payment of principal of, or interest or fees on, any such Loan or Available Facility Amount or releases all or substantially all of the Collateral (other than as expressly permitted pursuant to the Facility Documents).

ARTICLE X

INDEMNIFICATION

Section 10.01Indemnities by the Borrowers. Without limiting any other rights which any such Person may have hereunder or under applicable law, the Borrowers jointly and severally hereby agree to indemnify the Lender, its Affiliates, successors, permitted transferees and assigns and all officers, directors, shareholders, controlling persons, employees and agents of any of the foregoing (each an “Indemnified Party”), forthwith on demand, from and against any and all damages, losses, claims, liabilities and related costs and expenses, including attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by any of them arising out of or as a result of this Agreement, the other Facility Documents, or any transaction contemplated hereby or thereby excluding, however, (a) Indemnified Amounts to the extent a court of competent jurisdiction determines that they resulted from gross negligence, bad faith or willful misconduct on the part of such Indemnified Party, (b) in the event that the Lender has assigned its rights or delegated its obligations in respect of this Agreement, and the Indemnified Amounts with respect to such assignee exceed the Indemnified Amounts that would otherwise have been payable by the Borrowers to the Lender, the amount of such excess, (c) taxes expressly excluded from Taxes in Section 3.02(a) above (other than any such Taxes that are incremental and arise solely by reason of a breach by a Borrower of its obligations under this Agreement), and (d) any lost profits or indirect, exemplary, punitive or consequential damages of any Indemnified Party. In any suit, proceeding or action brought by the Lender in connection with any Collateral for any sum owing thereunder, or to enforce any provisions of any Collateral, the Borrowers, jointly and severally, will save, indemnify and hold the Lender harmless from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by a Borrower 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 or obligor or its successors from such Borrower. The Borrowers also agree to reimburse the Lender as and when billed by the Lender for all the Lender’s out-of-pocket costs and expenses incurred in connection with the enforcement or the preservation of the Lender’s rights under this Agreement, the Note, any other Facility Document or any transaction contemplated hereby or thereby, including without limitation the fees and disbursements of its counsel. The Borrowers hereby acknowledge that, notwithstanding the fact that the Note is secured by the Collateral, the obligation of each Borrower under the Note is a recourse obligation of each Borrower. Under no circumstances shall any Indemnified Party be liable to a Borrower for any lost profits or indirect, exemplary, punitive or consequential damages.

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Section 10.02General Provisions. If for any reason the indemnification provided above in Section 10.01 (and subject to the limitations on indemnification contained therein) is unavailable to an Indemnified Party or is insufficient to hold an Indemnified Party harmless on the basis of public policy, then the Borrowers shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnified Party on the one hand and the Borrowers on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations.

The provisions of this Article X shall survive the termination of this Agreement and the payment of the Obligations.

ARTICLE XI

MISCELLANEOUS

Section 11.01Amendments, Etc. Neither this Agreement nor any provision hereof may be amended, supplemented, or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Lender.

Section 11.02Notices, Etc. Except as provided herein, all notices required or permitted by this Agreement shall be in writing (including without limitation by Electronic Transmission, email or facsimile) and shall be effective and deemed delivered only when received by the party to which it is sent; provided that notices of Events of Default and exercise of remedies or under Section 8.02 shall be sent via overnight mail and by electronic transmission. Any such notice shall be sent to a party at the address, electronic mail or facsimile transmission number set forth on Schedule 11.02 or to such other address, e-mail address or facsimile number as either party may notify to the others in writing from time to time.

Section 11.03No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 11.04Binding Effect; Assignability. This Agreement shall be binding upon and inure to the benefit of the Borrowers and the Lender, and their respective successors and assigns, provided, however, that nothing in the foregoing shall be deemed to authorize any assignment not permitted in Section 9.01.

Section 11.05GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS AGREEMENT). EACH PARTY HERETO HEREBY SUBMITS TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE 

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BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT IN THE BOROUGH OF MANHATTAN AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY CONSENTS TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, OR ANY DOCUMENT DELIVERED PURSUANT HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE ADDRESS SPECIFIED AT THE TIME FOR NOTICES UNDER THIS AGREEMENT OR TO ANY OTHER ADDRESS OF WHICH IT SHALL HAVE GIVEN WRITTEN OR ELECTRONIC NOTICE TO THE OTHER PARTIES. THE FOREGOING SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO TO BRING SUIT IN THE COURTS OF ANY OTHER JURISDICTION.

EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

Section 11.06Entire Agreement. This Agreement and the Facility Documents embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understanding relating to the matters provided for herein.

Section 11.07Acknowledgement. Each Borrower hereby acknowledges that:

(a)it has been advised by counsel in the negotiation, execution and delivery of this Agreement, the Note and the other Facility Documents to which it is a party;

(b)the Lender has no fiduciary relationship to such Borrower, and the relationship between such Borrower and the Lender is solely that of debtor and creditor; and

(c)no joint venture exists among or between the Lender and (i) such Borrower or (ii) the Borrowers collectively.

Section 11.08Captions and Cross References. The various captions (including, without limitation, the table of contents) in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. References in this Agreement to any underscored Section or Exhibit are to such Section or Exhibit of this Agreement, as the case may be.

Section 11.09Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

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Section 11.10Confidentiality. Each party hereto agrees for the benefit of the other party that it will hold any confidential information received from the other party pursuant to this Agreement or any other Facility Document in strict confidence, as long as such information remains confidential except for disclosure to (i) its Affiliates, (ii) its legal counsel, accountants, and other professional advisors or to a permitted assignee or participant, (iii) regulatory officials, (iv) any Person as requested pursuant to or as required by law, regulation, legal process, or the rules and regulations of any Governmental Authority or stock exchange, (v) any Person in connection with any legal proceeding to which it is a party, (vi) rating agencies if requested or required by such agencies in connection with a rating, (vii) any Agency or (viii) any prospective or actual assignee or participant hereunder (including any prospective or actual credit hedge counterparty) (for so long as such party has executed a confidentiality or non-disclosure agreement substantially similar to the terms and provisions of this Section 11.10). The parties agree that this Agreement is confidential information of the Lender. The Lender also agrees that it will comply with all applicable securities laws with respect to any non-public information of the type referenced in the preceding sentence in its possession. This Section 11.10 shall survive termination of this Agreement. 

Notwithstanding anything to the contrary in this Section 11.10, in the event of a conflict between the confidentiality provisions of this Agreement and the other Facility Documents (other than the Freddie Mac Acknowledgment Agreement), on the one hand, and the confidentiality provisions of the Freddie Mac Acknowledgment Agreement, on the other hand, the confidentiality provisions of the Freddie Mac Acknowledgment Agreement shall control, but only to the extent applicable as provided in the Freddie Mac Acknowledgment Agreement.

Section 11.11Survival. This Agreement shall remain in effect until the Termination Date; provided, however, that no such termination shall affect Borrowers’ Obligations to Lender at the time of such termination. The obligations of each Borrower under Sections 3.02, 10.01 and 11.10 hereof shall survive the repayment of the Loans and the termination of this Agreement. In addition, each representation and warranty made, or deemed to be made by a request for a borrowing, herein or pursuant hereto shall survive the making of such representation and warranty, and the Lender shall not be deemed to have waived, by reason of making any Loan, any Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that the Lender may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such Loan was made.

Section 11.12 Set-Off. In addition to any rights and remedies of the Lender provided by this Agreement and by law, the Lender shall have the right, without prior notice to any Borrower, any such notice being expressly waived by each Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by any Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all Property and deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Lender or any Affiliate thereof to or for the credit or the account of such Borrower; provided, that the Lender’s right to set-off in relation to Freddie Mac Servicing Rights shall be permitted solely upon receipt of Surplus Proceeds (as such term is defined in the Freddie Mac Acknowledgment Agreement). Lender may set-off cash, the proceeds of the liquidation of any 

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Collateral and all other sums or obligations owed by the Lender or its Affiliates to a Borrower against all of such Borrower’s obligations to the Lender or its Affiliates under this Agreement with respect to such Borrower or under any other agreement between the parties or between any Borrower and any affiliate of the Lender, or otherwise whether or not such obligations are then due, without prejudice to the Lender’s or its Affiliate’s right to recover any deficiency. Lender agrees promptly to notify Borrowers after any such set-off and application made by the Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.

Section 11.13Guaranty. 

(a)Subject to Section 11.13(h) below, Guarantor hereby unconditionally and irrevocably guarantees to Lender the prompt payment of the Guaranteed Obligations in full when due (whether at the stated maturity, by acceleration or otherwise). Any such payment shall be made at such place and in the same currency as such relevant Guaranteed Obligation is payable. This guaranty is a guaranty of payment and not solely of collection and is a continuing guaranty and shall apply to all Guaranteed Obligations whenever arising.

(b)The obligations of the Guarantor hereunder are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of this Agreement, or any other agreement or instrument referred to herein, to the fullest extent permitted by Applicable Law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor. Guarantor agrees that this guaranty may be enforced by Lender without the necessity at any time of resorting to or exhausting any security or collateral and without the necessity at any time of having recourse to this Agreement or any other Facility Document or any collateral, if any, hereafter securing the Guaranteed Obligations or otherwise and Guarantor hereby waives the right to require Lender to proceed against any other Person or to require the Lender to pursue any other remedy or enforce any other right. Guarantor further agrees that nothing contained herein shall prevent Lender from suing in any jurisdiction on this Agreement or any other Facility Document or foreclosing its security interest in or Lien on any collateral, if any, securing the Guaranteed Obligations or from exercising any other rights available to it under this Agreement or any instrument of security, if any, and the exercise of any of the aforesaid rights and the completion of any foreclosure proceedings shall not constitute a discharge of Guarantor’s obligations hereunder; it being the purpose and intent of Guarantor that its obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. Neither Guarantor’s obligations under this guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by reason of the application of the laws of any foreign jurisdiction. Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance of by Lender upon this guaranty or acceptance of this guaranty. The Guaranteed 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. All dealings between Borrowers and Guarantor, on the one hand, and Lender, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this guaranty.

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(c)Guarantor agrees that (a) all or any part of the security which hereafter may be held for the Guaranteed Obligations, if any, may be exchanged, compromised or surrendered from time to time; (b) the Lender shall not have any obligation to protect, perfect, secure or insure any such security interests or Liens which hereafter may be held, if any, for the Guaranteed Obligations or the properties subject thereto; (c) the time or place of payment of the Guaranteed Obligations may be changed or extended, in whole or in part, to a time certain or otherwise, and may be renewed, increased or accelerated, in whole or in part; (d) each Borrower and any other party liable for payment under this Agreement may be granted indulgences generally; (e) any of the provisions of this Agreement or any other Facility Document may be modified, amended or waived; and (f) any deposit balance for the credit of any Borrower or any other party liable for the payment of the Guaranteed Obligations or liable upon any security therefor may be released, in whole or in part, at, before or after the stated, extended or accelerated maturity of the Guaranteed Obligations, all without notice to or further assent by Guarantor, which shall remain bound thereon, notwithstanding any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release.

(d)Guarantor expressly waives to the fullest extent permitted by Applicable Law: (a) notice of acceptance of this guaranty by the Lender and of all transfers of funds to any Borrower by Lender; (b) presentment and demand for payment or performance of any of the Guaranteed Obligations; (c) protest and notice of dishonor or of default (except as specifically required in this Agreement) with respect to the Guaranteed Obligations or with respect to any security therefor; (d) notice of Lender obtaining, amending, substituting for, releasing, waiving or modifying any Lien, if any, hereafter securing the Guaranteed Obligations, or Lender’s subordinating, compromising, discharging or releasing such Liens, if any; (e) all other notices to which any Borrower might otherwise be entitled in connection with the guaranty evidenced by this Section 11.13; and (f) demand for payment under this guaranty.

(e)The obligations of Guarantor under this Section 11.13 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and Guarantor agrees that it will indemnify Lender on demand for all reasonable and documented costs and out-of-pocket expenses (including, without limitation, reasonable and documented fees and expenses of counsel) incurred by Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

(f)Guarantor agrees that, as between Guarantor, on the one hand, and Lender, on the other hand, the Guaranteed Obligations may be declared to be forthwith due and payable as provided in Section 8.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 8.02) notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such Guaranteed Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or such Guaranteed Obligations being deemed to have become automatically due and payable), such Guaranteed Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by Guarantor.

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(g)Guarantor hereby agrees that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the this Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 11.13(a), whether by subrogation or otherwise, against a Borrower or any security for any of the Guaranteed Obligations.

(h)Notwithstanding any provision to the contrary contained herein, to the extent the obligations of Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any Applicable Law relating to fraudulent conveyances or transfers) then the obligations of Guarantor hereunder shall be limited to the maximum amount that is permissible under Applicable Law (as now or hereinafter in effect).

Section 11.14Joint and Several Liability of the Borrowers. 

(a)Each of PMC and Holdings shall be jointly and severally liable for the rights, covenants, obligations and warranties and representations of PMC and Holdings as contained herein and the actions of any Person or third party shall in no way affect such joint and several liability.

(b)Notwithstanding the forgoing, each Borrower acknowledges and agrees that a Default or an Event of Default is hereby considered a Default or an Event of Default by each Borrower.

(c)Each of PMC and Holdings acknowledges and agrees that the Lender shall have no obligation to proceed against either PMC or Holdings before proceeding against the other. Each of PMC and Holdings hereby waives any defense to its obligations under this Agreement or any other Facility Document based upon or arising out of the disability or other defense or cessation of liability of PMC or Holdings versus the other. A Borrower’s subrogation claim arising from payments to Lender shall constitute a capital investment in another Borrower (1) subordinated to any claims of Lender and (2) equal to a ratable share of the equity interests in such Borrower.

Section 11.15Provisions Applicable to Freddie Mac and the Freddie Mac Collateral.

Notwithstanding anything to the contrary in this Agreement or the other Facility Documents, Lender and Borrowers acknowledge and agree (with the intent that Freddie Mac may rely upon the same as an express third party beneficiary) that:

(a)PMC’s right, title and interest in and to the Pledged Servicing Rights serving as Collateral may only be pledged by PMC as collateral for the purposes set forth in the Freddie Mac Acknowledgment Agreement, and on the terms and conditions set forth in the Freddie Mac Acknowledgment Agreement;

(b)neither Holdings nor Guarantor has any interest in the Pledged Servicing Rights except as expressly set forth in the  Freddie Mac Acknowledgment Agreement with respect to the Pledged Servicing Rights: (i) PMC, as Borrower, is not pledging or conveying any Excess Servicing Fees and Freddie Mac is not consenting to any pledge or conveyance of any Excess Servicing Fees or any other purported pledge, transfer or sale of Pledged Servicing Rights or the 

38

Freddie Mac Servicing Contract by PMC, as seller and Holdings as purchaser, other than the Excess Servicing Fees as set forth in the Master Spread Acquisition and MSR Servicing Agreement subject in all respect to the Freddie Mac Acknowledgment Agreement; and (ii) any further purported pledge, conveyance, transfer, or sale by Holdings, as borrower, and Lender, as lender, of any Excess Servicing Fees shall be conclusively deemed to be null and void;

(c)solely as applicable to the Pledged Servicing Rights and the Freddie Mac Servicing Contract, Freddie Mac does not recognize Holdings as co-borrower under the Facility Documents, and Freddie Mac has no obligation and shall not interact with, provide notice to, otherwise deal with Holdings or Guarantor, except to the extent set forth in the Freddie Mac Acknowledgment Agreement ;

(d)a Default or Event of Default caused solely by Holdings or Guarantor under the Facility Documents that does not result in a Material Adverse Effect hereunder, shall have no impact on the Pledged Servicing Rights or Freddie Mac Servicing Contract and Lender shall have no right to exercise its rights or remedies pursuant to Section 8.02 or 11.12 of this Agreement, the UCC, the Freddie Mac Acknowledgment Agreement or otherwise applicable to Freddie Mac, against the Collateral as a result of a Default or Event of Default that does not result in a Material Adverse Effect hereunder caused solely by Holdings and/or Guarantor under the Facility Documents; provided, however, that the Lender shall be permitted to exercise its rights or remedies provided in this Agreement, the UCC or the Freddie Mac Acknowledgment Agreement applicable to Freddie Mac from and after (x) the occurrence of any Default or Event of Default by PMC and/or (y) the occurrence of any Default or Event of Default which would constitute a joint Default or Event of Default by any of PMC and Holdings and/or Guarantor pursuant to the Facility Documents (including a payment Event of Default under Section 8.01 of this Agreement); and

(e)subject and subordinate in all respects to the provisions of the Freddie Mac Acknowledgment Agreement, any Surplus Proceeds (as defined in the Freddie Mac Acknowledgment Agreement) received by Lender in connection with Lender’s exercise of its rights and remedies with respect to the Pledged Servicing Rights may be applied to reduce the amount owed to Lender by PMC, Holdings or Guarantor.

 

 [SIGNATURE PAGE FOLLOWS] 

39

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

Pennymac Corp., as a Borrower

By:  /s/ Pamela Marsh

Name:  Pamela Marsh

Title:    Managing Director, Treasurer

Pennymac HOLDINGS, LLC, as a Borrower

By  /s/ Pamela Marsh

Name:  Pamela Marsh

Title:    Managing Director, Treasurer

PENNYMAC MORTGAGE INVESTMENT TRUST, as Guarantor

By:  /s/ Pamela Marsh

Name:   Pamela Marsh

Title:    Managing Director, Treasurer

Signature Page to Loan and Security Agreement (PMC)

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Lender

By:  /s/ Margaret Dellafera

Name:  Margaret Dellafera

Title:    Authorized Signatory

By:  /s/ Patrick J. Hart

Name:  Patrick J. Hart

Title:    Authorized Signatory

 

  

Signature Page to Loan and Security Agreement (PMC)

SCHEDULE I

DEFINITIONS

	
1.1
	
Definitions. As used in this Agreement the following terms have the meanings as indicated:

“Accepted Servicing Practices” means, with respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.

“Advance” means any P&I Advance, T&I Advance or Corporate Advance.

“Adjusted Tangible Net Worth” has the meaning set forth in the Pricing Side Letter.

“Advance Rate” has the meaning assigned to it in the Pricing Side Letter.

“Affiliate” means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” (together with the correlative meanings of “controlled by” and “under common control with”) means possession, directly or indirectly, of the power (a) to vote 20% or more of the securities (on a fully diluted basis) having ordinary voting power for the directors or managing general partners (or their equivalent) of such Person, or (b) to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, that in respect of Subservicer, the term “Affiliate” shall include only Private National Mortgage Acceptance Company, LLC and its wholly owned subsidiaries, and in respect of a Borrower or Guarantor, the term “Affiliate” shall include only PennyMac Mortgage Investment Trust and its wholly owned subsidiaries.

“Agreement” has the meaning set forth in the preamble.

“Agency” means Fannie Mae, Freddie Mac or Ginnie Mae.

“Agency Guide” with respect to (1) Fannie Mae, the Fannie Mae Selling Guide and the Fannie Mae Servicing Guide, as amended from time to time, (2) Freddie Mac, the Freddie Mac Single-Family Seller/Servicer Guide (the “Freddie Mac Guide”), and (3) with respect to Ginnie Mae, the Ginnie Mae MBS Guide, and in all cases, any other applicable guides published by such Agency and any related announcements, directives and correspondence issued by such Agency.

“Agency Servicing Rights” means all Servicing Rights with respect to the Agencies.

“Ancillary Income” means all money which is due and payable in connection with each Mortgage Loan other than the Servicing Fee and specifically including, without limitation, late charge fees, assignment transfer fees, insufficient funds check charges, amortization schedule fees, interest from escrow accounts and all other incidental fees and charges and any Float Benefit, in each case, to the extent such amounts are allocable to a Mortgage Loan, specifically excluding Excluded Collateral.

Schedule I - 1

“Applicable Law” means as to any Person, any law, treaty, rule or regulation (including the Investment Company Act of 1940, as amended) or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Applicable Margin” has the meaning assigned to it in the Pricing Side Letter. 

“Available Facility Amount” has the meaning assigned to it in the Pricing Side Letter. 

“Available Loan Amount” means, on any Business Day, an amount equal to the lesser of (a) (i) the then current Available Facility Amount minus (ii) the Outstanding Aggregate Loan Amount, and (b) the Borrowing Base (giving effect to all Collateral to be pledged hereunder on such Business Day).

“Borrower” has the meaning set forth in the preamble.

“Borrower Funding Request” means the request to fund a Loan on any Funding Date, substantially in the form of Exhibit 2.03, delivered by the Borrowers in accordance with Section 2.03(a).

“Borrower Party” means each of the Borrowers and Guarantor.

“Borrowing Base” means, as of any date of determination, an amount equal to the aggregate Collateral Value of all Collateral for Loans that have been and remain pledged to the Lender hereunder.

“Borrowing Base Deficiency” has the meaning set forth in Section 2.08(b).

“Borrowing Base Report” means the borrowing base report, substantially in a format agreed upon between Borrowers and Lender, delivered by the Lender in accordance with Section 2.04.

“Borrowing Base Shortfall Day” has the meaning set forth in Section 2.08(b).

“Business Day” means any day other than (i) a Saturday or Sunday or (ii) a day upon which the New York Stock Exchange or the Federal Reserve Bank of New York is closed. 

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

“Cash Equivalents” means (a) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of 90 days or less from the date of acquisition and overnight bank deposits of Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of Lender or of 

Schedule I - 2

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

“Change in Law” means a change in any Applicable Law applicable to the Facility Documents that would have an adverse effect, as determined by Lender in its sole discretion, on Lender’s exercise of remedies following an Event of Default.

“Change of Control” (i) for each Borrower (a) any transaction or event as a result of which the Guarantor ceases to own, beneficially or of record, more than 50% of the stock of PMC or 100% of the certificates representing the beneficial ownership of Holdings, (b) the Disposition of all or substantially all of a Borrower’s assets (excluding any such action taken in connection with any securitization transaction or routine sales of Mortgage Loans), or (c) the consummation of a merger or consolidation of a Borrower with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s equity outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not equityholders of such Borrower immediately prior to such merger, consolidation or other reorganization and (ii) for the Guarantor (a) the Disposition of all or substantially all of Guarantor’s assets (excluding any such action taken in connection with any securitization transaction or routine sales of Mortgage Loans) or (b) the consummation of a merger or consolidation of Guarantor with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s equity outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not equityholders of the Guarantor immediately prior to such merger, consolidation or other reorganization.

“Closing Date” means the date on which all of the conditions set out in Section 5.01 are satisfied.

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

“Collateral” has the meaning set forth in Section 4.01.

“Collateral Reporting Date” has the meaning set forth in Section 2.03(b).

Schedule I - 3

“Collateral Value” means, for purposes of determining the value of the Borrowing Base from time to time, with respect to the Eligible Servicing Rights, (a) (i) the Advance Rate for Eligible Servicing Rights, multiplied by (ii) the MSR Value of the Eligible Servicing Rights, minus (b) any outstanding repurchase and indemnity obligations under the related Servicing Contract that are due and payable by the Borrowers, but have not yet been paid by the Borrowers.

“Collections” means any Servicing Fees, any excess servicing or subservicing rights or retained yield, and any Ancillary Income that PMC, as servicer and Holdings, as an excess spread purchaser, are entitled to receive pursuant to the Servicing Contracts and the Master Spread Acquisition and MSR Servicing Agreement, as applicable.

“Compliance Certificate” means a certificate substantially in the form of Exhibit A to the MLRA Pricing Side Letter or other form reasonably acceptable to the Lender. 

“Corporate Advance” means, collectively, (a) any advance (other than those described in clause (b) below) made by a Borrower as servicer pursuant to the Servicing Contracts to inspect, protect, preserve or repair properties that secure defaulted Mortgage Loans or that have been acquired through foreclosure or deed in lieu of foreclosure or other similar action pending disposition thereof, or for similar or related purposes, including, but not limited to, necessary legal fees and costs expended or incurred by a Borrower as servicer in connection with foreclosure, bankruptcy, eviction or litigation actions with or involving Mortgagors on defaulted Mortgage Loans, as well as costs to obtain clear title to such a property, to protect the priority of the lien created by a Mortgage Loan on such a property, and to dispose of properties taken through foreclosure or by deed in lieu thereof or other similar action, (b) any advance made by a Borrower as servicer pursuant to the Servicing Contracts to foreclose or undertake similar action with respect to a Mortgage Loan, and (c) any other out of pocket expenses incurred by a Borrower as servicer pursuant to the Servicing Contracts (including, for example, costs and expenses incurred in loss mitigation efforts and in processing assumptions of Mortgage Loans), to the extent such advances are reimbursable pursuant to the Servicing Contracts.

“CSCIB” means Credit Suisse AG, Cayman Islands Branch.

“CSFB” means Credit Suisse First Boston Mortgage Capital LLC. 

“Custodial File” means with respect to any Mortgage Loan, a file pertaining to such Mortgage Loan being held by the Custodian that contains the mortgage documents pertaining to such Mortgage Loan.

“Custodian” means any financial institution that holds documents for any of the Mortgage Loans on behalf of an Agency.

“Default” means an Event of Default or an Unmatured Event of Default.

“Default Rate” means, with respect to any Loan for any Interest Period, and any late payment of fees or other amounts due hereunder, the LIBOR Rate for the related Interest Period (or for all successive Interest Periods during which such fees or other amounts were delinquent), plus 5.0% per annum.

Schedule I - 4

“Disposition” means, with respect to any Person, any sale or other whole or partial conveyance of all or any portion of such Person’s Property, or any direct or indirect interest therein to a third party, including the granting of any purchase options, rights of first refusal, rights of first offer or similar rights in respect of any portion of such assets or the subjecting of any portion of such assets to restrictions on transfer.

“Dollars” or “$” means dollars in lawful money of the United States of America.

“Electronic File” means any electronic file, in form and substance reasonably acceptable to the Lender and containing the information agreed to between the Borrowers and the Lender; delivered by a Borrower to the Lender on a Funding Notice Date or Collateral Reporting Date pursuant to Section 2.03(a) or 2.03(b) and reflecting those Mortgage Loans related to Pledged Servicing Rights as of the close of business on such Funding Notice Date; provided, however, that with regard to the Electronic File delivered in connection with a Collateral Reporting Date, such Electronic File shall reflect information as of the close of business on the last Business Day of the preceding calendar month.

“Electronic Transmission” means the delivery of information in an electronic format acceptable to the applicable recipient thereof. An Electronic Transmission shall be considered written notice for all purposes hereof (except when a request or notice by its terms requires delivery of an original executed document).

“Eligible Seller” means a Person who sold Mortgage Loans to a Borrower, which Mortgage Loans such Borrower subsequently resold to another party or securitized, and retained the servicing rights and obligations with respect thereto under the Servicing Contracts.

“Eligible Servicing Rights” means, Servicing Rights owned by PMC that are either (i) appurtenant to mortgage loans that have been sold to Freddie Mac or otherwise delivered to Freddie Mac for inclusion in a securitization by Freddie Mac, and are serviced by PMC, (ii) appurtenant to mortgage loans (1) which were, but are no longer, pooled in securitizations by Freddie Mac, (2) which are currently owned by Freddie Mac in portfolio and (3) for which PMC is acting as the servicer, (iii) appurtenant to mortgage loans owned by PMC and not subject to any lien or other encumbrance, which mortgage loans are eligible for pooling with Freddie Mac, or (iv) appurtenant to mortgage loans that are serviced by PMC and are either securitized in a non-agency securitization with respect to which the Lender has approved the related PSA or held in whole loan format and either owned by PMC or servicing pursuant to a servicing agreement approved by the Lender; provided that all such mortgage loans shall be “qualified mortgages” or otherwise approved by the Lender for inclusion. In addition, all Eligible Servicing Rights must comply with the eligibility criteria set out in Schedule 6.02. 

“Eligible Subservicer” means an established mortgage servicer that (A)(i) has been a Freddie Mac approved issuer for at least two (2) years, (ii) services mortgage loans with an aggregate unpaid principal balance greater than or equal to $30,000,000,000 and (iii) has a servicer rating of at least “Average” by S&P, “SQ3” by Moody’s or “RPS3” by Fitch, and (B) is party to an Eligible Subservicing Agreement.  

Schedule I - 5

“Eligible Subservicing Agreement” means a subservicing agreement (i) that has been approved in writing by Lender, (ii) the subservicer of which is an Eligible Subservicer, and (iii) that has not been assigned or amended in any respect that is materially adverse to the Lender with respect to the remittance of servicing fees or advance reimbursements without the prior written consent of Lender. 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any corporation or trade or business that, together with Borrowers or Guarantor is treated as a single employer under Section 414(b) or (c) of the Code or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as a single employer described in Section 414 of the Code.

“Event of Default” has the meaning set forth in Section 8.01.

“Excess Servicing Fees” means the excess servicing fees sold by PMC to Holdings pursuant to the terms of the Master Spread Acquisition and MSR Servicing Agreement, subject to the terms and provisions of the Freddie Mac Acknowledgment Agreement. 

“Excluded Collateral” means all right, title and interest of the Borrowers, whether now owned or hereafter acquired, in, to and under its rights to reimbursement for all Advances made under the Servicing Contracts.

“External Rewarehouse Agreement” means that certain Second Amended and Restated Master Repurchase Agreement, dated as of April 28, 2017, by and among CSFB, as administrative agent, CSCIB, as committed buyer and a buyer, Alpine Securitization Ltd., as a buyer, POP, as a seller, and, Guarantor, as a guarantor.

“Facility” means the loan facility provided to the Borrowers by the Lender pursuant to this Agreement.

“Facility Documents” means this Agreement, the Note, the Pricing Side Letter, the Servicing Contracts, the Freddie Mac Acknowledgment Agreement, the Subservicer Acknowledgment Letter, the Subservicing Agreement and all notices, certificates, financing statements and other documents to be executed and delivered by the Borrower in connection with the transactions contemplated by this Agreement. 

“Fannie Mae” means The Federal National Mortgage Association, also known as Fannie Mae, or any successor thereto.

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

Schedule I - 6

“Fitch” means Fitch Ratings, Inc., or any successor thereto.

“Float Benefit” means the net economic benefit resulting from investments of funds representing escrow and custodial deposits held for the account of the servicer or subservicer, or the related Agency relating to the Mortgage Loans.

“FMSR VF1 Repo” means that certain Master Repurchase Agreement, dated as of December 20, 2017, among CSFB, as administrative agent, CSCIB, as repo buyer, and PMC, as repo seller.

“Foreign Lender” means any successor or assignee of Lender that is organized under the laws of a jurisdiction other than that in which a Borrower is resident for tax purposes. For purposes of this definition, the United States of America, each State and Commonwealth thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Freddie Mac” means The Federal Home Loan Mortgage Corporation, also known as Freddie Mac, or any successor thereto.

“Freddie Mac Acknowledgment Agreement” means an Acknowledgment Agreement, by and among Freddie Mac, each Borrower, Guarantor, and the Lender as secured party, pursuant to which Freddie Mac acknowledges the security interest granted pursuant to this Agreement of the Lender with respect to any Freddie Mac Servicing Rights, together with any amendments and addenda thereto.

“Freddie Mac Servicing Contract” means (i) the Purchase Contract (as defined in the Freddie Mac Guide), including a Purchase Contract confirmation, by and between PMC and Freddie Mac, (ii) the Freddie Mac Guide, (iii) any Bulletins (as defined in the Freddie Mac Guide), (iv) any agreement pursuant to which PMC provides a guaranty or any form of credit enhancement in connection with the sale of mortgage loans to Freddie Mac, (v) the Servicer Success Scorecard (as defined in the Freddie May Guide), (vi) any other document designated to be a Purchase Document by Freddie Mac, (vii) the Guide Plus Additional Provisions (as defined in the Freddie Mac Guide), as amended from time to time, and (viii) any other additional terms applicable to the sale of mortgage loans, such as written waivers, amendments or supplements to the Freddie Mac Guide that are made available to PMC by Freddie Mac through electronic means including sources designated by Freddie Mac for distribution of the Freddie Mac Guide.

“Freddie Mac Servicing Rights” means all Servicing Rights with respect to mortgage loans serviced by a Borrower for Freddie Mac.

“Funding Date” means the date of any Loan advance hereunder as provided in Section 2.03 hereof.

“Funding Notice Date” means the date on which a Borrower shall deliver a Borrower Funding Request, which shall be (i) at least two (2) Business Days prior to the date which such Borrower has requested as a Funding Date as provided therein, or (ii) if a Borrower Funding Request relates to new Collateral, at least five (5) Business Days prior to the date which such Borrower has requested as a Funding Date as provided therein. 

Schedule I - 7

“GAAP” means United States Generally Accepted Accounting Principles inclusive of, but not limited to, applicable statements of Financial Accounting Standards issued by the Financial Accounting Standards Board, its predecessors and successors and SEC Staff Accounting Guidance as in effect from time to time applied on a consistent basis.

“Ginnie Mae” means The Government National Mortgage Association, also known as Ginnie Mae, or any successor thereto.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any municipality and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guarantor” shall mean PennyMac Mortgage Investment Trust, its successors and permitted assigns.

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

“Guaranteed Obligations” means, without duplication, all of the Obligations of each Borrower to Lender, whenever arising, under this Agreement or any other Facility Document (including, but not limited to, obligations with respect to principal, interest and fees).

“HUD” means the United States Department of Housing and Urban Development, or any successor thereto.

“Indebtedness” means, for any Person: at any time, and only to the extent outstanding at such time: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital 

Schedule I - 8

Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements, including, without limitation, any Indebtedness arising hereunder; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) Indebtedness of general partnerships of which such Person is a general partner and (j) with respect to clauses (a)-(i) above both on and off balance sheet..

“Indemnified Amounts” has the meaning set forth in Section 10.01.

“Indemnified Party” has the meaning set forth in Section 10.01.

“Initial Borrower Funding Request” means the request to fund the Loan on the Initial Funding Date, substantially in the form of Exhibit 2.03, delivered in accordance with Section 2.03(a), that is current as of the end of the previous calendar month.

“Initial Funding Date” means the Funding Date on which the first Loan is made pursuant to this Agreement, as specified in the Initial Borrower Funding Request.

“Insolvency Law” means any bankruptcy, reorganization, moratorium, delinquency, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction in effect at any time during the term of this Agreement.”

“Interest Period” means, for any Loan, (i) an initial period beginning on the Funding Date for such Loan and ending on the last day of the calendar month in which such Funding Date occurs; and (ii) subsequent consecutive periods thereafter, beginning on the first day of each subsequent calendar month and ending on the earlier of (x) the last day of the same calendar month in which such Interest Period began and (y) the Wind Down Date; and (iii) subsequent consecutive periods thereafter, beginning on the first day following, initially, the Wind Down Date, and thereafter, each Loan Repayment Date, and ending on the earlier of (x) the next following Loan Repayment Date and (y) the date on which the amount of all Obligations have been reduced to zero.

“Interest Rate” means, with respect to all Loans, the LIBOR Rate plus the Applicable Margin.

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

“Lender” means CSCIB.

“LIBOR Rate” means for each day, the rate (adjusted for statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits for a period equal to one month appearing on Bloomberg Screen US 0001M Page or if such rate ceases to appear on Bloomberg Screen US 0001M Page, or any other service providing comparable rate quotations at approximately 11:00 a.m., London time, on the applicable date of determination, or such interpolated rate as determined by the Lender.

“Lien” means with respect to any property or asset of any Person (a) any mortgage, lien, pledge, charge or other security interest or encumbrance of any kind in respect of such property or 

Schedule I - 9

asset or (b) the interest of a vendor or lessor arising out of the acquisition of or agreement to acquire such property or asset under any conditional sale agreement, lease purchase agreement or other title retention agreement, and in each case, other than an Agency’s rights and interests in the related Agency Servicing Rights.

“Loan Repayment Date” means, (i) initially, the date that is thirty (30) days after the Wind Down Date, and (ii) thereafter, each date that is thirty (30) days after the immediately preceding Loan Repayment Date. 

“Loans” has the meaning set forth in Section 2.01.

“Margin Call” has the meaning set forth in Section 2.08(b).

“Master Spread Acquisition and MSR Servicing Agreement” means that certain Master Spread Acquisition and MSR Servicing Agreement, dated as of September 15, 2016 by and between PMC, as seller and Holdings, as purchaser.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Borrowers, Subservicer, Guarantor or any Affiliate thereof that is a party to any Facility Documents taken as a whole, (b) a material impairment of the ability of the Borrowers, Subservicer, Guarantor or any Affiliate thereof that is a party to any Facility Document to perform its obligations under any of the Facility Documents to which it is a party and to avoid any Event of Default, (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any of the Facility Documents against any Borrower Party or any Affiliate thereof that is a party to any Facility Document, as determined by the Lender in its sole discretion, or (d) a material adverse effect on the rights and remedies of PMC under the Master Spread Acquisition and MSR Servicing Agreement. 

“Maturity Date” means February 1, 2020. 

“MBS” means mortgage backed securities.

“MBS Trust” means any of the trusts or trust estates in which the Mortgage Loans being serviced by a Borrower pursuant to the Servicing Contracts are held by the related MBS Trustee.

“MBS Trustee” means a trustee or indenture trustee for an MBS Trust.

“MLRA Pricing Side Letter” means that certain Second Amended and Restated Pricing Side Letter, dated as of April 28, 2017, by and among CSFB, CSCIB, Alpine Securitization Ltd., PMC, Holdings, PMC REO Financing Trust, Guarantor and POP with respect to the Roll-Up Agreement and the External Rewarehouse Agreement.

“Monthly Settlement Date” means, (i) initially, the earliest to occur of (a) the twenty-fifth (25th) Business Day of each calendar month, commencing February 25, 2018, and (b) the Wind Down Date, and (ii) following the occurrence of the Wind Down Date, each Loan Repayment Date (or, if such day is not a Business Day, the following Business Day).

Schedule I - 10

“Moody’s” means Moody’s Investors Service, Inc. or its successor in interest.

“Mortgage” means a mortgage, mortgage deed, deed of trust, or other instrument creating a first lien on or first priority security interest in an estate in fee simple in real property securing a Mortgage Note including any riders, assumption agreements or modifications relating thereto.

“Mortgage File” means, with respect to any Mortgage Loan, a file or files pertaining to such Mortgage Loan that contains the mortgage documents pertaining to such Mortgage Loan including any mortgage documents pertaining to such Mortgage Loan required by the Agency Guides.

“Mortgage Loan” means the mortgage loans listed on the Relevant Electronic File (as provided to the Lender pursuant to Section 2.03(a) or 2.03(b)).

“Mortgage Note” means the note or other evidence of indebtedness of a Mortgagor secured by a Mortgage pertaining to a Mortgage Loan.

“Mortgaged Property” means the real property or leasehold estate, if applicable securing repayment of the debt evidenced by a Mortgage Note.

“Mortgagor” means the obligor on a Mortgage Note.

“MSR Value” means, with respect to (i) any Eligible Servicing Right included in the Borrowing Base the fair value ascribed to such asset by the Lender in its sole discretion, taking into account any outstanding obligations owed by the applicable Borrower to an Agency, as applicable, as marked to market as often as daily, (ii) a Servicing Right which is not an Eligible Servicing Right included in the Borrowing Base, zero. The Lender’s good faith determination of MSR Value shall be conclusive upon the parties, absent manifest error on the part of the Lender. Each Borrower acknowledges that the Lender’s determination of MSR Value is for the limited purpose of determining Collateral Value for lending purposes hereunder without the ability to perform customary purchaser’s due diligence and is not necessarily equivalent to a determination of the fair market value of the Eligible Servicing Rights achieved by obtaining competing bids. For the purpose of determining the related MSR Value, the Lender shall have the right to use either a Borrower’s valuation of the Eligible Servicing Rights delivered pursuant to Section 2.04 herein or the Lender’s valuation, or both. Subsequently, Lender shall have the right to reasonably request at any time from Borrowers, an updated valuation for each Eligible Servicing Right, in a form acceptable to Lender in its sole discretion; provided that the Lender shall not be obligated to rely on either valuation and shall have the right to determine the MSR Value of the Eligible Servicing Rights at any time in its sole discretion. The MSR Value shall be deemed to be zero with respect to each Loan for which such valuation is not provided within a reasonable time. 

“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by any Borrower Party or any ERISA Affiliate and that is covered by Title IV of ERISA.

“Net Income” means, for any period and any Person, the net income of such Person for such period as determined in accordance with GAAP.

Schedule I - 11

“Non-Recourse Debt” shall mean Indebtedness payable solely from the assets sold or pledged to secure such Indebtedness and under which Indebtedness no party has recourse to any Borrower Party or any of their Affiliates if such assets are inadequate or unavailable to pay off such Indebtedness, and neither Borrower Parties nor any of their Affiliates effectively has any obligation to directly or indirectly pay any such deficiency.

“Note” means the promissory note of the Borrowers issued to the Lender, in substantially the form of Exhibit 2.02(a), as amended from time to time, and any replacement thereof or substitution therefor.

“Obligations” means the Outstanding Aggregate Loan Amount, all accrued and unpaid interest thereon and all other amounts payable by a Borrower to the Lender pursuant to this Agreement, the Note or any other Facility Document.

“Opinion of Counsel” means a written opinion of counsel, reasonably acceptable to each Person to whom such opinion is addressed.

“Other Taxes” has the meaning set forth in Section 3.02(b).

“Outstanding Aggregate Loan Amount” means, at any time, the aggregate principal amount of the Loans funded by the Lender, minus the aggregate amount of payments received by the Lender prior to such time and applied to reduce the principal amount of the Loans.

“P&I Advance” means any advance disbursed by a Borrower as servicer pursuant to any Servicing Contract of delinquent interest and/or principal on the related Mortgage Loans.

“Participant” has the meaning set forth in Section 9.04.

“Participant Register” has the meaning set forth in Section 9.04.

“Person” means any individual, corporation, estate, partnership, limited liability company, limited liability partnership, joint venture, association, joint-stock company, business trust, trust, unincorporated organization, government or any agency or political subdivision thereof, or other entity of a similar nature.

“Plan” means an employee benefit or other plan established or maintained by any Borrower Party or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.

“Pledged Servicing Rights” means any Eligible Servicing Rights a security interest in which has been granted to the Lender pursuant to this Agreement (it being understood that the Servicing Rights pledged will be identified by pool number in the Electronic Files) subject to the terms and provisions of the Freddie Mac Acknowledgment Agreement.

“POP” means PennyMac Operating Partnership, L.P., a limited partnership organized under the laws of the State of Delaware.

“Pool” means a group of Mortgage Loans, which are the security for a mortgage-backed security issued or guaranteed by an Agency.

Schedule I - 12

“Prepayment Notice” means a notice substantially in the form of Exhibit 2.08(b).

“Pricing Side Letter” means that certain Loan and Security Agreement Pricing Side Letter, dated as of the date hereof, among the Borrowers, the Guarantor and the Lender, entered into in connection with this Agreement, as the same may be amended, modified or supplemented from time to time. 

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

“PSA” means a pooling and servicing agreement or similar agreement related to a non-agency securitization.

“Recourse Servicing Obligations” means with respect to any mortgage loan, (a) any obligation or liability (actual or contingent) of the servicer or subservicer in respect of such Mortgage Loan to indemnify the relevant Agency for any losses incurred in respect of any Mortgage Loan that was determined at the time of sale to have been ineligible for sale to the applicable Agency due to a breach of one or more representations and warranties but accepted for purchase subject to any waiver and indemnity obligations, or (b) any other obligations described from time to time as being sold “with recourse” as such term (or terms of similar meaning) are defined in the relevant Agency Guide, as amended or supplemented from time to time, and any successor publications thereto having the same general contents and purpose.

“Register” has the meaning set forth in Section 9.04.

“REIT” means a real estate investment trust, as defined in Section 856 of the Code.

“Related Escrow Account Balances” means the balance, on the related Funding Date, of any escrow or impound accounts maintained by a Borrower which relate to any Mortgage Loan, including, without limitation, items escrowed for mortgage insurance, property taxes (either real or personal), hazard insurance, flood insurance, ground rents, or any other escrow or impound items required by any Mortgage Note or Mortgage, reduced by any unpaid real estate taxes or insurance premiums required to be paid by such Borrower, with respect to which amounts have been escrowed by the related Mortgagor.

“Related Principal and Interest Custodial Accounts” means all principal and interest custodial accounts maintained by PMC that relate to any Mortgage Loan or Pool.

“Relevant Electronic File” means, on any Business Day, the most recently delivered Electronic File that was delivered in accordance with Section 2.03(a) or 2.03(b) and relates to Eligible Servicing Rights that constitute Collateral hereunder.

“Repayment Notice” means a notice substantially in the form of Exhibit 2.08(a).

“Requirements of Law” means, with respect to any Person or any of its property, the certificate of incorporation or articles of association and by-laws, certificate of limited partnership, limited partnership agreement or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of any arbitrator or Governmental Authority, 

Schedule I - 13

in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, whether Federal, state or local (including, without limitation, usury laws, the Federal Truth in Lending Act and retail installment sales acts).

“Responsible Officer” means (a) with respect to a Borrower, the chief executive officer, president, chief financial officer, treasurer, assistant vice president, assistant treasurer, secretary or assistant secretary of such Borrower, or any other officer having substantially the same authority and responsibility; provided, that with respect specifically to the obligations of the Borrowers set forth in Section 7.01(z) hereof, only the chief financial officer, treasurer, assistant treasurer, or comptroller of such Borrower shall be deemed to be a Responsible Officer; and (b) with respect to the Lender, a lending officer charged with responsibility for the day to day management of the relationship of such institution with the Borrower.

“Restricted Cash” means for any Person, any amount of cash of such Person that is contractually required to be set aside, segregated or otherwise reserved.

“Restricted Payment” means with respect to any Person, collectively, all dividends or other distributions of any nature (cash, securities, assets or otherwise), and all payments, by virtue of redemption or otherwise, on any class of equity securities (including, warrants, options or rights therefor) issued by such Person, which may hereafter be authorized or outstanding and any distribution in respect of any of the foregoing, whether directly or indirectly other than payments made in the ordinary course solely for the purpose of originating, servicing, subservicing and/or administrating Mortgage Loans.

“Roll-Up Agreement” means that certain Second Amended and Restated Master Repurchase Agreement, dated as of April 28, 2017, by and among CSFB, as administrative agent, CSCIB, as committed buyer and a buyer, Alpine Securitization Ltd., as a buyer, PMC, as a seller, Holdings, as a seller, PMC REO Financing Trust, as an asset subsidiary, Guarantor, as a guarantor, and POP, as a seller and as a guarantor.

“S&P” means Standard & Poor’s Ratings Services, or any successor thereto.

“SEC” means the Securities and Exchange Commission, or any successor thereto.

“Servicing Fee” means the total amount of the fee payable to the Subservicer as compensation for subservicing and administering the Mortgage Loans.

“Servicing Rights” means with respect to each Mortgage Loan, all of PMC’s right, title and interest in, to and under the Freddie Mac Servicing Contract, whether now or hereafter existing, acquired or created, whether or not yet accrued, earned, due or payable, as well as all other present and future right and interest under such Servicing Contracts, including, without limitation, the right (i) to receive the Servicing Fee income payable after the related Funding Date (including without limitation, any Uncollected Fees), (ii) any and all Ancillary Income received after the related Funding Date, (iii) to hold and administer the Related Escrow Account Balances, (iv) to hold and administer, in accordance with the applicable Agency Guides, the Related Principal and Interest Custodial Account, the Custodial File, and the Mortgage File arising from or connected to the servicing or subservicing of such Mortgage Loan under this Agreement and (v) all proceeds, income, profits, rents and products of any of the foregoing including, without 

Schedule I - 14

limitation, all of such Borrower’s rights to proceeds of any sale or other disposition of the Servicing Rights, but with respect to clauses (i) - (iv) above, specifically excluding any Excluded Collateral. Servicing Rights shall include any Excess Servicing Fees sold by PMC to Holdings pursuant to the terms of the Master Spread Acquisition and MSR Servicing Agreement.

“Subservicer” means PennyMac Loan Services, LLC, together with its permitted successors and assigns.

“Subservicer Termination Event” occurs when: (a) Subservicer ceases to be a seller/servicer approved by Fannie Mae or a lender approved by HUD, (b) Subservicer has been suspended as a seller/servicer by Fannie Mae or HUD on and after the date on which Subservicer first obtained such approval from Fannie Mae or HUD, as applicable or (c) Subservicer is under review or investigation outside of due course and has knowledge of imminent or future investigation outside of due course, by Fannie Mae or HUD on and after the date on which Subservicer became a Fannie Mae or HUD approved seller/servicer or lender, as the context may require, and the Borrower has not either (x) taken over the servicing of such Mortgage Loans itself or (y) (i) identified a replacement within thirty (30) days that meets the criteria of an Eligible Subservicer and (ii) replaced Subservicer with such Eligible Subservicer within sixty (60) days under an Eligible Subservicing Agreement and an agreement in form and substance similar to the Subservicing Agreement.

“Subservicing Agreement” means the Third Amended and Restated Flow Servicing Agreement, dated as of September 12, 2016, between POP, as owner, on behalf of its wholly owned Subsidiaries including PMC, and Subservicer as subservicer, as such agreement may be amended from time to time.

“Subsidiary” means a corporation of which a Person and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors.

“T&I Advance” means an advance made by a Borrower as servicer with respect to a Mortgage Loan pursuant to the servicer’s obligation to do so under any Servicing Contract of real estate taxes and assessments, or of hazard, flood or primary mortgage insurance premiums, required to be paid by the related Mortgagor under the terms of the related Mortgage Loan.

“Taxes” has the meaning set forth in Section 3.02.

“Termination Date” means the earliest of (i) the Maturity Date, (ii) the day on which the Facility is terminated pursuant to Section 8.02(a) or Section 8.02(b), (iii) the Loan Repayment Date on which the final amounts owing under the Facility are required to be paid as provided for in the first sentence of Section 2.08(a) hereof or (iv) termination of the External Rewarehouse Agreement, the Roll-Up Agreement or the FMSR VF1 Repo.  

“Test Period” means any one fiscal quarter.

“UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Collateral is governed by the Uniform 

Schedule I - 15

Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

“Uncollected Fees” means with respect to any Mortgage Loan, any accrued late charges, NSF fees, assumption fees, and other fees charged to Mortgagors in connection with the servicing or subservicing of such Mortgage Loan which have not been collected by a Borrower as of the related Funding Date.

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

“U.S. Person” means any Person that is a “United States Person” as defined in Section 77.01(a)(30) of the Code. 

“Wind Down Date” means the earliest to occur of (i) the Maturity Date, or (ii) the Business Day specified by the Lender upon ten (10) Business Days’ prior written notice to the Borrowers. 

 

Schedule I - 16

SCHEDULE 5.01

CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT

	
(a)
	
This Agreement duly executed by the parties hereto;

	
(b)
	
The Note duly executed by the Borrowers;

	
(c)
	
All other Facility Documents duly executed by the related parties;

	
(d)
	
A filed UCC-1 financing statement;

	
(e)
	
An incumbency certificate of each Borrower and Guarantor, certifying the names and true signatures of the persons authorized on the Borrowers’ and Guarantor’s behalf to sign, as applicable, this Agreement, the Note and the other Facility Documents to be delivered by the Borrower and Guarantor in connection herewith;

	
(f)
	
A certificate of a Responsible Officer of each Borrower and Guarantor attaching copies of organizational documents, resolutions, and good standing certificate of the Borrowers and the Guarantor;

	
(g)
	
An Opinion of Counsel, delivered by outside counsel acceptable to the Lender in its reasonable discretion, opining as to: New York enforceability, corporate matters and non-contravention, security interest, and the Investment Company Act of 1940; provided that opinions as to corporate matters and non-contravention may be given by the in-house counsel of the Borrowers; 

	
(h)
	
An executed Freddie Mac Acknowledgment Agreement and an opinion of counsel with respect to such Freddie Mac Acknowledgment Agreement; 

	
(i)
	
 A separate power of attorney of PMC with respect to the powers described in Section 4.04; 

	
(j)
	
The Master Spread Acquisition and MSR Servicing Agreement duly executed by the related parties;

	
(k)
	
The delivery of an executed release by Barclays Bank PLC, in form and substance satisfactory to the Lender, evidencing the release of its security interest in the Freddie Mac Servicing Rights subject to the lien of the Loan and Security Agreement (as amended or supplemented from time to time) dated as of March 24, 2017, by and among PennyMac Corp., PennyMac Holdings, LLC and Barclays Bank PLC;

	
(l)
	
The delivery of lien search reports with respect to the Borrowers covering the five-year period prior to the date hereof; and

	
(m)
	
The due filing of UCC financing statements on Form UCC-3, in form and substance satisfactory to the Lender, with respect to (i) the original financing statement file number 2017 1942108, filed by Barclays Bank PLC with the Delaware Secretary of State on March 24, 2017 

Schedule 5.01 - 1

		
with respect to Holdings, and (ii) the UCC-1 original financing statement file number 2017 1942157, filed by Barclays Bank PLC with the Delaware Secretary of State on March 24, 2017 with respect to PMC. 

 

 

Schedule 5.01 - 2

SCHEDULE 5.02

CONDITIONS PRECEDENT TO EACH LOAN

	
(a)
	
The Lender shall have received a duly executed copy of a Borrower Funding Request for such Loan in accordance with Section 2.03;

	
(b)
	
Delivery of all reasonable due diligence (to the extent supplemental due diligence is conducted by Lender with respect to such Loan);

	
(c)
	
The making of such Loan, and the application of the proceeds thereof, shall not result in the Outstanding Aggregate Loan Amount exceeding the Available Facility Amount;

	
(d)
	
The making of such Loan, and the application of the proceeds thereof, shall not result in a Borrowing Base Deficiency;

	
(e)
	
On the applicable Funding Date, the following statements shall be true (and each Borrower by delivering such Borrower Funding Request shall be deemed to have certified that):

(i)the representations and warranties set forth in Article VI are true and correct in all material respects (except for on the Closing Date, in which case the representations and warranties are true and correct on the Closing Date) on and as of such day as though made on and as of such day and shall be deemed to have been made on such day (except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case, such representation or warranty shall have been true and correct as of such date);

(ii)such Borrower is in compliance with all covenants set forth in Article VII;

(iii)all conditions precedent to the making of such Loan have been satisfied; 

(iv)no Default or Event of Default has occurred and is continuing, or would result from such Loans;

(v) all of the Servicing Rights included in the most recently delivered Electronic File are Eligible Servicing Rights, except for any non-qualifying Servicing Rights listed as such therein, and all Recourse Servicing Obligations have been identified as such in a schedule attached to such Electronic File;

	
(f)
	
The Lender shall have received (i) with respect to the Initial Borrower Funding Request, the initial Electronic File; and (ii) with respect to any subsequent Borrower Funding Request, a subsequent Electronic File on or prior to time required by Section 2.03; 

	
(g)
	
With respect to any Borrower Funding Request, the Freddie Mac Acknowledgment Agreement is effective and in place with respect to which the related Servicing Rights will be pledged under the Agreement and consents from all third parties, including warehouse lenders, as needed, except to the extent the foregoing have already been received;

Schedule 5.02 - 1

	
(h)
	
With respect to the Initial Borrower Funding Request, an Opinion of Counsel, delivered by outside counsel acceptable to the Lender in its reasonable discretion, opining as to: security interest creation, perfection and priority;

	
(i)
	
All Facility Documents shall continue to be in full force and effect in all material respects;

	
(j)
	
With respect to the Freddie Mac Servicing Rights, Freddie Mac has not exercised its right of Suspension (as defined in the Freddie Mac Acknowledgment Agreement) has occurred; and

	
(k)
	
The Lender’s pro rata portion of the FMSR VF1 Repo is fully drawn based upon the then-current VFN Principal Balance (as defined in the FMSR VF1 Repo). 

 

 

Schedule 5.02 - 2

SCHEDULE 6.01(S)

 

BORROWERS’ EXISTING FINANCING FACILITIES

 

[Attached]

 

 

 

Schedule 6.01(s) - 1

SCHEDULE 6.02

ELIGIBILITY CRITERIA WITH RESPECT TO THE SERVICING RIGHTS

All owned Servicing Rights for Mortgage Loans serviced by PMC on behalf of Freddie Mac, provided that such Servicing Rights are free and clear of any Liens, subject to Freddie Mac’s rights and interest in such Servicing Rights pursuant to the Acknowledgment Agreement and the Freddie Mac Servicing Contract acceptable in form and substance to the Lender.

 

 

Schedule 6.02 - 1

Schedule 7.01(cc)

Monthly MSR Collateral REPORT

 

Schedule 7.01(cc) - 1

SCHEDULE 11.02 

NOTICES

If to PMC:

PennyMac Corp.

3043 Townsgate Road, Suite 300 

Westlake Village, CA 91361

Attention:  Pamela Marsh/Josh Smith

Phone Number:  (805) 330-6059/ (818) 224-7078

E-mail:  pamela.marsh@pnmac.com; josh.smith@pnmac.com; contract.finance@pnmac.com

With copies to:

PennyMac Corp. 
3043 Townsgate Road, Suite 300

Westlake Village, CA 91361
Attention: Jeff Grogin

Telephone: (818) 224-7050
Facsimile: (818) 936-0231
E-mail: jeff.grogin@pnmac.com

 

If to Holdings:

PennyMac Holdings, LLC 
3043 Townsgate Road, Suite 310

Westlake Village, CA 91361

Attention:  Pamela Marsh/Josh Smith

Phone Number:  (805) 330-6059/ (818) 746-7078

E-mail:  pamela.marsh@pnmac.com; josh.smith@pnmac.com; contract.finance@pnmac.com

With copies to:

PennyMac Corp. 
3043 Townsgate Road, Suite 310

Westlake Village, CA 91361
Attention: Jeff Grogin

Telephone: (818) 224-7050
Facsimile: (818) 936-0231
E-mail: jeff.grogin@pnmac.com

 

 

If to the Guarantor:

PennyMac Mortgage Investment Trust 
3043 Townsgate Road

Westlake Village, CA 91361

Schedule 11.02 - 1

Attention:  Pamela Marsh/Josh Smith

Phone Number:  (805) 330-6059/ (818) 746-7078

E-mail:  pamela.marsh@pnmac.com; josh.smith@pnmac.com; contract.finance@pnmac.com

 

With copies to:

PennyMac Mortgage Investment Trust 
3043 Townsgate Road

Westlake Village, CA 91361
Attention: Jeff Grogin
Telephone: (818) 224-7050
Facsimile: (818) 936-0231
E-mail: jeff.grogin@pnmac.com 

 

if to Lender:

Credit Suisse AG, Cayman Islands Branch 
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, New York  10010
Attention:  Margaret Dellafera
Phone Number: 212‐325‐6471
Fax Number:  212‐743‐4810
E‐mail: margaret.dellafera@credit‐suisse.com; dominic.obaditch@credit-suisse.com; roni.saporta@credit-suisse.com; 

With copies to:

 

Credit Suisse AG, Cayman Islands Branch – Legal Department

c/o Credit Suisse Securities (USA) LLC

One Madison Avenue, 9th Floor

New York, NY 10010

Attention: Legal Department—RMBS Warehouse Lending

Fax Number: (212) 322-2376

 

CSFBMC LLC – Operations

c/o Credit Suisse Securities (USA) LLC

One Madison Avenue, 2nd floor

New York, New York 10010

Attention: Christopher Bergs, Resi Mortgage Warehouse Ops

Phone: 212-538-5087

E-mail: christopher.bergs@credit-suisse.com; list.afconduitreports@creditsuisse.com; agency.loanops@credit-suisse.com; david.bankert@creditsuisse.com; jason.golz@credit-suisse.com 

Schedule 11.02 - 2

EXHIBIT 2.02(a)

FORM OF PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS. THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS AND PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

 [], 2018

$_____________

 

New York, New York

FOR VALUE RECEIVED, Pennymac Corp., a Delaware corporation (“PMC”) and PENNYMAC HOLDINGS, LLC (“Holdings” and, together with PMC, the “Borrowers”), each hereby promises to pay to the order of CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (the “Lender”), at the principal office of the Lender at Eleven Madison Avenue, 4th Floor, New York, New York 10010, in lawful money of the United States, and in immediately available funds, the principal sum of [ ] ($[ ]) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to the Borrowers under the Loan Agreement), on the dates and in the principal amounts provided in the Loan Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement.

The date, amount and interest rate of each Loan made by the Lender to the Borrowers, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of' this Note, endorsed by the Lender on the schedule attached hereto or any continuation thereof; provided, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrowers to make a payment when due of any amount owing under the Loan Agreement or hereunder in respect of the Loans made by the Lender.

This Note is the Note referred to in the Loan and Security Agreement dated as of February 1, 2018 (as amended, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”) among Borrowers, PennyMac Mortgage Investment Trust, as guarantor and the Lender, and evidences Loans made by the Lender thereunder. Terms used but not defined in this Note have the respective meanings assigned to them in the Loan Agreement.

The Borrowers agree to pay all the Lender’s reasonable out-of-pocket costs of collection and enforcement (including reasonable attorneys’ fees and disbursements of Lender’s counsel) in respect of this Note when incurred as required by Section 10.01 of the Loan Agreement.

Schedule 2.02(a) - 1

Notwithstanding the pledge of the Collateral, the Borrowers hereby acknowledge, admit and agree that the Borrowers’ obligations under this Note are joint and several, recourse obligations of the Borrowers to which the Borrowers pledge their full faith and credit.

The Borrowers, and any endorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that this Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further Collateral, the release of any Collateral for this Note, the release of any party primarily or secondarily liable hereon, and (c) expressly agree that it will not be necessary for the Lender, in order to enforce payment of this Note, to first institute or exhaust the Lender’s remedies against the Borrowers or any other party liable hereon or against any Collateral for this Note. No extension of time for the payment of this Note, or any installment hereof, made by agreement by the Lender with any person now or hereafter liable for the payment of this Note, shall affect the liability under this Note of the Borrowers, even if the Borrowers are is not a party to such agreement; provided, however, that the Lender and the Borrowers, by written agreement between them, may affect the liability of the Borrowers.

Any reference herein to the Lender shall be deemed to include and apply to every subsequent holder of this Note. Reference is made to the Loan Agreement for provisions concerning optional and mandatory prepayments, Collateral, acceleration and other material terms affecting this Note.

Any enforcement action relating to this Note may be brought by motion for summary judgment in lieu of a complaint pursuant to Section 3213 of the New York Civil Practice Law and Rules.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS NOTE). THE BORROWERS HEREBY SUBMIT TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWERS HERETO IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT IN THE BOROUGH OF MANHATTAN AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE BORROWERS HERETO HEREBY CONSENT TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE, OR ANY DOCUMENT DELIVERED PURSUANT HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THEIR RESPECTIVE ADDRESSES SPECIFIED AT THE TIME FOR 

Schedule 2.02(a) - 2

NOTICES UNDER THE LOAN AGREEMENT OR TO ANY OTHER ADDRESS OF WHICH THEY SHALL HAVE GIVEN WRITTEN OR ELECTRONIC NOTICE TO THE LENDER. THE FOREGOING SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO TO BRING SUIT IN THE COURTS OF ANY OTHER JURISDICTION.

THE BORROWERS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.

 

[Signature Page Follows]

Schedule 2.02(a) - 3

 

	
Pennymac Corp.

	
 
	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

	
Pennymac HOLDINGS, LLC

	
 
	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

Schedule 2.02(a) - 4

SCHEDULE OF LOANS

This Note evidences Loans made under the within‐described Loan Agreement to the Borrowers, on the dates, in the principal amounts and bearing interest at the rates set forth below, and subject to the payments and prepayments of principal set forth below:

 

	
Date Made
	
Principal Amount

of Loan
	
Amount Paid

or Prepaid
	
Amount of

Additional Draws
	
Unpaid Principal

Amount
	
Notation

Made by

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

 

 

 

 

Schedule 2.02(a) - 5

EXHIBIT 2.03
to Loan and Security Agreement

FORM OF BORROWER FUNDING REQUEST

[DATE]

Credit Suisse AG, Cayman Islands Branch

Eleven Madison Avenue, 4th Floor

New York, New York  10010

Attention:  Margaret Dellafera

 

Ladies and Gentlemen:

This [Initial] Borrower Funding Request is delivered to you pursuant to Section 2.03 of the Loan and Security Agreement, dated as of February 1, 2018  (as amended, supplemented, restated or otherwise modified from time to time, the “Loan Agreement”), among PennyMac Corp., PennyMac Holdings, LLC, as borrowers, PennyMac Mortgage Investment Trust, as guarantor and Credit Suisse AG, Cayman Islands Branch, as lender (the “Lender”). Unless otherwise defined herein or as the context otherwise requires, terms used herein have the meaning assigned thereto under Schedule I of the Loan Agreement.

The undersigned (the “Borrowers”) hereby request that a Loan be made in the aggregate principal amount of $____ on _________, 20__ to be secured by the Servicing Rights.

An updated Electronic File, revised to reflect the acquisition of any additional Servicing Rights purchased by the Borrower since the most recently delivered Electronic File, has been delivered pursuant to Section 2.03 of the Loan Agreement. Such Electronic File reflects all Eligible Servicing Rights that constitute Collateral under the terms and conditions of the Agreement and a schedule of the mortgage loans related to the Servicing Rights identified in Electronic File is attached hereto as Schedule One.

[TO BE USED FOR ALL FUNDINGS THAT INVOLVE NEW COLLATERAL] [The Borrowers hereby acknowledge and agree that (other than with respect to the Agreement) (i) the Servicing Rights currently pledged as Collateral under the Agreement and (ii) any of the Servicing Rights identified on Schedule One attached hereto, are not currently assigned, pledged, conveyed or encumbered under any credit, warehouse or financing facility. The Borrowers further acknowledge and agree that (other than under the Agreement) it shall not assign, pledge, convey or encumber such Servicing Rights under any credit, warehouse or financing facility in the future, except with prior notice to, and consent from, the Lender.]

The undersigned hereby acknowledges that the delivery of this [Initial] Borrower Funding Request and the acceptance by the undersigned of the proceeds of the Loan requested hereby constitute a representation and warranty by the undersigned that all conditions precedent to such Loan specified in Article V of the Loan Agreement have been satisfied and will continue to be satisfied after giving effect to such Loan.

Schedule 2.03 - 1

The undersigned further represents and warrants that either (a) the Agency Guides and the Servicing Contracts have not been materially modified since the last date the undersigned delivered a Borrower Funding Request or (b) attached hereto is a true and complete description of any changes to the applicable Servicing Contracts since the last date the undersigned delivered a Borrower Funding Request.

Please wire transfer the proceeds of the Loan to the following account pursuant to the following instructions:

[______________]

The undersigned has caused this [Initial] Borrower Funding Request to be executed and delivered, and the certification and warranties contained herein to be made, by its duly authorized officer this ____ day of _________, 20__.

 

	
Pennymac Corp., as a Borrower

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

	
Pennymac HOLDINGS, LLC, as a Borrower

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

Acknowledged and agreed:

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

By:______________________________________

Name:

Title:

By:______________________________________

Name:

Title:

Schedule 2.03 - 2

 

 

SCHEDULE ONE

ELECTRONIC FILE

[To be provided by Borrower.]

 

 

Schedule 2.03 - 3

EXHIBIT 2.08(a)

FORM OF REPAYMENT NOTICE

[ ], 20__

TO:The Lender as defined in the Loan Agreement referred to below

Reference is hereby made to the Loan and Security Agreement, dated as of February 1, 2018 (as heretofore amended, the “Loan Agreement”), among PennyMac Corp. (“PMC”), PennyMac Holdings, LLC (“Holdings” and, together with PMC, collectively the “Borrowers”), PennyMac Mortgage Investment Trust (the “Guarantor”) and Credit Suisse AG, Cayman Islands Branch, as lender (the “Lender”). Capitalized terms not otherwise defined herein are used herein as defined in the Loan Agreement.

The Borrowers hereby notify you that, pursuant to Section 2.08[(a)/(b)] of the Loan Agreement, they shall make a repayment of the Loans outstanding under the Loan Agreement to the Lender on [  ], 20__ in the amount of $_____.

Also included in the repayment amount shall be accrued and unpaid interest, in the amount of $__________________.

Schedule 2.08(a) - 1

The undersigned has caused this Repayment Notice to be executed and delivered by its duly authorized officer this_________ day of ____________, 20__.

	
Pennymac Corp., as a Borrower

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

 

	
Pennymac HOLDINGS, LLC, as a Borrower

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

 

Schedule 2.08(a) - 2

EXHIBIT 2.08(b)

FORM OF PREPAYMENT NOTICE

[  ], 20__

TO:The Lender as defined in the Loan Agreement referred to below

Reference is hereby made to the Loan and Security Agreement, dated as of February 1, 2018 (as heretofore amended, the “Loan Agreement”), among PennyMac Corp. (“PMC”), PennyMac Holdings, LLC (“Holdings” and, together with PMC, collectively the “Borrowers”), PennyMac Mortgage Investment Trust (the “Guarantor”) and Credit Suisse AG, Cayman Islands Branch, as lender (the “Lender”). Capitalized terms not otherwise defined herein are used herein as defined in the Loan Agreement.

The Borrowers hereby notify you that, pursuant to and in compliance with Section 2.09 of the Loan Agreement, they shall make a prepayment of Loans outstanding under the Loan Agreement on [  ], 20__ in the amount of $________.

Also included in the prepayment amount shall be accrued and unpaid interest, in the amount of $____________.

The undersigned has caused this Prepayment Notice to be executed and delivered by its duly authorized officer this_________ day of ___________, 20__.

	
Pennymac Corp., as a Borrower

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

 

 

	
Pennymac HOLDINGS, LLC, as a Borrower

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

Schedule 2.08(b) - 1

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