Document:

Exhibit 10.5

 

EXECUTION VERSION

 

SERVICING AND ASSET MANAGEMENT AGREEMENT

 

 

Between

 

BRT REALTY TRUST

 

as Servicer and Asset Manager

 

and

 

BRT RLOC LLC

 

as Lender

 

 

Dated as of June     , 2011

 

 

SERVICING AND ASSET MANAGEMENT AGREEMENT

 

THIS SERVICING AND ASSET MANAGEMENT AGREEMENT (this “Agreement”) is made as of June     , 2011, between BRT REALTY TRUST, a business trust formed under and pursuant to the laws of the Commonwealth of Massachusetts (the “Servicer”), and BRT RLOC LLC a New York limited liability company, as Lender (the “Lender”).

 

WHEREAS, Lender owns and/or intends to own certain mortgage loans (individually, a “Mortgage Loan” and collectively, the “Mortgage Loans” and together with all of the instruments and agreements now evidencing, securing, guarantying, or otherwise relating to a Mortgage Loans, the “Loan Documents”);

 

WHEREAS, Servicer and Lender desire that Servicer manage and service collection and administration of the Mortgage Loans identified by Lender from time to time subject to the terms hereof and the Loan Documents.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, Lender and Servicer agree as follows:

 

ARTICLE I

 

SERVICING AND ASSET MANAGEMENT

 

Section 1.1                                    Appointment of Servicer as Servicer.  Servicer is hereby appointed to service, administer and collect all payments or proceeds with respect to all of the Mortgage Loans owned by Lender and identified by Lender from time to time in accordance with the terms hereof and the terms of the Loan Documents.  Servicer shall have full power and authority, as required by and pursuant to the terms of the Loan Documents to do or cause to be done any and all things in connection with such servicing, administration and collection of each Mortgage Loan as may be necessary or desirable to conform to Accepted Servicing Practices and the terms of the Loan Documents and this Agreement.  If there is any conflict between the terms of this Agreement and the Loan Documents with respect to the treatment of a Mortgage Loan, the terms of the Loan Documents shall govern.  Any capitalized term not otherwise defined herein shall have the meaning as specified on Exhibit A, or if specified thereon, as specified in the LSA.

 

Section 1.2                                    Documents Evidencing Assets.  Lender will provide to Servicer copies of each document evidencing a Mortgage Loan and the collateral and security therefor to be serviced by Servicer from time to time hereunder, together with such other documents as Servicer may reasonably request in order to perform its duties under this Agreement.  Other than as provided in the LSA and the Custodial Agreement, Servicer shall maintain physical or imaged possession of copies of all instruments or documents generated by or coming into the possession of Servicer that are required to document or service a Mortgage Loan.

 

Section 1.3                                    Duties of Servicer.  Servicer’s duties under this Agreement shall include the following:

 

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(a)                                 Servicer shall undertake all commercially reasonable efforts in accordance with Accepted Servicing Practices to collect or otherwise realize upon a Mortgage Loan in accordance with, and as expressly permitted by the terms of the Loan Documents.

 

(b)                                 Servicer shall maintain reasonable records with respect to a Mortgage Loan setting forth the status of a Mortgage Loan, the amount and application of any funds received on account of a Mortgage Loan, the amount of any advances made in collection of, or other realization upon a Mortgage Loan, in accordance with the terms of the Loan Documents.

 

(c)                                  All proceeds received from a Mortgage Loan shall either be deposited directly by the applicable Borrower pursuant to wire transfer into the account identified by Lender or delivered by the applicable Borrower by check to the Servicer.  Servicer shall deposit any proceeds or deliver any checks it may receive directly from a Borrower with respect to a Mortgage Loan into the applicable account identified by Lender for such Mortgage Loan.

 

(d)                                 Servicer shall monitor the payment of real estate taxes, insurance, and any other escrows or reserves, to the extent required by, and in accordance with the Loan Documents.  To the extent permitted under the terms of a Mortgage Loan, Servicer will manage escrow and reserve accounts including disbursement of payments to third parties on behalf of Lender and will perform periodic analyses of tax and insurance escrow accounts.  To the extent required with respect to any Mortgage Loan with future advances due to renovation or construction, Servicer shall manage draws of loan funds, determine loan balancing, oversee the construction manager and undertake such other rights of Lender under the Loan Documents with respect to such renovation or construction.

 

(e)                                  Servicer shall provide covenant compliance, and at Lender’s direction, enforcement of such compliance as required by the Loan Documents.

 

(f)                                   If the Borrower fails to obtain or maintain the insurance Lender requires, Servicer, upon receipt of prior written approval and funds from Lender, shall obtain such insurance with respect to Mortgage Loan collateral and advance on behalf of such Borrower the premiums for such insurance at the direction of Lender.  Servicer shall not incur any costs in obtaining or maintaining such insurance.

 

(g)                                  In addition to the servicing functions described in clauses (a) through (f) above, Servicer will provide the normal scope of asset management services.  These services provide that Servicer manage all aspects of Lender’s interest to the extent permitted under the terms of the Loan Documents.

 

Servicer’s obligations under this Section 1.3, where applicable, shall be subject to receipt of funds from Lender in accordance with this Agreement.

 

Notwithstanding anything to the contrary herein, Servicer agrees to perform those functions and services and create and provide those documents set forth in the LSA and the other Transaction Documents and otherwise abide by the terms and provisions applicable to the Servicer set forth therein.  In the event of any inconsistency between the

 

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terms and conditions of this Agreement and the LSA, the terms and conditions of the LSA shall supersede and control to the extent of such inconsistency.

 

Section 1.4                                    Servicing Standards.  Servicer shall administer services under this Agreement in accordance with the definition of “Accepted Servicing Practices”, the terms and conditions of the Loan Documents and the terms and conditions of this Agreement.

 

Section 1.5                                    Power and Authority.  Servicer is hereby granted the full power and authority to conduct its obligations pursuant to and in adherence with the terms of the Loan Documents and this Agreement, for and on behalf of Lender.  All actions taken hereunder by Servicer shall be performed in accordance with the terms of the Loan Documents.  In the event Lender receives a request for consent and does not consent or object within five (5) Business Days of receipt of a request for such consent, Lender shall be deemed to have consented to such matter.  If, pursuant to the terms of the Loan Documents, Servicer participates in any legal proceedings involving a Mortgage Loan, Servicer is authorized and empowered to execute and deliver in its name as servicer for Lender any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding.  Upon request, Lender shall furnish Servicer with any powers of attorney or other documents which Servicer may reasonably request in order to take such steps as Servicer deems necessary, appropriate or expedient to carry out its servicing, administration and collection activities under this Agreement and the Loan Documents.

 

Section 1.6                                    Non-Performance of the Loans and REO Property.  A Mortgage Loan shall be considered a “Specially Serviced Loan” for purposes of this Agreement when one or more of the events set forth in the definition of “Special Servicing Event” has occurred and is continuing with respect to such Mortgage Loan.  In addition, Lender, pursuant to the terms of the Loan Documents, may acquire the collateral securing the Mortgage Loans as a result of foreclosure, or by deed in lieu of foreclosure or walk-away guaranty (at which time the Property shall be known as an “REO Property”).  At the time a Mortgage Loan becomes either a Specially Serviced Loan or converts to an REO Property, Servicer and Lender shall mutually agree upon the scope of additional services to be performed not already provided for in this Agreement.  As used herein, the term “Special Servicing Event” shall mean, with respect to a Mortgage Loan, when any one of the following has occurred:  if (a) any payment of principal due thereunder is in default by more than sixty (60) days, (b) any payment of interest or other amount (other than principal) due thereunder is in default by more than sixty (60) days, (c) the Borrower with respect to such Mortgage Loan is in default with respect to any material financial or other covenants under the Loan Documents for such Mortgage Loan for a period of more than sixty (60) days, or such other criteria as may be identified by the Lender from time to time or (d) the Servicer determines pursuant to Accepted Servicing Practices that a Mortgage Loan is at risk of imminent default; provided, however, that a Mortgage Loan will cease to be a Specially Serviced Loan: (i) with respect to clauses (a) and (b) above, when all past due principal and interest and all late charges, default interest and other amounts due under the Loan Documents have been paid and the applicable Mortgage Loan otherwise becomes a performing Mortgage Loan for at least sixty (60) consecutive days, in accordance with its terms;  (ii) with respect to clause (c) above, when such specified event has been remedied, cured or otherwise resolved and (iii) with respect to clause (d) above, when determined by Servicer and approved by Lender.

 

Section 1.8                                    Advances.  Servicer shall, in no event, be required to make any advances to protect a Mortgage Loan or the underlying collateral, including without limitation, taxes,

 

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insurance and assessments; attorneys’ fees; trustee’s fees, recording, filing and publication fees; title report and title search costs; court costs; witness fees; other costs incurred with respect to any foreclosure sale, trustee’s sale or acquisition in lieu of foreclosure, or with respect to the marketing, sale or disposition of a Mortgage Loan collateral; inspections, engineering surveys or environmental assessments; repair, restoration, maintenance or protection of a Mortgage Loan collateral (“Protective Advances”).  In the event Servicer decides to make any Protective Advance, such Protective Advance will only be made after Servicer has obtained the funds required to make such Protective Advances from Lender and Servicer has obtained written consent of Lender.  Lender shall be under no obligation to agree to any Protective Advances.  Servicer shall have no liability hereunder for failure to make Protective Advances due to Lender’s refusal or failure to fund the same.

 

SECTION II

 

SERVICING FEES; REIMBURSEMENT OF EXPENSES

 

Section 2.1                                    Servicing Fees. Lender shall pay an annual fee to Servicer of $10,000.00 (the “Servicing Fee”).

 

Section 2.2                                    Costs.  Servicer shall only be required to incur costs, including of collection, in connection with its servicing, administration and collection activities with respect to a Mortgage Loan to the extent funds are received therefor from Lender.

 

Section 2.3                                    Expenses of Servicer.  Servicer shall be responsible for payment of all overhead expenses of Servicer, salaries, wages or other compensation of employees of Servicer, as set forth in the Loan Documents.

 

SECTION III

 

ACCOUNTING, STATEMENTS AND REPORTS

 

Section 3.1                                    Books and Records.  Servicer shall keep satisfactory books and records pertaining to a Mortgage Loan and shall make periodic reports in accordance with this Section.  All such records and all Mortgage Loan documents, whether or not developed or originated by Servicer, reasonably required to document or properly administer a Mortgage Loan shall remain at all times the property of Lender, although Servicer shall be entitled to copies thereof.  Upon termination of this Agreement, Servicer shall deliver all such records and Mortgage Loan documents to Lender or its designee.

 

Section 3.2                                    Periodic Reporting.  Servicer shall provide to Lender the periodic reporting requested from time to time by Lender.

 

Section 3.3                                    Inspection Rights.  Servicer shall provide Lender and its accountants or other representatives with free and unlimited access during normal business hours at Servicer’s offices upon reasonable prior notice to Servicer to, and the ability to make copies of, all books and records relating to the Mortgage Loans.

 

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SECTION IV

REPRESENTATIONS AND WARRANTIES

 

Section 4.1                                    Representations and Warranties of Servicer.  Servicer hereby represents and warrants to Lender the following:

 

(a)                                 Servicer is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.  Servicer has all requisite corporate power and authority to own and operate its properties, carry out its business as presently conducted and as proposed to be conducted and to enter into and discharge its obligations under this Agreement.

 

(b)                                 The execution and delivery by Servicer of this Agreement and the other documents to which it is a party, and performance and compliance by Servicer with the terms of this Agreement and the other documents to which it is a party have been duly authorized by all necessary corporate action on the part of Servicer and will not violate Servicer’s declaration of trust or by-laws, or constitute a default under any indenture or loan or credit agreement or any other material agreement, lease or instrument to which Servicer is a party or by which it or its properties may be bound or affected.

 

(c)                                  This Agreement constitutes the valid, legal and binding obligation of Servicer, enforceable against it in accordance with the terms hereof, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity (whether considered in a proceeding or action in equity or at law).

 

(d)                                 Servicer agrees to comply with the terms and conditions of the Loan Documents, to the extent Servicer’s compliance is required thereunder, and pursuant to the terms thereof, subject to Lender’s consent if required per this Agreement and, if applicable, Lender providing funds.

 

Section 4.2                                    Representations and Warranties of Lender. Lender hereby represents and warrants to Servicer the following:

 

(a)                                 Lender is a limited liability company duly formed, validly existing and in good standing under the laws of the State of New York, and is duly qualified to transact business and is in good standing in each jurisdiction in which the nature of its business make such qualification necessary, except where the failure to be so qualified does not materially affect Lender’s business operations.  Lender has all requisite corporate power and authority to own and operate its properties, carry out its business as presently conducted and as proposed to be conducted and to enter into and discharge its obligations under this Agreement.

 

(b)                                 The execution and delivery by Lender of this Agreement and the other documents to which it is a party and performance and compliance by Lender with the terms of this Agreement and the other documents to which it is a party have been duly authorized by all necessary corporate action on the part of Lender and will not violate Lender’s certificate of formation or limited liability company agreement, or constitute a default under any indenture or loan or credit agreement or any other material agreement,

 

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lease or instrument to which Lender is a party or by which it or its properties may be bound or affected.

 

(c)                                  This Agreement constitutes the valid, legal and binding obligation of Lender, enforceable against it in accordance with the terms hereof, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity (whether considered in a proceeding or action in equity or at law).

 

SECTION V

TERMINATION

 

Section 5.1  Termination Events.  Any of the following acts or occurrences shall constitute a Termination Event under this Agreement (each, a “Termination Event”):

 

(a)                                 gross negligence, willful misconduct, bad faith or felony act on the part of Servicer; or

 

(b)                                 any failure on the part of Servicer to observe or perform in any material respect any other of the covenants or agreements thereof contained in this Agreement which continues unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied; provided, however, that if such covenant or agreement is capable of being cured and Servicer is diligently pursuing such cure such thirty (30) day period shall be extended for an additional forty-five (45) days; or

 

(c)                                  with or without cause, either party may terminate this Agreement by sixty (60) day notice to the other party; provided, however, that upon a Servicer Default or an Event of Default, Lender or Agent may replace Servicer as servicer with respect to the Pledged Receivables..

 

SECTION VI

INTENTIONALLY OMITTED

 

SECTION VII

INDEMNIFICATION AND LIABILITY

 

Section 7.1   Indemnification for Third Party Claims.   Each of Servicer and Lender (each an “Indemnitor”) shall indemnify and hold harmless the other, its directors, officers, employees and agents from any third party claims arising from its gross negligence or willful misconduct.

 

Section 7.2   Liability.  Servicer and any officer, employee or agent may rely in good faith on any document of any kind, which is in its good faith belief properly executed and submitted by any person with respect to matters hereunder.

 

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SECTION VIII

MISCELLANEOUS

 

Section 8.1                                    Severability Clause.  Any part, provision, representation or warranty of this Agreement which is prohibited or which is held to be void or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.  Any part, provision, representation or warranty of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereto waive any provision of law which prohibits or renders void or unenforceable any provision hereof.  If the invalidity of any part, provision, representation or warranty of this Agreement shall deprive any party of the economic benefit intended to be conferred by this Agreement, the parties shall negotiate in good faith to develop a structure the economic effect of which is as nearly as possible the same as the economic effect of this Agreement without regard to such invalidity.

 

Section 8.2                                    Notices. All notices, demands, requests, consents, approvals or other communications (each of the foregoing, a “Notice”) required or permitted to be given hereunder or pursuant hereto or that are given with respect to this Agreement to any party shall be in writing and shall be (a) personally delivered, (b) sent by both registered or certified mail, postage prepaid and return receipt requested, and regular first class mail, (c) sent both by facsimile transmission with receipt of transmission confirmed electronically or by telephone and by regular first class mail, or (d) sent by reputable overnight courier service with charges prepaid and delivery confirmed, to the intended recipient at its respective address as set forth below; provided, however, that, if a party sending any Notice has received written notice in accordance with this Section 8.2 of a more recent address for any intended recipient referred to below, any Notice to such intended recipient shall be delivered or sent to it at the most recent address of which such Party has received such a notice:

 

If to Lender:

 

BRT RLOC LLC 
 c/o BRT Realty Trust
 60 Cutter Mill Road, Suite 303 
 Great Neck, New York 11021 
 Attn:  Jeffrey A. Gould, President 
 Facsimile number:  (516) 773-2770

 

If to Servicer:

 

BRT Realty Trust
 60 Cutter Mill Road, Suite 303 
 Great Neck, New York 11021 
 Attn:  Mark Lundy, Senior Vice President, and David Kalish
 Facsimile number:  (516) 684-4903 and (516) 773-2778

 

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Any Notice delivered or sent as provided above shall be deemed given when so delivered or sent and shall be deemed received (a) when personally delivered, (b) three (3) Business Days after being mailed as above provided, (c) when sent by facsimile transmission as above provided, or (d) one (1) Business Day after being sent by courier as above provided; provided, however, that any Notice specifying a new address to which any Notice shall be sent shall be deemed received only when actually received; and provided  further that any Notice that is personally delivered after 4 PM or is sent by facsimile after 4 PM shall be deemed to have been delivered on the next Business Day.

 

Section 8.3                                    Counterparts

 

(a)                                 A party to this Agreement may deliver executed signature pages to this Agreement by facsimile transmission or electronic mail attachment to any other parties, which facsimile copy or electronic mail attachment shall be deemed to be an original executed signature page; provided, however, that such party shall deliver an original signature page to the other promptly thereafter.  For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed to be an original, and together shall constitute and be one and the same instrument.

 

Section 8.4                                    Governing Law; Waiver of Jury Trial

 

(a)                                 Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.  Any dispute arising hereunder or related to this Agreement shall be resolved in the federal court sitting in New York, New York, and Lender and Servicer hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such federal court.

 

(b)                                 WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

 

Section 8.5                                    Amendments

 

(a)  This Agreement may be amended from time to time by a written instrument signed by Servicer and Lender and consented to by Agent (which consent shall not be unreasonably withheld) and no waiver of any of the terms hereof by any party shall be effective unless it is in writing and signed by the other parties and Agent.

 

Section 8.6                                    Headings Descriptive.  The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

 

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Section 8.7                                    General Definitional Provisions.

 

(a)                                 The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, appendix and exhibit references are to this Agreement, unless otherwise specified.

 

(b)                                 The meanings given to terms defined herein shall be equally applicable to the singular and plural forms of such terms.

 

Section 8.8                                    Judicial Interpretation.  Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any person by reason of the rule of construction that a document is to be construed more strictly against the person who itself or through its agent prepared the same, it being agreed that all parties hereto have participated in the preparation of this Agreement.

 

Section 8.9                                    Integration.  The Agreement comprises the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof as of the date hereof and shall constitute the entire agreement among the parties hereto with respect to such subject matter, superseding all prior oral or written understandings.

 

Section 8.10.                          Successors and Assigns; No Third Party Beneficiary.  This Agreement and the provisions hereof shall be binding upon and enforceable against each of the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and their respective successors and permitted assigns.  This Agreement is not intended to confer any rights or benefits on any persons other than the parties hereto, Agent and their respective successors and permitted assigns.

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their authorized officer as of the day and year first above written.

 

 

	
LENDER:  
    	
 
    	
SERVICER:  
    
	
 
    	
 
    	
 
    
	
BRT   RLOC LLC 
    	
 
    	
BRT   REALTY TRUST 
    
	
 
    	
 
    	
 
    
	
By:   
    	
/s/ Mark H. Lundy 
    	
 
    	
By:
    	
/s/ Mark H. Lundy 
    
	
 
    	
Mark   H. Lundy 
    	
 
    	
 
    	
Mark   H. Lundy 
    
	
 
    	
Senior   Vice President
    	
 
    	
 
    	
Senior   Vice President
    

 

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Exhibit A

Certain Definitions

 

“Accepted Servicing Practices” shall mean the obligation of Servicer to service and administer the Mortgage Loans solely in the best interests and for the benefit of Lender, generally exercising the same basic care, skill, prudence, diligence and practices which Servicer utilizes for loans which Servicer or its Affiliate owns for its own account, in each case, acting in accordance with the terms of this Agreement and with a view to the maximization of timely recovery of principal and interest on the Mortgage Loans.

 

“Affiliate” means, with respect to any specified Person, (a) any other Person directly or indirectly controlling, controlled by, or under common control with such specified Person, (b) any individual who is an executive or other senior officer, general partner, manager or managing member (or Person serving in a similar capacity) of or with such specified Person or of any other Person described in clause (a) of this definition or (c) any other Person directly or indirectly controlling, controlled by, or under common control with any individual or groups of individuals described in clause (b) of this definition.

 

“Business Day” means any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York.

 

“Fiscal Quarter” means a three-month period commencing on January 1st, April 1st, July 1st or October 1st, as the case may be.

 

“LSA” means that certain Loan and Security Agreement, dated as of June [ ], 2011, by and among, Servicer, Lender, Servicer, as guarantor, Capital One, National Association, as agent, and the lenders from time to time party thereto (as amended, supplemented, restated or otherwise modified from time to time)

 

“Person” means any individual, partnership, corporation, limited liability company, trust or other entity.

 

10Exhibit 10.6

 

CUSTODIAL AGREEMENT

 

CUSTODIAL AGREEMENT, dated as of June 22, 2011 (this “Agreement”), among CAPITAL ONE, NATIONAL ASSOCIATION (“Capital One”), as custodian (together with its successors in such capacity, the “Custodian”), BRT RLOC LLC (the “Borrower”), BRT REALTY TRUST, as Servicer (together with its successors in such capacity, the “Servicer”), and CAPITAL ONE, NATIONAL ASSOCIATION, as Agent (the “Agent”).

 

W I T N E S S E T H

 

WHEREAS, pursuant to the Loan and Security Agreement, dated as of the date hereof (as amended, restated, supplemented and/or otherwise modified from time to time, the “LSA”), among the Lenders named therein (collectively, the “Lenders”), the Custodian, the Agent, the Servicer, BRT Realty Trust, as guarantor, and the Borrower, the Lenders have agreed to provide financing for the purchase and/or origination by the Borrower of certain Receivables and the Related Security and Other Conveyed Property related thereto;

 

WHEREAS, pursuant to the LSA, the Borrower has granted to the Agent, for the benefit of the Lenders, a security interest in, among other things, all of the Pledged Receivables and the related Receivable Files for the purpose of securing the due and punctual payment of all amounts due from the Borrower under the terms of the LSA;

 

WHEREAS, the Agent desires that the Custodian hold such Receivable Files and other documents related thereto as the Custodian for, and bailee of, the Agent, for the benefit of the Lenders;

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1.                                       Definitions.  Capitalized terms used but not otherwise defined herein have the meanings ascribed thereto in the LSA.  The following terms shall have the following meanings when used in this Agreement:

 

“Authorized Representative” has the meaning set forth in Section 20 hereof.

 

“Collateral Receipt” has the meaning set forth in Section 5 hereof.

 

“Deficiency” means, with respect to any Receivable File, (i) the failure of one or more Specified Documents contained therein to appear, on its face, to be fully executed or to correspond to the information on the related Receivables Schedule except item (iv) of  such Receivables Schedule, (ii) one or more Specified Documents contained therein are mutilated, damaged, torn or otherwise physically altered (provided, that handwritten additions, changes or corrections shall not constitute physical alteration if initialed by

 

 

Borrower or BRT and the applicable Obligor) or (iii) the absence from a Receivable File of any Specified Document required to be contained in such Receivable File.

 

“Monthly Report” has the meaning set forth in Section 7(e) hereof.

 

“Notice of Pledge” means a fully executed Confirmation and Notice of Pledge in the form of Exhibit 5 to this Agreement.

 

“Receivables Schedule” means the schedule of Contracts evidencing Pledged Receivables appended to a Notice of Pledge delivered by the Borrower to the Custodian and the Agent.  Each such schedule shall identify each Contract by (i) Obligor name; (ii) the type of Contract; (iii) all Underlying Collateral for such Contract; (iv) the Outstanding Balance of the Receivable related to such Contract as of the date of Pledge; (v) whether such Contract has a co-lender or a participant; and (vi) which of the items listed in clauses (i) and (ii) of the definition of the term Receivable File, if applicable, were received by the Servicer or the Borrower in connection with such Contract.

 

“Request for Release of Documents” means a request for release, appropriately completed, substantially in the form of Exhibit 1 to this Agreement.

 

“Specified Documents” means, with respect to any Receivable File, (i) the documents required to be contained in such Receivable File pursuant to the definition of Receivable File and (ii) any other documents listed in the definition of Receivable File that are also listed in the related Receivables Schedule (pursuant to clause (vi) of the definition of Receivables Schedule) as having been received by BRT, the Servicer or the Borrower in connection with such Contract.

 

“Third-Party Claim” has the meaning set forth in Section 16 hereof.

 

2.                                       Appointment of the Custodian.  Subject to the terms and conditions hereof, each of the Agent and the Borrower hereby revocably appoints the Custodian, and the Custodian hereby accepts such appointment and agrees, to act as custodian, bailee and collateral agent on behalf of the Borrower and the Agent, for the benefit of the Lenders, to maintain exclusive custody of the Receivable Files pertaining to the Receivables from time to time Pledged under the LSA in order to perfect the ownership interest of the Borrower and the security interest of the Agent, for the benefit of the Lenders, in the Contracts evidencing such Receivables and the other items in the Receivable Files and any and all proceeds of the foregoing.  In performing its duties hereunder, the Custodian agrees to act with reasonable care, using that standard of skill and attention that the Custodian would exercise with respect to the files relating to all comparable loan receivables that it services or holds for itself or others (provided, that if applicable industry standards of care, skill and attention are more stringent than the Custodian’s standard of care skill and attention, the Custodian shall be obligated to follow the more stringent industry standards).

 

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3.                                       Delivery of Receivable Files.

 

(a)                                  Not later than 5:00 P.M. (New York City time) two (2) Business Days prior to any Borrowing Date, the Borrower shall deliver (or cause to be delivered) to the Custodian a Notice of Pledge together with an accurate and complete Receivables Schedule listing each of the Receivables to be Pledged under the LSA on such Borrowing Date and all information with respect to such Receivables and the related Contracts required pursuant to the definition of the term Receivables Schedule.  Not later than 5:00 P.M. (New York City time) two (2) Business Days prior to any Borrowing Date, the Borrower shall deliver (or cause to be delivered) and release to the Custodian as custodian for, and bailee of, the Agent, for the benefit of the Lenders, the Receivable File pertaining to each of the Receivables to be Pledged under the LSA on such Borrowing Date.  The information set forth on any Receivables Schedule delivered pursuant to this Section 3(a) shall also be concurrently delivered to the Custodian in an electronic format mutually acceptable to the Borrower and the Custodian.

 

(b)                                 The Custodian shall be entitled to rely upon each Receivables Schedule provided by the Borrower pursuant to Section 3(a) as the conclusive schedule in its review, pursuant to Section 5 hereof, of the Receivable Files.

 

(c)                                  Promptly and in any event within three (3) Business Days of receipt and no later than (i) one hundred and eighty (180) days after the related Receivable becomes a Pledged Asset under the LSA if the real estate comprising the Underlying Collateral is not located in the State of New York and (ii) two hundred and seventy (270) days after the related Receivable becomes a Pledged Asset under the LSA if the real estate comprising the Underlying Collateral is located in the State of New York, the Borrower shall forward to the Custodian for inclusion in the appropriate Receivable File the recorded mortgage (and the assignments thereof to the Borrower, if any), and the Custodian shall add such mortgage and such assignments to the appropriate Receivable File.

 

(d)                                 From time to time, the Borrower shall forward to the Custodian for inclusion in the appropriate Receivable File any additional documents which come into existence and are required to be included in a Receivable File previously delivered to the Custodian or are otherwise material to such Pledge Receivable, and the Custodian shall add such additional documents to the appropriate Receivable File.

 

4.                                       Intentionally Omitted.

 

5.                                       Certification.

 

(a)                                  Not later than 1:00 P.M. (New York City time) on the applicable Borrowing Date, the Custodian shall deliver to the Agent and the Borrower an acknowledged Notice of Pledge and a certificate (each such certificate, a “Collateral Receipt”), in the form annexed as Exhibit 2 hereto, to the effect that, as to each Pledged Receivable listed on the Receivables Schedule delivered to the Custodian and the Agent  pursuant to Section 3(a), (i) all Specified Documents with respect to the related Receivable File appear, on their face, to be fully executed and are in its possession, (ii) such Specified Documents have been reviewed by it and have not been mutilated,

 

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damaged, torn or otherwise physically altered (handwritten additions, changes or corrections shall not constitute physical alteration if initialed by Borrower or BRT and the Obligor related to such Pledged Receivable) and such documents relate to such Pledged Receivable, and (iii) other than the item required under clause (iv) of the definition of the Receivables Schedule, based on its examination of the related Receivable File, the information set forth on the Receivables Schedule with respect to such Pledged Receivable accurately reflects the information set forth in the related Receivable File; provided, however that if any of the foregoing statements are, in part or in whole, not true and correct, the Custodian shall detail in an accompanying exception report any Deficiencies that it discovers.

 

(b)                                 The Borrower, the Agent, and the Custodian may from time to time agree in writing to alternative certification procedures with respect to any particular Pledged Receivable.

 

6.                                       Deficiencies In Receivable Files.

 

(a)                                  If any Collateral Receipt exception report discloses any Deficiencies in any of the related Receivable Files, then the Custodian promptly (and, in any case, not later than the delivery of such Collateral Receipt) shall notify the Servicer, the Borrower and the Agent of such Deficiencies.  The Agent shall notify the Custodian and the Servicer in writing that either (i) the Deficiencies noted in such Collateral Receipt exception report are waived or (ii) the Servicer shall either (x) cure the Deficiencies noted in such Collateral Receipt exception report within thirty (30) days of the date of such notification or (y) request that the related Receivable File be returned to the Borrower (and, upon the receipt of any such request, the Custodian shall promptly return the related Receivable File to the Borrower at Borrower’s sole cost and expense) (it being understood by the parties hereto that the Receivable related to any Receivable File as to which an unwaived Deficiency exists, shall be deemed not to be an Eligible Receivable under the LSA).

 

(b)                                 If a notice given to the Custodian by the Agent pursuant to Section 6(a) states that the Servicer shall take an action specified in clause (ii) of Section 6(a) above and the Servicer fails to take either such action within the time period set forth in clause (ii) of Section 6(a) above, then the Custodian shall notify the Agent and the Servicer of such failure and shall return the deficient Receivable File to the Borrower.

 

(c)                                  Within five (5) Business Days after receipt by the Custodian of any additional documents pursuant to Section 6(a), the Custodian shall review such documents and deliver to the Agent a revised Collateral Receipt exception report.  If the revised Collateral Receipt exception report shall indicate any remaining Deficiencies in a Receivable File, the provisions of this Section 6 shall again be followed.

 

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7.                                       Obligations of the Custodian.

 

(a)                                  The Custodian shall segregate and maintain continuous custody of the Receivable Files in secure and fire resistant facilities in accordance with customary standards for such custody.

 

(b)                                 With respect to the documents constituting each Receivable File, the Custodian shall (A) act as the custodian for, and the bailee of the Borrower to perfect the ownership interest of the Borrower in the documents constituting such Receivable File, (B) act as the custodian for, and the bailee (for purposes of UCC Section 9-313) of, the Agent, for its benefit and the benefit of the Lenders to perfect the security interest of the Agent, for its benefit and the benefit of the Lenders, in the documents constituting such Receivable File, (C) hold all documents constituting such Receivable File received by it for the exclusive use and benefit of the Agent, for its benefit and the benefit of the Lenders, and (D) make dispositions thereof only in accordance with the terms of this Agreement or with written instructions furnished by the Agent.

 

(c)                                  In the event that (i) the Agent, the Borrower, or the Custodian shall be served by a third party with any type of levy, attachment, writ or court order with respect to any Receivable File or a document included within a Receivable File or (ii) a third party shall institute any court proceeding by which any Receivable File or a document included within a Receivable File shall be required to be delivered otherwise than in accordance with the provisions of this Agreement, the party receiving such service shall promptly deliver or cause to be delivered to the other parties to this Agreement copies of all court papers, orders, documents and other materials concerning such proceedings.  The Custodian shall continue to hold and maintain all Receivable Files that are the subject of such proceedings pending a final order of a court of competent jurisdiction permitting or directing disposition thereof.  Upon final determination of such court, the Custodian shall dispose of such Receivable File or any document included within such Receivable File as directed by such determination or, if no such determination is made, in accordance with the provisions of this Agreement.  Expenses of the Custodian incurred as a result of such proceedings shall be borne by the Borrower.

 

(d)                                 The Custodian shall immediately notify the Agent in writing if the recorded mortgage and assignments thereof from BRT to Borrower are not delivered to the Custodian for inclusion in the Receivable File for such Pledged Receivable within (i) one hundred and eighty (180) days after the related Receivable becomes a Pledged Asset under the LSA if the real estate comprising the Underlying Collateral is not located in the State of New York and (ii) two hundred and seventy (270) days after the related Receivable becomes a Pledged Asset under the LSA if the real estate comprising the Underlying Collateral is located in the State of New York.

 

(e)                                  On and after the request of the Agent, the Custodian shall deliver to the Agent on the third Business Day of each calendar month an exception report (the “Monthly Report”) in an electronic form, and otherwise in form and substance to be agreed upon by the Custodian and the Agent, that sets forth (i) a list of all Receivables Files held by the Custodian as of the date of delivery of such Monthly Report, (ii) all Deficiencies with respect to such Receivable Files as of the date of delivery of such

 

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Monthly Report and (iii) all items which the Custodian is waiting to receive or report on pursuant to clause (d) above as of the date of delivery of such Monthly Report.

 

8.                                       Release of Receivable Files.

 

(a)                                  The Custodian shall release all or any part of the Receivable Files to the Agent upon written request of the Agent or, to the extent specified in a written request by the Borrower (which shall have been acknowledged and signed by the Agent) in connection with a release of Pledged Receivables pursuant to the terms of the LSA, to the Borrower or its designee.

 

(b)                                 In addition, if the Servicer delivers a Request for Release of Documents to the Custodian (which such Request for Release of Documents shall have been acknowledged and signed by the Agent), the Custodian shall deliver a specified Receivable File to the Servicer.  If a Receivable File is released to the Servicer pursuant to the previous sentence for the purpose of facilitating the servicing or enforcement of the Receivable related to such Receivable File, the Servicer shall return such Receivable File immediately upon its need for such Receivable File having come to an end.  At such time as the Servicer returns any such Receivable File to the Custodian, the Servicer shall provide written notice of such return to the Agent and the Custodian in the form of Exhibit 3 to this Agreement.  The Custodian shall acknowledge receipt of the returned materials by signing the Servicer’s notice and shall promptly send copies of such acknowledgment of receipt to the Agent and the Servicer.

 

9.                                       Fees and Expenses of the Custodian.  It is understood that the Custodian shall be entitled to receive reimbursement for reasonable out-of-pocket expenses under this Agreement and such expenses shall be payable by the Borrower.

 

10.                                 [Intentionally omitted.]

 

11.                                 [Intentionally omitted.]

 

12.                                 Insurance of the Custodian.  If the Custodian is not Capital One, the Custodian shall, at its own expense, maintain at all times during the term of this Agreement and keep in full force and effect (a) fidelity insurance, (b) theft of documents insurance, (c) fire insurance, and (d) forgery insurance.  All such insurance shall be in amounts, with standard coverage and subject to deductibles, as are customary for similar insurance typically maintained by banks that act as custodian in similar transactions.

 

13.                                 Periodic Statements.  Within two (2) Business Day after the written request of the Agent, any Lender or the Borrower, the Custodian shall provide to the requesting party a list of all the Pledged Receivables for which the Custodian holds a Receivable File pursuant to this Agreement.  Such list may be in the form of a copy of all Receivables Schedules with manual deletions to specifically denote any Pledged Receivables paid in full, liquidated or released since the date of this Agreement.  Such list may be in the form of a Monthly Report.

 

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14.                                 Copies of Receivable Files.  Within three (3) Business Days after the written request of the Agent, any Lender or the Borrower, the Custodian shall provide the requesting party with copies of the documents in the Receivable Files.  The payment of such fees and expenses related thereto shall be payable by the Borrower.

 

15.                                 Resignation by and Removal of Custodian; Successor Custodian.

 

(a)                                  The Custodian may, with or without cause, at any time resign and terminate its obligations under this Agreement upon at least sixty (60) days’ prior written notice to the Borrower and the Agent; provided, however that no such resignation or termination shall be effective until a successor Custodian is appointed (and accepts such appointment) pursuant to the terms of this Section 15(a).  Promptly after receipt of notice of the Custodian’s intended resignation, the Agent shall appoint, by written instrument, a successor custodian, provided that, so long as no Event of Default has occurred, Borrower shall have approved such successor custodian (which approval shall not be unreasonably withheld).  If the Agent fails to appoint a successor Custodian within sixty (60) days after receipt of the Custodian’s notice of resignation, the Custodian may petition a court of competent jurisdiction to appoint a successor custodian.  One original counterpart of any aforementioned instrument of appointment shall be delivered to each of the Borrower, the Agent and the successor custodian.

 

(b)                                 The Agent, with or without cause, upon at least sixty (60) days’ written notice to the Custodian, may remove and discharge the Custodian (or any successor custodian thereafter appointed) from the performance of its obligations under this Agreement.  A copy of such notice shall be delivered to the Borrower.  Promptly after the giving of notice of removal of the Custodian, the Agent shall appoint, by written instrument, a successor custodian, provided that, so long as no Event of Default has occurred, Borrower shall have approved such successor custodian (which approval shall not be unreasonably withheld).  If the Agent fails to appoint a successor Custodian within sixty (60) days after receipt of the Custodian’s notice of resignation, the Custodian may petition a court of competent jurisdiction to appoint a successor custodian.  One original counterpart of such instrument of appointment shall be delivered to each of the Borrower, the Agent, the Custodian and the successor custodian.

 

(c)                                  In the event of any such resignation or removal, after the payment of outstanding fees and expenses, the Custodian shall promptly transfer to the successor custodian, as directed in writing by the Agent, all Receivable Files being administered under this Agreement.

 

16.                                 Indemnity.  The Borrower agrees to indemnify and hold harmless the Custodian against any and all claims, losses, liabilities, damages or expenses (including, but not limited to, reasonable attorneys’ fees, court costs and costs of investigation) of any kind or nature whatsoever arising out of or in connection with this Agreement that may be imposed upon, incurred by or asserted against the Custodian; provided, however, that this Section 16 shall not relieve the Custodian from liability for its willful misfeasance, bad faith or gross negligence.  If a claim for indemnification is made by the Custodian in respect of a claim or demand made by a person not a party to any of the

 

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Transaction Documents (a “Third-Party Claim”), the Borrower shall have the right to assume control of the defense against the Third-Party Claim by counsel reasonably satisfactory to the Custodian, at the sole expense of the Borrower or Servicer (if BRT or an Affiliate thereof), as the case may be, and to compromise and settle the Third-Party Claim with the prior written consent of the Custodian (such consent not to be unreasonably withheld or delayed); provided, however, that the Custodian may in its sole discretion withhold consent to any settlement that would result in a criminal conviction, the issuance of an injunction against the Custodian or the commitment on the part of the Custodian to take, or to forbear to take, any action.  Notwithstanding the foregoing, the right of the Borrower to defend the Custodian against a Third-Party Claim shall apply only so long as (i) the Borrower notifies the Custodian in writing within twenty (20) days after the Custodian has given notice of the Third-Party Claim that the Borrower will indemnify the Custodian from and against any claims, losses, liabilities, damages or expenses for which the Custodian is liable hereunder resulting from such Third-Party Claim, (ii) the Borrower provides the Custodian with evidence reasonably acceptable to the Custodian that the Borrower will have the financial resources to defend against the Third-Party Claim and fulfill its indemnification obligations hereunder, (iii) the Third-Party Claim involves only monetary damages and does not seek an injunction or equitable relief, and (iv) settlement of, or adverse judgment with respect to such Third-Party Claim is not, in the good faith judgment of the Custodian, likely to establish a precedential customer practice adverse to the continuing business interest of the Custodian.  Each party shall cooperate reasonably in any such defense.  If the Borrower does not assume control of the defense or fails to prosecute or withdraws from such defense, the Custodian shall have the right, at the expense of the Borrower to undertake the defense and to compromise or settle the Third-Party Claim as it deems reasonably appropriate.  The provisions of this Section 16 shall survive the resignation or removal of the Custodian and the termination of this Agreement.

 

17.                                 Limitation of Liability.

 

(a)                                  In connection with the Custodian’s timely performance of its obligations and duties under Section 5(a), Section 6 and Section 7 hereof, the Custodian shall not be liable to the Borrower, the Agent or any other Person for any loss, claim, damage, liability or expense resulting from or arising out of any act or failure to act by it, other than for any loss, claim, damage, liability or expense arising out of the Custodian’s failure to perform such obligations in accordance with the standard of care set forth in Section 2.  Except in connection with the Custodian’s timely performance of its obligations and duties under Section 5(a), Section 6 and Section 7 hereof and except as set forth in the immediately preceding sentence, the Custodian shall not be liable to the Borrower, the Agent or any other Person for any loss, claim, damage, liability or expense resulting from or arising out of any act or failure to act by it in connection with this Agreement, other than for any loss, claim, damage, liability or expense arising out of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations hereunder.  In no event shall the Custodian or its directors, affiliates, officers, agents, and employees be held liable for any special, indirect, incidental, punitive or consequential damages resulting from any action taken or omitted to be taken by it or them hereunder or in connection herewith even if advised of the possibility of such damages.  The

 

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obligations of the Custodian shall be determined solely by the express provisions of this Agreement.  No representation, warranty, covenant, agreement, obligation or duty of the Custodian shall be implied with respect to this Agreement or the Custodian’s services hereunder.

 

(b)                                 In the Custodian’s review of documents pursuant to Section 5 of this Agreement, the Custodian shall be under no duty or obligation to inspect, review or examine the Receivable Files to determine that the contents thereof are genuine, enforceable or appropriate for the represented purpose or that they are other than what they purport to be on their face.

 

(c)                                  The Custodian may rely, and shall be protected in acting or refraining to act, in each case, in accordance with the terms of this Agreement, upon and need not verify the accuracy of, (i) any written instructions, from any persons the Custodian reasonably believes to be authorized to give such instructions, who shall only be, with respect to the Borrower and the Agent, persons the Custodian believes in good faith to be Authorized Representatives (as defined in Section 20 hereof), and (ii) any written instruction, notice, order, request, direction, certificates opinion or other instrument or document reasonably believed by the Custodian to be genuine and to have been signed and presented by the proper party or parties, which, with respect to the Borrower and the Agent, shall mean signature and presentation by Authorized Representatives whether such presentation is by personal delivery, express delivery or facsimile.

 

(d)                                 The Custodian may consult with counsel with regard to legal questions arising out of or in connection with this Agreement, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by the Custodian in reliance, in good faith, and in accordance therewith.

 

(e)                                  Except as otherwise expressly set forth herein, no provision of this Agreement shall require the Custodian to expend or risk its own funds or otherwise incur financial liability in the performance of its duties under this Agreement if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity is not reasonably assured to it.

 

(f)                                    The Custodian shall not be responsible or liable for, and makes no representation or warranty with respect to, the validity, adequacy or perfection of any lien upon, or security interest in, any Pledged Receivables or related Receivable Files purported to be granted at any time pursuant to the LSA.

 

(g)                                 Notwithstanding anything to the contrary in Section 17(a), the Custodian shall not be liable for any delays in performance for causes beyond its control, including, but not limited to, acts of war or terrorism, computer viruses, power line failures, fire, flood, epidemic, strike, acts of the Borrower or the Agent, restriction by civil or military authority in their sovereign or contractual capacities or transportation

 

9

 

failure.  In the event of any such delay, performance shall be extended for so long as such period of delay.

 

(h)                                 The Custodian shall have no duties or responsibilities except those that are specifically set forth herein.  The Custodian shall be under no responsibility or duty with respect to the disposition of any Receivable Files while such Receivable Files are not in its possession.  If the Custodian shall request instructions from the Agent with respect to any act, action or failure to act in connection with this Agreement, the Custodian shall be entitled to refrain from taking such action and continue to refrain from acting unless and until the Custodian shall have received written instructions from the Agent, without incurring any liability therefor to the Agent, the Borrower or any other person.

 

(i)                                     The Custodian shall not be responsible for preparing or filing any reports or returns relating to federal, state or local income taxes with respect to this Agreement, other than for the Custodian’s compensation or for reimbursement of expenses.

 

18.                                 Borrower and the Servicer Remain Liable.  Notwithstanding any term or provision of this Agreement, (a) the Servicer, the Guarantor and the Borrower shall remain liable under the LSA and other agreements to which they are parties executed with respect to the Pledged Assets to perform all of their respective duties and obligations thereunder to the same extent as if this Agreement had not been executed and (b) the exercise by the Agent or the Custodian of any of their respective rights under this Agreement shall not release the Borrower, the Guarantor or the Servicer from any of their respective duties or obligations under the LSA or any other agreements executed with respect to the Pledged Assets.

 

19.                                 Term of Agreement.  This Agreement shall be terminated upon written notice of termination from the Agent to the Custodian and payment in full of all amounts due to the Custodian hereunder.  If the LSA has terminated on or prior to the termination of this Agreement, upon receipt of written notice from the Agent, the Custodian shall deliver all documents remaining in the Receivable Files to the Borrower or its designee at the Borrower’s expense.  If the LSA remains in effect at the time this Agreement is terminated, upon receipt of written notice from the Agent, the Custodian shall deliver all documents remaining in the Receivable Files to the Agent or such other person as may be designated by the Agent at the Borrower’s expense.

 

20.                                 Authorized Representatives.  The names of the officers of the Borrower, the Servicer and of the Agent who are authorized to give and receive notices, requests and instructions and to deliver certificates and documents in connection with this Agreement on behalf of the Borrower, the Servicer and the Agent (“Authorized Representatives”) are set forth respectively on Exhibit 4A, Exhibit 4B and Exhibit 4C hereto.  From time to time, the Borrower, the Servicer and the Agent may, by delivering to the Custodian a revised exhibit, change the information previously given, but the Custodian shall be entitled to rely conclusively on the last exhibit until receipt of a superseding exhibit.  The parties hereto acknowledge and agree that the Servicer has been

 

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appointed pursuant to the LSA as Servicer to service, administer and collect the Pledged Receivables and otherwise to enforce the rights and interests of the Borrower, the Agent and the Lenders in and under the Pledged Receivables and the other Pledged Assets.  Until receipt by the Custodian of written notice, with a copy to the Borrower and the Servicer, from the Agent of the designation of a successor Servicer pursuant to the provisions of the LSA, the Borrower and the Agent on behalf of the Lenders hereby authorize and instruct the Custodian to accept performance of the Servicer, as the agent of the Borrower, the Agent and the Lenders with respect to matters relating to the servicing, administration and collection of the Pledged Receivables and the enforcement of the rights and interests of the Borrower, the Agent and the Lenders in and under the Pledged Receivables and the other Pledges Assets, including the discharge of such duties of the Borrower hereunder.

 

21.           Notices.  Except where telephonic instructions or notices are authorized herein to be given, all notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto shall be in writing and shall be personally delivered or sent by overnight courier service, or by registered, certified or express mail, postage prepaid, return receipt requested, or by facsimile copy (accompanied by a telephonic confirmation of receipt thereof) and shall be deemed to be delivered for purposes of this Agreement on (a) the fifth (5th)  Business Day following the day on which such notice was placed in the custody of the U.S. Postal Service, (b) the next Business Day following the day on which such notice was placed in the custody of any overnight courier service, including express mail service or (c) the same Business Day on which such notice is sent by messenger or facsimile.  Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section 21, notices, demands, instructions and other communications in writing shall be given to or made upon the respective parties hereto at their respective addresses (or to their respective facsimile numbers) indicated below, and, in the case of telephonic instructions or notices, by calling the telephone number or numbers indicated for such party below:

 

	
If   to the Borrower:
    	
BRT   RLOC LLC
   c/o BRT Realty Trust

60   Cutter Mill Road

Great   Neck, New York 11021
   Attention:  David W. Kalish
   Facsimile No.: (516) 466-3132
   Telephone No.: (516) 773-2715
    
	
 
    	
 
    
	
If   to the Servicer:
    	
BRT   Realty Trust
   60 Cutter Mill Road

Great   Neck, New York 11021
   Attention:  David W. Kalish
   Facsimile No.: (516) 466-3132
   Telephone No.: (516) 773-2715
    

 

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If   to the Agent:
    	
Capital One, National Association
   275 Broadhollow Road

Melville,   New York 11747
   Attention: Bob Bernard
   Facsimile No.: (631) 531-2798
   Telephone No.: (631) 531-2172
    
	
 
    	
 
    
	
If   to the Custodian:
    	
Capital One, National Association
   275 Broadhollow Road

Melville,   New York 11747
   Attention: Bob Bernard
   Facsimile No.: (631) 531-2798
   Telephone No.: (631) 531-2172
    

 

22.           GOVERNING LAW.  THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

 

23.           Consent to Service; Submission to Jurisdiction; Waiver of Trial by Jury.  Each party irrevocable consents to the service of process by registered or certified mail, postage prepaid, to it at its address set forth in Section 21 hereof.  With respect to any claim arising out of this Agreement, each party hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York sitting in New York City, Nassau county or Suffolk County and the United States District Courts located therein, and each party irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such court, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and further irrevocably waives the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party, provided that service of process is made as set forth in this Section 23, or by any other lawful means.  To the extent permitted by applicable law, each party irrevocably waives all right of trial by jury in any action, proceeding or counterclaim arising out of or in connection with this Agreement or any matter arising hereunder.

 

24.           Assignment; Binding Effect.  No party to this Agreement may assign its rights or delegate its obligations under this Agreement without the express written consent of the other parties hereto, which consent shall not be unreasonably withheld.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  In addition, each Lender shall be a third party beneficiary hereof.

 

25.           Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed to be an original, and together

 

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shall constitute and be one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

 

26.           Headings.  The Section headings are not part of this Agreement and shall not be used in its interpretation.

 

27.           Representations, Warranties and Covenants of the Custodian.

 

(a)           The Custodian hereby represents and warrants to, and covenants with the Agent, for the benefit of the Lender, and the Borrower that as of the date hereof and as of each Borrowing Date:

 

(i)            The Custodian is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America;

 

(ii)           The Custodian has the full power and authority to hold each Contract and each other item in any Receivable File on behalf of the Agent, for the benefit of the Lenders, and to execute, deliver and perform, and to enter into and consummate all transactions contemplated by this Agreement and the LSA, and has duly authorized the execution, delivery and performance of this Agreement and the LSA, has duly executed and delivered this Agreement and the LSA, and this Agreement and the LSA constitute the legal, valid and binding obligations of the Custodian, enforceable against it in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies;

 

(iii)          None of the execution and delivery of this Agreement, the LSA, the delivery of Receivable Files to the Custodian, the consummation of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and/or the LSA will conflict with or result in a breach of any of the terms, conditions or provisions of the Custodian’s charter or bylaws or any agreement or instrument to which the Custodian is now a party or by which it is bound or constitute a default or result in an acceleration under any of the foregoing, or result in the violation of any law, rule, regulation order, judgment or decree to which the Custodian or its property is subject;

 

(iv)          There is no litigation pending or, to the Custodian’s knowledge, after due inquiry, threatened, which if determined adversely to the Custodian, would adversely affect the execution, delivery or enforceability of this Agreement, or any of the duties or obligations of the Custodian thereunder, or which would have a material adverse effect on the financial condition of the Custodian;

 

13

 

(v)           No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Custodian of or compliance by the Custodian with this Agreement or the consummation of the transactions contemplated hereby or thereby;

 

(vi)          Upon written request of the Agent, the Custodian shall take such reasonable steps as requested by the Agent to protect or maintain any interest in any Pledged Receivable; and

 

(vii)         The Custodian has not been notified by any party that any third party claims an interest in the Pledged Receivables or is requesting the Custodian to act as a bailee with respect to the Receivable Files, except such interests as are created under the LSA.

 

(b)           The Custodian covenants and warrants to the Agent, each Lender and the Borrower that as of the initial Borrowing Date: (i) it holds no adverse interest, by way of security or otherwise, in any Pledged Receivable or Receivable File; and (ii) the execution of this Agreement and the creation of the custodial relationship hereunder does not create any interest, by way of security or otherwise, of the Custodian in or to any Pledged Receivable or Receivable File, other than the Custodian’s rights as custodian hereunder.

 

28.           Advice from Independent Counsel.  The parties hereto understand that this Agreement is a legally binding agreement that may affect such party’s rights.  Each party represents to the others that is has received legal advice from counsel of its choice regarding the meaning and legal significance of this Agreement and that it is satisfied with its legal counsel and the advice received from it.

 

29.           Merger or Consolidation of the Custodian.  Any corporation, banking association or trust company into which the Custodian may be merged or converted or consolidated with, or any corporation, banking association or trust company resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation, banking association or trust company succeeding to all or substantially all the corporate trust business of the Custodian, shall be the successor of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

 

30.           Certain Remedies; Instructions of Agent.

 

(a)           The Custodian may, in its discretion (with the consent of the Agent), and shall, at the direction of the Agent, perform the Custodian’s duties and protect and enforce the Custodian’s rights and the rights of the Agent and the Lenders under this Agreement by such appropriate actions and proceedings as the Custodian (with the consent of the Agent) or the Agent shall deem most effective to protect and enforce any such rights, whether by bringing suit for the specific enforcement of any covenant or agreement in this Agreement or by the exercise of any power granted herein or therein, or

 

14

 

by any other proper remedy or legal or equitable right vested in the Custodian under this Agreement or by applicable law.

 

(b)           Without limitation to any provision of Section 30(a) hereof, the Custodian hereby agrees to follow the reasonable instructions of the Agent with respect to the performance of the Custodian’s duties, the exercise of the Custodian’s powers and the enforcement of the Custodian’s rights (in any capacity) and the rights of the Agent and the Lenders under this Agreement.

 

31.           Amendments.  No amendment or modification of any provision of this Agreement shall be effective without the written agreement of each of the parties hereto, no termination or waiver of any provision of this Agreement or consent to any departure therefrom by the Borrower or the Servicer shall be effective without the written concurrence of the Agent, and no termination or waiver of any provision of this Agreement or consent to any departure therefrom by the Custodian shall be effective without the written occurrence of the Agent and the Borrower.

 

15

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives as of the day and year first above written.

 

	
 
    	
BRT   RLOC LLC, as the Borrower
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark H. Lundy
    
	
 
    	
 
    	
Name:
    	
Mark   H. Lundy
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
BRT   REALTY TRUST,
    
	
 
    	
as   the Servicer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark H. Lundy
    
	
 
    	
 
    	
Name:
    	
Mark   H. Lundy
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
CAPITAL   ONE, NATIONAL ASSOCIATION,
    
	
 
    	
as   the Custodian
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Paul Kesicki
    
	
 
    	
 
    	
Name:
    	
Paul   Kesicki
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
CAPITAL   ONE, NATIONAL ASSOCIATION,
    
	
 
    	
as   the Agent
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Paul Kesicki
    
	
 
    	
 
    	
Name:
    	
Paul   Kesicki
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

SIGNATURE PAGE TO

CUSTODIAL AGREEMENT

 

 

Exhibit 1 to
  Custodial Agreement

 

FORM OF REQUEST FOR RELEASE OF DOCUMENTS

 

[                         , 20    ]

 

	
To:
    	
Capital   One, National Association
    
	
 
    	
275   Broadhollow Road
    
	
 
    	
Melville,   New York 11747
    
	
 
    	
Attention:   Bob Bernard
    
	
 
    	
Facsimile   No.: (631) 531-2798
    
	
 
    	
Telephone   No.: (631) 531-2172
    

 

Re:          Custodial Agreement (the “Agreement”) dated as of June 22, 2011 among BRT RLOC LLC, BRT Realty Trust, as Servicer, Capital One, National Association, as the Agent and Capital One, National Association, as the Custodian

 

In connection with the administration of the Pledged Receivables and related Receivable Files held by you as the Custodian for the Agent, for the benefit of the Lenders, we request the release, and acknowledge receipt of the [Receivable File/specify documents] for the Pledged Receivable(s) described below, for the reason(s) indicated.

 

Obligor’s Name, Address & ZIP Code:

 

Receivable Number:

 

Reason for Requesting Documents (check one)

 

1.             Receivable paid in full

 

2.             Receivable substituted with alternate Receivable to be delivered to the Custodian with a revised Receivables Schedule indicating substitutions

 

3.             Receivable liquidated by

 

4.             Documents required for Servicing

 

5.             Other (explain)

 

If part of the Receivable File was previously released to us, please release to us our previous Request for Release of Documents on file with you, as well as any additional documents in your possession relating to the above specified Pledged Receivable.

 

This request also constitutes a trust receipt. Servicer hereby promises and declares to Custodian and Agent that Servicer will safeguard and hold the Pledged Receivables

 

Exhibit 1-1

 

shipped to Servicer pursuant to this request in trust, and as agent and bailee, for Agent and Agent shall continue to have and Servicer will defend, a first and prior security interest in all such Pledged Receivables pursuant to the LSA.

 

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Agreement.

 

	
 
    	
BRT   REALTY TRUST, as Servicer
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
ACKNOWLEDGED   AND AGREED:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
CAPITAL   ONE, NATIONAL ASSOCIATION
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    	
 
    

 

Exhibit 1-2

 

Exhibit 2 to
  Custodial Agreement

 

FORM OF COLLATERAL RECEIPT

 

[                         , 20    ]

 

Collateral Receipt

 

BRT RLOC LLC
 c/o BRT Realty Trust

60 Cutter Mill Road

Great Neck, New York 11021
 Attention:  David Kalish

 

Capital One, National Association
 275 Broadhollow Road

Melville, New York 11747
 Attention: Bob Bernard

 

Re:             Custodial Agreement (the “Agreement”) dated as of June 22, 2011 among BRT RLOC LLC, BRT REALTY TRUST, as Servicer, Capital One, National Association, as the Agent and Capital One, National Association, as the Custodian

 

Ladies and Gentlemen:

 

In accordance with the provisions of Section 5 of the Agreement, the undersigned, as the Custodian, hereby certifies that, as to each Pledged Receivable listed in the Receivables Schedule dated [                     , 20    ], a copy of which is attached hereto, it has reviewed the documents delivered to it pursuant to Section 3 of the Agreement and has determined that, except as noted in the attached Schedule of Deficiencies, (i) all Specified Documents with respect to the related Receivable File appear, on their face, to be fully executed and are in its possession, (ii) such Specified Documents have been reviewed by it and have not been mutilated, damaged, torn or otherwise physically altered (handwritten additions, changes or corrections shall not constitute physical alteration if initialed by BRT or Borrower and the Obligor related to such Pledged Receivable) and such documents relate to such Pledged Receivable, and (iii) other than the item required under clause (iv) of the definition of the Receivables Schedule based on its examination of the related Receivable File, the information set forth in the Receivables Schedule respecting such Pledged Receivable accurately reflects the information set forth in the related Receivable File.  The Custodian has made no independent examination of such documents beyond the review specifically required in the Agreement.  The Custodian makes no representations as to the: (i) validity, legality, sufficiency, enforceability or genuineness of any such documents contained in the Receivable File related to any of the Pledged Receivables identified on the Receivables Schedule other 

 

Exhibit 2-1

 

than that such documents are fully executed, or (ii) collectability, insurability, effectiveness or suitability of any such Pledged Receivable.

 

Exhibit 2-2

 

 

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Agreement.

 

	
 
    	
CAPITAL   ONE, NATIONAL ASSOCIATION, as the Custodian
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Exhibit 2-3

 

SCHEDULE OF DEFICIENCIES

 

Exhibit 3 to
  Custodial Agreement

 

[                         , 20    ]

 

FORM OF RETURN OF DOCUMENTS TO CUSTODIAN

 

Capital One, National Association
 275 Broadhollow Road

Melville, New York 11747

Attention: Bob Bernard
 Facsimile No.: (631) 531-2798
 Telephone No.: (631) 531-2172

 

Capital One, National Association
 275 Broadhollow Road

Melville, New York 11747

Attention: Bob Bernard
 Facsimile No.: (631) 531-2798
 Telephone No.: (631) 531-2172

 

Re:                               Custodial Agreement (the “Agreement”) dated as of June     , 2011 among BRT RLOC LLC, BRT REALTY TRUST, as Servicer, Capital One, National Association, as the Agent and Capital One, National Association, as the Custodian

 

Ladies and Gentlemen:

 

In accordance with Section 8 of the Agreement, enclosed please find the [Receivable File/specify documents] for the Pledged Receivable(s) described below:

 

[Obligors Name, Address & Zip Code:

 

Receivable Number:  ]

 

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Agreement.

 

	
 
    	
BRT   REALTY TRUST, as Servicer
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:                    ,   20
    

 

Exhibit 3-1

 

RECEIPT ACKNOWLEDGED:

 

CAPITAL ONE, NATIONAL ASSOCIATION,
 as the Custodian

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    	
 
    
				

 

Exhibit 3-2

 

Exhibit 4A to
  Custodial Agreement

 

AUTHORIZED REPRESENTATIVES

 

Authorized Representatives of BRT RLOC, LLC

 

	
NAME
    	
 
    	
TITLE
    	
 
    	
SIGNATURE
    
	
Mark   H. Lundy
    	
 
    	
Senior   Vice President and Secretary
    	
 
    	
 
    
	
David   W. Kalish
    	
 
    	
Senior   Vice President - Finance
    	
 
    	
 
    
	
Jeffrey   A. Gould
    	
 
    	
Chief   Executive Officer
    	
 
    	
 
    
	
Isaac   M. Kalish
    	
 
    	
Treasurer
    	
 
    	
 
    

 

Exhibit 4-1

 

Exhibit 4B to
  Custodial Agreement

 

AUTHORIZED REPRESENTATIVES

 

Authorized Representatives of BRT REALTY TRUST

 

	
NAME
    	
 
    	
TITLE
    	
 
    	
SIGNATURE
    
	
Mark   H. Lundy
    	
 
    	
Senior   Vice President and Assistant Secretary
    	
 
    	
 
    
	
David   W. Kalish
    	
 
    	
Senior   Vice President - Finance
    	
 
    	
 
    
	
Jeffrey   A. Gould
    	
 
    	
Chief   Executive Officer
    	
 
    	
 
    

 

Exhibit 4-2

 

Exhibit 4C to
  Custodial Agreement

 

AUTHORIZED REPRESENTATIVES

 

Authorized Representatives of the Agent

 

	
NAME
    	
 
    	
TITLE
    	
 
    	
SIGNATURE
    
	
Paul   Kesicki
    	
 
    	
Vice   President
    	
 
    	
 
    

 

Exhibit 4-3

 

Exhibit 5
  Custodial Agreement

 

FORM OF CONFIRMATION AND NOTICE OF PLEDGE

 

[                         , 20    ]

 

Capital One, National Association
 275 Broadhollow Road

Melville, New York 11747

Attention: Bob Bernard

 

Ladies and Gentlemen:

 

The undersigned hereby notifies you, as the Custodian, that the Contracts and related Receivable Files specified in the attached Schedule A (the “Receivables Schedule”) have been pledged by BRT RLOC LLC (the “Borrower”) pursuant to a Loan and Security Agreement, dated as of the date hereof (as amended, restated, supplemented and/or otherwise modified from time to time, the “LSA”), among the Lenders named therein (collectively, the “Lenders”), Capital One, National Association, as custodian, Capital One, National Association, as agent (the “Agent”), BRT Realty Trust, as servicer (the “Servicer”), BRT Realty Trust, as guarantor, and the Borrower, and are to be held by you as bailee of, and agent for, the Agent, for the benefit of the Lenders, as secured party pursuant to the provisions of the Custodial Agreement (the “Custodial Agreement”) dated as of June     , 2011 among Borrower, Servicer, Agent and the Custodian, until released or transferred as provided in the Custodial Agreement.  Capitalized words used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Custodial Agreement.

 

A security interest in the Pledged Receivables has been granted to the Agent, for the benefit of the Lenders, pursuant to the LSA.  You are instructed to enter the Agent’s name and address in your records as the pledgee of such Pledged Receivables and to promptly provide to the Agent an acknowledgment of this Notice of Pledge by signing in the space provided below and delivering an acknowledged copy of this Notice of Pledge to the Agent at Capital One, National Association, 275 Broadhollow Road, Melville, New York 11747, Attention: Bob Bernard.  Such acknowledgment will serve to confirm that this Notice of Pledge has been duly received by you and that (i) the related Receivable Files are being held by you as bailee of, and agent for, the Agent, for the benefit of the Lenders, and (ii) you have duly reflected on your records that the Agent, for the benefit of the Lenders, has been granted a security interest in and to such Contracts and related Receivable Files all in accordance with the provisions of the Custodial Agreement.

 

[Signature page to follow.]

 

Exhibit 5-1

 

	
 
    	
BRT   RLOC LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
ACKNOWLEDGED   BY:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
CAPITAL   ONE, NATIONAL ASSOCIATION,
    	
 
    	
 
    
	
as   the Custodian
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    	
 
    

 

Exhibit 5-2

 

Schedule A

 

Receivables Schedule

 

Schedule A-1

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