Document:

EXHIBIT 10.32

 

LOAN OBLIGATION PURCHASE AGREEMENT

 

This LOAN OBLIGATION PURCHASE AGREEMENT (this “Agreement”) is made as of December 20, 2017 by and between Arbor Realty SR, Inc., a Maryland corporation (the “Seller”), and Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd., an exempted company incorporated in the Cayman Islands with limited liability (the “Issuer” and, in some instances, the “Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, the Issuer desires to purchase from the Seller and the Seller desires to sell to the Issuer an initial portfolio of loan obligations (the “Initial Portfolio”);

 

WHEREAS, in connection with the sale of such obligations to the Issuer, the Seller desires to release any interest it may have in the loan obligations and desires to make certain representations and warranties regarding the loan obligations;

 

WHEREAS, pursuant to an indenture, dated as of December 20, 2017 (the “Indenture”), by and among the Issuer, the Co-Issuer (hereinafter defined), U.S. Bank National Association, as trustee, paying agent, calculation agent, transfer agent, custodial securities intermediary, backup advancing agent and notes registrar (together with any successor trustee permitted under the Indenture, the “Trustee”), U.S. Bank National Association, as custodian and Arbor Realty SR, Inc., as advancing agent, (A) the Issuer and Arbor Realty Commercial Real Estate Notes 2017-FL3, LLC, a Delaware limited liability company (the “Co-Issuer”), intend to issue the U.S.$271,200,000 Class A Senior Secured Floating Rate Notes Due 2027 (the “Class A Notes”), the U.S.$24,000,000 Class B Secured Floating Rate Notes Due 2027 (the “Class B Notes”), the U.S.$24,600,000 Class C Secured Floating Rate Notes Due 2027 (the “Class C Notes”) and the U.S.$36,600,000 Class D Secured Floating Rate Notes Due 2027 (the “Class D Notes”, and together with Class A Notes, Class B Notes and Class C Notes, the “Offered Notes”), and (B) the Issuer intends to issue the U.S.$31,800,000 Class E Floating Rate Notes Due 2027 (the “Class E Notes” and, together with the Offered Notes, the “Notes”);

 

WHEREAS, pursuant to its Governing Documents, certain resolutions of its Board of Directors and a preferred share paying agency agreement, the Issuer also intends to issue the U.S.$91,800,000 aggregate notional amount preferred shares (the “Preferred Shares” and, together with the Notes, the “Securities”);

 

WHEREAS, the Issuer intends to pledge the obligations purchased hereunder by the Issuer to the Trustee as security for the Offered Notes;

 

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NOW, THEREFORE, the parties hereto agree as follows:

 

1.             Defined Terms.

 

Capitalized terms used and not otherwise defined herein shall have the same meanings ascribed to such terms in the Indenture.

 

“Accountants’ Due Diligence Report”:  The meaning specified in Section 4(l) hereof.

 

“Assignment of Leases, Rents and Profits”:  With respect to any Mortgage, an assignment of leases thereunder, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the Underlying Mortgaged Property is located to reflect the assignment of leases to the Mortgagee.

 

“Assignment of Mortgage”:  With respect to any Mortgage, an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Underlying Mortgaged Property is located to reflect the assignment of the Mortgage to the Mortgagee.

 

“Borrower”:  The borrower under a Mortgage Loan.

 

“Closing Date”:  The meaning specified in Section 2(b) hereof.

 

“Collateral File”:  With respect to any Loan Obligation, the Underlying Instruments.

 

“Companion Loan”: Any Non-Acquired Participation.

 

“Cut-off Date”:  Has the same meaning as Reference Date.

 

“Cut-off Date Stated Principal Balance”:  With respect to each Mortgage Loan, the outstanding principal balance of the Underlying Note as of the Cut-off Date.

 

“Exception Schedule”: The schedule identifying any exceptions to the representations and warranties made with respect to the Loan Obligations conveyed hereunder, which is attached hereto as Schedule 1(a).

 

“Exchange Act”:  The meaning specified in Section 4(l) hereof.

 

“Form 15G”:  The meaning specified in Section 4(m) hereof.

 

“Junior Participation”: One or more junior participation interests (or B notes in a Whole Loan.

 

“Loan Documents”:  The documents evidencing a Mortgage Loan.

 

“Loan Obligation”:  Each Whole Loan or Participation identified on Exhibit A hereto.

 

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“Loss Value Payment”:  The meaning specified in Section 4(e) hereof.

 

“Mortgage”:  With respect to each Loan Obligation, the mortgage, deed of trust, deed to secure debt or similar instrument that secures the Underlying Note and creates a lien on the fee or leasehold interest in the related Underlying Mortgaged Property.

 

“Mortgagee”: With respect to each Mortgage Loan, the party secured by the related Mortgage.

 

“Mortgage File”:  The file containing the Loan Documents.

 

“Mortgage Loan”:  With respect to (1) each Loan Obligation that is a Whole Loan, such Whole Loan and (2) with respect to each Loan Obligation that is a Participation, the underlying Whole Loan in which such Participation represents an interest.

 

“Mortgage Rate”:  The stated rate of interest on a Mortgage Loan.

 

“Mortgaged Property”:  With respect to each Mortgage Loan, the real property securing such Mortgage Loan.

 

“Participation”: Any Senior Participation or Junior Participation.

 

“Participation Agreement”: With respect to each Loan Obligation that is a Participation, the participation agreement and/or sub-participation agreement that governs the rights and obligations of the holders of such Participation and the related Non-Acquired Participations.

 

“Qualifying REIT Subsidiary”:  As defined in the Indenture.

 

“Reference Date”:  With respect to each Loan Obligation and Mortgage Loan, the later of November 1, 2017, or the related asset origination date.

 

“Senior Participation”:  A senior participation interest in a Whole Loan.

 

“Servicing File”:  The file maintained by the servicer with respect to each Loan Obligation

 

“Stated Principal Balance”:  With respect to each Loan Obligation and Mortgage Loan, the outstanding principal balance thereof.

 

“UCC”:  The applicable Uniform Commercial Code.

 

“Underlying Note or Note”:  With respect to each Mortgage Loan, the promissory note evidencing the indebtedness of the related Underlying Obligor, together with any rider, addendum or amendment thereto, or any renewal, substitution or replacement of such note.

 

“Underlying Obligor”:  With respect to any Mortgage Loan, the related Borrower or other obligor thereunder.

 

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“Whole Loan”:  A mortgage loan secured by a first mortgage lien on one or more multi-family properties (including student housing properties) or office properties, industrial properties, retail properties, hospitality properties or self-storage properties.

 

2.             Purchase and Sale of the Loan Obligations.

 

(a)           Set forth in Exhibit A hereto is a list of Loan Obligations and certain other information with respect to each of the Loan Obligations.  The Seller agrees to sell to the Issuer, and the Issuer agrees to purchase from the Seller, all of the Loan Obligations at an aggregate purchase price of U.S.$366,500,000 plus accrued interest (the “Purchase Price”).  Immediately prior to such sale, the Seller hereby conveys and assigns all right, title and interest it may have in such Loan Obligation to the Issuer.

 

(b)           Delivery or transfer of the Loan Obligations shall be made on or about December 20, 2017 (the “Closing Date”) at the time and in the manner agreed upon by the parties. Upon receipt of evidence of the delivery or transfer of the Loan Obligations to the Issuer or its designee, the Issuer shall pay or cause to be paid to the Seller the Purchase Price in the manner agreed upon by the Seller and the Issuer.

 

3.             Conditions.

 

The obligations of the parties under this Agreement are subject to satisfaction of the following conditions:

 

(a)           the representations and warranties contained herein shall be accurate and complete;

 

(b)           on the Closing Date, counsel for the Issuer shall have been furnished with all such documents, certificates and opinions as such counsel may reasonably request in order to evidence the accuracy and completeness of any of the representations, warranties or statements of the Seller, the performance of any of the obligations of the Seller hereunder or the fulfillment of any of the conditions herein contained; and

 

(c)           the issuance of the Securities and receipt by the Issuer of full payment therefor.

 

4.             Covenants, Representations and Warranties.

 

(a)           Each party hereby represents and warrants to the other party that (i) it is duly organized or incorporated, as the case may be, and validly existing as an entity under the laws of the jurisdiction in which it is incorporated, chartered or organized, (ii) it has the requisite power and authority to enter into and perform this Agreement, and (iii) this Agreement has been duly authorized by all necessary action, has been duly executed by one or more duly authorized officers and is the valid and binding agreement of such party enforceable against such party in accordance with its terms.

 

(b)           The Seller further represents and warrants to the Issuer that:

 

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(i)            immediately prior to the sale of the Loan Obligations to the Issuer, the Seller shall own the Loan Obligations, shall have good and marketable title thereto, free and clear of any pledge, lien, security interest, charge, claim, equity, or encumbrance of any kind, and upon the delivery or transfer of the Loan Obligations to the Issuer as contemplated herein, the Issuer shall receive good and marketable title to the Loan Obligations, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind;

 

(ii)           the Seller acquired its ownership in the Loan Obligations in good faith without notice of any adverse claim, and upon the delivery or transfer of the Loan Obligations to the Issuer as contemplated herein, the Issuer shall acquire ownership in the Loan Obligations in good faith without notice of any adverse claim;

 

(iii)          the Seller has not assigned, pledged or otherwise encumbered any interest in the Loan Obligations (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released);

 

(iv)          none of the execution, delivery or performance by the Seller of this Agreement shall (x) conflict with, result in any breach of or constitute a default (or an event which, with the giving of notice or passage of time, or both, would constitute a default) under, any term or provision of the organizational documents of the Seller, or any material indenture, agreement, order, decree or other material instrument to which the Seller is party or by which the Seller is bound which materially adversely affects the Seller’s ability to perform its obligations hereunder or (y) violate any provision of any law, rule or regulation applicable to the Seller of any regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or its properties which has a material adverse effect;

 

(v)           no consent, license, approval or authorization from, or registration or qualification with, any governmental body, agency or authority, nor any consent, approval, waiver or notification of any creditor or lessor is required in connection with the execution, delivery and performance by the Seller of this Agreement the failure of which to obtain would have a material adverse effect except such as have been obtained and are in full force and effect;

 

(vi)          it has adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.  It is generally able to pay, and as of the date hereof is paying, its debts as they come due.  It has not become or is not presently, financially insolvent nor will it be made insolvent by virtue of its execution of or performance under any of the provisions of this Agreement within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction.  It has not entered into this Agreement or the transactions effectuated hereby in contemplation of insolvency or with intent to hinder, delay or defraud any creditor;

 

(vii)         no proceedings are pending or, to its knowledge, threatened against it before any federal, state or other governmental agency, authority, administrative or regulatory body, arbitrator, court or other tribunal, foreign or domestic, which, singularly

 

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or in the aggregate, could  materially and adversely affect the ability of the Seller to perform any of its obligations under this Agreement; and

 

(viii)        the consideration received by it upon the sale of the Loan Obligations owned by it constitutes fair consideration and reasonably equivalent value for such Loan Obligations.

 

(c)           the Seller further represents and warrants to the Issuer that:

 

(i)            the Underlying Instruments with respect to each Loan Obligation do not prohibit the Issuer from granting a security interest in and assigning and pledging such Loan Obligation to the Trustee;

 

(ii)           the information set forth with respect to the Loan Obligations in Schedule A of the Indenture is true and correct;

 

(iii)          none of the Loan Obligations will cause the Issuer to have payments subject to foreign or United States withholding tax;

 

(iv)          with respect to each Loan Obligation, except as set forth in the Exception Schedule, the representations and warranties set forth in Schedule 1 are true and correct; and

 

(v)           the Seller has delivered to the Issuer or its designee (A) the original of any note (or a copy of such note together with a lost note affidavit and indemnity), certificate or other instrument, if any, constituting or evidencing such Loan Obligation together with an assignment in blank and all other assignment documents reasonably necessary to evidence the transfer of the Loan Obligation including, where applicable, UCC assignments and any other Underlying Instrument and copies of any other documents related to the Loan Obligation in the Seller’s possession, including copies of any related mortgage loan documents if the Loan Obligation is a Mortgage Loan, related to such Loan Obligation the delivery of which is necessary to perfect the security interest of the Trustee in such Loan Obligation and (B) copies of the Underlying Instruments.

 

(d)           For purposes of the representations and warranties set forth in Schedule 1, the phrases “to the knowledge of the Seller” or “to the Seller’s knowledge” shall mean, except where otherwise expressly set forth in a particular representation and warranty, the actual state of knowledge of the Seller or any servicer acting on its behalf regarding the matters referred to, in each case:  (i) at the time of the Seller’s origination or acquisition of the particular Loan Obligation, after the Seller having conducted such inquiry and due diligence into such matters as would be customarily performed by a prudent institutional commercial or multifamily, as applicable, mortgage lender; and (ii) subsequent to such origination, the Seller having utilized monitoring practices that would be utilized by a prudent institutional commercial or multifamily, as applicable, mortgage lender and having made prudent inquiry as to the knowledge of the servicer servicing such Loan Obligation on its behalf.  Also, for purposes of such representations and warranties, the phrases “to the actual knowledge of the Seller” or “to the Seller’s actual knowledge” shall mean, except where otherwise expressly set forth below, the actual state of knowledge of the Seller or any servicer acting on its behalf without any express or implied

 

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obligation to make inquiry.  All information contained in documents which are part of or required to be part of a Collateral File shall be deemed to be within the knowledge and the actual knowledge of the Seller.  Wherever there is a reference to receipt by, or possession of, the Seller of any information or documents, or to any action taken by the Seller or not taken by the Seller, such reference shall include the receipt or possession of such information or documents by, or the taking of such action or the failure to take such action by, the Seller or any servicer acting on its behalf.

 

(e)           If the Seller receives written notice of a breach of a representation or a warranty pursuant to this Agreement relating to any Loan Obligation, which breach materially and adversely affects the value of such Loan Obligation, the value of the related Mortgaged Property or the interests of the Trustee or any Noteholder therein, then the Seller shall (1) not later than 90 days from receipt of such notice or discovery by the Seller, cure such breach (to the extent such breach is capable of being cured), (2) subject to the consent of a Majority of each Class of Notes (excluding any Note held by the Seller or any of its affiliates), make a Cash payment to the Issuer in an amount that the Loan Obligation Manager, on behalf of the Issuer, subject to the consent of a Majority of each Class of Notes (excluding any Note held by the Seller or any of its affiliates), determines is sufficient to compensate the Issuer for such breach of representation or warranty (such payment, a “Loss Value Payment”), which Loss Value Payment will be deemed to cure such breach of representation or warranty, or (3) if such breach cannot be cured within such 90-day period, repurchase the affected Loan Obligation not later than the end of such 90-day period at the Repurchase Price (as defined in Section 16.3(c) of the Indenture)

 

(f)            The Seller hereby acknowledges and consents to the collateral assignment by the Issuer of this Agreement and all right, title and interest thereto to the Trustee, for the benefit of the Noteholders, as required in Sections 15.1(f)(i) and (ii) of the Indenture.

 

(g)           The Seller hereby covenants and agrees that it shall perform any provisions of the Indenture made expressly applicable to the Seller by the Indenture, as required by Section 15.1(f)(i) of the Indenture.

 

(h)           The Seller hereby covenants and agrees that all of the representations, covenants and agreements made by or otherwise entered into by it in this Agreement shall also be for the benefit of the Trustee and the Noteholders, as required by Section 15.1(f)(ii) of the Indenture and agrees that enforcement of any rights hereunder by the Trustee shall have the same force and effect as if the right or remedy had been enforced or executed by the Issuer but that such rights and remedies shall not be any greater than the rights and remedies of the Issuer under Section 4(e) above.

 

(i)            On or prior to the Closing Date, the Seller shall deliver the Underlying Instruments to the Issuer or, at the direction of the Issuer, to the Trustee, with respect to each Loan Obligation sold to the Issuer hereunder.  The Seller hereby covenants and agrees, as required by Section 15.1(f)(iii) of the Indenture, that it shall deliver to the Trustee duplicate original copies of all notices, statements, communications and instruments delivered or required to be delivered to the Issuer by each party pursuant to this Agreement.

 

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(j)            The Seller hereby covenants and agrees, as required by Section 15.1(f)(iv) of the Indenture, that it shall not enter into any agreement amending, modifying or terminating this Agreement (other than in respect of an amendment or modification to cure any inconsistency, ambiguity or manifest error), without notifying the Rating Agencies.

 

(k)           The Seller hereby covenants, that at all times (1) Seller will qualify as a REIT for federal income tax purposes and the Issuer will qualify as a Qualified REIT Subsidiary (or other disregarded entity) of Seller for federal income tax purposes, (2) based on an Opinion of Counsel, the Issuer will be treated as a Qualified REIT Subsidiary (or other disregarded entity) of a REIT other than Seller, or (3) based on an Opinion of Counsel, the Issuer will be treated as a foreign corporation that will not be treated as engaged in a trade or business in the United States for U.S. federal income tax purposes.

 

(l)            Except for the agreed-upon procedures report obtained from a nationally recognized accounting firm for due diligence services with respect to certain information regarding the Loan Obligations to be conveyed to the Issuer (such report, the “Accountants’ Due Diligence Report”), the Seller has not obtained and shall not obtain any “third party due diligence report” (as defined in Rule 15Ga-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) in connection with the securitization transaction contemplated by the recitals hereto.

 

(m)          The Purchaser (A) prepared or caused to be prepared a report on Form ABS-15G (the “Form 15G”) containing the findings and conclusions of the Accountants’ Due Diligence Report and meeting all other requirements of that Rule 15Ga-2 under the Exchange Act, any other rules and regulations of the Securities and Exchange Commission and the Exchange Act; (B) provided a copy of the final draft of the Form 15G to the Placement Agent at least seven Business Days before the first sale of any Notes; and (C) furnished the Form 15G to the Securities and Exchange Commission on Electronic Data Gathering, Analysis and Retrieval System (EDGAR) at least five Business Days before the first sale of any Notes as required by Rule 15Ga-2 under the Exchange Act.

 

5.             Sale.

 

It is the intention of the parties hereto that the transfer and assignment contemplated by this Agreement shall constitute a sale of the Loan Obligations from the Seller to the Issuer and the beneficial interest in and title to the Loan Obligations shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. In the event that, notwithstanding the intent of the parties hereto, the transfer and assignment contemplated hereby is held not to be a sale (for non-tax purposes), this Agreement shall constitute a security agreement under applicable law, and, in such event, the Seller shall be deemed to have granted, and the Seller hereby grants, to the Issuer a security interest in the Loan Obligations for the benefit of the Secured Parties and its assignees as security for the Seller’s obligations hereunder and the Seller consents to the pledge of the Loan Obligations to the Trustee.

 

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6.             Non-Petition.

 

The Seller agrees not to institute against, or join any other Person in instituting against the Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings or other proceedings under U.S. federal or state bankruptcy or similar laws in any jurisdiction until at least one year and one day or, if longer, the applicable preference period then in effect after the payment in full of all Notes issued under the Indenture.  This Section 6 shall survive the termination of this Agreement for any reason whatsoever.

 

7.             Amendments.

 

This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement by the parties hereto and receipt by the parties hereto of prior written confirmation of each Rating Agency that such amendment or modification shall not cause the rating of the Notes to be reduced.

 

8.             Communications.

 

Except as may be otherwise agreed between the parties, all communications hereunder shall be made in writing to the relevant party by personal delivery or by courier or first-class registered mail, or the closest local equivalent thereto, or by facsimile transmission confirmed by personal delivery or by courier or first-class registered mail as follows:

 

To the Seller:                                                                         Arbor Realty SR, Inc.
 333 Earle Ovington Boulevard, 9th Floor
 Uniondale, New York 11553
 Attention:  Executive Vice President — Structured Securitization
 Telephone Number:  (212) 389-6546
 Facsimile Number:  (212) 389-6573

 

To the Issuer:                                                                      Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd.

 

c/o MaplesFS Limited
 P.O. Box 1093
 Boundary Hall, Cricket Square
 Grand Cayman, KY1-1102 Cayman Islands
 Attention:  The Directors
 Telephone Number:  (345) 945-7099
 Facsimile Number:  (345) 945-7100

 

with a copy to the Loan Obligation Manager (as addressed above);

 

or to such other address, telephone number or facsimile number as either party may notify to the other in accordance with the terms hereof from time to time. Any communications hereunder shall be effective upon receipt.

 

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9.             Governing Law and Consent to Jurisdiction.

 

(a)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

(b)           The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and any court in the State of New York located in the City and County of New York, and any appellate court hearing appeals from the Courts mentioned above, in any action, suit or proceeding brought against it and to or in connection with this Agreement or the transaction contemplated hereunder or for recognition or enforcement of any judgment, and the parties hereto hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard or determined in such New York State court or, to the extent permitted by law, in such federal court. The parties hereto agree that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. To the extent permitted by applicable law, the parties hereto hereby waive and agree not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in any inconvenient forum, that the venue of the suit, action or proceeding is improper or that the subject matter thereof may not be litigated in or by such courts.

 

(c)           To the extent permitted by applicable law, the parties hereto shall not seek and hereby waive the right to any review of the judgment of any such court by any court of any other nation or jurisdiction which may be called upon to grant an enforcement of such judgment.

 

(d)           The Issuer appoints CT Corporation System, 111 8th Avenue, 13th Floor, New York, New York 10011, as its agent for service of process in New York in respect of any such suit, action or proceeding. The Issuer agrees that service of such process upon such agent shall constitute personal service of such process upon it.

 

(e)           The Seller irrevocably consents to the service of any and all process in any action or proceeding by the mailing by certified mail, return receipt requested, or delivery requiring proof of delivery of copies of such process to it at the address set forth in Section 8 hereof.

 

10.          Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.

 

11.          Limited Recourse Agreement.

 

All obligations of the Issuer arising hereunder or in connection herewith are limited in recourse to the Pledged Obligations and to the extent the proceeds of the Pledged Obligations, when applied in accordance with the Priority of Payments, are insufficient to meet

 

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the obligations of the Issuer hereunder in full, the Issuer shall have no further liability in respect of any such outstanding obligations and any obligations of, and claims against, the Issuer, arising hereunder or in connection herewith, shall be extinguished and shall not thereafter revive.  The obligations of the Issuer hereunder or in connection herewith will be solely the corporate obligations of the Issuer and the Seller will not have recourse to any of the directors, officers, employees, shareholders or affiliates of the Issuer with respect to any claims, losses, damages, liabilities, indemnities or other obligations in connection with any transactions contemplated hereby or in connection herewith.  This Section 11 shall survive the termination of this Agreement for any reason whatsoever.

 

12.          Assignment and Assumption

 

With respect to the Loan Obligations that are subject to a Participation Agreement, the parties hereto intend that the provisions of this Section 12 serve as an assignment and assumption agreement between the Seller, as the assignor, and the Issuer, as the assignee.  Accordingly, the Seller hereby (and in accordance with and subject to all other applicable provisions of this Agreement) assigns, grants, sells, transfers, delivers, sets over, and conveys to the Issuer all right, title and interest of the Seller in, to and arising out of the related Participation Agreement and the Issuer hereby accepts (subject to applicable provisions of this Agreement) the foregoing assignment and assumes all of the rights and obligations of the Seller with respect to related Participation Agreement from and after the Closing Date.

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Loan Obligations Purchase Agreement as of the day and year first above written.

 

	
 
    	
 
    
	
 
    	
ARBOR REALTY   SR, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARBOR   REALTY COMMERCIAL REAL
   ESTATE NOTES 2017-FL3, LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

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Exhibit A

 

LIST OF LOAN OBLIGATIONS

 

Preston Hollow

 

The Darlington

 

CubeSmart Self Storage

 

Vista Promenade

 

Quarry Station

 

Lynnfield Place Apartments

 

The Factory I & II

 

Seaport Inn

 

114 East 25th Street

 

Campus Commons

 

Jamesbridge Apartments

 

Sonoma View Apartments

 

Century Plaza Apartments

 

963 First Avenue

 

Kerner Mill Apartments

 

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SCHEDULE 1

 

REPRESENTATIONS AND WARRANTIES
 REGARDING LOAN OBLIGATIONS

 

(1)                                 Whole Loan; Ownership of Loan Obligations.  Except for the Loan Obligations identified that are Senior Participations, each Closing Date Loan Obligation is a whole loan and not a participation interest in a Mortgage Loan.  Each Additional Loan Obligation and Replacement Loan Obligation that is a Senior Participation is a senior portion (or a pari passu interest in a senior portion) of a whole mortgage loan.  At the time of the sale, transfer and assignment to Purchaser, no Note, Mortgage or Senior Participation was subject to any assignment (other than assignments to the Seller), participation (other than with respect to the Senior Participations) or pledge, and the Seller had good title to, and was the sole owner of, each Loan Obligation free and clear of any and all liens, charges, pledges, encumbrances, participations (other than with respect to the Senior Participations), any other ownership interests on, in or to such Loan Obligation other than any servicing rights appointment or similar agreement.  The Seller has full right and authority to sell, assign and transfer each Loan Obligation, and the assignment to Purchaser constitutes a legal, valid and binding assignment of such Loan Obligation free and clear of any and all liens, charges, pledges, encumbrances, participations (other than with respect to the Senior Participations), any other ownership interests on, in or to such Loan Obligation other than any servicing rights appointment or similar agreement.

 

(2)                                 Loan Document Status. Each related Note, Mortgage, Assignment of Leases, Rents and Profits (if a separate instrument), guaranty and other agreement executed by or on behalf of the related borrower, guarantor or other obligor in connection with such Mortgage Loan is the legal, valid and binding obligation of the related borrower, guarantor or other obligor (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except (i) as such enforcement may be limited by (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (ii) that certain provisions in such Loan Documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment/yield maintenance or prepayment fees, charges and/or premiums) are, or may be, further limited or rendered unenforceable by or under applicable law, but (subject to the limitations set forth in clause (i) above) such limitations or unenforceability will not render such Loan Documents invalid as a whole or materially interfere with the mortgagee’s realization of the principal benefits and/or security provided thereby (clauses (i) and (ii) collectively, the “Standard Qualifications”).

 

Except as set forth in the immediately preceding sentences, there is no valid offset, defense, counterclaim or right of rescission available to the related borrower with respect to any of the related Notes, Mortgages or other Loan Documents, including, without limitation, any such valid offset, defense, counterclaim or right based on intentional fraud by the Seller in connection with the origination of the Mortgage Loan, that would deny the mortgagee the principal benefits intended to be provided by the Note, Mortgage or other Loan Documents.

 

(3)                                 Mortgage Provisions.  The Loan Documents for each Mortgage Loan contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the principal benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, nonjudicial foreclosure subject to the limitations set forth in the Standard Qualifications.

 

(4)                                 Mortgage Status; Waivers and Modifications.  Since origination and except prior to the Cut-off Date by written instruments set forth in the related Mortgage File (a) the material terms of such Mortgage, Note, Mortgage Loan guaranty, participation agreement, if applicable, and related Loan Documents have not

 

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been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect which materially interferes with the security intended to be provided by such Mortgage; (b) no related Mortgaged Property or any portion thereof has been released from the lien of the related Mortgage in any manner which materially interferes with the security intended to be provided by such Mortgage or the use or operation of the remaining portion of such Mortgaged Property; and (c) neither the related borrower nor the related guarantor nor the related Participating Institution has been released from its material obligations under the Mortgage Loan or participation agreement, if applicable.

 

(5)                                 Lien; Valid Assignment.  Subject to the Standard Qualifications, each assignment of Mortgage and assignment of Assignment of Leases, Rents and Profits from the Seller constitutes a legal, valid and binding assignment from the Seller.  Each related Mortgage is a legal, valid and enforceable first lien on the related Borrower’s fee or leasehold interest in the Mortgaged Property in the principal amount of such Mortgage Loan or allocated loan amount subject to the Title Exceptions, Permitted Encumbrances and Standard Qualifications (each as defined herein). Each related Assignment of Mortgage and Assignment of Leases, Rents and Profits from the Seller to the Purchaser constitutes the legal, valid and binding first priority assignment from the Seller, except as such enforcement may be limited by the Standard Qualifications, any Permitted Encumbrances and any Title Exceptions (as defined herein).  Each Mortgage and Assignment of Leases, Rents and Profits is freely assignable. Notwithstanding anything herein to the contrary, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of Uniform Commercial Code (“UCC”) financing statements is required in order to effect such perfection.

 

(6)                                 Permitted Liens; Title Insurance.  Each Mortgaged Property securing a Mortgage Loan is covered by an American Land Title Association loan title insurance policy or a comparable form of loan title insurance policy approved for use in the applicable jurisdiction (or, if such policy is yet to be issued, by a pro forma policy, a preliminary title policy with escrow instructions or a “marked up” commitment, in each case binding on the title insurer) (the “Title Policy”) in the original principal amount of such Mortgage Loan (or with respect to a Mortgage Loan secured by multiple properties, an amount equal to at least the allocated loan amount with respect to the Title Policy for each such property) after all advances of principal (including any advances held in escrow or reserves), that insures for the benefit of the owner of the indebtedness secured by the Mortgage, the first priority lien of the Mortgage, which lien is subject only to the following title exceptions (each such title exception, including any exceptions set forth on Schedule 1(a) hereto, a “Title Exception” and collectively, the “Title Exceptions”): (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record; (c) the exceptions (general and specific) and exclusions set forth in such Title Policy; (d) other matters to which like properties are commonly subject; (e) the rights of tenants (as tenants only) under leases (including subleases) pertaining to the related Mortgaged Property and condominium declarations; and (f) if the related Mortgage Loan is cross-collateralized and cross-defaulted with another Mortgage Loan (each a “Crossed Mortgage Loan”), the lien of the Mortgage for another Mortgage Loan that is cross-collateralized and cross-defaulted with such Crossed Mortgage Loan, provided that none of items (a) through (f), individually or in the aggregate, materially and adversely interferes with the value or current use of the Mortgaged Property or the security intended to be provided by such Mortgage or the borrower’s ability to pay its obligations when they become due (collectively, the “Permitted Encumbrances”).  Except as contemplated by clause (f) of the preceding sentence, none of the Permitted Encumbrances are mortgage liens that are senior to or coordinate and co-equal with the lien of the related Mortgage.  Such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no claims have been made by the Seller thereunder and no claims have been paid thereunder.  Neither the Seller, nor to the Seller’s knowledge, any other holder of the Mortgage Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.

 

(7)                                 Junior Liens.  It being understood that B notes and junior participation interests secured by the same Mortgage as a Mortgage Loan are not subordinate mortgages or junior liens, except for any Crossed Mortgage Loan, there are, as of origination, and to the Seller’s knowledge, as of the Cut-off Date, no subordinate mortgages or junior liens securing the payment of money encumbering the related Mortgaged Property (other than Permitted Encumbrances and the Title Exceptions, taxes and assessments, mechanics

 

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and materialmen’s liens (which are the subject of the representation in paragraph (5) above), and equipment and other personal property financing).  Except as set forth in Schedule 1(b), the Seller has no knowledge of any mezzanine debt secured directly by interests in the related borrower.

 

(8)                                 Assignment of Leases, Rents and Profits.  There exists as part of the related Mortgage File an Assignment of Leases, Rents and Profits (either as a separate instrument or incorporated into the related Mortgage). Subject to the Permitted Encumbrances and the Title Exceptions, each related Assignment of Leases, Rents and Profits creates a valid first-priority collateral assignment of, or a valid first-priority lien or security interest in, rents and certain rights under the related lease or leases, subject only to a license granted to the related borrower to exercise certain rights and to perform certain obligations of the lessor under such lease or leases, including the right to operate the related leased property, except as the enforcement thereof may be limited by the Standard Qualifications.  The related Mortgage or related Assignment of Leases, Rents and Profits, subject to applicable law, provides that, upon an event of default under the Mortgage Loan, a receiver is permitted to be appointed for the collection of rents or for the related mortgagee to enter into possession to collect the rents or for rents to be paid directly to the mortgagee.

 

(9)                                 UCC Filings.  The Seller has filed and/or recorded or caused to be filed and/or recorded (or, if not filed and/or recorded, such have been submitted in proper form for filing and/or recording), UCC financing statements in the appropriate public filing and/or recording offices necessary at the time of the origination of the Mortgage Loan to perfect a valid security interest in all items of physical personal property reasonably necessary to operate such Mortgaged Property owned by such borrower and located on the related Mortgaged Property (other than any non-material personal property, any personal property subject to a purchase money security interest, a sale and leaseback financing arrangement as permitted under the terms of the related Mortgage Loan documents or any other personal property leases applicable to such personal property), to the extent perfection may be effected pursuant to applicable law by recording or filing, as the case may be.  Subject to the Standard Qualifications, each related Mortgage (or equivalent document) creates a valid and enforceable lien and security interest on the items of personalty described above.  No representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC financing statements are required in order to effect such perfection.

 

(10)                          Condition of Property.  The Seller or the originator of the Mortgage Loan (i) inspected or caused to be inspected each related Mortgaged Property at least six months prior to origination of the Mortgage Loan and, (ii) if the term of the Mortgage Loan has already continued for at least twelve months, inspected or caused to be inspected each related Mortgaged Property at least once during the past twelve months.

 

An engineering report or property condition assessment was prepared in connection with the origination of each Mortgage Loan not more than twelve months prior to the origination of such Mortgage Loan.  To the Seller’s knowledge, based solely upon due diligence customarily performed in connection with the origination of comparable mortgage loans, as of the Closing Date, each related Mortgaged Property was free and clear of any material damage (other than (i) deferred maintenance or repairs for which escrows were established at origination and (ii) any damage fully covered by insurance) that would affect materially and adversely the use or value of such Mortgaged Property as security for the Mortgage Loan.

 

(11)                          Taxes and Assessments.  All taxes, governmental assessments and other outstanding governmental charges (including, without limitation, water and sewage charges), or installments thereof, that could be a lien on the related Mortgaged Property that would be of equal or superior priority to the lien of the Mortgage and that prior to the Cut-off Date have become delinquent in respect of each related Mortgaged Property have been paid, or an escrow of funds has been established in an amount sufficient to cover such payments and reasonably estimated interest and penalties, if any, thereon.  For purposes of this representation and warranty, real estate taxes and governmental assessments and other outstanding governmental charges and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

 

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(12)                          Condemnation.  As of the date of origination and to the Seller’s knowledge as of the Cut-off Date, there is no proceeding pending, and, to the Seller’s knowledge as of the date of origination and as of the Cut-off Date, there is no proceeding threatened, for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the value, use or operation of the Mortgaged Property.

 

(13)                          Actions Concerning Mortgage Loan.  As of the date of origination and to the Seller’s knowledge as of the Cut-off Date, there was no pending or filed action, suit or proceeding, arbitration or governmental investigation involving any borrower, guarantor, or borrower’s interest in the Mortgaged Property that would materially and adversely affect (a) such borrower’s title to the Mortgaged Property, (b) the validity or enforceability of the Mortgage, (c) such borrower’s ability to perform under the related Mortgage Loan, (d) such guarantor’s ability to perform under the related guaranty, (e) the principal benefit of the security intended to be provided by the Mortgage Loan documents or (f) the current principal use of the Mortgaged Property.

 

(14)                          Escrow Deposits.  All escrow deposits and payments required to be escrowed with lender pursuant to each Mortgage Loan are in the possession, or under the control, of the Seller or its servicer, and there are no deficiencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required to be escrowed with lender under the related Loan Documents are being conveyed by the Seller to Purchaser or its servicer.

 

(15)                          No Holdbacks.  The Stated Principal Balance as of the Cut-off Date of the Mortgage Loan set forth on the mortgage loan schedule attached as Exhibit A to this Agreement has been fully disbursed as of the Closing Date and there is no requirement for future advances thereunder (except in those cases where the full amount of the Mortgage Loan has been disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the related Mortgaged Property, the borrower or other considerations determined by the Seller to merit such holdback).

 

(16)                          Insurance.  Each related Mortgaged Property is, and is required pursuant to the related Mortgage to be, insured by a property insurance policy providing coverage for loss in accordance with coverage found under a “special cause of loss form” or “all risk form” that includes replacement cost valuation issued by an insurer meeting the requirements of the related Loan Documents and having a claims-paying or financial strength rating of at least A or better and a financial class of VIII or better by A.M. Best Company, Inc. (collectively the “Insurance Rating Requirements”), in an amount (subject to a customary deductible) not less than the lesser of (1) the original principal balance of the Mortgage Loan and (2) the full insurable value on a replacement cost basis of the improvements, furniture, furnishings, fixtures and equipment owned by the borrower and included in the Mortgaged Property (with no deduction for physical depreciation), but, in any event, not less than the amount necessary or containing such endorsements as are necessary to avoid the operation of any coinsurance provisions with respect to the related Mortgaged Property.

 

Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Loan Documents, by business interruption or rental loss insurance which (subject to a customary deductible) covers a period of not less than 12 months (or with respect to each Mortgage Loan on a single asset with a principal balance of $50 million or more, 18 months).

 

If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the related borrower is required to maintain insurance in the maximum amount available under the National Flood Insurance Program.

 

If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, the related borrower is required to maintain coverage for windstorm and/or windstorm related perils and/or “named storms” issued by an insurer meeting the Insurance Rating Requirements or endorsement covering damage from windstorm and/or windstorm related perils and/or named storms.

 

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The Mortgaged Property is covered, and required to be covered pursuant to the related Loan Documents, by a commercial general liability insurance policy issued by an insurer meeting the Insurance Rating Requirements including coverage for property damage, contractual damage and personal injury (including bodily injury and death) in amounts as are generally required by the Seller for loans originated for securitization, and in any event not less than $1 million per occurrence and $1 million in the aggregate.

 

An architectural or engineering consultant has performed an analysis of each of the Mortgaged Properties located in seismic zones 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the scenario expected limit (“SEL”) for the Mortgaged Property in the event of an earthquake. In such instance, the SEL was based on a 475-year return period, an exposure period of 50 years and a 10% probability of exceedance. If the resulting report concluded that the SEL would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated least “A:VIII” by A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-”  by Standard & Poor’s Financial Services, LLC in an amount not less than 100% of the SEL.

 

The Loan Documents provide that if a specified percentage (which is in no event greater than 20%) of the reasonably estimated aggregate fair market value of the Mortgaged Property is damaged or destroyed, the lender shall have the option, in its sole discretion, to apply the net casualty insurance proceeds received to the payment of the Mortgage Loan or to allow such proceeds to be used for the repair or restoration of the Mortgaged Property.

 

All premiums on all insurance policies referred to in this section required to be paid as of the Cut-off Date have been paid, and such insurance policies name the lender under the Mortgage Loan and its successors and assigns as a loss payee under a mortgagee endorsement clause or, in the case of the general liability insurance policy, as named or additional insured.  Such insurance policies will inure to the benefit of the Trustee.  Each related Mortgage Loan obligates the related borrower to maintain all such insurance and, at such borrower’s failure to do so, authorizes the lender to maintain such insurance at the borrower’s cost and expense and to charge such borrower for related premiums.  All such insurance policies (other than commercial liability policies) require at least 30 days prior notice to the lender of termination or cancellation (or such lesser period, not less than 10 days, as may be required by applicable law) arising for any reason other than non-payment of a premium and no such notice has been received by the Seller.

 

(17)                          Access; Utilities; Separate Tax Lots.  Each Mortgaged Property (a) is located on or adjacent to a public road and has direct legal access to such road, or has access  via an irrevocable easement or irrevocable right of way permitting ingress and egress to/from a public road, (b) is served by or has uninhibited access rights to public or private water and sewer (or well and septic) and all required utilities, all of which are appropriate for the current use of the Mortgaged Property, and (c) constitutes one or more separate tax parcels which do not include any property which is not part of the Mortgaged Property or is subject to an endorsement under the related Title Policy insuring the Mortgaged Property, or in certain cases, an application has been, or will be, made to the applicable governing authority for creation of separate tax lots, in which case the Mortgage Loan requires the borrower to escrow an amount sufficient to pay taxes for the existing tax parcel of which the Mortgaged Property is a part until the separate tax lots are created.

 

(18)                          No Encroachments.  To the Seller’s knowledge based solely on surveys obtained in connection with origination and the lender’s Title Policy (or, if such policy is not yet issued, a pro forma title policy, a preliminary title policy with escrow instructions or a “marked up” commitment) obtained in connection with the origination of each Mortgage Loan, all material improvements that were included for the purpose of determining the appraised value of the related Mortgaged Property at the time of the origination of such Mortgage Loan are within the boundaries of the related Mortgaged Property, except encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy.  No improvements on adjoining parcels encroach onto the related Mortgaged Property except for encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy.  No improvements encroach upon any easements except for encroachments the removal of which would not materially and adversely affect the value or

 

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current use of such Mortgaged Property or for which insurance or endorsements were obtained with respect to the Title Policy.

 

(19)                          No Contingent Interest or Equity Participation.  No Mortgage Loan has a shared appreciation feature, any other contingent interest feature or a negative amortization feature or an equity participation by the Seller.

 

(20)                          Compliance with Usury Laws.  The Mortgage Rate (exclusive of any default interest, late charges, yield maintenance charge, or prepayment premiums) of such Mortgage Loan complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

 

(21)                          Authorized to Do Business.  To the extent required under applicable law, as of the Cut-off Date or as of the date that such entity held the Note, each holder of the Note was authorized to transact and do business in the jurisdiction in which each related Mortgaged Property is located, or the failure to be so authorized does not materially and adversely affect the enforceability of such Mortgage Loan.

 

(22)                          Trustee under Deed of Trust.  With respect to each Mortgage which is a deed of trust, as of the date of origination and, to the Seller’s knowledge, as of the Closing Date, a trustee, duly qualified under applicable law to serve as such, currently so serves and is named in the deed of trust or has been substituted in accordance with the Mortgage and applicable law or may be substituted in accordance with the Mortgage and applicable law by the related mortgagee.

 

(23)                          Local Law Compliance.  To the Seller’s knowledge, based upon any of a letter from any governmental authorities, a legal opinion, an architect’s letter, a zoning consultant’s report, an endorsement to the related Title Policy, or other affirmative investigation of local law compliance consistent with the investigation conducted by the Seller for similar commercial and multi-family mortgage loans intended for securitization, with respect to the improvements located on or forming part of each Mortgaged Property securing a Mortgage Loan as of the date of origination of such Mortgage Loan and as of the Cut-off Date, there are no material violations of applicable zoning ordinances, building codes and land laws (collectively “Zoning Regulations”) other than those which (i) are insured by the Title Policy or a law and ordinance or other insurance policy or (ii) would not have a material adverse effect on the Mortgage Loan.  The terms of the Loan Documents require the borrower to comply in all material respects with all applicable governmental regulations, zoning and building laws.

 

(24)                          Licenses and Permits.  Each borrower covenants in the Loan Documents that it shall keep all material licenses, permits and applicable governmental authorizations necessary for its operation of the Mortgaged Property in full force and effect, and to the Seller’s knowledge based upon a letter from any government authorities or other affirmative investigation of local law compliance consistent with the investigation conducted by the Seller for similar commercial and multi-family mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect.  The Mortgage Loan requires the related borrower to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located.

 

(25)                          Recourse Obligations.  The Loan Documents for each Mortgage Loan provide that such Mortgage Loan is non-recourse to the related parties thereto except for certain carve-outs, including but not limited to the following: (a) the related borrower and at least one individual or entity shall be fully liable for actual losses, liabilities, costs and damages arising from certain acts of the related borrower and/or its principals specified in the related Loan Documents, which acts generally include the following: (i) acts of fraud or intentional material misrepresentation, (ii) misapplication or misappropriation of rents, insurance proceeds or condemnation awards, (iii) intentional material physical waste of the Mortgaged Property, and (iv) any breach of the environmental covenants contained in the related Loan Documents, and (b) the Mortgage Loan shall become full recourse to the related borrower and at least one individual or entity, if the related borrower files a voluntary petition under federal or state bankruptcy or insolvency law.

 

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(26)                          Mortgage Releases.  The terms of the related Mortgage or related Loan Documents do not provide for release of any material portion of the Mortgaged Property from the lien of the Mortgage except (a) a partial release, accompanied by principal repayment of not less than a specified percentage at least equal to the lesser of (i) 110% of the related allocated loan amount of such portion of the Mortgaged Property and (ii) the outstanding principal balance of the Mortgage Loan, (b) upon repayment in full of such Mortgage Loan, (c) releases of out-parcels that are unimproved or other portions of the Mortgaged Property which will not have a material adverse effect on the underwritten value of the Mortgaged Property and which were not afforded any value in the appraisal obtained at the origination of the Mortgage Loan and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (d) as required pursuant to an order of condemnation.

 

(27)                          Financial Reporting and Rent Rolls.  Each Mortgage requires the borrower to provide the owner or holder of the Mortgage with quarterly and annual operating statements, and quarterly rent rolls for properties and annual financial statements, which annual financial statements with respect to each Mortgage Loan with more than one borrower are in the form of an annual combined balance sheet of the borrower entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combining balance sheet and statement of income for the Mortgaged Properties on a combined basis.

 

(28)                          Acts of Terrorism Exclusion.  With respect to each Mortgage Loan over $20 million, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) do not specifically exclude Acts of Terrorism, as defined in the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and further amended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (collectively referred to as “TRIA”), from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy.  With respect to each other Mortgage Loan, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) did not, as of the date of origination of the Mortgage Loan, and, to the Seller’s knowledge, do not, as of the Cut-off Date, specifically exclude Acts of Terrorism, as defined in TRIA, from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy.  With respect to each Mortgage Loan, the related Loan Documents do not expressly waive or prohibit the mortgagee from requiring coverage for Acts of Terrorism, as defined in TRIA, or damages related thereto except to the extent that any right to require such coverage may be limited by commercial availability on commercially reasonable terms, or as otherwise indicated in Schedule 1; provided, however, that if TRIA or a similar or subsequent statute is not in effect, then, provided that terrorism insurance is commercially available, the Borrower under each Mortgage Loan is required to carry terrorism insurance, but in such event the Borrower shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable in respect of the property and business interruption/rental loss insurance required under the related Loan Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at the time of the origination of the Mortgage Loan, and if the cost of terrorism insurance exceeds such amount, the borrower is required to purchase the maximum amount of terrorism insurance available with funds equal to such amount.

 

(29)                          Due on Sale or Encumbrance.  Subject to specific exceptions set forth below, each Mortgage Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Mortgage Loan if, without the consent of the holder of the Mortgage (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Loan Documents (which provide for transfers without the consent of the lender which are customarily acceptable to the Seller lending on the security of property comparable to the related Mortgaged Property, including, without limitation, transfers of worn-out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers by leases entered into in accordance with the Loan Documents), (a) the related Mortgaged Property, or any equity interest of greater than 50% in the related borrower, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers or transfers upon death or legal incapacity, (ii) transfers to certain affiliates as defined in the related Loan Documents, (iii) transfers of less than, or other than, a controlling interest in the related borrower, (iv) transfers to another holder of direct or indirect equity in the borrower, a specific 

 

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Person designated in the related Loan Documents or a Person satisfying specific criteria identified in the related Loan Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies, (vi) a substitution or release of collateral within the parameters of paragraph (26) herein or the exceptions thereto set forth in Schedule 1(a), or (vii) as set forth on Schedule 1(b) hereto by reason of any mezzanine debt that existed at the origination of the related Mortgage Loan, or future permitted mezzanine debt as set forth on Schedule 1(c) hereto or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any Companion Loan or any subordinate debt that existed at origination and is permitted under the related Loan Documents, (ii) purchase money security interests, (iii) any Crossed Mortgage Loan as set forth on Schedule 1(d) hereto, or (iv) Permitted Encumbrances.  The Mortgage or other Loan Documents provide that to the extent any Rating Agency fees are incurred in connection with the review of and consent to any transfer or encumbrance, the borrower is responsible for such payment along with all other reasonable fees and expenses incurred by the Mortgagee relative to such transfer or encumbrance.

 

(30)                          Single-Purpose Entity.  Each Mortgage Loan requires the borrower to be a Single-Purpose Entity for at least as long as the Mortgage Loan is outstanding.  Both the Loan Documents and the organizational documents of the borrower with respect to each Mortgage Loan with a Cut-off Date Stated Principal Balance in excess of $5 million provide that the borrower is a Single-Purpose Entity, and each Mortgage Loan with a Cut-off Date Stated Principal Balance of $20 million or more has a counsel’s opinion regarding non-consolidation of the borrower.  For this purpose, a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents (or if the Mortgage Loan has a Cut-off Date Stated Principal Balance equal to $5 million or less, its organizational documents or the related Loan Documents) provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more of the Mortgaged Properties securing the Mortgage Loans and prohibit it from engaging in any business unrelated to such Mortgaged Property or Properties, and whose organizational documents further provide, or which entity represented in the related Loan Documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Mortgaged Property or Properties, or any indebtedness other than as permitted by the related Mortgage(s) or the other related Loan Documents, that it has its own books and records and accounts separate and apart from those of any other person (other than a borrower for a Crossed Mortgage Loan), and that it holds itself out as a legal entity, separate and apart from any other person or entity.

 

(31)                          Ground Leases.   For purposes of this Agreement, a “Ground Lease” shall mean a lease creating a leasehold estate in real property where the fee owner as the ground lessor conveys for a term or terms of years its entire interest in the land and buildings and other improvements, if any, comprising the premises demised under such lease to the ground lessee (who may, in certain circumstances, own the building and improvements on the land), subject to the reversionary interest of the ground lessor as fee owner and does not include industrial development agency (IDA) or similar leases for purposes of conferring a tax abatement or other benefit.

 

With respect to any Mortgage Loan where the Mortgage Loan is secured by a leasehold estate under a Ground Lease in whole or in part, and the related Mortgage does not also encumber the related lessor’s fee interest in such Mortgaged Property, based upon the terms of the Ground Lease and any estoppel or other agreement received from the ground lessor in favor of the Seller, its successors and assigns, the Seller represents and warrants that:

 

(a)                                 The Ground Lease or a memorandum regarding such Ground Lease has been duly recorded or submitted for recordation in a form that is acceptable for recording in the applicable jurisdiction.  The Ground Lease or an estoppel or other agreement received from the ground lessor permits the interest of the lessee to be encumbered by the related Mortgage and does not restrict the use of the related Mortgaged Property by such lessee, its successors or assigns in a manner that would materially adversely affect the security provided by the related Mortgage;

 

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(b)                                 The lessor under such Ground Lease has agreed in a writing included in the related Mortgage File (or in such Ground Lease) that the Ground Lease may not be amended or  modified, or canceled or terminated by agreement of lessor and lessee, without the prior written consent of the lender, and no such consent has been granted by the Seller since the origination of the Mortgage Loan except as reflected in any written instruments which are included in the related Mortgage File;

 

(c)                                  The Ground Lease has an original term (or an original term plus one or more optional renewal terms, which, under all circumstances, may be exercised, and will be enforceable, by either borrower or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Mortgage Loan, or 10 years past the stated maturity if such Mortgage Loan fully amortizes by the stated maturity (or with respect to a Mortgage Loan that accrues on an actual 360 basis, substantially amortizes);

 

(d)                                 The Ground Lease either (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, except for the related fee interest of the ground lessor and the Permitted Encumbrances, or (ii)  is subject to a subordination, non-disturbance and attornment agreement to which the mortgagee on the lessor’s fee interest in the Mortgaged Property is subject;

 

(e)                                  The Ground Lease does not place commercially unreasonable restrictions on the identity of the Mortgagee and the Ground Lease is assignable to the holder of the Mortgage Loan and its successors and assigns without the consent of the lessor thereunder, and in the event it is so assigned, it is further assignable by the holder of the Mortgage Loan and its successors and assigns without the consent of the lessor;

 

(f)                                   The Seller has not received any written notice of material default under or notice of termination of such Ground Lease.  To the Seller’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to the Seller’s knowledge, such Ground Lease is in full force and effect as of the Closing Date;

 

(g)                                  The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give to the lender written notice of any default, and provides that no notice of default or termination is effective against the lender unless such notice is given to the lender;

 

(h)                                 A lender is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease through legal proceedings) to cure any default under the Ground Lease which is curable after the lender’s receipt of notice of any default before the lessor may terminate the Ground Lease;

 

(i)                                     The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by the Seller in connection with loans originated for securitization;

 

(j)                                    Under the terms of the Ground Lease, an estoppel or other agreement received from the ground lessor and the related Mortgage (taken together), any related insurance proceeds or the portion of the condemnation award allocable to the ground lessee’s interest (other than (i) de minimis amounts for minor casualties or (ii) in respect of a total or substantially total loss or taking as addressed in clause (k) below) will be applied either to the repair or to the restoration of all or part of the related Mortgaged Property with (so long as such proceeds are in excess of the threshold amount specified in the related Loan Documents) the lender or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest;

 

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(k)                                 In the case of a total or substantially total loss or taking, under the terms of the Ground Lease, an estoppel or other agreement and the related Mortgage (taken together), any related insurance proceeds, or portion of the condemnation award allocable to ground lessee’s interest in respect of a total or substantially total loss or taking of the related Mortgaged Property to the extent not applied to restoration, will be applied first to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest; and

 

(l)                                     Provided that the lender cures any defaults which are susceptible to being cured, the ground lessor has agreed to enter into a new lease with the lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.

 

(32)                          Servicing.  The servicing and collection practices used by the Seller with respect to the Mortgage Loan have been, in all respects, legal and have met customary industry standards for servicing of commercial loans for conduit loan programs.

 

(33)                          Origination and Underwriting.  The origination practices of the Seller (or the related originator if the Seller was not the originator) with respect to each Mortgage Loan have been, in all material respects, legal and as of the date of its origination, such Mortgage Loan and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the origination of such Mortgage Loan; provided that such representation and warranty does not address or otherwise cover any matters with respect to federal, state or local law otherwise covered in this Schedule 1.

 

(34)                          No Material Default; Payment Record.  No Mortgage Loan has been more than 30 days delinquent, without giving effect to any grace or cure period, in making required payments since origination, and as of the date hereof, no Mortgage Loan is more than 30 days delinquent (beyond any applicable grace or cure period) in making required payments as of the Closing Date.  To the Seller’s knowledge, there is (a) no material default, breach, violation or event of acceleration existing under the related Mortgage Loan or participation agreement, if applicable, or (b) no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, which default, breach, violation or event of acceleration, in the case of either clause (a) or clause (b), materially and adversely affects the value of the Mortgage Loan or participation agreement, if applicable, or the value, use or operation of the related Mortgaged Property, provided, however, that this representation and warranty does not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by the Seller in this Schedule 1.  No person other than the holder of such Mortgage Loan may declare any event of default under the Mortgage Loan or accelerate any indebtedness under the Loan Documents.

 

(35)                          Bankruptcy.  As of the date of origination of the related Mortgage Loan and to the Seller’s knowledge as of the Cut-off Date, no borrower, guarantor or tenant occupying a single-tenant property is a debtor in state or federal bankruptcy, insolvency or similar proceeding.

 

(36)                          Organization of Borrower.  With respect to each Mortgage Loan, in reliance on certified copies of the organizational documents of the borrower delivered by the borrower in connection with the origination of such Mortgage Loan, the borrower is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico.  Except with respect to any Crossed Mortgage Loan, no Mortgage Loan has a borrower that is an Affiliate of another borrower. (An “Affiliate” for purposes of this paragraph (36) means, a borrower that is under direct or indirect common ownership and control with another borrower.)

 

(37)                          Environmental Conditions.  A Phase I environmental site assessment (or update of a previous Phase I and or Phase II site assessment) and, with respect to certain Mortgage Loans, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements conducted by a reputable environmental consultant in connection with such Mortgage Loan was delivered to the Seller within 12 months prior to the origination date of each Mortgage Loan (or an update of a previous ESA was prepared), and such ESA (i) did not identify the existence of recognized environmental conditions (as such term is defined in ASTM

 

10

 

E1527-05 or its successor, hereinafter “Environmental Condition”) at the related Mortgaged Property or the need for further investigation, or (ii) if the existence of an Environmental Condition or need for further investigation was indicated in any such ESA, then at least one of the following statements is true:  (A) an amount reasonably estimated by a reputable environmental consultant to be sufficient to cover the estimated cost to cure any material noncompliance with applicable environmental laws or the Environmental Condition has been escrowed by the related borrower and is held or controlled by the related lender; (B) if the only Environmental Condition relates to the presence of asbestos-containing materials, radon in indoor air, lead based paint or lead in drinking water, and the only recommended action in the ESA is the institution of such a plan, an operations or maintenance plan has been required to be instituted by the related borrower that can reasonably be expected to mitigate the identified risk; (C) the Environmental Condition identified in the related environmental report was remediated or abated in all material respects prior to the date hereof, and, if and as appropriate, a no-further-action or closure letter was obtained from the applicable governmental regulatory authority (or the Environmental Condition affecting the related Mortgaged Property was otherwise listed by such governmental authority as “closed” or a reputable environmental consultant has concluded that no further action is required); (D) a secured creditor environmental policy or a pollution legal liability insurance policy that covers liability for the Environmental Condition was obtained from an insurer rated no less than A- (or the equivalent) by Moody’s, S&P and/or Fitch; (E) a party not related to the borrower was identified as the responsible party for such Environmental Condition and such responsible party has financial resources reasonably estimated to be adequate to address the situation; or (F) a party related to the borrower having financial resources reasonably estimated to be adequate to address the situation is required to take action.  To Seller’s knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property.

 

(38)                          Appraisal.  The Servicing File contains an appraisal of the related Mortgaged Property with an appraisal date within six months of the Mortgage Loan origination date.  The appraisal is signed by an appraiser who is either a Member of the Appraisal Institute (“MAI”) and/or has been licensed and certified to prepare appraisals in the state where the Mortgaged Property is located. Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation and has certified that such appraiser had no interest, direct or indirect, in the Mortgaged Property or the borrower or in any loan made on the security thereof, and its compensation is not affected by the approval or disapproval of the Mortgage Loan.

 

(39)                          Loan Obligation Schedule.  The information pertaining to each Loan Obligation that is set forth in the schedule attached as Exhibit A to this Agreement is true and correct in all material respects as of the Cut-off Date and contains all information required by this Agreement to be contained therein.

 

(40)                          Cross-Collateralization.  No Mortgage Loan is cross-collateralized or cross-defaulted with any mortgage loan that is not owned by the Issuer, except as set forth in Schedule 1(d).

 

(41)                          Advance of Funds by the Seller.  After origination, no advance of funds has been made by the Seller to the related borrower other than in accordance with the Loan Documents, and, to the Seller’s knowledge, no funds have been received from any person other than the related borrower or an affiliate for, or on account of, payments due on the Mortgage Loan (other than as contemplated by the Loan Documents, such as, by way of example and not in limitation of the foregoing, amounts paid by the tenant(s) into a lender-controlled lockbox if required or contemplated under the related lease or Loan Documents).  Neither the Seller nor any affiliate thereof has any obligation to make any capital contribution to any borrower under a Mortgage Loan, other than contributions made on or prior to the date hereof.

 

(42)                          Compliance with Anti-Money Laundering Laws.  The Seller (or the related originator if the Seller was not the originator) has complied in all material respects with all applicable anti-money laundering laws and regulations, including without limitation the USA PATRIOT Act of 2001 with respect to the origination of the Mortgage Loan, the failure to comply with which would have a material adverse effect on the Mortgage Loan.

 

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(43)                          Floating Interest Rates. Each Mortgage Loan bears interest at a floating rate based on LIBOR.

 

(44)                          Participations. With respect to each Loan Obligation that is a Participation:

 

(i)          Either (A) the Participation is treated as a real estate asset for purposes of Section 856(c) of the Code, and the interest payable pursuant to such Participation is treated as interest on an obligation secured by a mortgage on real property or on an interest in real property for purposes of Section 856(c) of the Code, or (B) the Participation qualifies as a security that would not otherwise cause ARMS Equity to fail to qualify as a REIT under the Code (including after the sale, transfer and assignment to the Issuer of such Senior Participation);

 

(ii)         To the actual knowledge of the Seller, as of the Closing Date, the related Participating Institution was not a debtor in any outstanding proceeding pursuant to the federal bankruptcy code;

 

(iii)        The Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Participation is or may become obligated;

 

(iv)        The participation agreement is legal, valid and enforceable as between its parties, and provides that (other than any Non-Controlling Participations) the lead and control participant or participants (the “Lead Participant”) have full power, authority and discretion to service the Loan Obligation, modify and amend the terms thereof, pursue remedies and enforcement actions, including foreclosure or other legal action, without consent or approval of any other participant (each, a “Third-Party Participant”);

 

(v)         Each Third Party Participant is required to pay its pro rata share of any expenses, costs and fees associated with servicing and enforcing rights and remedies under the related Loan Obligation upon request therefor by the related servicer or Lead Participant;

 

(vi)        Each participation agreement is effective to convey the participation interest to the related participants and is not intended to be, or to be effective as a loan or other financing secured by the Loan Obligation or the underlying Whole Loan.  If the Issuer will be the Lead Participant, the Lead Participant owes no fiduciary duty or obligation to any Third-Party Participant under any participation agreement;

 

(vii)       All amounts due and owing to any Third Party Participant pursuant to each participation agreement have been duly and timely paid.  There is no default by the Lead Participant, or to the Seller’s knowledge, by any Third-Party Participant under any participation agreement;

 

(viii)      The participation interest and, if being transferred to the Issuer, the Lead Participant role, rights and responsibilities are assignable by the Seller without consent or approval other than those that have been obtained;

 

(ix)        If the Issuer will be the Lead Participant, the terms of the participation agreement do not require or obligate the Lead Participant or its successor or assigns to repurchase the participation interest under any circumstances; and

 

(x)         The Seller, in selling any other participation interest to a Third-Party Participant, made no misrepresentation, fraud or omission of information necessary for such Third-Party Participant to make an informed decision to purchase its participation interest.

 

For purposes of these representations and warranties, the phrases “the Seller’s knowledge” or “the Seller’s belief” and other words and phrases of like import shall mean, except where otherwise expressly set forth herein, the actual state of knowledge or belief of the Seller, its officers and employees directly responsible for the underwriting, origination, servicing or sale of the Mortgage Loans regarding the matters expressly set forth herein.

 

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SCHEDULE 1(a)

 

EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES

 

Representation numbers referred to below relate to the corresponding Closing Date Loan Obligation representations and warranties set forth in Schedule 1 to this Agreement.

 

	
Loan Obligation
    	
 
    	
Representation
    	
 
    	
Exception
    
	
The Darlington
    	
 
    	
#15
    	
 
    	
Interest will not accrue on the funds in the   Renovation Reserve (not including U.S.$4,800,000 of reserve funds allocated   to materials, the funding of which will not trigger interest accrual and   payment on the full U.S.$19,000,000 reserve) until the earlier of   (i) the date on which any funds are first disbursed to the borrower and   (ii) April 14, 2018. Thus, if the borrower does not draw on any   funds in the Renovation Reserve (except for materials below), interest will   start accruing on the full U.S.$19,000,000 reserve from and after April 14,   2018. If the borrower draws any amount prior to April 14, 2018, interest   will start accruing on the full U.S.$19,000,000 reserve as of the date of   that draw. To date, the borrower has not drawn any funds from the Renovation   Reserve, thereby triggering the accrual and payment of interest thereon.
    
   If the above conditions are not met by October 14, 2018, the lender has   the right to not fund any amounts from the Renovation Reserve. Any fundings   are then at the lender’s discretion.
    
   Disbursements for Materials — The borrower has the right to request up to   U.S.$4,800,000 (in 4 draw requests of U.S.$1,200,000 each) for the purchase   of materials. This does not trigger the payment of interest on the full   U.S.$19,000,000 reserve. The borrower only has to pay interest on the amount   drawn for materials.
    
	
The Darlington
    	
 
    	
#36
    	
 
    	
The borrower under The Darlington loan is owned, in   part, and controlled by the same sponsor who also owns, in part, and controls   the borrower under the Targeted Additional Loan Obligation (as defined in the   Indenture).
    
	
Campus Commons
    	
 
    	
#36
    	
 
    	
The borrower under the Campus Commons loan is owned,   in part, and controlled by the same sponsors who also own, in part, and   control the borrowers under The Factory I & II loan.
    
	
The Factory I & II
    	
 
    	
#36
    	
 
    	
The borrowers under The Factory I & II loan   are owned, in part, and controlled by the same sponsors who also own, in   part, and control the borrower under the Campus Commons loan.
    

 

1

 

SCHEDULE 1(b)

 

Existing Mezzanine Debt

 

None.

 

1

 

SCHEDULE 1(c)

 

Future Mezzanine Debt

 

None.

 

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SCHEDULE 1(d)

 

Crossed Loan Obligations

 

None.

 

1EXHIBIT 10.33

 

ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2017-FL3, LTD.
 CLASS A NOTES, CLASS B NOTES, CLASS C NOTES AND CLASS D NOTES

 

 

Placement Agreement

 

Dated as of December 6, 2017

 

J.P. Morgan Securities LLC
 383 Madison Avenue, 8th Floor
 New York, New York 10179

 

Ladies and Gentlemen:

 

ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2017-FL3, LTD. (the “Issuer”) and ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2017-FL3, LLC (the “Co-Issuer” and, together with the Issuer, the “Co-Issuers”), propose to issue their $271,200,000 Class A Senior Secured Floating Rate Notes Due 2027 (the “Class A Notes”), their $24,000,000 Class B Secured Floating Rate Notes Due 2027 (the “Class B Notes”), their $24,600,000 Class C Secured Floating Rate Notes Due 2027 (the “Class C Notes”), and their $36,000,000 Class D Secured Floating Rate Notes Due 2027 (the “Class D Notes”).  The Issuer intends to issue their $31,800,000 Class E Floating Rate Notes Due 2027 (the “Class E Notes” and, together with the Class A Notes, Class B Notes, Class C Notes and Class D Notes, the “Notes”) and 91,800 preferred shares, with a par value of U.S.$0.0001 per share and a notional amount of U.S.$1,000 per share (the “Preferred Shares” and, together with the Notes, the “Securities”).  The Co-Issuers have engaged J.P. Morgan Securities LLC (the “Placement Agent”) to act as placement agent in conjunction with the offer and sale of the Offered Notes (as defined below) pursuant to this Placement Agreement (this “Agreement”).

 

The Notes shall be issued pursuant to an Indenture, to be dated as of December 20, 2017 (the “Indenture”), among the Co-Issuers, Arbor Realty SR, Inc. (including any successor by merger, the “Seller” or the “Arbor Parent”), as advancing agent, U.S. Bank National Association, as trustee (in such capacity, the “Trustee”), paying agent, calculation agent, transfer agent, custodial securities intermediary, backup advancing agent and notes registrar, and U.S. Bank National Association, as custodian, and the Preferred Shares shall be issued pursuant to the Governing Documents (as defined in the Indenture) of the Issuer, certain resolutions of the board of directors of the Issuer passed prior to the issuance of the Preferred Shares and the Preferred Share Paying Agency Agreement, to be dated as of December 20, 2017 (the “Preferred Share Paying Agency Agreement”), among the Issuer, U.S. Bank National Association, as preferred share paying agent (the “Preferred Share Paying Agent”), and MaplesFS Limited, as share registrar.  Capitalized terms used but not defined herein shall have the meanings specified in the Offering Memorandum (as hereinafter defined) or, to the extent not defined therein, in the Indenture.

 

On the Closing Date, the Issuer will purchase the Loan Obligations described and listed in Annex A to the Offering Memorandum (collectively, the “Loan Obligations” and, with

 

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all other assets pledged to the Trustee on behalf of the Secured Parties pursuant to the Indenture, the “Collateral”) from the Arbor Parent.

 

As used herein, the term “Offered Notes” means the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes.

 

The Co-Issuers, the Arbor Parent and the Placement Agent agree as follows:

 

1.                                      Appointment of Placement Agent; Offer and Sale of Notes.

 

(a)                                 The Co-Issuers and the Arbor Parent hereby appoint the Placement Agent to act as placement agent in connection with the offer and sale of the Offered Notes in accordance with the terms hereof, and the Placement Agent hereby accepts such appointment in accordance with the terms hereof.  Subject to the terms and conditions hereof and in reliance on the representations and warranties herein set forth, the Co-Issuers agree to sell, and the Arbor Parent agrees to cause to be sold, the Notes and the Placement Agent agrees, on a best efforts basis, to (i) solicit offers to purchase the Notes on behalf of the Co-Issuers from time to time in negotiated transactions at various prices to be determined at the time of the sale and (ii) provide customary facilitation of the offering and sale of the Offered Notes.  In connection with acting as placement agent hereunder, the Placement Agent shall have the right (but not the obligation) to purchase the Offered Notes and resell the Offered Notes pursuant to the terms of this Agreement.  Each of the Co-Issuers, the Arbor Parent and the Placement Agent agrees that, as to any and all of the Offered Notes with respect to which the Placement Agent arranges the sale pursuant to this Agreement, such Notes shall be offered and sold in reliance on, among other things, the agreements, representations, warranties and covenants of the Co-Issuers and the Arbor Parent contained herein and on the terms and conditions and in the manner provided for herein; provided, however, that the Placement Agent shall have no liability to the Co-Issuers, the Arbor Parent or any of their respective affiliates in the event that any purchase or sale is not consummated for any reason.  The Co-Issuers and the Arbor Parent shall have the sole right to accept or reject any or all offers presented by the Placement Agent in the sole and absolute discretion of the Co-Issuers and the Arbor Parent.  The Co-Issuers shall direct the Placement Agent to remit the aggregate purchase price for the Offered Notes (net of the advisory, structuring and placement agent fee (the “Advisory, Structuring and Placement Agent Fee”) set forth on Schedule I, which shall be retained by the Placement Agent) placed pursuant hereto to an account specified by the Issuer.

 

(b)                                 The Placement Agent hereby represents, warrants and agrees that:

 

(i)                                     it understands that the offer and sale of the Offered Notes have not and will not be registered under the Securities Act or registered or qualified under any applicable state securities laws and that none of the Co-Issuers or the Arbor Parent is obligated to so register or qualify the Offered Notes;

 

(ii)                                  it is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act (a “QIB”);

 

(iii)                               (x) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer to sell, the Offered Notes or any interest therein by means of

 

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any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act (“Regulation D”), including, but not limited to, any advertisement, article, magazine or similar medium or broadcast over television or radio or any seminar or meeting whose attendees have been invited by any general solicitation or advertising (as those terms are used in Regulation D), or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act and (y) it has not solicited offers for or offered or sold, and will not solicit offers for, or offer or sell, the Offered Notes as part of their initial offering except on the terms set forth in the Offering Memorandum (as defined below):  (A) within the United States (or to U.S. persons within the meaning of Regulation S) to persons each of whom it reasonably believes to be a Qualified Purchaser within the meaning of the Investment Company Act of 1940 and that are either (1) QIBs in transactions pursuant to Rule 144A under the Securities Act (“Rule 144A”) and as to which in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of the Offered Notes is aware that such sale is being made in reliance on Rule 144A or (2) institutions that are “accredited investors” as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D (“Institutional Accredited Investors”), who, in the case of purchasers described in this clause (2), purchase the Offered Notes in certificated form for their own account and for any discretionary account for which they are acquiring securities and provide a letter in the form required under the Indenture or (B) in accordance with the restrictions set forth in Annex A hereto;

 

(iv)                              (x) it has not provided, as of the date of this Agreement, and covenants with the Co-Issuers that it will not provide, on or prior to the Closing Date, to any Rating Agency or other “nationally recognized statistical rating organization” (within the meaning of the Exchange Act), any information, written or oral, relating to the Offered Notes, the Collateral, the transactions contemplated by this Agreement or the Indenture or any other information, that could be reasonably determined to be relevant to determining an initial credit rating for the Notes (as contemplated by Rule 17g-5(a)(3)(iii)(C) of the Exchange Act), without the prior consent of the Co-Issuers, and (y) covenants with the Co-Issuers that it will not provide to any Rating Agency or other “nationally recognized statistical rating organization” (within the meaning of the Exchange Act), any information, written or oral, relating to the Offered Notes, the Collateral, the transactions contemplated by this Agreement or the Indenture or any other information, that could be reasonably determined to be relevant to undertaking credit rating surveillance for the Offered Notes (as contemplated by Rule 17g-5(a)(iii)(3)(D) under the Exchange Act), without the prior consent of the Co-Issuers; provided, in the case of both (x) and (y), the Co-Issuers acknowledge that they have requested that the Placement Agent participate in or initiate communications with the Rating Agencies with respect to information posted on the website established pursuant to Rule 17g-5 of the Exchange Act (“Rule 17g-5”) throughout the transactions contemplated hereby or by the Indenture and to provide for posting to such website any information relayed in such communications to the extent not already posted on such website without requesting the Co-Issuers’ specific prior consent and without the Co-Issuers’ participation, and any and all such communication shall be deemed to have been consented to by the Co-Issuers; and

 

3

 

(v)                                 other than the Time of Sale Information, the Indenture, the Offering Memorandum and the other Basic Documents, neither it nor any of its affiliates (including its agents and representatives) has furnished or made available, or will furnish or make available, to potential investors in the Offered Notes, without the prior consent of the Co-Issuers and the Arbor Parent, any written communication that constitutes an offer to sell or solicitation of an offer to buy the Offered Notes.

 

(c)                                  In connection with the issuance of the Offered Notes, the Co-Issuers and the Arbor Parent have prepared an Offering Memorandum, dated December 6, 2017 (including any exhibits and annexes thereto and any accompanying electronic media, the “Offering Memorandum”), in form and substance acceptable to the Placement Agent.  Copies of the Offering Memorandum will be delivered by the Co-Issuers and the Arbor Parent to the Placement Agent pursuant to the terms of this Agreement.  At or prior to the time when sales of the Offered Notes were first made, which was approximately 10:30 AM (prevailing Eastern time) on December 6, 2017 (the “Time of Sale”), the Co-Issuers and the Arbor Parent have prepared the following documents: a Preliminary Offering Memorandum, dated December 1, 2017 (including any exhibits and annexes thereto and any accompanying electronic media, the “Preliminary Offering Memorandum” and, together with any Additional Disclosure Materials (as defined below), the “Time of Sale Information”).  If, subsequent to the date of this Agreement, (x) the Co-Issuers, the Arbor Parent and the Placement Agent determine that, as to any investors in the Offered Notes, the Time of Sale Information as of the Time of Sale included an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and the Placement Agent terminates its old purchase contracts and enters into new purchase contracts with investors in the Offered Notes, then “Time of Sale Information” shall also include such additional information conveyed to investors as of the time of entry into the new purchase contracts, including any information that corrects such material misstatements or omissions and “Time of Sale” shall refer to the time and date on which such new purchase contracts were entered into.  Any Time of Sale Information furnished to the Placement Agent subsequent to the date of this Agreement shall be in form and substance satisfactory to the Placement Agent and shall be listed on Annex B hereto.

 

(d)                                 Except as otherwise set forth in paragraph (e) below, the Offered Notes to be placed by the Placement Agent shall be represented by one or more definitive global notes in book-entry form, which shall be deposited by or on behalf of the Co-Issuers with the Depository Trust Company (the “DTC”) or its designated custodian.  The Co-Issuers shall deliver the applicable Offered Notes to the Placement Agent, acting on behalf of the purchasers of the applicable Notes, by causing DTC to credit such Offered Notes to the account of the Placement Agent (or its designee) at DTC.  The Offered Notes shall be registered in such names and such authorized denominations as the Placement Agent may request in writing not less than forty-eight (48) hours prior to the Closing Date.  The Co-Issuers shall cause the Offered Notes to be made available to the Placement Agent for inspection at least twenty-four (24) hours prior to the Closing Date at the offices of Clifford Chance US LLP at 31 West 52nd Street, New York, New York 10019 (the “Closing Location”).  The time and date of delivery of the Offered Notes shall be 10:00 a.m., New York City time, on December 20, 2017, or such other time and date as the Placement Agent and the Co-Issuers may agree upon in writing.  The time and date of such payment and delivery is referred to herein as the “Closing Date”.  On the Closing Date, the Co-

 

4

 

Issuers and the Arbor Parent (jointly and severally) agree to pay to the Placement Agent the Advisory, Structuring and Placement Agent Fee as set forth on Schedule I hereto.

 

(e)                                  The Offered Notes sold to Institutional Accredited Investors that are not QIBs, as specified by the Placement Agent upon at least forty-eight (48) hours’ prior notice to the Co-Issuers (such request to include the authorized denominations and the names in which they are to be registered), shall be delivered in definitive certificated form to or upon the instructions of the Placement Agent, acting on behalf of the applicable purchasers of the Offered Notes, against payment of the purchase price therefor by wire transfer of immediately available funds.  The Offered Notes shall be made available for inspection and packaging in New York, New York, not later than 1:00 p.m. on the business day prior to the Closing Date at the Closing Location.

 

(f)                                   The documents to be delivered at the Closing Date by or on behalf of the parties hereto pursuant to Section 5 hereof and the Offered Notes shall be delivered at the Closing Location on the Closing Date.  A meeting shall be held at the Closing Location at 5:00 p.m., New York City time, on the New York Business Day next preceding the Closing Date, or such other time agreed to by the parties hereto, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence shall be available for review by the parties hereto.  For the purposes of this Section 1(f), “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.

 

(g)                                  The Placement Agent acknowledges and agrees that the Co-Issuers and, for purposes of the opinions to be delivered to the Placement Agent pursuant to Sections 5(h) and 5(i) hereof, counsel for the Co-Issuers and counsel for the Placement Agent, respectively, may rely upon the accuracy of the representations and warranties of the Placement Agent, and compliance by the Placement Agent with its agreements contained in Section 1(b) (including Annex A hereto), and the Placement Agent hereby consents to such reliance.

 

(h)                                 The Co-Issuers and the Arbor Parent acknowledge and agree that the Placement Agent is acting solely in the capacity of an arm’s-length contractual counterparty to the Co-Issuers and the Arbor Parent with respect to the offering and sale of the Offered Notes if and to the extent contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or fiduciary to, or agent of, the Co-Issuers, the Arbor Parent or any other person in connection with each transaction contemplated hereby and the process leading to such transaction.  Additionally, the Placement Agent is not advising the Co-Issuers, the Arbor Parent or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction.  The Co-Issuers and the Arbor Parent shall consult with their own advisors concerning such matters and shall be responsible for making their own independent investigation and appraisal of the transactions contemplated hereby, and the Placement Agent shall not have any responsibility or liability to the Co-Issuers, the Arbor Parent or any other person with respect thereto.  Any review by the Placement Agent of the Co-Issuers and the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Placement Agent, and shall not be on behalf of the Co-Issuers, the Arbor Parent or any other person.  Each of the Co-Issuers and the Arbor Parent agree

 

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that it will not claim that the Placement Agent has rendered financial advisory services of any nature or respect, or owes a fiduciary or similar duty to the Co-Issuers, the Arbor Parent or any other person in connection with such transaction or the process leading thereto.

 

(i)                                     The Placement Agent may provide to prospective investors Additional Disclosure Materials (as defined below), subject to the following conditions:  (i) the Placement Agent shall provide to the Issuer any Additional Disclosure Materials that the Placement Agent has prepared prior to providing such materials to investors; and (ii) in the event that the Issuer or the Placement Agent discovers an error in the Additional Disclosure Materials, the Issuer, if it has discovered such error, shall notify the Placement Agent in writing and, in either case, the Placement Agent shall correct such error prior to providing such materials to any prospective investors.  “Additional Disclosure Materials” shall mean any “flip” book or similar marketing materials or any term sheet or similar marketing materials and any and all other summaries, reports, documents, in written or electronic form, (i) provided to the Placement Agent by or on behalf of the Issuer or any of its affiliates or (ii) prepared by the Placement Agent and provided to the Issuer prior to distribution to prospective investors in accordance with the preceding sentence.

 

(j)                                    Except for the Accountants’ Due Diligence Report (as defined in Section 3.1(a) below), it has not obtained any Due Diligence Report (as defined in Section 3.1(a) below) in connection with the offering contemplated hereby.

 

2.                                      Representations and Warranties of the Co-Issuers.  The Co-Issuers represent and warrant to the Placement Agent that:

 

(a)                                 Time of Sale Information and Offering Memorandum.  The Time of Sale Information, as of the Time of Sale, did not, and as of the Closing Date, will not, and the Offering Memorandum, as of the date thereof, did not, and as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Co-Issuers do not make any representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to the Placement Agent furnished to the Co-Issuers in writing by the Placement Agent expressly for use in the Time of Sale Information and the Offering Memorandum and any amendment or supplement thereto (such information, as identified in Section 12, the “Placement Agent Information”).

 

(b)                                 Additional Written Communications.  Other than the Time of Sale Information and the Offering Memorandum, neither the Co-Issuers nor any of their affiliates (including their agents and representatives) have made, used, prepared, authorized, approved or referred to or will prepare, make, use, authorize, approve or refer to any written communication that constitutes an offer to sell or solicitation of an offer to buy the Notes.

 

(c)                                  No Material Adverse Change.  Other than as set forth in the Time of Sale Information, since the Time of Sale and other than as set forth in the Offering Memorandum, since the date thereof, there has not been any material adverse change or any development involving a prospective material adverse change, in or affecting the business, properties,

 

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management, financial position, stockholders’ equity or results of operations of the Co-Issuers or the Arbor Parent.

 

(d)                                 Organization and Good Standing.  Each of the Co-Issuers, the Arbor Parent and their respective affiliates that will be a party to a Basic Document has been duly incorporated or organized, as the case may be, and is a validly existing company or organization, as the case may be, in good standing under the laws of its jurisdiction of organization, is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction in which the conduct of its business requires such qualification, and has all power and authority necessary to enter into and perform its obligations under each of the Basic Documents (as defined in Section 2(g) below) to which it is a party and to own or hold its properties and to conduct the business in which it is engaged.

 

(e)                                  Due Authorization.  Each of the Co-Issuers, the Arbor Parent and their respective affiliates that will be a party to a Basic Document has full right, power and authority to execute and deliver each of the Basic Documents to which it is a party, and to perform its obligations hereunder and thereunder; and all action required to be taken for the due and proper authorization, execution and delivery of each of the Basic Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly and validly taken.

 

(f)                                   The Offered Notes.  The Offered Notes have been duly authorized and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will be entitled to the benefits and security afforded by the Indenture.

 

(g)                                  Indenture and the other Basic Documents; Description of Basic Documents.  When used in this agreement, the term “Basic Documents” shall mean this Agreement, the Indenture, the Notes, the Servicing Agreement, the Securities Account Control Agreement, the Preferred Share Paying Agency Agreement, the Loan Obligations Purchase Agreement, the Loan Obligation Management Agreement and any other contract or agreement that is, or is to be, entered into by the Issuer on the Closing Date or otherwise in connection with any of the foregoing or this Agreement.  Each Basic Document to which the Issuer, the Co-Issuer the Arbor Parent or any affiliate thereof is a party has been duly authorized by such entity, as applicable, and when duly executed and delivered in accordance with its terms by each of the parties thereto (other than such entity, as applicable), will constitute a valid and legally binding agreement of such entity, as applicable, enforceable against such entity, as applicable, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.  The Basic Documents described in the Time of Sale Information or the Offering Memorandum will conform in all material respects to the descriptions thereof contained in the Time of Sale Information and in the Offering Memorandum.

 

(h)                                 No Violation or Default.  None of the Co-Issuers, the Arbor Parent or any of their respective affiliates that will be a party to a Basic Document is (A) in violation of its charter, by-laws, memorandum and articles of association or similar organizational documents; (B) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or

 

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condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets are subject; or (C) in violation of any law or statute or any judgment, order or regulation of any court or governmental agency or body having jurisdiction over it or any of its properties (“Governmental Authority”).

 

(i)                                     No Conflicts with Existing Instruments.  The execution, delivery and performance by the Issuer, the Co-Issuer, the Arbor Parent or any of their respective affiliates of any Basic Document to which it is a party, the issuance and sale of the Notes and compliance by it with the terms thereof and the consummation of the transactions contemplated by such Basic Documents will not (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or, except as contemplated by the Basic Documents, result in the creation or imposition of any lien, charge or encumbrance upon any of its property or assets pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets are subject; (B) result in any violation of the provisions of the charter, by-laws, memorandum and articles of association or similar organizational documents of the Issuer, the Co-Issuer, the Arbor Parent or any of their respective affiliates; or (C) result in the violation of any law or statute or any judgment, order or regulation of any Governmental Authority.

 

(j)                                    No Consents Required.  Assuming compliance by the Placement Agent with its agreement in Section 1(b) hereof, no consent, approval, authorization, order, registration or qualification of or with any Governmental Authority is required for the execution, delivery and performance by the Issuer, the Co-Issuer, the Arbor Parent or any of their respective affiliates of each of the Basic Documents to which it is a party, the issuance and sale of the Securities and compliance by such Issuer, Co-Issuer, Arbor Parent and their respective affiliates with the terms thereof and the consummation of the transactions contemplated by the Basic Documents, except for such consents, approvals, authorizations, orders and registrations or qualifications as have already been obtained, or as of the Closing Date will have been obtained or as may be required under applicable state securities laws in connection with the placement of the Offered Notes by the Placement Agent or any purchase and resale of the Offered Notes by the Placement Agent.

 

(k)                                 Legal Proceedings.  Except as described in the Time of Sale Information and the Offering Memorandum, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Issuer, the Co-Issuer or the Arbor Parent is a party or to which any property of the Issuer, the Co-Issuer or the Arbor Parent is the subject that, individually or in the aggregate, if determined adversely to such person, could reasonably be expected to have a material adverse effect on (A) the ability of any of the Issuer, the Co-Issuer or the Arbor Parent to perform its obligations under any Basic Document to which it is a party or (B) the transactions contemplated herein or in the Basic Documents; and to the knowledge after due inquiry of the Co-Issuers and the Arbor Parent, no such investigations, actions, suits or proceedings are threatened or contemplated by any Governmental Authority or threatened by others.

 

(l)                                     Title to Assets.  The Arbor Parent will, at the Closing Date, own and transfer the Loan Obligations, free and clear of any lien, mortgage, pledge, charge, security

 

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interest or other encumbrance, and, at the Closing Date, the Arbor Parent will have full power and authority to sell the Loan Obligations to the Issuer under the Loan Obligations Purchase Agreement and deliver the Loan Obligations to the Issuer thereunder, and at the Closing Date will have duly authorized such sale and delivery to the Issuer by all necessary action; and (C) the Issuer will, at the Closing Date, own the related Collateral, free and clear of any lien, mortgage, pledge, charge, security interest or other encumbrance, and will have full power and authority to pledge such Collateral to the Trustee pursuant to the terms of the Indenture.

 

(m)                             Investment Company Act.  None of the Issuer or the Co-Issuer are, nor after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Time of Sale Information and the Offering Memorandum, will be an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities Exchange Commission thereunder (collectively, the “Investment Company Act”). The Issuer and the Co-Issuer are relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act contained in Section 3(c)(5)(C) thereof or Rule 3a-7 thereunder.

 

(n)                                 Integration.  None of the Issuer, the Co-Issuer, the Arbor Parent or any of their respective affiliates (as defined in Rule 501(b) of Regulation D) has directly, or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) that is or will be integrated with the sale of the Notes in a manner that would require registration of the Securities under the Securities Act.

 

(o)                                 No General Solicitation or Directed Selling Efforts.  None of the Issuer, the Co-Issuer, the Arbor Parent or any of their respective affiliates or any other person acting on its or their behalf (other than, in the case of the Offered Notes, the Placement Agent, as to which no representation or warranty is made) has (A) solicited offers for, or offered or sold any of the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act or (B) engaged in any directed selling efforts within the meaning of Regulation S, and all such persons have complied with the offering restrictions requirement of Regulation S.

 

(p)                                 Securities Law Exemptions.  Assuming the accuracy of the representations and warranties of the Placement Agent contained in Section l(b) hereof (including Annex A hereto) and its compliance with the agreements set forth therein, it is not necessary in connection with the offer, sale, resale and delivery of the Offered Notes in the manner contemplated by this Agreement, the Time of Sale Information or the Offering Memorandum to register the Notes under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended.

 

(q)                                 Taxes and Fees.  Any taxes, fees and other governmental charges in connection with the execution, delivery and performance of each Basic Document and the Securities (other than such federal, state and local taxes as may be payable on the income or gain recognized therefrom), in all cases to the extent material to any of the Issuer, the Co-Issuer or the Arbor Parent, have been or will be paid at or prior to the Closing Date.

 

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(r)                                    Rule 144A Eligibility.  When the Securities are executed, authenticated and delivered pursuant to the Indenture, the Securities will not be (and will not be convertible or exchangeable into securities that are) of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or quoted in an automated inter-dealer quotation system; and the Offering Memorandum, as of its date, contains or, as of the Closing Date, will contain, or the Co-Issuers will otherwise provide or cause to be provided, all the information that, if requested by a prospective purchaser of the Notes, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act.

 

(s)                                   Representations in Basic Documents.  The representations and warranties of the Co-Issuers, the Arbor Parent and their respective affiliates contained in the Basic Documents, respectively, shall be true and correct as of the Closing Date in all material respects.

 

(t)                                    17g-5 Compliance.  Arbor Realty Trust, Inc. (“ART”) or one or more of its affiliates has executed and delivered a written representation to Moody’s Investors Service, Inc. (“Moody’s”) and DBRS, Inc. (“DBRS” and, together with Moody’s, the “Rating Agencies”) that it will take the actions specified in paragraphs (a)(3)(iii)(A) through (D) of Rule 17g-5, and such entity has complied with each such representation in all material respects. In connection therewith, ART has entered into a 17g-5 Website Posting Agreement, dated November 7, 2017, with J.P. Morgan Securities LLC.

 

3.1                               Representations and Warranties of the Arbor Parent.  The Arbor Parent represents and warrants to the Placement Agent that:

 

(a)                              The Issuer, the Co-Issuer and the Arbor Parent have not obtained any third-party due diligence report contemplated by Rule 15Ga-2 under the Exchange Act (“Rule 15Ga-2”) (each, a “Due Diligence Report”) in connection with the transactions contemplated by this Agreement and the Offering Memorandum other than the agreed-upon procedures report (the “Accountants’ Due Diligence Report”), in form and substance reasonably satisfactory to the Placement Agent, obtained from the accounting firm (the “Accountants”) engaged to provide procedures involving a comparison of information in the loan files for the loans backing the Notes (the “Loans”) to information on a data tape relating to the Loans (“Due Diligence Services”), a copy of which has been furnished to the Placement Agent, at the request of the Arbor Parent, and addressed to the Placement Agent.  The Accountants have consented to the use of the Accountants’ Due Diligence Report in the preparation of a Form 15G (as defined below) furnished on EDGAR as required by Rule 15Ga-2.

 

(b)                                 Any certification on Form ABS Due Diligence-15E received by the Issuer, the Co-Issuer or the Arbor Parent from the Accountants in connection with the Due Diligence Services provided by the Accountants was promptly posted, after receipt, on the Rule 17g-5 website established by or on behalf of the Arbor Parent as required by Rule 17g-5.

 

(c)                                  The Issuer, the Co-Issuer or the Arbor Parent (A) prepared, or caused to be prepared, one or more reports on Form ABS-15G (each, a “Form 15G”) containing the findings and conclusions of the Accountants’ Due Diligence Report and meeting all other requirements of Rule 15Ga-2, any other rules and regulations of the SEC and the Exchange Act; (B) provided, or

 

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caused to be provided, a copy of the final draft of each Form 15G to the Placement Agent at least seven Business Days before the Time of Sale; and (C) furnished, or caused to be furnished, each Form 15G to the SEC on EDGAR at least five Business Days before the Time of Sale as required by Rules 15Ga-2.

 

(d)                                 No portion of any Form 15G contains any names, addresses, other personal identifiers or zip codes with respect to any individuals, or any other personally identifiable or other information that would be associated with an individual, including without limitation any “nonpublic personal information” within the meaning of Title V of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999.

 

3.2                               Representations, Warranties, Covenants and Agreements of the Arbor Parent. The Arbor Parent represents, warrants, covenants, undertakes and agrees to and with the Placement Agent that:

 

(a)                                 Arbor Parent has organized and initiated an asset-backed securities transaction by committing to sell and selling, directly or through an affiliate, the Closing Date Loan Obligations to the Issuer and, accordingly, Arbor Parent satisfies the definition of “sponsor”, and is the “sponsor of the securitization”, as set forth in the U.S. Credit Risk Retention Rules.  It is hereby acknowledged and agreed by the parties hereto that the Placement Agent does not accept any liability or responsibility for such designation of Arbor Parent (or for the non-designation of any other entity) as a “sponsor”;

 

(b)                                 Arbor Parent is an entity having the capability to comply, and agrees that it will comply, with all legal requirements imposed on the “sponsor” of a “securitization transaction” in accordance with the U.S. Credit Risk Retention Rules;

 

(c)                                  Arbor Parent has determined the fair value of the Retained Interest and each Class of Notes and the Preferred Shares in accordance with the fair value assessment described in Accounting Standards Codification 820, “Fair Value Measurements and Disclosures”, under U.S. generally accepted accounting principles (“GAAP”);

 

(d)                                 Arbor Parent, directly or through a majority-owned affiliate, will retain an “eligible horizontal residual interest” in Preferred Shares of the Issuer  in compliance with the U.S. Credit Risk Retention Rules for the duration required in the U.S. Credit Risk Retention Rules, the fair value of which interest will be at least 5% of the aggregate fair value of the Notes and the Preferred Shares, as of the Closing Date (the “Retained Interest”), as determined in accordance with the fair value assessment framework under GAAP;

 

(e)                                  Arbor Parent is and will be solely responsible for compliance with the disclosure requirements of U.S. Credit Risk Retention Rules which include, without limitation, the material terms of the Retained Interest, and the timing of cash flows and determination of fair value. Without limiting any liability that Arbor Parent or any of its affiliates may have hereunder, (i) Arbor Parent is and will be solely responsible for ensuring that the disclosure required by U.S. Credit Risk Retention Rules is contained in each of the Preliminary Offering Memorandum and the Offering Memorandum, (ii) Arbor Parent is and will be solely responsible for the content of that disclosure and, as of the date hereof, has met applicable disclosure requirements under the

 

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U.S. Credit Risk Retention Rules, and (iii) if any disclosure is required after the Closing Date pursuant to U.S. Credit Risk Retention Rules, Arbor Parent will be solely responsible for making and delivering such disclosure in a medium that does not involve any action or participation by the Placement Agent (other than timely delivery by the Placement Agent of the Preliminary Offering Memorandum and the Offering Memorandum to the investors).  For the avoidance of doubt, it is hereby acknowledged and agreed by the parties hereto that the Placement Agent does not accept any liability or responsibility whatsoever in respect of Arbor Parent’s determination of the fair value of the Retained Interest or Arbor Parent’s valuation methodology, inputs and assumptions. The Preliminary Offering Memorandum contains, and the Offering Memorandum will contain, all of the disclosures that are required under Rule 4(c)(1)(i) of the U.S. Credit Risk Retention Rules; and

 

(f)                                   Arbor Parent or its affiliates, as relevant, has not engaged in any hedging or financing of the Retained Interest as of the date hereof and will not engage in any activities that would constitute impermissible hedging, transfer or financing of the Retained Interest as prohibited by the U.S. Credit Risk Retention Rules for the duration required in the U.S. Credit Risk Retention Rules.

 

If the U.S. Credit Risk Retention Rules are modified to reduce the obligations of the sponsor thereunder or repealed, Arbor Parent may, notwithstanding the foregoing, choose to comply with the U.S. Credit Risk Retention Rules as are then in effect, and such compliance shall not be a breach or violation of any of the foregoing.

 

4.                                      Further Agreements of the Co-Issuers and the Arbor Parent.  Each of the Co-Issuers and the Arbor Parent jointly and severally covenants and agrees with the Placement Agent that:

 

(a)                                 Delivery of Copies.  It will deliver to the Placement Agent as many printed copies of the Preliminary Offering Memorandum, any other Time of Sale Information and the Offering Memorandum (including all amendments and supplements thereto) as the Placement Agent may reasonably request.

 

(b)                                 Amendments or Supplements.  Before making or distributing any amendment or supplement to any Time of Sale Information or the Offering Memorandum, the Co-Issuers and the Arbor Parent will furnish to the Placement Agent and counsel for the Placement Agent a copy of the proposed amendment or supplement for review and will not distribute any such proposed amendment or supplement to which the Placement Agent reasonably objects.

 

(c)                                  Notice to the Placement Agent.  The Co-Issuers and the Arbor Parent will advise the Placement Agent promptly, and confirm such advice in writing:  (i) of the issuance by any governmental or regulatory authority of any order preventing or suspending the use of either any Time of Sale Information or the Offering Memorandum or the initiation or threatening of any proceeding for that purpose; (ii) of the occurrence of any event at any time prior to the completion of the initial offering of the Notes as a result of which any Time of Sale Information or the Offering Memorandum as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact necessary in order to make the

 

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statements therein, in the light of the circumstances existing when the Time of Sale Information and the Offering Memorandum are delivered to a purchaser, not misleading; and (iii) of the receipt by any of the Co-Issuers or the Arbor Parent or any of their affiliates of any notice with respect to any suspension of the qualification of the Notes for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and the Co-Issuers and the Arbor Parent will use their commercially reasonable efforts to prevent the issuance of any such order preventing or suspending the use of any Time of Sale Information or the Offering Memorandum or suspending any such qualification of the Notes and, if any such order is issued, will obtain as soon as possible the withdrawal thereof.

 

(d)                                 Ongoing Compliance.  If, at any time prior to the Time of Sale, (i) any event shall occur or condition shall exist as a result of which any of the Time of Sale Information would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) it is necessary to amend or supplement any of the Time of Sale Information so that any of the Time of Sale Information will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, the Co-Issuers and the Arbor Parent will promptly notify the Placement Agent thereof and forthwith prepare (in a form reasonably acceptable to the Placement Agent) and, subject to paragraph (b) above in this Section 4, furnish to the Placement Agent such amendments or supplements to any of the Time of Sale Information as may be necessary so that the statements in any of the Time of Sale Information as so amended or supplemented will not, in light of the circumstances under which they were made, be misleading.  If at any time prior to the Closing Date, (x) any event shall occur or condition shall exist as a result of which the Offering Memorandum as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing (A) when the Offering Memorandum is delivered to a purchaser and (B) at the Closing Date, not misleading or (y) it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, the Co-Issuer and the Arbor Parent will promptly notify the Placement Agent thereof and forthwith prepare (in a form reasonably acceptable to the Placement Agent) and, subject to paragraph (b) above in this Section 4, furnish to the Placement Agent such amendments or supplements to the Offering Memorandum as may be necessary so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances existing when the Offering Memorandum as so amended or supplemented is delivered to a purchaser and at the Closing Date, be misleading or so that the Offering Memorandum will comply with applicable law.

 

(e)                                  Blue Sky Compliance.  The Co-Issuers and the Arbor Parent will use commercially reasonable efforts to qualify the Offered Notes for offer and sale under the securities or “blue sky” laws of such jurisdictions in the United States as the Placement Agent shall reasonably request and will continue such qualifications in effect so long as required for the initial offering and sale of the Offered Notes; provided that none of the Co-Issuers and the Arbor Parent shall be required to:  (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify; (ii) file any general consent to or take any action that would subject itself to service of process in such jurisdiction; or (iii) subject itself to taxation in any such jurisdiction.  Prior to the Time of Sale,

 

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the Placement Agent shall notify the Co-Issuers and the Arbor Parent of any jurisdictions that would require qualifications or legends or disclaimers in the Preliminary Offering Memorandum.

 

(f)                                   Copies of Reports.  So long as the Offered Notes are outstanding, the Co-Issuers shall furnish, or cause to be furnished, to the Placement Agent copies of all reports or other communications (financial or other) furnished to holders of the Offered Notes.

 

(g)                                  Use of Proceeds.  The Co-Issuers shall apply the net proceeds from the sale of the Securities as described in the Time of Sale Information and the Offering Memorandum under the heading “Use of Proceeds”.

 

(h)                                 Rating Agencies.  The Offered Notes shall have been assigned ratings no lower than those set forth on Schedule I hereto by the Rating Agencies.  To the extent, if any, that the ratings provided with respect to the Offered Notes by the Rating Agencies are conditional upon the furnishing of documents or the taking of any other action by the Co-Issuers, the Arbor Parent or any of their respective affiliates, the Co-Issuers and the Arbor Parent shall use their commercially reasonable efforts to furnish, or cause to have furnished, such documents and take, or cause to have taken, any such other action.

 

(i)                                     No Integration.  None of the Co-Issuers, the Arbor Parent or any of their respective affiliates (as defined in Rule 501(b) of Regulation D) will, directly or through any agent, sell, offer for sale, solicit offers to buy or otherwise negotiate in respect of, any security (as defined in the Securities Act), that is or will be integrated with the sale of the Offered Notes in a manner that would require registration of any of the Securities under the Securities Act.

 

(j)                                    No Solicitation or Directed Selling Efforts.  None of the Co-Issuers, the Arbor Parent or any of their respective affiliates or any person acting on its or their behalf (other than, with respect to the Offered Notes, the Placement Agent, as to which no covenant is given) will (i) solicit offers for, or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act or (ii) engage in any directed selling efforts within the meaning of Regulation S, and all such persons will comply with the offering restrictions requirement of Regulation S.

 

(k)                                 Supplying Information.  While the Offered Notes remain outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Co-Issuers and the Arbor Parent will, during any period in which they are not subject to and in compliance with Section 13 or 15(d) under the Exchange Act, furnish to holders of the Offered Notes and prospective purchasers of the Offered Notes designated by such holders, in each case upon request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

(l)                                     DTC.  The Co-Issuers will assist the Placement Agent in arranging for the Offered Notes to be eligible for clearance and settlement through DTC.

 

(m)                             Sale Treatment.  The Arbor Parent agrees that its transfer of the Loan Obligations shall be reflected on its balance sheet and other financial statements as a sale and/or contribution of the Loan Obligations to the Issuer and not as a financing.  Issuer agrees that the

 

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transfer to the Issuer of the Loan Obligations shall be reflected on Issuer’s balance sheet and other financial statements as the purchase and/or acquisition of such Loan Obligations by Issuer from the Arbor Parent and not as a loan to the Issuer from the Arbor Parent.  The Arbor Parent is not selling the Loan Obligations and the Co-Issuers are not selling the Notes with any intent to hinder, delay or defraud any of the creditors of the Arbor Parent, the Co-Issuers or any of their respective affiliates.

 

(n)                                 Rule 17g-5 Compliance.  The Co-Issuers, ART and the Arbor Parent shall take reasonable efforts to cause the Trustee (pursuant to the Trustee’s related obligations under the Basic Documents) to comply with each representation made by it to the Rating Agencies with respect to the Notes pursuant to paragraph (a)(3)(iii) of Rule 17g-5.

 

5.                                      Conditions to Placement Agent’s Obligations.  The obligations of the Placement Agent hereunder are subject to the performance by the Co-Issuers and the Arbor Parent of their respective covenants and other obligations hereunder and to the following additional conditions:

 

(a)                                 Representations and Warranties.  The representations and warranties of the Co-Issuers and the Arbor Parent contained herein shall be true and correct on the date hereof, on and as of the date of the Time of Sale and on and as of the Closing Date; and the statements of the Co-Issuers and the Arbor Parent and their respective officers made in any certificates delivered pursuant to this Agreement shall be true and correct in all material respects on and as of the date of the Time of Sale and on and as of the Closing Date.

 

(b)                                 No Material Adverse Change.  Subsequent to the execution and delivery of this Agreement, no event or condition of a type described in Section 2(c) hereof shall have occurred or shall exist, which event or condition is not described in the Time of Sale Information and the Offering Memorandum (excluding any amendment or supplement thereto) and the effect of which, in the judgment of the Placement Agent, makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Offered Notes on the terms and in the manner contemplated by this Agreement, the Time of Sale Information and the Offering Memorandum.

 

(c)                                  Officer’s Certificate of the Co-Issuers.  The Placement Agent shall have received on and as of the Closing Date a certificate of an executive officer of each of the Issuer and the Co-Issuer satisfactory to the Placement Agent:  (i) confirming that such officer has carefully reviewed the Time of Sale Information and the Offering Memorandum and to the knowledge of such officer, after due inquiry, the representation set forth in Section 2(a) hereof is true and correct; (ii) confirming that the other representations and warranties of the Issuer and Co-Issuer, as applicable, in this Agreement are true and correct in all material respects on and as of the date of the Time of Sale and on and as of the Closing Date and that each of the Issuer and the Co-Issuer, as applicable, have complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and (iii) to the effect set forth in Section 2(c) hereof as to such Issuer.

 

(d)                                 Officer’s Certificate of the Arbor Parent.  The Placement Agent shall have received on and as of the Closing Date a certificate of an executive officer of the Arbor Parent satisfactory to the Placement Agent:  (i) confirming that such officer has carefully reviewed the

 

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Time of Sale Information and the Offering Memorandum and, to the knowledge of such officer, after due inquiry, the representation set forth in Section 2(a) hereof is true and correct; (ii) confirming that the Co-Issuers, the Arbor Parent or the other Arbor entities each complied in all material respects with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date; and (iii) to the effect set forth in Section 2(c) hereof as to each of the Co-Issuers, the Arbor Parent and their respective affiliates, as applicable.

 

(e)                                  Officer’s Certificate of the Loan Obligation Manager.  The Placement Agent shall have received on and as of the Closing Date a certificate of an authorized officer of Arbor Realty Collateral Management, LLC, dated as of the Closing Date, substantially in the form attached hereto as Exhibit A.

 

(f)                                   Officer’s Certificate of the Seller.  The Placement Agent shall have received on and as of the Closing Date a certificate of authorized officers of the Seller, dated as of the Closing Date, substantially in the form attached hereto as Exhibit B.

 

(g)                                  Comfort Letters.  On the date of the Preliminary Offering Memorandum and on the date of this Agreement, Ernst & Young LLP shall have furnished to the Co-Issuers and the Placement Agent, at the request of the Co-Issuers, letters dated the respective dates of delivery thereof and addressed to the Placement Agent, in form and substance reasonably satisfactory to the Placement Agent.

 

(h)                                 Opinion of Counsel for the Co-Issuers and the Arbor Parent.  Clifford Chance US LLP, special counsel to the Co-Issuers and the Arbor Parent, Richards, Layton & Finger, P.A., counsel to the Co-Issuer, Maples and Calder, Cayman Islands counsel to the Issuer, and other applicable counsel to the Arbor Parent shall have furnished to the Placement Agent their respective written opinions with respect to such matters as the Placement Agent may reasonably request, each dated the Closing Date and addressed to the Placement Agent and in form and substance reasonably satisfactory to the Placement Agent.  Except with respect to any negative assurance letter relating to the Time of Sale Information or the Offering Memorandum, each such opinion (a) may express counsel’s reliance as to factual matters on certificates of government and agency officials and the representations and warranties made by, and on certificates or other documents furnished by officers of, the parties to the Basic Documents and (b) may be qualified as an opinion only on the law of the State of New York, the laws of the Cayman Islands, the Delaware Limited Liability Company Act and/or the federal law of the United States of America.

 

(i)                                     Opinion of Counsel for the Placement Agent.  The Placement Agent shall have received on and as of the Closing Date an opinion of Cadwalader, Wickersham & Taft LLP, counsel for the Placement Agent, with respect to such matters as the Placement Agent may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

 

(j)                                    Opinion of Counsel for the Trustee, the Preferred Share Paying Agent, the Loan Obligation Manager, the CLO Servicer, Arbor Realty SR, Inc. and ARMS Equity.  Prior to the placement of the Offered Notes hereunder, the Placement Agent shall have received the

 

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opinions, dated as of the Closing Date, of the respective counsel to the Trustee, the Preferred Share Paying Agent, the Loan Obligation Manager, the CLO Servicer, the Seller and ARMS Equity, each in form and substance reasonably satisfactory to the Placement Agent.

 

(k)                                 Rating Agency Opinions.  The Placement Agent shall be addressed in any opinion from any counsel delivering any written opinion to the Rating Agencies in connection with the transaction described herein which is not otherwise described in this Agreement.

 

(l)                                     Rating Agency Letters.  The Placement Agent shall have received copies of letters from the Rating Agencies stating that the Offered Notes are rated as set forth on Schedule I hereto by the Rating Agencies.

 

(m)                             No Legal Impediment to Issuance.  No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any Governmental Authority that would, as of the Closing Date, prevent the issuance or sale of the Notes; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance or sale of the Notes.

 

(n)                                 Good Standing.  The Placement Agent shall have received on and as of the Closing Date satisfactory evidence of the good standing of each of the Issuer, Co-Issuer, and the Arbor Parent in its jurisdiction of organization, dated not earlier than 30 days prior to the Closing Date, in each case, in writing or any standard form of telecommunication from the appropriate Governmental Authorities of such jurisdiction.

 

(o)                                 DTC.  All the Offered Notes shall be eligible for clearance and settlement through DTC.

 

(p)                                 Additional Documents.  On or prior to the Closing Date, the Co-Issuers and the Arbor Parent shall have furnished to the Placement Agent such other certificates and documents as the Placement Agent may reasonably request.

 

(q)                                 Compliance with Rule 15Ga-2 and Rule 17g-5.  The Co-Issuers shall have complied with all requirements of Rule 15Ga-2 and Rule 17g-5 under the Exchange Act to the satisfaction of the Placement Agent.

 

(r)                                    Compliance with U.S. Credit Risk Retention Rules. The Retention Holder and the Arbor Parent (as sponsor) shall have acted to comply with the requirements of the U.S. Credit Risk Retention Rules to the satisfaction of the Placement Agent, who shall have been provided an opinion or memorandum of counsel to the Arbor Parent as to such compliance, in form and substance satisfactory to the Placement Agent.

 

6.                                      Indemnification and Contribution.

 

(a)                                 Indemnification of the Placement Agent by Co-Issuers and ART  Each of the Co-Issuers and ART (jointly and severally) agree to indemnify and hold harmless the Placement Agent, its affiliates, directors and officers and each person, if any, who controls the Placement Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each a “Placement Agent Indemnitee”), from and against any and all losses,

 

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claims, damages and liabilities (including, without limitation, out-of-pocket legal fees and other out-of-pocket expenses incurred in connection with any suit, action, investigations or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Time of Sale Information or the Offering Memorandum (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information with respect to which the Placement Agent has agreed to indemnify each of the Issuer, Co-Issuer and ART pursuant to Section 6(b) hereof; provided that with respect to any such untrue statement in or omission from the Time of Sale Information, the indemnity agreement contained in this paragraph (a) with respect to the Time of Sale Information shall not inure to the benefit of a Placement Agent Indemnitee, to the extent that the sale to the person asserting any such loss, claim, damage or liability was an initial sale by the Placement Agent and any such loss, claim, damage or liability of or with respect to the Placement Agent results from the fact that (i) prior to the occurrence of the events described in clause (ii) below, and prior to the Time of Sale, the Co-Issuers or ART shall have notified the Placement Agent that the Time of Sale Information contains an untrue statement of material fact or omits to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) such untrue statement or omission of a material fact was corrected in an amended or supplemented Time of Sale Information and such corrected Time of Sale Information was provided to the Placement Agent far enough in advance of the Time of Sale (but not less than one (1) Business Day) so that such corrected Time of Sale Information could have been provided (electronically or otherwise) to such person asserting any such loss, claim, damage or liability prior to the Time of Sale and (iii) the Placement Agent did not send or give such corrected Time of Sale Information to such person at or prior to the Time of Sale.

 

(b)                                 Indemnification of the Co-Issuers and ART by Placement Agent.  The Placement Agent agrees to indemnify and hold harmless the Co-Issuers and ART and their respective affiliates, directors and officers and each person, if any, who controls any of the Co-Issuers or ART within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the indemnity set forth in subsection (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with the Placement Agent Information provided by the Placement Agent.

 

(c)                                  [Reserved]

 

(d)                                 Notice and Procedures.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to paragraph (a) or (b) above, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 6 except to the extent that it has been materially prejudiced (through the

 

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forfeiture of substantive rights or defenses) by such failure (in which case the Indemnifying Person shall be relieved of its indemnification obligation only to the extent of any loss caused by the Indemnified Person’s failure to provide notice); and provided further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 6.  If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; or (iii) the use of counsel chosen by the Indemnifying Person to represent the Indemnified Person would present such counsel with a conflict of interest.  It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred.  Any such separate firm for the Placement Agent, its affiliates, directors, officers and any control persons of the Placement Agent shall be designated in writing by the Placement Agent and any such separate firm for the Co-Issuers and ART, their respective directors and officers and any person who controls the Co-Issuers or ART, as applicable, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall be designated in writing by the Co-Issuers and ART.  Upon receipt of notice from the Indemnifying Person to such Indemnified Person of its election to assume the defense of such action and approval by the Indemnified Person of counsel, the Indemnifying Person will not be liable to such Indemnified Person under this Section 6 for any legal or other expenses subsequently incurred by such Indemnified Person in connection with the defense thereof unless the Indemnified Person shall have employed separate counsel in accordance with the third immediately preceding sentence (it being understood, however, that the Indemnifying Person shall not be liable for the expenses of more than one separate counsel (in addition to local counsel).  The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there is a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than forty-five (45) days after receipt by the Indemnifying Person of such request, (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement and (iii) such settlement does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of the Indemnifying Person.  No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of

 

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which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

 

(e)                                  Contribution.  If the indemnification provided for in subsections (a) or (b) above is unavailable to an Indemnified Person or is insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Co-Issuers and ART on the one hand and the Placement Agent on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Co-Issuers or ART on the one hand and the Placement Agent on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the Co-Issuers and ART on the one hand and the Placement Agent on the other shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Co-Issuers and/or ART from the sale of the Offered Notes and the total fees, discounts and commissions received by the Placement Agent in connection therewith bear to the aggregate offering price of the Offered Notes.  The relative fault of the Co-Issuers and ART on the one hand and the Placement Agent on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Co-Issuers or ART or by the Placement Agent and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances.

 

(f)                                   Limitation on Liability.  Each of the Co-Issuers, ART and the Placement Agent agrees that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (e) above.  The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (e) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 6, in no event shall the Placement Agent be required to contribute any amount in excess of the amount by which the total fees, discounts and commissions received by it with respect to the offering of the Notes exceeds the amount of any damages that the Placement Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  Further, ART and the Co-Issuers each acknowledge and agree that the Placement Agent has no responsibility and shall not assume any liability for

 

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(i) any information that is posted to the internet website established and maintained by ART, the Arbor Parent, the Co-Issuers or any other party pursuant to Rule 17g-5 of the Exchange Act (such internet website, the “17g-5 Website”), or (ii) the failure of any information to be posted to the 17g-5 Website by any party.

 

(g)                                  Non-Exclusive Remedies.  The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

 

7.                                      Effectiveness of Agreement.  This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

 

8.                                      Termination.  This Agreement may be terminated in the absolute discretion of the Placement Agent solely with respect to its role in this transaction, by notice to the Co-Issuers and the Arbor Parent if, after the execution and delivery of this Agreement and prior to the Closing Date (a) trading generally shall have been suspended or materially limited on or by any of the New York Stock Exchange or the over-the-counter market; (b) a general moratorium on commercial banking activities shall have been declared by federal or New York State authorities or there is a material disruption in commercial banking or securities settlement or clearance services in the United States generally; or (c) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, either within or outside the United States, that in the judgment of the Placement Agent is material and adverse and makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Offered Notes on the terms and in the manner contemplated by this Agreement, the Time of Sale Information or the Offering Memorandum.

 

9.                                      Payment of Expenses.

 

(a)                                 Regardless of whether the transactions contemplated by this Agreement are consummated or whether this Agreement is terminated, the Co-Issuers and the Arbor Parent shall pay or cause to be paid all costs and expenses incident to the performance of their obligations hereunder, including without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and delivery of the Notes and any taxes payable in connection therewith; (ii) the costs and expenses incident to the preparation and printing of the Time of Sale Information and the Offering Memorandum (including all exhibits, attachments, amendments and supplements thereto) and the distribution thereof in connection with the offering, purchase, sale, resale and delivery of the Notes; (iii) the costs of reproducing and distributing each of the Basic Documents; (iv) the reasonable costs and expenses of the Placement Agent, including the fees and expenses of its counsel, transfer taxes on resale of any of the Offered Notes by the Placement Agent, any advertising expenses and other expenses incurred by the Placement Agent in connection with offering or reoffering the Offered Notes and/or entering into purchase contracts with investors in the Offered Notes; (v) the fees and expenses of the counsel to the Co-Issuers, the Arbor Parent and independent accountants; (vi) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Offered Notes under the laws of such jurisdictions as the Placement Agent may designate and the preparation, printing and distribution of any “blue sky” memorandum (including the related reasonable fees and expenses of counsel for the Placement Agent); (vii) any fees charged by the

 

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Rating Agencies for rating and surveillance of the Notes; (viii) the fees and expenses of the Trustee and the CLO Servicer (including related reasonable fees and expenses of any counsel to such parties), except to the extent otherwise set forth in the Basic Documents; (ix) all expenses and application fees incurred in connection with the application for the approval of all the Notes for book-entry transfer by DTC; (x) all reasonable expenses incurred in connection with any “road show” presentation to potential investors; (xi) the costs and expenses of the Co-Issuers in connection with the purchase of the Loan Obligations; and (xii) all other costs and expenses incident to the performance of the obligations of the Co-Issuers and the Arbor Parent hereunder that are not otherwise specifically provided for in this Section 9(a).

 

(b)                                 If (i) this Agreement is terminated pursuant to Section 8 hereof, (ii) the Co-Issuers for any reason fail to tender the Offered Notes for delivery to the Placement Agent, (iii) the Issuer, the Co-Issuer, or the Arbor Parent fail or refuse to comply with this Agreement, or (iv) the Placement Agent fails to place the Offered Notes, each of the Issuer, the Co-Issuer, and the Arbor Parent (jointly and severally) agrees to reimburse the Placement Agent for all out-of-pocket costs and expenses (including the fees and expenses of its counsel) reasonably incurred by the Placement Agent in connection with this Agreement and the offer and sale of the Offered Notes contemplated hereby.

 

10.                               Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors.  Nothing in this Agreement is intended or shall be construed to give any other person, other than the affiliates, officers, directors and controlling persons referred to in Section 6 hereof and their respective heirs and legal representatives any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.  No purchaser of Notes from the Placement Agent shall be deemed to be a successor merely by reason of such purchase.

 

11.                               Survival.  The respective indemnities, rights of contribution, representations, warranties and agreements of the Co-Issuers, the Arbor Parent and the Placement Agent contained in this Agreement or made by or on behalf of the Co-Issuers, the Arbor Parent or the Placement Agent pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Offered Notes and shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of the Co-Issuers and the Arbor Parent or the Placement Agent.

 

12.                               Placement Agent Information.  The parties hereto acknowledge and agree that the Placement Agent Information shall consist solely of the fourth and fifth sentences of the first paragraph under the heading “Placement of the Notes” in the Offering Memorandum.

 

13.                               Certain Defined Terms.  For purposes of this Agreement, except where otherwise expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities Act.

 

14.                               Miscellaneous.

 

(a)                                 Notices.  All notices and other communications hereunder shall be in writing and effective only upon receipt, and shall be deemed to have been duly given if mailed or

 

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transmitted and confirmed by any standard form of telecommunication.  Notices to the Placement Agent shall be given to it at:

 

J.P. Morgan Securities LLC

383 Madison Avenue, 8th Floor

New York, New York 10179

Attention:  SPG Syndicate

email:  ABS_Synd@jpmorgan.com

 

with copies to:

 

J.P. Morgan Securities LLC

383 Madison Avenue, 32nd Floor

New York, New York  10179

Attention: Bianca A. Russo, Esq.

email: US_CMBS_Notice@jpmorgan.com

 

and

 

Cadwalader, Wickersham & Taft LLP

200 Liberty Street

New York, New York 10281

Attention: Jeffrey Rotblat

fax: (212) 504-6401

email: jeffrey.rotblat@cwt.com

 

or at any other address or email address furnished in writing by the Placement Agent.

 

Notices to the Issuer shall be given to it at Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd., c/o MaplesFS Limited, Queensgate House, P.O. Box 1093, Queensgate House, KY1 1102, Grand Cayman, Cayman Islands, Attention:  The Directors, telephone:  (345) 945 7099, fax:  (345) 945 7100 with a copy to the Arbor Parent at the address below.  Notices to ART or the Arbor Parent shall be given to them at Arbor Realty Collateral Management, LLC, 333 Earle Ovington Boulevard, 9th Floor, Uniondale, New York  11553, Attention:  Executive Vice President, Structured Securitization, fax:  (212) 389 6573, telephone:  (212) 389 6546.  Notices to the Co-Issuer shall be given to it at Arbor Realty Commercial Real Estate Notes 2017-FL3, LLC, c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, Attention:  Donald J. Puglisi, telephone:  (302) 738 6680, fax:  (302) 738 7210 with a copy to the Arbor Parent at the address above.

 

(b)                                 Governing Law.  THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AGREEMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF.  THE PARTIES

 

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HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AGREEMENT.

 

(c)                                  Integration.  This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

 

(d)                                 Counterparts.  This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Agreement in Portable Document Format (PDF) or by facsimile transmission shall be as effective as delivery of a manually executed original counterpart of this Agreement.

 

(e)                                  Amendments or Waivers.  No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

 

(f)                                   Headings.  The headings herein are included for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

 

(g)                                  No Bankruptcy Petition/Limited Recourse.  The Placement Agent agrees that, prior to the date which is one year and one day (or, if longer, the applicable preference period then in effect plus one day) after the payment in full of all of the Offered Notes issued by the Co-Issuers, it will not institute against, or join any other person in instituting against, any of the Co-Issuers any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any bankruptcy, insolvency, reorganization or similar law in any jurisdiction.  Notwithstanding any other provision of this Agreement, the obligations of the Issuer hereunder are limited-recourse obligations and the obligations of the Co-Issuer hereunder are non-recourse obligations, in each case, payable solely from the Collateral in accordance with the terms of the Indenture and following realization thereof and reduction thereof to zero, all obligations of and all claims against the Co-Issuers hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive.  No recourse may be had under this Agreement against any employee, agent, officer, partner, member, shareholder or director of any party hereto (collectively, the “Associated Persons”), in respect of the transactions contemplated by this Agreement, it being expressly agreed and understood that this Agreement is solely an obligation of each of the parties hereto and that no personal liability whatever shall attach to or be incurred by any Associated Person under or by reason of the obligations, representations and agreements of the parties contained in this Agreement, or implied therefrom.  This Section 14(g) shall survive the termination or expiration of this Agreement.

 

(h)                                 Waiver of Jury Trial.  EACH OF THE CO-ISSUERS, THE PARENT AND THE PLACEMENT AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION,

 

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PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST THE OTHER PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

 

(i)                                     Exclusive Jurisdiction.  EACH OF THE PARTIES HERETO IRREVOCABLY (I) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT; (II) WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM IN ANY ACTION OR PROCEEDING IN ANY SUCH COURT; (III) AGREES THAT A FINAL JUDGMENT IN ANY ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (IV) CONSENTS TO SERVICE OF PROCESS UPON IT BY MAILING A COPY THEREOF BY CERTIFIED MAIL ADDRESSED TO IT AS PROVIDED FOR NOTICES HEREUNDER.

 

[SIGNATURE PAGES FOLLOW]

 

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If the foregoing is in accordance with your understanding, please indicate your acceptance of this Agreement by signing in the space provided below.

 

Very truly yours,

 

	
 
    	
ISSUER:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2017-FL3, LTD.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signatures continue on following page]

 

ARCREN 2017-FL3 — Placement Agreement

 

 

	
 
    	
CO-ISSUER:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2017-FL3, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signatures continue on following page]

 

ARCREN 2017-FL3 — Placement Agreement

 

 

	
 
    	
PARENT:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY SR, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signatures continue on following page]

 

ARCREN 2017-FL3 — Placement Agreement

 

 

	
 
    	
ART:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY TRUST, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signatures continue on following page]

 

ARCREN 2017-FL3 — Placement Agreement

 

 

	
Accepted:                       ,   2017
    	
 
    
	
 
    	
 
    
	
PLACEMENT   AGENT:
    	
 
    
	
 
    	
 
    
	
J.P. MORGAN SECURITIES LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

ARCREN 2017-FL3 — Placement Agreement

 

 

SCHEDULE I

 

NOTES

 

	
 
    	
 
    	
Initial Note
   Principal
   Balance
    	
 
    	
Interest Rate
    	
 
    	
Ratings
   (Moody’s / DBRS)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Class A Notes
    	
 
    	
U.S.$
    	
271,200,000
    	
 
    	
One-month LIBOR + 0.99%
    	
 
    	
Aaa(sf) / AAA(sf)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Class B Notes
    	
 
    	
U.S.$
    	
24,000,000
    	
 
    	
One-month LIBOR + 1.50%
    	
 
    	
NR / AA(low)(sf)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Class C Notes
    	
 
    	
U.S.$
    	
24,600,000
    	
 
    	
One-month LIBOR + 2.40%
    	
 
    	
NR / A(low)(sf)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Class D Notes
    	
 
    	
U.S.$
    	
36,600,000
    	
 
    	
One-month LIBOR + 3.35%
    	
 
    	
NR / BBB(low)(sf)
    

 

The aggregate combined Advisory, Structuring and Placement Agent Fee paid to the Placement Agent shall be an amount equal to the aggregate placement fees (with respect to the Offered Notes) and other fees set forth in the engagement letter, dated October 27, 2017, entered into by Arbor Realty Trust Inc. and J.P. Morgan Securities LLC.

 

 

ANNEX A

 

Restrictions on Offers and Sales Outside the United States

 

In connection with offers and sales of the Notes outside the United States:

 

(a)           The Placement Agent acknowledges that the Offered Notes have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act.

 

(b)           The Placement Agent represents, warrants and agrees that:

 

(A) It has offered and sold the Offered Notes, and will offer and sell the Offered Notes, (A) as part of their distribution at any time and (B) otherwise until forty (40) days after the later of the commencement of the offering of the Offered Notes and the Closing Date, only in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act.

 

(B) Neither it nor any of its affiliates or any other person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Offered Notes, and all such persons have complied and shall comply with the offering restrictions requirement of Regulation S.

 

(C) At or prior to the confirmation of sale of any Offered Notes sold in reliance on Regulation S, it will have sent to each distributor, dealer or other person receiving a selling concession, fee or other remuneration that purchases Offered Notes from it during the distribution compliance period a confirmation or notice to substantially the following effect:

 

“The Notes offered hereby have not been registered under Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until forty (40) days after the later of the commencement of the offering of the Notes and the date of original issuance of the Notes, except in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act.  Terms used above have the meanings given to them in Regulation S.”

 

(D) It has not and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Offered Notes, except with its affiliates or with the prior written consent of the Co-Issuers.

 

Annex A-1

 

(E) It has not made and will not make any invitation to any member of the public in the Cayman Islands, within the meaning of Section 175 of the Cayman Islands Companies Law (2016 Revision), to subscribe for the Offered Notes.

 

Terms used in paragraph (a) and this paragraph (b) and not otherwise defined in this Agreement have the meanings given to them in Regulation S.

 

(c)           The Placement Agent further represents, warrants and agrees that:

 

(A) it has only communicated or caused to be communicated and will only communicate or cause to be communicated in the United Kingdom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Offered Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Co-Issuers and (B) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Offered Notes in, from or otherwise involving the United Kingdom;

 

(B) it, in relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), has represented and agreed that, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, has not made and will not make an offer of the Offered Notes which are the subject of the offering contemplated by the Offering Memorandum as completed by the accompanying prospectus to the public in that Relevant Member State other than:  (A) to any legal entity which is a “qualified investor” as defined in the Prospectus Directive; (B) to fewer than 150 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the Co-Issuers for any such offer; or (C) in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided that, no such offer of the Offered Offered Notes referred to in (A) to (C) above shall require the Co-Issuers or the Placement Agent to publish a prospectus pursuant to Article 3 of the Prospectus Directive.  For the purposes of this provision, the expression an “offer of the Notes which are subject of the offering contemplated by the Offering Memorandum to the public” in relation to any Offered Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Offered Notes to be offered so as to enable an investor to decide to purchase or subscribe to the Notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) and includes any relevant implementing measure in the Relevant Member State; and

 

(C)  The Offered Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, (the “FIEA”)).  Accordingly, the Placement Agent represents and agrees

 

Annex A-2

 

that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, a resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident in Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with the FIEA and other relevant laws and regulations of Japan.

 

(d)           The Placement Agent acknowledges that no action has been or will be taken by the Co-Issuers that would permit a public offering of the Offered Notes, or possession or distribution of the Time of Sale Information, the Offering Memorandum or any other offering or publicity material relating to the Offered Notes, in any country or jurisdiction where action for that purpose is required.

 

Annex A-3

 

ANNEX B

 

Subsequent Time of Sale Information

 

Annex B-1

 

EXHIBIT A

 

ARBOR REALTY COLLATERAL MANAGEMENT, LLC

Officer’s Certificate

 

The undersigned, Salvatore Villani, pursuant to Section 5(e) of that certain Placement Agreement dated as of December 6, 2017 by and among Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd., Arbor Realty Commercial Real Estate Notes 2017-FL3, LLC, Arbor Realty SR, Inc., Arbor Realty Trust, Inc. and J.P. Morgan Securities LLC (the “Placement Agreement”) does HEREBY CERTIFY that:

 

(a)           The Loan Obligation Manager (i) is a limited liability company, duly organized, is validly existing and is in good standing under the laws of the State of Delaware, (ii) has full power and authority to own its assets and to transact the business in which it is currently engaged, and (iii) is duly qualified and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires, or the performance of the Loan Obligation Management Agreement and the Indenture would require, such qualification, except for failures to be so qualified that would not in the aggregate have a material adverse effect on the business, operations, assets or financial condition of the Loan Obligation Manager or on the ability of the Loan Obligation Manager to perform its obligations thereunder, or on the validity or enforceability of, the Loan Obligation Management Agreement and the provisions of the Indenture applicable to the Loan Obligation Manager; the Loan Obligation Manager has full power and authority to execute, deliver and perform the Loan Obligation Management Agreement and its obligations thereunder and the provisions of the Indenture applicable to it; the Loan Obligation Management Agreement has been duly authorized, executed and delivered by it and constitutes a legal, valid and binding agreement of the Loan Obligation Manager, enforceable against it in accordance with the terms thereof, except that the enforceability thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law);

 

(b)           Neither the Loan Obligation Manager nor any of its Affiliates is in violation of any federal or state securities law or regulation promulgated thereunder that would have a material adverse effect upon the ability of the Loan Obligation Manager to perform its duties under the Loan Obligation Management Agreement or the Indenture, and there is no charge, investigation, action, suit or proceeding before or by any court or regulatory agency pending or, to the best knowledge of the Loan Obligation Manager, threatened which could reasonably be expected to have a material adverse effect upon the ability of the Loan Obligation Manager to perform its duties under the Loan Obligation Management Agreement or the Indenture;

 

(c)           Neither the execution and delivery of the Loan Obligation Management Agreement nor the performance by the Loan Obligation Manager of its duties thereunder or under the Indenture conflicts with or will violate or result in a breach or violation of any of the terms or provisions of, or constitutes a default under:  (i) the limited liability company agreement of the Loan Obligation Manager, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement or other evidence of indebtedness or other agreement, obligation, condition, covenant or instrument to which the Loan Obligation Manager is a party or is bound,

 

Exhibit A-1

 

(iii) any law, decree, order, rule or regulation applicable to the Loan Obligation Manager of any court or regulatory, administrative or governmental agency, body or authority or arbitrator having jurisdiction over the Loan Obligation Manager or its properties, and which would have, in the case of any of (i), (ii) or (iii) of this subsection (c), either individually or in the aggregate, a material adverse effect on the business, operations, assets or financial condition of the Loan Obligation Manager or the ability of the Loan Obligation Manager to perform its obligations under the Loan Obligation Management Agreement or the Indenture;

 

(d)           No consent, approval, authorization or order of or declaration or filing with any government, governmental instrumentality or court or other person is required for the performance by the Loan Obligation Manager of its duties under the Loan Obligation Management Agreement and under the Indenture, except such as have been duly made or obtained;

 

(e)           The Offering Memorandum, as of the date thereof (including as of the date of any supplement thereto) and as of the Closing Date does not contain any untrue statement of a material fact and does not omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

(f)            On the Closing Date, there shall not have been, since the respective dates as of which information is given in the Offering Materials, any material adverse change or prospective material adverse change with respect to the Issuer, the Co-Issuer or the pool of Assets; and

 

(g)           The Loan Obligation Manager is registered as an investment adviser under the Investment Advisers Act of 1940, as amended.

 

Capitalized terms not set forth herein shall have the meaning ascribed thereto in the Indenture.

 

[Signature page follows]

 

Exhibit A-2

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th day of December, 2017.

 

 

	
 
    	
ARBOR REALTY COLLATERAL   MANAGEMENT, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

Exhibit A-3

 

EXHIBIT B

 

ARBOR REALTY SR, INC.

Officer’s Certificate

 

The undersigned, Valerie Rubin, pursuant to Section 5(f) of that certain Placement Agreement dated as of December 6, 2017, by and among Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd., Arbor Realty Commercial Real Estate Notes 2017-FL3, LLC, Arbor Realty SR, Inc., Arbor Realty Trust, Inc. and J.P. Morgan Securities LLC (the “Placement Agreement”) does HEREBY CERTIFY that:

 

(a)           Arbor Realty SR, Inc. (“Seller”) (i) is a corporation, duly incorporated, is validly existing and is in good standing under the laws of the State of Maryland, (ii) has full power and authority to own its assets and to transact the business in which it is currently engaged, and (iii) is duly qualified and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires, or the performance of the Loan Obligation Purchase Agreement and the Indenture would require, such qualification, except for failures to be so qualified that would not in the aggregate have a material adverse effect on the business, operations, assets or financial condition of Seller or on the ability of Seller to perform its obligations thereunder, or on the validity or enforceability of, the Loan Obligation Purchase Agreement and the provisions of the Indenture applicable to Seller; Seller has full power and authority to execute, deliver and perform the Loan Obligation Purchase Agreement and its obligations thereunder and the provisions of the Indenture applicable to it; the Loan Obligation Purchase Agreement has been duly authorized, executed and delivered by it and constitutes a legal, valid and binding agreement of Seller, enforceable against it in accordance with the terms thereof, except that the enforceability thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law);

 

(b)           Neither Seller nor any of its Affiliates is in violation of any federal or state securities law or regulation promulgated thereunder that would have a material adverse effect upon the ability of Seller to perform its duties under the Loan Obligation Purchase Agreement or the Indenture, and there is no charge, investigation, action, suit or proceeding before or by any court or regulatory agency pending or, to the best knowledge of Seller, threatened which could reasonably be expected to have a material adverse effect upon the ability of Seller to perform its duties under the Loan Obligation Purchase Agreement or the Indenture;

 

(c)           Neither the execution and delivery of the Loan Obligation Purchase Agreement nor the performance by Seller of its duties thereunder or under the Indenture conflicts with or will violate or result in a breach or violation of any of the terms or provisions of, or constitutes a default under:  (i) the articles of incorporation or by-laws of Seller, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement or other evidence of indebtedness or other agreement, obligation, condition, covenant or instrument to which Seller is

 

Exhibit B-1

 

a party or is bound, (iii) any law, decree, order, rule or regulation applicable to Seller of any court or regulatory, administrative or governmental agency, body or authority or arbitrator having jurisdiction over Seller or its properties, and which would have, in the case of any of (i), (ii) or (iii) of this subsection (c), either individually or in the aggregate, a material adverse effect on the business, operations, assets or financial condition of Seller or the ability of Seller to perform its obligations under the Loan Obligation Purchase Agreement or the Indenture;

 

(d)           No consent, approval, authorization or order of or declaration or filing with any government, governmental instrumentality or court or other person is required for the performance by Seller of its duties under the Loan Obligation Purchase Agreement and under the Indenture, except such as have been duly made or obtained; and

 

(e)           With respect to any information in the Offering Memorandum regarding Seller, the Offering Memorandum, as of the date thereof (including as of the date of any supplement thereto) and as of the Closing Date does not contain any untrue statement of a material fact and does not omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(f)            With respect to Section 5(d) of the Placement Agreement, (i) the undersigned has carefully reviewed the Time of Sale Information (as defined in the Placement Agreement) and the Offering Memorandum and hereby confirms, to the knowledge of the undersigned, after due inquiry, the representation set forth in Section 2(a) of the Placement Agreement is true and correct; (ii) the undersigned further confirms that the Co-Issuers, the Arbor Parent or the other Arbor entities each complied in all material respects with all agreements and satisfied all conditions on their part to be performed or satisfied under the Placement Agreement at or prior to the Closing Date; and (iii) other than as set forth in the Time of Sale Information, since the Time of Sale (as defined in the Placement Agreement) and other than as set forth in the Offering Memorandum, since the date thereof, there has not been any material adverse change or any development involving a prospective material adverse change, in or affecting the business, properties, management, financial position, stockholders’ equity or results of operations of the Co-Issuers or the Arbor Parent.

 

Capitalized terms not set forth herein shall have the meaning ascribed thereto in the Indenture.

 

[Signature page follows]

 

Exhibit B-2

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th day of December, 2017.

 

 

	
 
    	
ARBOR REALTY   SR, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

Exhibit B-3

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