Document:

Exhibit 4.2

 

THIRD SUPPLEMENTAL INDENTURE

 

by and among

 

Ventas Realty, Limited Partnership, as Issuer,

Ventas, Inc., as Guarantor

 

and

 

U.S. Bank National Association,

as Trustee

 

$450,000,000

3.250% Senior Notes due 2026

 

 

Dated as of September 21, 2016

 

Supplement to Indenture dated as of July 16, 2015 (Senior Debt Securities)

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   CREATION OF THE SECURITIES
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 1.01
    	
 
    	
Designation of the Series; Securities Guarantee
    	
 
    	
2
    
	
Section 1.02
    	
 
    	
Form of Notes
    	
 
    	
2
    
	
Section 1.03
    	
 
    	
No Limit on Amount of Notes
    	
 
    	
2
    
	
Section 1.04
    	
 
    	
Ranking
    	
 
    	
3
    
	
Section 1.05
    	
 
    	
Certificate of Authentication
    	
 
    	
3
    
	
Section 1.06
    	
 
    	
No Sinking Fund
    	
 
    	
3
    
	
Section 1.07
    	
 
    	
No Additional Amounts
    	
 
    	
3
    
	
Section 1.08
    	
 
    	
Definitions
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II   REDEMPTION
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 2.01
    	
 
    	
Amendment to Article 3
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III   COVENANTS
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 3.01
    	
 
    	
Amendments to Article 4
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV SUCCESSORS
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 4.01
    	
 
    	
Amendments to Article 5
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V   DEFAULTS AND REMEDIES
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 5.01
    	
 
    	
Amendments to Article 6
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI   TRUSTEE
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 6.01
    	
 
    	
Amendments to Article 7
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII   LEGAL DEFEASANCE AND COVENANT DEFEASANCE
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 7.01
    	
 
    	
Applicability of Defeasance Provisions
    	
 
    	
19
    
	
Section 7.02
    	
 
    	
Determinations Under Section 8.03
    	
 
    	
19
    
	
Section 7.03
    	
 
    	
Determination Under Section 8.07
    	
 
    	
19
    
	
Section 7.04
    	
 
    	
Amendments to Article 8
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII   GUARANTEES
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 8.01
    	
 
    	
Applicability of Guarantee Provisions
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX   MISCELLANEOUS
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 9.01
    	
 
    	
Determination Under Section 13.10
    	
 
    	
20
    
	
Section 9.02
    	
 
    	
Application of Third Supplemental Indenture; Ratification
    	
 
    	
20
    

 

 

	
Section 9.03
    	
 
    	
Benefits of Third Supplemental Indenture
    	
 
    	
20
    
	
Section 9.04
    	
 
    	
Effective Date
    	
 
    	
20
    
	
Section 9.05
    	
 
    	
Governing Law
    	
 
    	
20
    
	
Section 9.06
    	
 
    	
Counterparts
    	
 
    	
20
    

 

	
SCHEDULE 1
    	
Real Estate Revenues
    
	
 
    	
 
    
	
EXHIBIT A
    	
Form of Note
    
	
EXHIBIT B
    	
Form of Notation of Securities Guarantee
    

 

 

THIS THIRD SUPPLEMENTAL INDENTURE, dated as of September 21, 2016 (the “Third Supplemental Indenture”), is by and among Ventas Realty, Limited Partnership, a Delaware limited partnership (the “Issuer”), Ventas, Inc., a Delaware corporation, and U.S. Bank National Association, having a Corporate Trust Office at 425 Walnut ML CN WN 06 CT, Cincinnati, Ohio 45202, as Trustee (the “Trustee”) under the Indenture (as defined below).

 

WHEREAS, Ventas, Inc., the Issuer and the Trustee are parties to that certain indenture dated as of July 16, 2015 (the “Base Indenture” and, together with this Third Supplemental Indenture, as amended and supplemented from time to time, the “Indenture”), providing for the issuance by Ventas, Inc. or by the Issuer together from time to time of their respective senior debt securities in one or more series (the “Securities”);

 

WHEREAS, Sections 2.01, 2.02 and 9.01 of the Base Indenture provide, among other things, that, without the consent of the Holders of the Securities, one or more indentures supplemental to the Base Indenture may be entered into to establish the form or terms of Securities of any series or to change or eliminate any of the provisions of the Base Indenture; provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provisions;

 

WHEREAS, the Issuer, acting in its capacity as issuer under the Base Indenture, desires to issue a series of its Securities under the Base Indenture, and has duly authorized the creation and issuance of such series of Securities and the execution and delivery of this Third Supplemental Indenture to establish such series of Securities, to modify certain terms of the Base Indenture as they apply to such series of Securities and to provide certain additional provisions in respect of such Securities as hereinafter described;

 

WHEREAS, the Issuer desires to issue such Securities with the benefit of a Securities Guarantee provided by Ventas, Inc. on the terms set forth in the Base Indenture, as supplemented by this Third Supplemental Indenture;

 

WHEREAS, the Issuer, Ventas, Inc. and the Trustee deem it advisable to enter into this Third Supplemental Indenture for the purposes of establishing the terms of such series of Securities and the related Securities Guarantee, and providing for the rights, obligations and duties of the Trustee with respect to such Securities;

 

WHEREAS, concurrently with the execution hereof, the Issuer has delivered to the Trustee an Officers’ Certificate and has caused its counsel to deliver to the Trustee an Opinion of Counsel or a reliance letter upon an Opinion of Counsel satisfying the requirements of Section 2.03 of the Base Indenture; and

 

WHEREAS, all conditions and requirements of the Base Indenture necessary to make this Third Supplemental Indenture a valid, binding and legal instrument, enforceable in accordance with its terms, have been performed and fulfilled by the parties hereto, and the execution and delivery hereof have been in all respects duly authorized by the parties hereto.

 

 

NOW, THEREFORE, for and in consideration of the premises and agreements herein contained, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities of such series established hereby, as follows:

 

ARTICLE I

 

CREATION OF THE SECURITIES

 

Section 1.01                             Designation of the Series; Securities Guarantee.

 

(a)                                 The changes, modifications and supplements to the Base Indenture effected by this Third Supplemental Indenture shall be applicable only with respect to, and govern the terms of, the Notes (as defined below), which shall not apply to any other Securities that have been or may be issued under the Base Indenture, unless a supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements. Pursuant to the terms hereof and Sections 2.01 and 2.02 of the Base Indenture, the Issuer hereby creates a series of Securities designated as the “3.250% Senior Notes due 2026” (the “Notes”), which Notes shall be deemed “Securities” for all purposes under the Base Indenture.  Except as otherwise provided in the Base Indenture, the Notes shall form their own series for voting purposes, and shall not be part of the same class or series as any other Securities issued by the Issuer or by Ventas, Inc.

 

(b)                                 Each of the Notes will be guaranteed by the Guarantor in accordance with Article 10 of the Base Indenture and Article VIII of this Third Supplemental Indenture.

 

Section 1.02                             Form of Notes.  The Notes will be issued in permanent global form as one or more Global Securities substantially in the form set forth in Exhibit A attached hereto, which is incorporated herein and made a part hereof.  The Notes shall bear interest, be payable and have such other terms as are stated in such form of global Note or in the Base Indenture, as supplemented by this Third Supplemental Indenture.  The stated maturity of the principal of the Notes shall be October 15, 2026.

 

Section 1.03                             No Limit on Amount of Notes.  The Trustee shall authenticate and deliver on the Issue Date under the Indenture Notes for original issue in an aggregate principal amount of up to $450,000,000.  Notwithstanding the foregoing, the aggregate principal amount of the Notes that may be authenticated and delivered under the Indenture shall be unlimited, subject to the covenants set forth in the Indenture, including under Section 4.10 hereof; provided, that the terms of all Notes issued under this Third Supplemental Indenture (other than the date of issuance, the issuance price, and the initial Interest Payment Date) shall be the same.  The Issuer may, upon the execution and delivery of this Third Supplemental Indenture or from time to time thereafter, execute and deliver the Notes to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes upon an Authentication Order and delivery of an Officers’ Certificate and Opinion of Counsel as contemplated by Section 2.03 of the Base Indenture, without further action by the Issuer.

 

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Section 1.04                             Ranking.  The Notes will be the Issuer’s unsecured and unsubordinated obligations and rank equal in right of payment with all of the Issuer’s existing and future unsecured and unsubordinated indebtedness.

 

Section 1.05                             Certificate of Authentication.  The Trustee’s certificate of authentication to be included on the Notes shall be substantially as provided in the form of Note attached hereto as Exhibit A.

 

Section 1.06                             No Sinking Fund.  No sinking fund will be provided with respect to the Notes (notwithstanding any provisions of the Base Indenture with respect to sinking fund obligations).

 

Section 1.07                             No Additional Amounts.  No Additional Amounts will be payable with respect to the Notes (notwithstanding any provisions of the Base Indenture with respect to Additional Amount obligations).

 

Section 1.08                             Definitions.

 

(a)                                 Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned thereto in the Base Indenture.

 

(b)                                 Solely for purposes of this Third Supplemental Indenture and the Notes, the following definitions in Section 1.01 of the Base Indenture are hereby amended in their entirety to read as follows:

 

“Business Day” means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York are required or authorized to close.

 

(c)                                  Solely for purposes of this Third Supplemental Indenture and the Notes, the following terms shall have the indicated meanings:

 

“Consolidated EBITDA” means, for any period of time, the net income (loss) of Ventas, Inc. and its Subsidiaries, determined on a consolidated basis in accordance with GAAP for such period, before deductions for (without duplication):

 

(1)                                 Interest Expense;

 

(2)                                 taxes;

 

(3)                                 depreciation, amortization, and all other non-cash items, as determined reasonably and in good faith by Ventas, Inc., deducted in arriving at net income (loss);

 

(4)                                 extraordinary items;

 

(5)                                 non-recurring items or other unusual items, as determined reasonably and in good faith by Ventas, Inc. (including, without limitation, all prepayment penalties and all costs or fees incurred in connection with any debt financing or amendment thereto, acquisition,

 

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disposition, recapitalization or similar transaction (regardless of whether such transaction is completed));

 

(6)                                 noncontrolling interests;

 

(7)                                 income or expense attributable to transactions involving derivative instruments that do not qualify for hedge accounting in accordance with GAAP; and

 

(8)                                 gains or losses on dispositions of depreciable real estate investments, property valuation losses and impairment charges.

 

For purposes of calculating Consolidated EBITDA, all amounts shall be as determined reasonably and in good faith by Ventas, Inc., and in accordance with GAAP except to the extent that GAAP is not applicable with respect to the determination of all non-cash and non-recurring items.

 

“Consolidated Financial Statements” means, with respect to any Person, collectively, the consolidated financial statements and notes to those financial statements, of that Person and its subsidiaries prepared in accordance with GAAP.

 

“Contingent Liabilities of Ventas, Inc. and Subsidiaries” means, as of any date, those liabilities of Ventas, Inc. and its Subsidiaries consisting of (without duplication) indebtedness for borrowed money, as determined in accordance with GAAP, that are or would be stated and quantified as contingent liabilities in the notes to the Consolidated Financial Statements of Ventas, Inc. as of the date of determination.

 

“Debt” means, as of any date (without duplication), (1) all indebtedness and liabilities for borrowed money, secured or unsecured, of Ventas, Inc. and its Subsidiaries, including mortgages and other notes payable (including the Notes to the extent outstanding from time to time), but excluding any indebtedness, including mortgages and other notes payable, which is secured by cash, cash equivalents or marketable securities or defeased (it being understood that cash collateral shall be deemed to include cash deposited with a trustee with respect to third party indebtedness) and (2) all Contingent Liabilities of Ventas, Inc. and Subsidiaries, excluding in each of clauses (1) and (2) Intercompany Debt and all liabilities associated with customary exceptions to Non-Recourse Debt, such as for fraud, misapplication of funds, environmental indemnities, voluntary bankruptcy, collusive involuntary bankruptcy and other similar exceptions.

 

It is understood that Debt shall not include any redeemable equity interest in Ventas, Inc.

 

“Guarantor” means Ventas, Inc. and its successors and assigns; provided, however, that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its Guarantee of the Notes is released in accordance with the terms of the Indenture.

 

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“Intercompany Debt” means, as of any date, Debt to which the only parties are Ventas, Inc. and any of its Subsidiaries as of such date; provided, however, that with respect to any such Debt of which the Issuer or the Guarantor is the borrower, such Debt is subordinate in right of payment to the Notes.

 

“Interest Expense” means, for any period of time, the aggregate amount of interest recorded in accordance with GAAP for such period by Ventas, Inc. and its Subsidiaries, but excluding (i) interest reserves funded from the proceeds of any loan, (ii) prepayment penalties, (iii) amortization of deferred financing costs, and (iv) non-cash swap ineffectiveness charges, in all cases as reflected in the applicable Consolidated Financial Statements.

 

“Issue Date” means September 2, 2016.

 

“Issuer” has the meaning stated in the preamble.

 

“Latest Completed Quarter” means, as of any date, the then most recently ended fiscal quarter of Ventas, Inc. for which Consolidated Financial Statements of Ventas, Inc. have been completed, it being understood that at any time when Ventas, Inc. is subject to the informational requirements of the Exchange Act, and in accordance therewith files annual and quarterly reports with the Commission, the term “Latest Completed Quarter” shall be deemed to refer to the fiscal quarter covered by Ventas, Inc.’s most recently filed Quarterly Report on Form 10-Q, or, in the case of the last fiscal quarter of the year, Ventas, Inc.’s Annual Report on Form 10-K.

 

“Make-Whole Amount” means, in connection with any optional redemption of the Notes, the excess, if any, of:

 

(1)                                 the aggregate present value as of the date of such redemption of each dollar of principal of the Notes being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of each such dollar if such redemption or accelerated payment had been made on July 15, 2026, determined by discounting, on a semi-annual basis, such principal and interest at the Reinvestment Rate (determined on the third Business Day preceding the date a notice of redemption is given or declaration of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or payment had been made on July 15, 2026, over

 

(2)                                 the aggregate principal amount of the Notes being redeemed or paid.

 

“Notes” has the meaning stated in Section 1.01 hereof.

 

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Debt.

 

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“Property EBITDA” means for any property owned by Ventas, Inc. or any of its Subsidiaries as of the date of determination, for any period of time (without duplication), the net income (loss) derived from such property for such period, before deductions for:

 

(1)                                 Interest Expense;

 

(2)                                 taxes;

 

(3)                                 depreciation, amortization, and all other non-cash items, as determined reasonably and in good faith by Ventas, Inc., deducted in arriving at net income (loss);

 

(4)                                 general and administrative expenses that are not allocated by management to a property segment, as reflected in Ventas, Inc.’s Consolidated Financial Statements available for the four (4) consecutive fiscal quarters ending with the Latest Completed Quarter;

 

(5)                                 extraordinary items;

 

(6)                                 non-recurring items or other unusual items, as determined reasonably and in good faith by Ventas, Inc. (including, without limitation, all prepayment penalties and all costs or fees incurred in connection with any debt financing or amendment thereto, acquisition, disposition, recapitalization or similar transaction (regardless of whether such transaction is completed));

 

(7)                                 noncontrolling interests;

 

(8)                                 income or expense attributable to transactions involving derivative instruments that do not qualify for hedge accounting in accordance with GAAP; and

 

(9)                                 property valuation losses and impairment charges;

 

in each case attributable to such property.

 

For purposes of calculating Property EBITDA, all amounts shall be determined reasonably and in good faith by Ventas, Inc., and in accordance with GAAP except to the extent that GAAP is not applicable with respect to the determination of all non-cash and non-recurring items.

 

Property EBITDA shall be adjusted (without duplication) to give pro forma effect:

 

(x)                                 in the case of any assets having been placed-in-service or removed from service since the first day of the period to the date of determination, to include or exclude, as the case may be, any Property EBITDA earned or eliminated as a result of the placement of such assets in service or removal of such assets from service as if the placement of such assets in service or removal of such assets from service occurred as of the first day of the period; and

 

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(y)                                 in the case of any acquisition or disposition of any asset or group of assets since the first day of the period to the date of determination, including, without limitation, by merger, or stock or asset purchase or sale, to include or exclude, as the case may be, any Property EBITDA earned or eliminated as a result of the acquisition or disposition of those assets as if the acquisition or disposition occurred as of the first day of the period.

 

“Reinvestment Rate” means 0.25% plus the arithmetic mean of the yields under the respective heading Week Ending published in the most recent Statistical Release under Treasury Constant Maturities for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity of the principal of the Notes being redeemed or paid as of such redemption or payment date, which maturity shall be deemed to be July 15, 2026. If no maturity exactly corresponds to such deemed maturity, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate in respect of the Notes shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For the purpose of calculating the Reinvestment Rate in respect of the Notes, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used.

 

“Secured Debt” means, as of any date, that portion of the aggregate principal amount of all outstanding Debt of Ventas, Inc. and its Subsidiaries as of that date that is secured by a Lien on properties or other assets of Ventas, Inc. or any of its Subsidiaries.

 

“Stabilized Development Asset” means, as of any date, a new construction or development Real Estate Asset at such date that, following the first four (4) consecutive fiscal quarters occurring after substantial completion of construction or development, either (i) an additional six (6) consecutive fiscal quarters have occurred or (ii) such Real Estate Asset is at least 90% leased, whichever shall first occur.

 

“Statistical Release” means that statistical release designated H.15(519) or any successor publication that is published weekly by the Federal Reserve System and that establishes annual yields on actively traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under the Indenture, then such other reasonably comparable index the Issuer designates.

 

“Subsidiary” means, with respect to any Person, a corporation, partnership association, joint venture, trust, limited liability company or other business entity which is required to be consolidated with such Person in accordance with GAAP.

 

“Third Supplemental Indenture” has the meaning stated in the preamble.

 

“Total Assets” means, as of any date, in each case as determined reasonably and in good faith by Ventas, Inc., the sum of (without duplication):

 

(1)                                 with respect to Real Estate Assets that were owned by Ventas, Inc. and its Subsidiaries as of April 17, 2002 and that continue to be owned as of the date of

 

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determination, the annualized rental revenues specified for such Real Estate Assets on Schedule 1 attached to this Third Supplemental Indenture, divided by 0.0900, plus any annualized incremental rental revenue generated by such Real Estate Assets as a result of, arising out of or in connection with annual rent escalations or rent reset rights of Ventas, Inc. and its Subsidiaries with respect to such Real Estate Assets (whether by agreement or exercise of such right or otherwise), divided by 0.0900; for the purpose of this clause (1), “annualized incremental rental revenue” in respect of a Real Estate Asset shall mean the increase in daily rental revenue generated by such Real Estate Asset as a result of, arising out of or in connection with such annual rent escalations or rent reset rights over the daily rental revenue generated by such Real Estate Asset immediately prior to the effective date of such increase, annualized by multiplying such daily increase by 365;

 

(2)                                 with respect to all other Real Estate Assets owned by Ventas, Inc. and its Subsidiaries as of the date of determination (except as set forth in clause (3) below), the cost (original cost plus capital improvements before depreciation and amortization) thereof, determined in accordance with GAAP;

 

(3)                                 with respect to Stabilized Development Assets owned by Ventas, Inc. and its Subsidiaries as of the date of determination, the aggregate sum of all Property EBITDA for such Stabilized Development Assets for the four (4) consecutive fiscal quarters ending with the Latest Completed Quarter divided by (i) 0.0900, in the case of a government reimbursed property and (ii) 0.0700 in all other cases; provided, however, that if the value of a particular Stabilized Development Asset calculated pursuant to this clause (3) is less than the cost (original cost plus capital improvements before depreciation and amortization) of such Real Estate Asset, as determined in accordance with GAAP, such cost shall be used in lieu thereof with respect to such Real Estate Asset;

 

(4)                                 the proceeds of the Debt, or the assets to be acquired in exchange for such proceeds, as the case may be, incurred since the end of the Latest Completed Quarter;

 

(5)                                 mortgages and other notes receivable of Ventas, Inc. and its Subsidiaries, determined in accordance with GAAP;

 

(6)                                 cash, cash equivalents and marketable securities of Ventas, Inc. and its Subsidiaries but excluding all cash, cash equivalents and marketable securities securing, or applied to defease or discharge, in each case as of that date, any indebtedness, including mortgages and other notes payable (including cash deposited with a trustee with respect to third party indebtedness), all determined in accordance with GAAP; and

 

(7)                                 all other assets of Ventas, Inc. and its Subsidiaries (excluding goodwill), determined in accordance with GAAP.

 

“Unencumbered Assets” means, as of any date, in each case as determined reasonably and in good faith by Ventas, Inc., the sum of (without duplication):

 

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(1)                                 with respect to Real Estate Assets that were owned by Ventas, Inc. and its Subsidiaries as of April 17, 2002 and that continue to be owned as of the date of determination, but excluding any such Real Estate Assets that are serving as collateral for Secured Debt, the annualized rental revenues specified for such Real Estate Assets on Schedule 1 attached to this Third Supplemental Indenture, divided by 0.0900, plus any annualized incremental rental revenue generated by such Real Estate Assets as a result of, arising out of or in connection with annual rent escalations or rent reset rights of Ventas, Inc. and its Subsidiaries with respect to such Real Estate Assets (whether by agreement or exercise of such right or otherwise), divided by 0.0900; for the purpose of this clause (1), “annualized incremental rental revenue” in respect of a Real Estate Asset shall mean the increase in daily rental revenue generated by such Real Estate Asset as a result of, arising out of or in connection with such annual rent escalations or rent reset rights over the daily rental revenue generated by such Real Estate Asset immediately prior to the effective date of such increase, annualized by multiplying such daily increase by 365;

 

(2)                                 with respect to all other Real Estate Assets owned by Ventas, Inc. and its Subsidiaries as of the date of determination (except as set forth in clause (3) below), but excluding any such Real Estate Assets that are serving as collateral for Secured Debt, the cost (original cost plus capital improvements before depreciation and amortization) thereof, determined in accordance with GAAP;

 

(3)                                 with respect to Stabilized Development Assets owned by Ventas, Inc. and its Subsidiaries as of the date of determination, excluding any such Stabilized Development Assets that are serving as collateral for Secured Debt, the aggregate sum of all Property EBITDA for such Stabilized Development Assets for the four (4) consecutive fiscal quarters ending with the Latest Completed Quarter divided by (i) 0.0900, in the case of a government reimbursed property and (ii) 0.0700 in all other cases; provided, however, that if the value of a particular Stabilized Development Asset calculated pursuant to this clause (3) is less than the cost (original cost plus capital improvements before depreciation and amortization) of such Real Estate Asset, as determined in accordance with GAAP, such cost shall be used in lieu thereof with respect to such Real Estate Asset;

 

(4)                                 the proceeds of the Debt, or the assets to be acquired in exchange for such proceeds, as the case may be, incurred since the end of the Latest Completed Quarter;

 

(5)                                 mortgages and other notes receivable of Ventas, Inc. and its Subsidiaries, except any mortgages or other notes receivable that are serving as collateral for Secured Debt, determined in accordance with GAAP;

 

(6)                                 cash, cash equivalents and marketable securities of Ventas, Inc. and its Subsidiaries but excluding all cash, cash equivalents and marketable securities securing, or applied to defease or discharge, in each case as of that date, any indebtedness, including mortgages and other notes payable (including cash deposited with a trustee with respect to third party indebtedness), all determined in accordance with GAAP; and

 

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(7)                                 all other assets of Ventas, Inc. and its Subsidiaries (excluding goodwill), other than assets pledged to secure Debt, determined in accordance with GAAP; provided, however, that Unencumbered Assets shall not include net real estate investments in unconsolidated joint ventures of Ventas, Inc. and its Subsidiaries.

 

For the avoidance of doubt, cash held by a “qualified intermediary” in connection with proposed like-kind exchanges pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, which may be classified as “restricted” for GAAP purposes shall nonetheless be included in clause (6) above, so long as Ventas, Inc. or any of its Subsidiaries has the right to (i) direct the qualified intermediary to return such cash to Ventas, Inc. or such Subsidiary if and when Ventas, Inc. or such Subsidiary fails to identify or acquire the proposed like-kind property or at the end of the 180-day replacement period or (ii) direct the qualified intermediary to use such cash to acquire like-kind property.

 

“Unsecured Debt” means, as of any date, that portion of the aggregate principal amount of all outstanding Debt of Ventas, Inc. and its Subsidiaries as of that date that is neither Secured Debt nor Contingent Liabilities of Ventas, Inc. and its Subsidiaries.

 

“Ventas Capital” means Ventas Capital Corporation, a Delaware corporation.

 

ARTICLE II

 

REDEMPTION

 

Section 2.01                             Amendment to Article 3.  Pursuant to Sections 2.02(7) and 2.02(8) of the Base Indenture, Article 3 of the Base Indenture is hereby amended with respect to the Notes by adding to the end the following new Sections 3.09 and 3.10, in each case to read as follows:

 

“Section 3.09  Optional Redemption.

 

(a)                                 The Issuer may, at its option, redeem the Notes at any time prior to maturity, in whole or from time to time in part.

 

(b)                                 The redemption price for any redemption of the Notes before July 15, 2026 shall be equal to the sum of (1) the principal amount of the Notes being redeemed, (2) accrued and unpaid interest thereon, if any, to (but excluding) the redemption date, and (3) the Make-Whole Amount, if any (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date).  The calculation of the Make-Whole Amount shall be the responsibility of the Issuer or the party they appoint. The redemption price for any redemption of the Notes on or after July 15, 2026 shall be equal to the sum of (1) the principal amount of the Notes being redeemed and (2) accrued and unpaid interest thereon, if any, to (but excluding) the redemption date.

 

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(c)                                  Any redemption pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.07 of the Indenture.

 

Section 3.10  Mandatory Redemption.  The Issuer is not required to make mandatory redemption payments with respect to the Notes.”

 

ARTICLE III

 

COVENANTS

 

Section 3.01                             Amendments to Article 4.

 

(a)                                 Pursuant to Section 2.02(14) of the Base Indenture, Section 4.03 of the Base Indenture is hereby amended with respect to the Notes by deleting the text thereof in its entirety and inserting in its place the following:

 

“Section 4.03  Reports.  Whether or not required by the Commission, so long as any Notes are outstanding, Ventas, Inc. shall file with the Trustee, within 15 days after it files the same with the Commission (or if not subject to the periodic reporting requirements of the Exchange Act, within 15 days after it would have been required to file the same with the Commission had it been so subject):

 

(1)                                 all quarterly and annual financial information that is required to be contained in filings with the Commission on Forms 10-Q and 10-K, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by Ventas, Inc.’s certified independent accountants; and

 

(2)                                 all current reports that are required to be filed with the Commission on Form 8-K.

 

For so long as any Notes remain outstanding, if at any time Ventas, Inc. is not required to file with the Commission the reports required by the preceding paragraph of this Section 4.03, Ventas, Inc. shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

The availability of the foregoing materials on the Commission’s website or on Ventas, Inc.’s website shall be deemed to satisfy the foregoing delivery obligations.”

 

(b)                                 Pursuant to Section 2.02(14) of the Base Indenture, Section 4.04 of the Base Indenture is hereby amended with respect to the Notes by deleting the text thereof in its entirety and inserting in its place the following:

 

11

 

“Section 4.04  Compliance Certificate.  “Ventas, Inc. shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers’ Certificate stating that a review of the activities of Ventas, Inc. and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether Ventas, Inc. has kept, observed, performed and fulfilled its obligations under the Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, Ventas, Inc. has kept, observed, performed and fulfilled each and every covenant contained in the Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of the Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action Ventas, Inc. is taking or proposes to take with respect thereto) and that to the best of his or her knowledge, no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Securities of any series is prohibited or if such event has occurred, a description of the event and what action Ventas, Inc. is taking or proposes to take with respect thereto.  For purposes of this Section 4.04, such compliance shall be determined without regard to any period of grace or requirement of notice under the Indenture.”

 

(c)                                  Pursuant to Section 2.02(14) of the Base Indenture, Section 4.06 of the Base Indenture is hereby amended with respect to the Notes by deleting the text thereof in its entirety and inserting in its place the following:

 

“Section 4.06  Corporate Existence.  Except as permitted by Article 5 and Section 10.04, Ventas, Inc. and the Issuer shall do all things necessary to preserve and keep their existence, rights and franchises; except that neither Ventas, Inc. nor the Issuer shall be required to preserve any such right or franchise if Ventas, Inc. or the Issuer, as applicable, shall determine reasonably and in good faith that the preservation thereof is no longer desirable in the conduct of its business.”

 

(d)                                 Pursuant to Section 2.02(14) of the Base Indenture, Article 4 of the Base Indenture is hereby amended with respect to the Notes by adding to the end the following new Sections 4.07 through 4.11, in each case to read as follows:

 

“Section 4.07  Taxes.  Ventas, Inc. will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

 

Section 4.08  Stay, Extension and Usury Laws.  Each of Ventas, Inc. and the Issuer covenants (to the extent that they may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim

 

12

 

or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of the Indenture; and each of Ventas, Inc. and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

 

Section 4.09  Restrictions on Activities of Ventas Capital.  Each of Ventas, Inc. and the Issuer shall not permit Ventas Capital to hold any material assets, become liable for any material obligations or engage in any significant business activities, except that Ventas Capital may be a co-obligor with respect to Debt if the Issuer is a primary obligor of such Debt and the net proceeds of such Debt are received by the Issuer or one or more of its Subsidiaries other than Ventas Capital.

 

Section 4.10  Limitations on Incurrence of Debt.

 

(a)                                 Ventas, Inc. shall not, and shall not permit any of its Subsidiaries to, Incur any Debt if, immediately after giving effect to the Incurrence of such additional Debt and any other Debt Incurred since the end of the Latest Completed Quarter and the application of the net proceeds therefrom, the aggregate principal amount of all outstanding Debt would exceed 60% of the sum of (without duplication) (i) Total Assets as of the end of the Latest Completed Quarter and (ii) the purchase price of any Real Estate Assets or mortgages receivable acquired, and the amount of any securities offering proceeds received (to the extent such proceeds were not used to acquire Real Estate Assets or mortgages receivable or to reduce Debt), since the end of the Latest Completed Quarter.

 

(b)                                 Ventas, Inc. shall not, and shall not permit any of its Subsidiaries to, Incur any Secured Debt if, immediately after giving effect to the Incurrence of such additional Secured Debt and any other Secured Debt Incurred since the end of the Latest Completed Quarter and the application of the net proceeds therefrom, the aggregate principal amount of all outstanding Secured Debt would exceed 50% of the sum of (without duplication) (i) Total Assets as of the end of the Latest Completed Quarter and (ii) the purchase price of any Real Estate Assets or mortgages receivable acquired, and the amount of any securities offering proceeds received (to the extent such proceeds were not used to acquire Real Estate Assets or mortgages receivable or to reduce Debt), since the end of the Latest Completed Quarter.

 

(c)                                  Ventas, Inc. shall not, and shall not permit any of its Subsidiaries to, Incur any Debt if, immediately after giving effect to the Incurrence of such additional Debt and any other Debt Incurred since the

 

13

 

end of the Latest Completed Quarter and the application of the net proceeds therefrom, the ratio of Consolidated EBITDA to Interest Expense for the four (4) consecutive fiscal quarters ending with the Latest Completed Quarter would be less than 1.50 to 1.00 on a pro forma basis and calculated on the assumption (without duplication) that:

 

(i)                                     the additional Debt and any other Debt Incurred by Ventas, Inc. or any of its Subsidiaries since the first day of such four-quarter period to the date of determination, which was outstanding at the date of determination, had been Incurred at the beginning of that period and continued to be outstanding throughout that period, and the application of the net proceeds of such Debt, including to refinance other Debt, had occurred at the beginning of such period, except that in determining the amount of Debt so Incurred, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period;

 

(ii)                                  the repayment or retirement of any other Debt repaid or retired by Ventas, Inc. or any of its Subsidiaries since the first day of such four-quarter period to the date of determination had occurred at the beginning of that period, except that in determining the amount of Debt so repaid or retired, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period; and

 

(iii)                               in the case of any acquisition or disposition of any asset or group of assets (including, without limitation, by merger, or stock or asset purchase or sale) or the placement of any assets in service or removal of any assets from service by Ventas, Inc. or any of its Subsidiaries since the first day of such four-quarter period to the date of determination, the acquisition, disposition, placement in service or removal from service and any related repayment or refinancing of Debt had occurred as of the first day of such period, with the appropriate adjustments to Consolidated EBITDA and Interest Expense with respect to the acquisition, disposition, placement in service or removal from service being included in that pro forma calculation.

 

Section 4.11  Maintenance of Unencumbered Assets. Ventas, Inc. and its Subsidiaries shall maintain at all times Unencumbered Assets of not less than 150% of the aggregate principal amount of all outstanding Unsecured Debt.”

 

14

 

ARTICLE IV

 

SUCCESSORS

 

Section 4.01                             Amendments to Article 5.

 

(a)                                 Pursuant to Section 2.02(23) of the Base Indenture, Section 5.01 of the Base Indenture is hereby amended with respect to the Notes by deleting the text thereof in its entirety and inserting in its place the following:

 

“Section 5.01                      Merger, Consolidation, or Sale of Assets.

 

Ventas, Inc. may not, directly or indirectly: (a) consolidate or merge with or into another Person (whether or not Ventas, Inc. is the surviving corporation); or (b) sell, assign, transfer, convey, lease (other than to an unaffiliated operator in the ordinary course of business) or otherwise dispose of all or substantially all of the properties or assets of Ventas, Inc. and its Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

 

(1)                                 either:

 

(i)                                     Ventas, Inc. is the surviving corporation; or

 

(ii)                                  the Person formed by or surviving any such consolidation or merger (if other than Ventas, Inc.) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia;

 

(2)                                 the Person formed by or surviving any such consolidation or merger (if other than Ventas, Inc.) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all of Ventas, Inc.’s obligations under the Notes and the Indenture pursuant to agreements reasonably satisfactory to the Trustee; and

 

(3)                                   immediately after such transaction, on a pro forma basis giving effect to such transaction or series of transactions (and treating any obligation of Ventas, Inc. or any Subsidiary incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default exists under the Indenture.

 

Notwithstanding anything to the contrary in this Section 5.01, the Guarantor may consolidate or merge with or into the Issuer, or sell and/or

 

15

 

transfer to the Issuer all or substantially all of its assets, in each case, without compliance with any of the requirements set forth in this Article 5.”

 

(b)                                 Pursuant to Sections 2.02(23) of the Base Indenture, Article 5 of the Base Indenture is hereby amended with respect to the Notes by adding to the end the following new Sections 5.03 and 5.04, in each case to read as follows:

 

“Section 5.03                      Assumption by the Guarantor.

 

The Guarantor, or a Subsidiary thereof that is organized and existing under the laws of the United States, any State of the United States or the District of Columbia, may directly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all the Notes and the performance of every covenant of the Indenture on the part of the Issuer to be performed or observed. Upon any such assumption, the Guarantor or such Subsidiary shall succeed to, and be substituted for and may exercise every right and power of, the Issuer under the Indenture with the same effect as if the Guarantor or such Subsidiary had been named as the Issuer herein and the Issuer shall be released from liability as obligor on the Notes.

 

Section 5.04                            Termination of the Guarantee.

 

The obligations of the Guarantor under the Indenture shall terminate at such time the Guarantor merges or consolidates with the Issuer or at such other time as the Issuer acquires all of the assets and partnership interests of the Guarantor.”

 

ARTICLE V

 

DEFAULTS AND REMEDIES

 

Section 5.01                             Amendments to Article 6.

 

(a)                                 Pursuant to Section 2.02(14) of the Base Indenture, Section 6.01 of the Base Indenture is hereby amended with respect to the Notes by deleting the text thereof in its entirety and inserting in its place the following:

 

“Section 6.01.  Events of Default.

 

Each of the following is an “Event of Default”:

 

(1)                                 Ventas, Inc. or the Issuer does not pay the principal or any premium on any Note when due and payable;

 

(2)                                 Ventas, Inc. or the Issuer does not pay interest on any Note within 30 days after the applicable due date;

 

16

 

(3)                                 Ventas, Inc. or its Subsidiaries remain in breach of any other term of the Indenture for 90 days after they receive a notice of Default stating they are in breach.  Either the Trustee or the Holders of more than 25% in aggregate principal amount of the Notes then Outstanding may send the notice;

 

(4)                                 except as permitted by the Indenture and the Notes, the Securities Guarantee by the Guarantor shall cease to be in full force and effect or the Guarantor shall deny or disaffirm its obligations with respect thereto;

 

(5)                                 the Issuer, Ventas, Inc. or any of its Significant Subsidiaries default under any of their indebtedness (including a default with respect to Securities of any series issued under the Base Indenture other than the Notes) in an aggregate principal amount exceeding $50.0 million after the expiration of any applicable grace period, which default results in the acceleration of the maturity of such indebtedness.  Such default is not an Event of Default if the other indebtedness is discharged, or the acceleration is rescinded or annulled, within a period of 30 days after the Issuer, Ventas, Inc. or any such Significant Subsidiary, as the case may be, receives notice specifying the default and requiring that they discharge the other indebtedness or cause the acceleration to be rescinded or annulled.  Either the Trustee or the Holders of more than 25% in aggregate principal amount of the Notes then Outstanding may send the notice;

 

(6)                                 the Issuer, Ventas, Inc. or any of its Significant Subsidiaries, or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary:

 

(i)                                     commence a voluntary case;

 

(ii)                                  consent to the entry of an order for relief against them in an involuntary case;

 

(iii)                               consent to the appointment of a custodian of them or for all or substantially all of their property;

 

(iv)                              make a general assignment for the benefit of their creditors; or

 

(v)                                 generally are not paying their debts as they become due; or

 

(7)                                 a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(i)                                     is for relief against the Issuer, Ventas, Inc. or any of its Significant Subsidiaries, or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, in an involuntary case;

 

(ii)                                  appoints a custodian of the Issuer, Ventas, Inc. or any of its Significant Subsidiaries, or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, or for all or substantially all of the

 

17

 

property of the Issuer, Ventas, Inc. or any of its Significant Subsidiaries, or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or

 

(iii)                               orders the liquidation of the Issuer, Ventas, Inc. or any of its Significant Subsidiaries, or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary;

 

and the order or decree remains unstayed and in effect for 60 consecutive days.”

 

(b)                                 Pursuant to Section 2.02(14) of the Base Indenture, Section 6.02 of the Base Indenture is hereby amended with respect to the Notes by (i) deleting the first sentence thereof in its entirety and inserting in its place the following:

 

“In the case of an Event of Default specified in clause (6) or (7) of Section 6.01, with respect to the Issuer, Ventas, Inc. or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all Outstanding Notes will become due and payable immediately without further action or notice.”

 

and (ii) adding to the end of Section 6.02 the following:

 

“Notwithstanding anything to the contrary contained in the Indenture, the sole remedy for an Event of Default relating to a failure to comply with any of the provisions of Section 4.03 hereof shall consist exclusively of the right to receive additional interest on the Notes at an annual rate equal to 0.25% of the outstanding principal amount of the Notes.  This additional interest will be payable in the same manner and on the same dates as the stated interest payable on the Notes and will accrue on all Outstanding Notes from and including the date on which such Event of Default first occurs to, but not including, the date on which such Event of Default shall have been cured or waived.”

 

(c)                                  Pursuant to Section 2.02(14) of the Base Indenture, Section 6.08 of the Base Indenture is hereby amended with respect to the Notes by deleting from the first line thereof the reference to clause (3) of Section 6.01 of the Base Indenture.

 

ARTICLE VI

 

TRUSTEE

 

Section 6.01                             Amendments to Article 7.  Pursuant to Section 2.02(14) of the Base Indenture, Section 7.07(e) of the Base Indenture is hereby amended with respect to the Notes by changing the references to Section 6.01(7) or (8) therein to Section 6.01(6) or (7).

 

18

 

ARTICLE VII

 

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

Section 7.01                             Applicability of Defeasance Provisions.  Pursuant to Sections 2.02(17) and 8.01 of the Base Indenture, so long as any of the Notes are Outstanding, Sections 8.02 and 8.03 of the Base Indenture shall be applicable to the Notes.

 

Section 7.02                             Determinations Under Section 8.03.  For the purposes of Sections 2.02(17) and 8.03 of the Base Indenture, Section 8.03 of the Base Indenture shall apply to Sections 4.09 through 4.11, inclusive.

 

Section 7.03                             Determination Under Section 8.07.  For the purposes of Sections 8.07 and 11.02 of the Base Indenture, the provisions of Section 8.07 of the Base Indenture shall apply to the Notes.

 

Section 7.04                             Amendments to Article 8.

 

(a)                                 Pursuant to Section 2.02(17) of the Base Indenture, the last sentence of Section 8.03 of the Base Indenture is hereby amended with respect to the Notes by changing the references to Sections 6.01(4) through 6.01(6) therein to Sections 6.01(3) through 6.01(5).

 

(b)                                 Pursuant to Section 2.02(23) of the Base Indenture, clause (5) of Section 8.04 of the Base Indenture is hereby amended with respect to the Notes by deleting the text thereof in its entirety and inserting in its place the following:

 

“(5)                             such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the Indenture in respect of the Notes) to which Ventas, Inc. or the Issuer is a party or by which Ventas, Inc. or the Issuer is bound;”

 

(c)                                  Pursuant to Section 2.02(23) of the Base Indenture, clause (2) of Section 8.07(c) of the Base Indenture is hereby amended with respect to the Notes by deleting the references to “Restricted Subsidiaries” and replacing such references with the word “Subsidiaries.”

 

ARTICLE VIII

 

GUARANTEES

 

Section 8.01                             Applicability of Guarantee Provisions.

 

(a)                                 Pursuant to Sections 2.02(1) and 10.01 of the Base Indenture, so long as any of the Notes are Outstanding, Article 10 shall be applicable to the Notes.

 

(b)                                 To evidence its Guarantee in accordance with Section 10.03 of the Indenture, the Guarantor agrees that a notation of such Guarantee substantially in the form attached as Exhibit B hereto will be endorsed by an Officer of such Guarantor on each Note authenticated

 

19

 

and delivered by the Trustee and that the Indenture has been executed on behalf of such Guarantor by one of its Officers.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.01                             Determination Under Section 13.10.  For the purposes of Section 13.10 of the Base Indenture, the agreements of the Guarantor will bind its successors except as otherwise provided in Article 10 of the Base Indenture.

 

Section 9.02                             Application of Third Supplemental Indenture; Ratification.

 

(a)                                 Each and every term and condition contained in this Third Supplemental Indenture that modifies, amends or supplements the terms and conditions of the Base Indenture shall apply only to the Notes created hereby and not to any future series of Securities established under the Indenture.

 

(b)                                 The Base Indenture, as supplemented and amended by this Third Supplemental Indenture, is in all respects ratified and confirmed, and the Base Indenture and this Third Supplemental Indenture shall be read, taken and construed as the same instrument.

 

(c)                                  In the event of any conflict between this Third Supplemental Indenture and the Base Indenture, the provisions of this Third Supplemental Indenture shall prevail.

 

Section 9.03                             Benefits of Third Supplemental Indenture.  Nothing contained in this Third Supplemental Indenture shall or shall be construed to confer upon any Person other than a Holder of the Notes, the Issuer, the Guarantor or the Trustee any right or interest to avail itself of any benefit under any provision of the Base Indenture or this Third Supplemental Indenture.

 

Section 9.04                             Effective Date.  This Third Supplemental Indenture shall be effective as of the date first above written and upon the execution and delivery hereof by each of the parties hereto.

 

Section 9.05                             Governing Law.  This Third Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflicts of laws principles thereof.

 

Section 9.06                             Counterparts.  This Third Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

20

 

IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed by their respective officers hereunto duly authorized, all as of the day and year first above written.

 

	
 
    	
VENTAS   REALTY, LIMITED PARTNERSHIP
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Ventas, Inc.,   its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Robert F. Probst
    
	
 
    	
 
    	
Name:
    	
Robert   F. Probst
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and
    
	
 
    	
 
    	
 
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
GUARANTOR
    
	
 
    	
 
    	
 
    
	
 
    	
VENTAS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Robert F. Probst
    
	
 
    	
 
    	
Name:
    	
Robert   F. Probst
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and
    
	
 
    	
 
    	
 
    	
Chief   Financial Officer
    
						

 

[Signature Page to Third Supplemental Indenture]

 

 

	
 
    	
TRUSTEE
    
	
 
    	
 
    	
 
    
	
 
    	
U.S.   BANK NATIONAL ASSOCIATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Daniel Boyers
    
	
 
    	
 
    	
Name:   Daniel Boyers
    
	
 
    	
 
    	
Title:   Vice President
    
				

 

[Signature Page to Third Supplemental Indenture]

 

 

SCHEDULE 1

 

1-1

 

EXHIBIT A

 

FORM OF NOTE

 

[Face of Note]

 

CUSIP # 92277G AJ6

 

3.250% Senior Note due 2026

 

	
No.          
    	
$                               
    

 

VENTAS REALTY, LIMITED PARTNERSHIP

 

promises to pay to CEDE & CO. or registered assigns, the principal sum of                  Dollars on October 15, 2026.

 

Interest Payment Dates:  April 15 and October 15

 

Record Dates:  April 1 and October 1

 

Dated:                        , 20        

 

THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (2) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (3) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (4) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.

 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A

 

A-1

 

SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

A-2

 

	
 
    	
VENTAS   REALTY, LIMITED PARTNERSHIP
    
	
 
    	
 
    
	
 
    	
By:   Ventas, Inc., its General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

A-3

 

This is one of the Securities of the

series designated therein referred to
 in the within-mentioned Indenture:

 

U.S. BANK NATIONAL ASSOCIATION, 
 as Trustee

 

	
By:
    	
 
    	
 
    
	
 
    	
Authorized   Signatory
    	
 
    

 

A-4

 

[Back of Note]

 

3.250% Senior Notes due 2026

 

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

 

(1)                                 Interest.  Ventas Realty, Limited Partnership (the “Issuer”) promises to pay interest on the principal amount of this Note at 3.250% per annum from September 21, 2016 until maturity.  The Issuer will pay interest semi-annually in arrears on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”).  Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 21, 2016; provided, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be April 15, 2017.  The Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; the Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful.  Interest will be computed on the basis of a 360-day year of twelve 30-day months.

 

(2)                                 Method of Payment.  The Issuer will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the April 1 or October 1 (each, a “Record Date”) preceding the next Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest.  The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Issuer maintained for such purpose within or without the City and State of New York, or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided, that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium, if any, on all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Issuer or the Paying Agent.  Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

 

(3)                                 Paying Agent and Registrar.  Initially, U.S. Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Issuer may

 

A-5

 

change any Paying Agent or Registrar without notice to any Holder.  The Issuer or any of its Subsidiaries may act in any such capacity.

 

(4)                                 Indenture.  The Issuer issued the Notes under an indenture, dated as of July 16, 2015 (the “Base Indenture”), as amended by the Third Supplemental Indenture, dated as of September 21, 2016 (the “Third Supplemental Indenture” and, together with the Base Indenture and as the Base Indenture and the Third Supplemental Indenture may be further amended and supplemented from time to time, the “Indenture”), among the Issuer, the Guarantor named therein and the Trustee.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb).  The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms.  To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.  The Notes are unsecured obligations of the Issuer.

 

(5)                                 Optional Redemption.  (a) The Issuer may, at its option, redeem the Notes at any time prior to maturity, in whole or from time to time in part.

 

(b)                                 The redemption price for any redemption of the Notes before July 15, 2026 shall be equal to the sum of (i) the principal amount of the Notes being redeemed, (ii) accrued and unpaid interest thereon, if any, to (but excluding) the redemption date, and (iii) the Make-Whole Amount, if any (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date).  The redemption price for any redemption of the Notes on or after July 15, 2026 shall be equal to the sum of (i) the principal amount of the Notes being redeemed and (ii) accrued and unpaid interest thereon, if any, to (but excluding) the redemption date.

 

(c)                                  Any redemption of the Notes shall be made pursuant to the provisions of Sections 3.01 through 3.07 of the Indenture.

 

(6)                                 Mandatory Redemption.  The Issuer will not be required to make mandatory redemption payments with respect to the Notes.

 

(7)                                 Notice of Redemption.  Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address.  Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.  On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

 

(8)                                 Denominations, Transfer, Exchange.  The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000.  The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture.  The

 

A-6

 

Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part.  Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a Record Date and the corresponding Interest Payment Date.

 

(9)                                 Persons Deemed Owners.  The registered Holder of a Note may be treated as its owner for all purposes.

 

(10)                          Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture, the Securities Guarantee or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then Outstanding Securities affected by such amendment or supplemental indenture voting as a single class, and any existing Default or Event of Default or compliance with any provision of the Indenture, the Securities Guarantee or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then Outstanding Securities affected thereby voting as a single class.  Without the consent of any Holder of a Note, the Indenture, the Securities Guarantee or the Notes may be amended or supplemented to, among other things, cure any ambiguity, defect or inconsistency; to provide for uncertificated Notes in addition to or in place of certificated Notes; to provide for the assumption of the Issuer’s obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s assets; add additional Guarantees with respect to the Notes; secure the Notes; to make any other change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder; or to comply with requirements of the Commission in order to effect or maintain the qualification of the applicable Indenture under the Trust Indenture Act.

 

(11)                          Defaults and Remedies.  Events of Default with respect to the Notes include:  (i) default in the payment of principal or any premium on the Notes when due and payable; (ii) default in the payment of interest on the Notes within 30 days after the applicable due date; (iii) breach of any other term of the Indenture for 90 days after receipt of a notice of Default stating the Issuer is in breach; (iv) default under any of certain Debt of the Issuer, Ventas, Inc. and its Significant Subsidiaries, which default results in the acceleration of the maturity of such indebtedness, unless such other Debt is discharged, or the acceleration is rescinded or annulled, within 30 days after the Issuer, Ventas, Inc. or its Significant Subsidiaries, as applicable, receive notice of the default; and (v) certain events in bankruptcy, insolvency or reorganization occur with respect to the Issuer, Ventas, Inc. or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary.  If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then Outstanding Notes may declare the entire principal amount of the Notes to be due and payable; provided, that the sole remedy for an Event of Default relating to a failure to comply with any of the provisions of Section 4.03 of the Indenture shall consist exclusively of the right to receive additional interest on the Notes in accordance with the terms set forth in the Indenture.  Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all Outstanding Notes

 

A-7

 

will become due and payable without further action or notice.  Holders may not enforce the Indenture or the Notes except as provided in the Indenture.  Subject to certain limitations, the Holders of a majority in principal amount of the then Outstanding Notes may direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default in the payment of principal, premium, if any, or interest) if and so long as it determines that withholding notice is in the interest of the Holders of the Notes.  Subject to certain exceptions, the Holders of a majority in aggregate principal amount of the then Outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of principal of, premium, if any, or interest on the Notes.  The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture.

 

(12)                          Trustee Dealings with Issuer.  The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuer or its Affiliates, and may otherwise deal with the Issuer or its Affiliates as if it were not the Trustee.

 

(13)                          No Recourse Against Others.  No director, officer, employee or stockholder of Ventas, Inc. or any of its Subsidiaries, as such, will have any liability for any obligations of Ventas, Inc. or any of its Subsidiaries under the Notes or the Indenture based on, in respect of, or by reason of such obligations or their creation.  Each Holder by accepting a Note waives and releases all such liability.  The foregoing waiver and release are an integral part of the consideration for the issuance of the Notes.

 

(14)                          Authentication.  This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

 

(15)                          Abbreviations.  Customary abbreviations may be used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

(16)                          CUSIP Numbers.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

 

A-8

 

The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture.  Requests may be made to:

 

Ventas Realty, Limited Partnership
 c/o Ventas, Inc.
 10350 Ormsby Park Place, Suite 300
 Louisville, Kentucky 40223
 Attention:  General Counsel

 

A-9

 

Assignment Form

 

To assign this Note, fill in the form below:

 

	
(I) or   (we) assign and transfer this Note to:
    	
 
    
	
 
    	
(Insert assignee’s legal name)
    
	
 
    	
 
    
	
(Insert assignee’s Soc. Sec. or Tax I.D. No.)
    
	
 
    
	
 
    
	
 
    
	
 
    
	
 
    
	
 
    
	
 
    
	
(Print or type assignee’s name, address and zip code)
    
	
 
    
	
and   irrevocably appoint
    	
 
    
	
to   transfer this Note on the books of the Issuer.  The agent may substitute another to act for   him.
    
	
 
    
			

 

	
Date: 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Your Signature:
    	
 
    
	
 
    	
 
    	
(Sign exactly as your   name appears on the face
    
	
 
    	
 
    	
of this Note)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature Guarantee*:
    	
 
    	
 
    	
 
    
						

 

*                 Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

 

A-10

 

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

 

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

 

	
Date of Exchange
    	
 
    	
Amount of
   decrease in
   Principal Amount
   of this Global
   Note
    	
 
    	
Amount of increase
   in Principal
   Amount of this
   Global Note
    	
 
    	
Principal Amount
   of this Global
   Note following
   such decrease
   (or increase)
    	
 
    	
Signature of
   authorized
   officer of Trustee
   or Custodian
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

A-11

 

EXHIBIT B

 

FORM OF NOTATION OF SECURITIES GUARANTEE

 

For value received, the Guarantor (which term includes any successor Person under the Indenture hereinafter referred to) has unconditionally guaranteed to the extent set forth in, and subject to the provisions of, an indenture dated as of July 16, 2015 (the “Base Indenture”), as amended by the Third Supplemental Indenture, dated as of September 21, 2016 (the “Third Supplemental Indenture” and, together with the Base Indenture and as the Base Indenture and the Third Supplemental Indenture may be further amended and supplemented from time to time, the “Indenture”) among Ventas Realty, Limited Partnership (the “Issuer”), the Guarantor named therein and U.S. Bank National Association, as trustee (the “Trustee”), providing for the issuance of 3.250% Senior Notes due 2026, (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Issuer to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.  The obligation of the Guarantor to the Holders of Notes and to the Trustee pursuant to the Securities Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Securities Guarantee. Each Holder of a Note, by accepting the same, agrees to and shall be bound by such provisions.

 

	
 
    	
VENTAS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

B-1pmt-ex101_7.htm

Execution Version

 

Exhibit 10.1

 

MASTER SPREAD ACQUISITION AND MSR SERVICING AGREEMENT

This Master Spread Acquisition Agreement (the “Agreement”) is entered into as of September 15, 2016 by and between PennyMac Corp., a Delaware corporation (the “Seller”) and PennyMac Holdings, LLC, a Delaware limited liability company (the “Purchaser”).

RECITALS

WHEREAS, the Purchaser may from time to time desire to acquire the right to excess servicing spread arising from mortgage servicing rights owned by Seller; and

WHEREAS, the Seller and the Purchaser desire that the Seller service or cause to be subserviced the mortgage loans to which such servicing rights relate and provide additional administrative services;

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

ARTICLE 1

DEFINITIONS

Section 1.01Definitions.  For purposes of this Agreement (which, for the avoidance of doubt, shall include the Preamble and Recitals hereto), the following capitalized terms, unless the context otherwise requires, shall have the respective meanings set forth below:

“Accepted Servicing Practices” means, with respect to each Mortgage Loan (including all real estate acquired in respect of such Mortgage upon a foreclosure or acceptance of a deed in lieu of foreclosure), each of those mortgage servicing practices (including collection procedures) of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, which servicing practices (i) are in compliance with all federal, state and local laws and regulations, (ii) shall be in accordance with the Seller’s policies and procedures as amended from time to time for mortgage loans of the same type, (iii) are in accordance with the terms of the related mortgage, deed of trust or similar security instrument and the related promissory note and (iv) are at a minimum based on the requirements set forth from time to time by Freddie Mac.

“Assignment” means an assignment substantially in the form of Exhibit B.

“Assignment Date” means, with respect to any Mortgage Loan Identification Date, the date that is five (5) Business Days following such Mortgage Loan Identification Date or such other date as may be set forth in the applicable Confirmation.

“Base Servicing Fee” means, with respect to each Primary Portfolio and each Collection Period, an amount equal to the product of (A) the aggregate outstanding principal balance of the Primary Portfolio Mortgage Loans as of the first day of such Collection Period and (B) one-twelfth of the Transaction Base Servicing Fee Rate; provided, however, that (1) if the initial Collection Period is less than a full month, such fee for each such Primary Portfolio Mortgage Loan shall be an amount equal to 

 

Execution Version

 

the product of the fee otherwise described above and a fraction, the numerator of which is the number of days in such initial Collection Period and the denominator of which is 360; (2) if any Primary Portfolio Mortgage Loan ceases to be part of the Primary Portfolio during such Collection Period as a result of a termination of the Seller’s duties as servicer or subservicer under the Servicing Agreement and Freddie Mac Guide, the portion of such amount that is attributable to such Primary Portfolio Mortgage Loan shall be adjusted to an amount equal to the product of such portion and a fraction, the numerator of which is the number of days in such Collection Period during which such Primary Portfolio Mortgage Loan was included in the Primary Portfolio, and the denominator of which is 360; and (3) if the Primary Portfolio Collections for such Primary Portfolio and such Collection Period were used to cover prepayment interest shortfalls on the Primary Portfolio Mortgage Loans, the fee otherwise described above shall be reduced by the amount of such reduction multiplied by the ratio (expressed as a percentage) equal to the Transaction Base Servicing Fee Rate divided by the rate per annum at which the Primary Portfolio Collections accrued in the aggregate during such Collection Period. 

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

“Collection Period” means, with respect to each Transaction Remittance Date, the calendar month preceding the month in which such Transaction Remittance Date occurs.

“Confirmation” means a letter agreement between the Seller and the Purchaser identified therein and substantially in the form attached hereto as Exhibit A that includes a mortgage loan schedule and sets forth each of a “transaction settlement date”, a “transaction base servicing fee rate”, a “transaction asset purchase agreement”, a “transaction purchase price percentage” and a “transaction excess spread percentage”.

“Confirmation Date” means the date of a Confirmation.

“Cut-off Date” means, with respect to each Primary Portfolio, the date set forth in the related Confirmation.

“Eligible Account” means any of (i) an account maintained with a federal or state chartered depository institution or trust company, the long-term deposit or long-term unsecured debt obligations of which are rated no less than investment grade by at least two Rating Agencies, if the deposits are to be held in the account for more than thirty (30) days, or the short-term deposit or short-term unsecured debt obligations of which are rated investment grade by at least two Rating Agencies, (ii) a segregated trust account maintained with the trust department of a federal or state chartered depository institution or trust company acting in its fiduciary capacity, and which, in either case, has a combined capital and surplus of at least $50,000,000 and is subject to supervision or examination by federal or state authority and to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b), or (iii) an account approved by the Seller and the Purchaser.

“Expense Amount” has the meaning set forth in Section 7.16.

“Expense Amount Accountant’s Letter” has the meaning set forth in Section 7.16.

“Expense Amount Tax Opinion” has the meaning set forth in Section 7.16.

“Expense Escrow Account” has the meaning set forth in Section 7.16.

 “Freddie Mac” means the Federal Home Loan Mortgage Corporation, or any successor thereto.

 

Execution Version

 

“Freddie Mac Guide” means the Freddie Mac Single-Family Seller/Servicer Guide, as such guide may be amended from time to time hereafter, including the “Purchase Documents” (as such term is defined therein).

“Freddie Mac Mortgage Loan”  A Mortgage Loan underwritten in accordance with the guidelines of Freddie Mac described in the Freddie Mac Guide.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, collateral assignment, charge, deposit, arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any indebtedness or the performance of any other obligation, including any conditional sale or other title retention agreement.

“Mortgage Loan”“ means a one-to-four family residential loan that is secured by a mortgage, deed of trust or other similar security instrument.  A Mortgage Loan includes the Mortgage Loan Documents, the Mortgage File, the monthly payments, any principal payments or prepayments, any related escrow accounts, the mortgage servicing rights and all other rights, benefits, proceeds and obligations arising from or in connection with such Mortgage Loan.

“Mortgage Loan Documents” means the mortgages, notes, assignments and an electronic record or copy of a mortgage loan application. 

“Mortgage Loan Identification Date” means, with respect to a calendar month, the 25th day of the immediately succeeding calendar month.

“Mortgaged Property” means the real property that secures a Mortgage Loan.

“Nonqualifying Income” means any amount that is treated as gross income for purposes of Section 856 of the Code and which is not Qualifying Income.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Primary Portfolio” means the residential mortgage loans identified and listed on a schedule to a Confirmation. 

“Primary Portfolio Collections” means, with respect to each Primary Portfolio, the funds collected on the related Primary Portfolio Mortgage Loans and allocated as the servicing compensation payable to the Seller as servicer or subservicer of such Primary Portfolio Mortgage Loans pursuant to the Servicing Agreement and the Freddie Mac Guide, other than Ancillary Income and, for the avoidance of doubt, other than reimbursements received by the Seller from a loan owner for advances and other out-of-pocket expenditures pursuant to the Servicing Agreement and the Freddie Mac Guide.

“Primary Portfolio Excess Spread” means, with respect to each Primary Portfolio, the rights of the Seller to the Transaction Excess Spread Percentage of the Primary Portfolio Total Spread on such Primary Portfolio. For the avoidance of doubt, the funds represented by this term are derived from the Servicing Rights, but do not include the right to all or any portion of the Servicing Rights themselves.

“Primary Portfolio Mortgage Loan” means a Mortgage Loan that is included in the Primary Portfolio.

 

Execution Version

 

“Primary Portfolio Retained Spread” means, with respect to each Primary Portfolio, the rights of the Seller to the Transaction Retained Spread Percentage of the Primary Portfolio Total Spread on such Primary Portfolio.

“Primary Portfolio Termination Payment” means, with respect to each Primary Portfolio, any payment made by a loan owner or master servicer in connection with an exercise of any right that such Person may have to terminate the Seller as the servicer or subservicer of any Primary Portfolio Mortgage Loan; provided, however, that, if such a payment is made with respect to a group of mortgage loans and fewer than all such mortgage loans are Primary Portfolio Mortgage Loans, then the “Primary Portfolio Termination Payment” shall mean the portion of such termination payment that is reasonably attributable to the Primary Portfolio Mortgage Loans in such group based upon the methodology set forth in the Servicing Agreement and the Freddie Mac Guide for the calculation of termination payments thereunder.

“Primary Portfolio Total Spread” means, with respect to each Primary Portfolio, for each Collection Period on or after the related Transaction Settlement Date, the sum of the following:  (a) the Primary Portfolio Collections received during such Collection Period, net of the  Base Servicing Fee; and (b) all other amounts payable by a loan owner or master servicer to the Seller with respect to the Servicing Rights for the Primary Portfolio Mortgage Loans, including any Primary Portfolio Termination Payments, but for the avoidance of doubt, excluding all Ancillary Income and reimbursements for advances and other out-of-pocket expenditures received by the Seller from a loan owner in accordance with the Servicing Agreement and the Freddie Mac Guide.

“Protected REIT” means any entity that (i) has elected to be taxed as a real estate investment trust pursuant to Section 856 et seq. of the Code, (ii) owns a direct or indirect equity interest in Purchaser, and (iii) is treated for purposes of Section 856 of the Code as owning all or a portion of the assets of the Purchaser or as receiving all or a portion of the Purchaser’s income.

 “Qualifying Income” means gross income that is described in Section 856(c)(2) or 856(c)(3) of the Code.

 “REIT Requirements” means the requirements imposed on real estate investment trusts pursuant to Sections 856 through and including 860 of the Code. 

“Servicing Agreement” means the unitary indivisible master servicing contract described in the Freddie Mac Guide and entered into by and between Freddie Mac and the Seller.

“Servicing Rights” means, with respect to each Mortgage Loan, the indivisible, conditional, non-delegable contract right and obligation to do any and all of the following:  (a) service and administer such Mortgage Loan; (b) collect any payments or monies payable or received for servicing such Mortgage Loan; (c) collect any late fees, assumption fees, penalties or similar payments with respect to such Mortgage Loan; (d) enforce the provisions of all agreements or documents creating, defining or evidencing any such servicing rights and all rights of the servicer thereunder, including, but not limited to, any clean-up calls and termination options; (e) collect and apply any escrow payments or other similar payments with respect to such Mortgage Loan; (f) control and maintain all accounts and other rights to payments related to any of the property described in the other clauses of this definition; (g) possess and use any and all documents, files, records, servicing files, servicing documents, servicing records, data tapes, computer records, or other information pertaining to such Mortgage Loan or pertaining to the past, present or prospective servicing of such Mortgage Loan; and (h) enforce any and all rights, powers and privileges incident to any of the foregoing.

 

Execution Version

 

 “Transaction” means the collective transactions scheduled to be consummated or that are consummated (as the context may require) with respect to a Primary Portfolio on a Transaction Settlement Date.

“Transaction Asset Purchase Agreement” means, with respect to each Transaction, the agreement, trade confirmation and/or other documentation or evidence pursuant to which the Seller acquires the Servicing Rights relating to the Primary Portfolio Mortgage Loans, as in effect from time to time.  

“Transaction Base Servicing Fee Rate” means, with respect to each Primary Portfolio, the rate per annum denominated as such and set forth in the related Confirmation.

“Transaction Excess Spread Percentage” means, with respect to each Primary Portfolio, the percentage denominated as such and set forth in the related Confirmation. 

 “Transaction Purchase Price” means, with respect to each Transaction, the product of (i) the aggregate outstanding principal balance of the Primary Portfolio Mortgage Loans as of the Cut-off Date, (ii) the Transaction Purchase Price Percentage and (iii) the Transaction Excess Spread Percentage.

“Transaction Purchase Price Percentage” means, with respect to each Primary Portfolio, the percentage denominated as such and set forth in the related Confirmation.

“Transaction Remittance Date” means with respect to each Primary Portfolio, the date denominated as such and set forth in the Confirmation, or, if no date is set forth in the Confirmation, the 10th day of each calendar month, or if such day is not a Business Day, the prior Business Day, beginning in the month following the Transaction Settlement Date, or such other day as may be agreed upon by the Seller and the Purchaser.

“Transaction Retained Spread Percentage” means, with respect to each Primary Portfolio, 100% minus the Transaction Excess Spread Percentage.

“Transaction Settlement Date” means, with respect to each Primary Portfolio, the date denominated as such and set forth in the related Confirmation.

Section 1.02General Interpretive Principles.  For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: 

(a)The terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;

(b)Accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles;

(c)References herein to “Articles,” “Sections,” “Subsections,” “Paragraphs,” and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement;

(d)A reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions;

 

Execution Version

 

(e)The words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision; and 

(f)The term “include” or “including” shall mean without limitation by reason of enumeration.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

Section 2.01Representations, Warranties and Agreements of the Seller.  The Seller hereby makes to the Purchaser and the Seller, as of the date hereof and as of each Transaction Settlement Date and each Assignment Date, the representations and warranties set forth on Exhibit C.

Section 2.02Representations, Warranties and Agreements of the Purchaser.  The Purchaser hereby makes to the Seller and Seller, as of the date hereof and as of each Transaction Settlement Date and each Assignment Date, the representations and warranties set forth on Exhibit D.

ARTICLE 3

PURCHASES

Section 3.01Purchases.

(a)Transaction Agreement.  The execution and delivery of each Confirmation between the Seller and the Purchaser shall be an agreement between such parties to the effect that, with respect to the Primary Portfolio described therein, and subject to the terms hereof and thereof, (i) the Seller shall sell, and the Purchaser shall purchase, on the Transaction Settlement Date all of the Seller’s right, title and interest in and to the Primary Portfolio Excess Spread and all proceeds thereof, all in exchange for the payment of the Transaction Purchase Price, and (ii) each party shall perform its duties under this Agreement as supplemented and amended by such Confirmation.

(b)Closing Conditions.  The duties of the Seller and the Purchaser to consummate each Transaction shall be subject to the satisfaction of various conditions as set forth below:

(i)The duty of each party to consummate such Transaction shall be subject to the satisfaction of the following conditions:

	
 
	
(A)
	
the Seller shall own the Servicing Rights with respect to the related Primary Portfolio; 

	
 
	
(B)
	
the representations and warranties made by the other party in this Agreement and each other Transaction document to which such party is a party to be made on or prior to the Transaction Settlement Date shall be true and correct in all material respects; and

	
 
	
(C)
	
the other party shall have performed or caused the performance of each covenant or obligation required to be performed by such party on or before the Transaction Settlement Date (including the delivery of documents required to be delivered by such other party under subsection (c));

 

Execution Version

 

(ii)The duty of the Seller to consummate such Transaction shall be further subject to the satisfaction of the additional condition that no change in the Purchaser’s financial condition shall have occurred following the Confirmation Date that would be reasonably likely to materially and adversely affect the Purchaser’s ability to consummate the Transaction on the Transaction Settlement Date; 

(iii)The duty of the Purchaser to consummate such Transaction shall be further subject to the satisfaction of the following additional conditions:

	
 
	
(A)
	
no change in the Seller’s financial or operating condition, the Seller’s good standing with and authority from Freddie Mac, the Servicing Rights, the Primary Portfolio Mortgage Loans or the escrow accounts related to the Primary Portfolio Mortgage Loans shall have occurred following the Confirmation Date that, individually or in the aggregate, would be  reasonably likely to materially and adversely one or more of (x) the Seller’s ability to consummate such Transaction on the Transaction Settlement Date, (y) the performance of the Primary Portfolio Excess Spread, or (z) the practical or other ability of an owner of the Servicing Rights to realize the benefits thereof;

	
 
	
(B)
	
the Seller shall have obtained or caused to have been obtained all consents, approvals or other requirements of third parties required for the consummation of the transactions contemplated by this Agreement, including  all requisite Freddie Mac approvals; 

	
 
	
(D)
	
the Seller shall have been appointed as the servicer or subservicer for the Primary Portfolio Mortgage Loans; and

	
 
	
(E)
	
the information set forth in the data tape delivered to Purchaser on the Transaction Settlement Date shall be true and correct in all material respects as of the date specified.

(c)Closing Documents.  The closing documents for each Transaction shall consist of the documents set forth below, which the Seller shall deliver or cause to be delivered to Purchaser on or before the Transaction Settlement Date:

(i)an Assignment executed by the Seller in which the Seller assigns to the Purchaser all of the Seller’s right, title and interest in, to and under the Primary Portfolio Excess Spread;

(ii)a copy of the Transaction Asset Purchase Agreement;

(iii)a copy of the instrument evidencing the Seller’s acquisition of the Servicing Rights with respect to the Primary Portfolio;

(iv)all consents, approvals or other requirements of third parties required for the consummation of the transactions contemplated by this Agreement, including all requisite Freddie Mac approvals; and

(v)such officers’ certificates, opinions of counsel, instruments and documents as the Purchaser may reasonably request.  

 

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(d)Closing.  On the Transaction Settlement Date for each Primary Portfolio, the Purchaser shall pay the Transaction Purchase Price to the Seller, the Seller shall convey the Primary Portfolio Excess Spread to the Purchaser and the Seller shall commence servicing or subservicing the Primary Portfolio Mortgage Loans in accordance with the Servicing Agreement and the Freddie Mac Guide if such servicing or subservicing has not already commenced.  The Transaction Purchase Price shall be paid by wire transfer of immediately available funds.   

(e)Additional Representations and Warranties.  Upon the consummation of the transactions scheduled to occur on the Transaction Settlement Date for each Primary Portfolio:

(i)the Seller shall be deemed to have represented and warranted to the Purchaser (and such representations and warranties shall survive the Transaction Settlement Date) that:

	
 
	
(A)
	
with respect to each Primary Portfolio Mortgage Loan, the Seller has been duly and validly appointed as the servicer or subservicer thereof under the Servicing Agreement and the Freddie Mac Guide and, for the purposes of such capacity, such Servicing Agreement is in full force and effect;

	
 
	
(B)
	
the Seller is not in breach of or in default of its duties under the Servicing Agreement or the Freddie Mac Guide to the extent that such breach would adversely affect the interests of the Purchaser with respect to one or more Primary Portfolio Mortgage Loans;

	
 
	
(C)
	
no event has occurred that, with or without notice or the passage of time, would entitle any Person to terminate the Seller as servicer or subservicer of any Primary Portfolio Mortgage Loan under the Servicing Agreement or the Freddie Mac Guide, and the Seller has no notice or knowledge of the intention of any Person to terminate or cause the termination of the Seller’s rights and duties as servicer or subservicer under the Servicing Agreement or the Freddie Mac Guide; 

	
 
	
(D)
	
the information set forth in the data tape delivered to Purchaser on the Transaction Settlement Date is true and correct in all material respects as of the date specified; and

	
 
	
(E)
	
subject in all cases to the terms of the Servicing Agreement and the Freddie Mac Guide and the rights of Freddie Mac in such Servicing Rights as described therein, the Seller is the sole owner of the Servicing Rights related to each Mortgage Loan in such Primary Portfolio, free and clear of any Lien, claim, encumbrance or ownership interest in favor or any Person other than the interests of the Purchaser contemplated hereby;

(ii)the Purchaser shall be deemed to have represented and warranted to the Seller (and such representations and warranties shall survive the Transaction Settlement Date) that the Purchaser is a sophisticated investor and its decision to enter into such Transaction is based upon the Purchaser’s independent experience, knowledge and due diligence and evaluation of such Transaction without reliance on any oral or written information provided by Seller other than the representations and warranties made by Seller pursuant to the terms hereof; and

 

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(iii)the Purchaser further agrees and acknowledges as follows: 

(A)the Seller is entitled to the Base Servicing Fee and the Seller and the Purchaser, as applicable, are entitled to the Primary Portfolio Excess Spread only so long as the Seller maintains its status as an approved Freddie Mac seller/servicer;

(B)upon the transfer or termination of the Servicing Rights or the Seller’s loss of its status as an approved Freddie Mac seller/servicer, the Purchaser’s rights to any Primary Portfolio Excess Spread (excluding any applicable Primary Portfolio Termination Payments) shall terminate and be extinguished; and

(C)the Purchaser’s interests in the Primary Portfolio Excess Spread do not include or convey (u) any right to all or any portion of the Servicing Rights, (v) the right to service the Mortgage Loans under the Servicing Agreement or the Freddie Mac Guide, (w) the right to terminate the Seller as an approved Freddie Mac seller/servicer, (x) the right to terminate, in whole or in part, the Servicing Agreement,  (y) the right to transfer any of the Servicing Rights, or (z) the right to further transfer the Primary Portfolio Excess Spread or the security interest therein without Freddie Mac’s prior written consent.

Section 3.02Intent of Parties.

The Seller and the Purchaser intend that each Transaction constitute a valid sale of the Primary Portfolio Excess Spread for the related Primary Portfolio by the Seller to the Purchaser, free and clear of any Lien.  If the conveyance of the Primary Portfolio Excess Spread is characterized by a court or governmental authority as security for a loan rather than an absolute transfer or sale, the Seller will be deemed to have granted to Purchaser, and Seller hereby grants to Purchaser, a security interest in all of its right, title and interest in, to and under the Primary Portfolio Excess Spread and all proceeds thereof as security for a loan in an amount equal to the Transaction Purchase Price.  

In connection with each Transaction, the Seller hereby authorizes the filing of any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as the Purchaser may determine, in its sole discretion, are necessary or advisable to perfect the sale of the assets conveyed and security interests granted to Purchaser and agrees to execute financing statements in form reasonably acceptable to the Purchaser and the Seller at the request of the Purchaser in order to reflect the Purchaser’s interests in the assets conveyed to or subjected to a security interest in favor of the Purchaser pursuant to such Transaction.

ARTICLE 4

DEPOSITS AND PAYMENTS

(a)Deposits.  With respect to each Primary Portfolio, the Seller shall deposit into an Eligible Account identified by Purchaser any and all Primary Portfolio Collections attributable to Primary Portfolio Excess Spread, in each case as soon as practicable but no later than the Transaction Remittance Date. 

(b)Payments. All payments to the Purchaser shall be made by wire or ACH transfer of immediately available funds to the Eligible Account designated by the Purchaser. 

 

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ARTICLE 5

SERVICING AND OTHER MATTERS

Section 5.01Seller’s Duties With Respect to Servicing.  

(a)Effective on the Transaction Settlement Date for each Primary Portfolio, the Seller agrees for the benefit of the Purchaser to service or cause to be subserviced the related Primary Portfolio Mortgage Loans at all times substantially in accordance with the Servicing Agreement and the Freddie Mac Guide.  In connection with the Primary Portfolio Mortgage Loans related to each Transaction, the Seller shall not, without the express written consent of Purchaser (which consent may be withheld in its absolute discretion), (a) terminate or amend any Servicing Rights, or (b) enter into any termination, modification, waiver or amendment of the Servicing Agreement or the Freddie Mac Guide insofar such termination, modification, waiver or amendment would be reasonably likely to adversely affect the interests of the Purchaser.

(b)Under no circumstances shall the Purchaser be responsible for the servicing acts and omissions of the Seller or any other servicer or any originator of the Mortgage Loans, or for any servicing related obligations or liabilities of any servicer under the Servicing Agreement or the Freddie Mac Guide or any Person under the Mortgage Loan Documents, or for any other obligations or liabilities of the Seller. 

(c)Upon the termination of the Seller as servicer or subservicer under the Servicing Agreement or the Freddie Mac Guide, the Seller shall remain liable to the Purchaser and the applicable loan owner or master servicer for all liabilities and obligations incurred by the Seller while the Seller was acting as the servicer or subservicer thereunder.

Section 5.02Base Servicing Fees.  The Seller agrees that, as between the parties hereto, the Seller shall be entitled to servicing fees on the Primary Portfolio only to the extent of the applicable Base Servicing Fee. Under no circumstances shall the Purchaser be liable to the Seller for the payment of any Base Servicing Fee. If for any reason a sub-servicer or sub-sub-servicer is appointed with respect to any Primary Portfolio Mortgage Loan, the servicing fees and expenses of such sub-servicer or sub-sub-servicer shall be paid by the Seller from its own funds without right of reimbursement therefor, whether from Primary Portfolio Collections, Primary Portfolio Termination Payments, the Purchaser or otherwise.  

Section 5.03Reporting.  In connection with each Transaction, the Seller shall deliver to the Purchaser monthly reports, and afford the Purchaser access to information, at such times and in such form and substance as are set forth in the related Confirmation or as may reasonably be agreed between the Seller and the Purchaser.

Section 5.04Certain Awards.  If an award of damages is received by the Seller or the Purchaser as a result of a judgment, settlement or arbitration (including payment pursuant to a guaranty of an obligor) pursuant to a breach by the seller under the Transaction Asset Purchase Agreement for any Transaction, then (i) if such breach had an adverse effect on the value of the Total Servicing Spread, then the Transaction Excess Spread Percentage of such award shall be distributed to the Purchaser or its designee promptly and the remainder of such award shall be retained by the Seller and (ii) if such breach did not have an adverse effect on the value of the Total Servicing Spread, the Seller shall be entitled to the entirety of such award.

 

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ARTICLE 6

LIABILITIES OF THE SELLER

Section 6.01Liability of the Seller.  The Seller shall be liable in accordance herewith only to the extent of the obligations specifically and respectively imposed upon and undertaken by the Seller herein.

Section 6.02Merger or Consolidation of the Seller. 

(a)The Seller shall keep in full effect its existence, rights and franchises as an entity and maintain its qualification to service mortgage loans for each of Freddie Mac and HUD and comply with the laws of each State in which any Mortgaged Property is located to the extent necessary to protect the validity and enforceability of this Agreement, and to perform its duties under this Agreement.  The Seller shall keep in full effect its existence, rights and franchises as an entity.

(b)Any Person into which the Seller may be merged, converted, or consolidated, or any Person resulting from any merger, conversion or consolidation to which the Seller shall be a party, or any Person succeeding to the business of the Seller, shall be the successor of the Seller hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that such successor shall have expressly assumed the duties of the Seller hereunder.

Section 6.03Indemnification. 

The Seller shall indemnify the Purchaser and its directors, officers, employees and agents and hold them harmless against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other costs, fees and expenses that any of them may sustain by reason of the Seller’s (i) willful misfeasance, bad faith or negligence in the performance of its duties under this Agreement or the Servicing Agreement or the Freddie Mac Guide, (ii) reckless disregard of its obligations or duties under this Agreement or the Servicing Agreement or the Freddie Mac Guide, or (iii) breach of its representations, warranties or covenants under this Agreement or the Servicing Agreement or the Freddie Mac Guide.

 

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ARTICLE 7

MISCELLANEOUS

Section 7.01Notices.  All notices, requests, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon the delivery or mailing thereof, as the case may be, sent by registered or certified mail, return receipt requested:

(i)if to the Seller:

PennyMac Corp.
Attn: General Counsel
3043 Townsgate Road
Westlake Village, CA 91361

if to the Purchaser:

PennyMac Holdings, LLC
Attn: General Counsel
3043 Townsgate Road
Westlake Village, CA 91361

or such other address as may hereafter be furnished to the other parties by like notice.

Section 7.02Amendment.  Neither this Agreement, nor any terms hereof, may be amended, supplemented or modified except in an instrument in writing executed by the parties hereto.

Section 7.03Entire Agreement.  This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.  The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.

Section 7.04Binding Effect; Beneficiaries.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.  No  provision of this Agreement is intended or shall be construed to give to any Person, other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

Section 7.05Headings.  The section and subsection headings in this Agreement are for convenience of reference only and shall not be deemed to alter or affect the interpretation of any provisions hereof.

Section 7.06Further Assurances.  The Seller agrees to execute and deliver such instruments and take such further actions as the Purchaser may, from time to time, reasonably request in order to effectuate the purposes and to carry out the terms of this Agreement.

Section 7.07Governing Law.  This Agreement shall be construed in accordance with the substantive laws of the State of New York applicable to agreements made and to be performed entirely in 

 

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such State, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.  The parties hereto intend that the provisions of Section 5-1401 of the New York General Obligations Law shall apply to this Agreement. 

Section 7.08Relationship of Parties.  Nothing herein contained shall be deemed or construed to create a partnership or joint venture between the parties.  Without limiting the generality of the preceding statement, the servicing duties and responsibilities of the Seller shall be rendered by it as an independent contractor and not as an agent of the Purchaser.  The Seller shall have full control of all of its acts, doings, proceedings, relating to or requisite in connection with the discharge of its duties and responsibilities under this Agreement.

Section 7.09Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.

Section 7.10No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of a party hereto, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

Section 7.11Exhibits.  The exhibits to this Agreement are hereby incorporated and made a part hereof and form integral parts of this Agreement.

Section 7.12Counterparts.  This Agreement may be executed by the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

Section 7.13WAIVER OF TRIAL BY JURY. 

EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

Section 7.14LIMITATION OF DAMAGES.

NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE PARTIES AGREE THAT NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE, PROVIDED, HOWEVER, THAT SUCH LIMITATION SHALL NOT BE APPLICABLE WITH RESPECT TO ANY THIRD PARTY CLAIM MADE AGAINST A PARTY.

 

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Section 7.15SUBMISSION TO JURISDICTION; WAIVERS. 

EACH PARTY HERETO HEREBY IRREVOCABLY (I) SUBMITS, FOR ITSELF IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE JURISDICTION OF ANY NEW YORK STATE AND FEDERAL COURTS SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY WITH RESPECT TO MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT; (II) AGREES THAT ALL CLAIMS WITH RESPECT TO ANY ACTION OR PROCEEDING REGARDING SUCH MATTERS MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURTS; (III) WAIVES, TO THE FULLEST POSSIBLE EXTENT, WITH RESPECT TO SUCH COURTS, THE DEFENSE OF AN INCONVENIENT FORUM; AND (IV) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

Section 7.16Expense Reserve.

Notwithstanding anything in Section 6.03, in the event that counsel or independent accountants for a Protected REIT determine that there exists a material risk that any amounts due to the Seller or the Purchaser under Section 6.03 hereof would be treated as Nonqualifying Income for such Protected REIT upon the payment of such amounts to the Seller or the Purchaser, the amount paid to the Seller or the Purchaser, as the case may be, pursuant to this Agreement in any tax year shall not exceed the maximum amount that can be paid to the Seller or the Purchaser in such year without causing such Protected REIT to fail to meet the REIT Requirements for such year, determined as if the payment of such amount were Nonqualifying Income as determined by such counsel or independent accountants to such Protected REIT.  If the amount payable for any tax year under the preceding sentence is less than the amount which the Person obligated to make payment under Section 6.03 would otherwise be obligated to pay to the Seller or the Purchaser, as the case may be, pursuant to such Section 6.03 of this Agreement (the “Expense Amount”), then:  (1) such obligated Person shall place the Expense Amount into an escrow account (the “Expense Escrow Account”) using an escrow agent and agreement reasonably acceptable to the Seller or the Purchaser, as the case may be, and shall not release any portion thereof to the Seller or the Purchaser, as the case may be, and the Seller or the Purchaser, as the case may be, shall not be entitled to any such amount, unless and until the Seller or the Purchaser, as the case may be, delivers to such obligated Person, at the sole option of such Protected REIT, (i) an opinion (an “Expense Amount Tax Opinion”) of such Protected REIT’s tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income, (ii) a letter (an “Expense Amount Accountant’s Letter”) from such Protected REIT’s independent accountants indicating the maximum amount that can be paid at that time to the Seller or the Purchaser, as the case may be, without causing such Protected REIT to fail to meet the REIT Requirements for any relevant taxable year, or (iii) a private letter ruling issued by the IRS to such Protected REIT indicating that the receipt of any Expense Amount hereunder will not cause such Protected REIT to fail to satisfy the REIT Requirements (a “REIT Qualification Ruling” and, collectively with an Expense Amount Tax Opinion and an Expense Amount Accountant’s Letter, a “Release Document”); and (2) pending the delivery of a Release Document by the Seller or the Purchaser, as the case may be, to such obligated Person, the Seller or the Purchaser, as the case may be, shall have the right, but not the obligation, to borrow the Expense Amount from the Escrow Account pursuant to a loan agreement (an “Indemnity Loan Agreement”) reasonably acceptable to the Seller or the Purchaser, as the case may be, that (i) requires such obligated Person to lend the Seller or the Purchaser, as the case may be, immediately available cash proceeds in an amount equal to the Expense Amount (an “Indemnity Loan”), and (ii) provides for (A) a commercially reasonable interest rate and commercially reasonable covenants, taking into account the credit standing and profile of the Seller or the Purchaser, as the case 

 

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may be, or any guarantor of the Seller or the Purchaser, as the case may be, including such Protected REIT, at the time of such Indemnity Loan, and (B) a 15 year maturity with no periodic amortization.

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

 

	
PENNYMAC CORP.

	
(Seller)

	
 
	
 
	
 

	
By:
	
 
	
/s/ Andrew S. Chang

	
Name:
	
 
	
Andrew S. Chang

	
Title:
	
 
	
Senior Managing Director and

	
 
	
 
	
Chief Business Development Officer

	
 
	
 
	
 

	
PENNYMAC HOLDINGS, LLC

	
(Purchaser)
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
/s/ Anne D. McCallion

	
Name:
	
 
	
Anne D. McCallion

	
Title:
	
 
	
Senior Managing Director and

	
 
	
 
	
Chief Financial Officer

 

 

 

 

EXHIBIT A

 

(Form of Confirmation)

 

CONFIRMATION

OF SPREAD ACQUISITION TRANSACTION UNDER
MASTER SPREAD ACQUISITION AND MSR SERVICING AGREEMENT

 

 

		
	
PARTIES:
	
PennyMac Corp. (Seller)

	
 
	
 

	
 
	
PennyMac Holdings, LLC (Purchaser)

	
 
	
 

	
DATE:
	
_______________, ___

	
 
	
 

	
RE:
	
Spread Acquisition – Pool No. [___]

	
 
	
 

	
 
	
_______________________________

 

The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into between PennyMac Corp. and PennyMac Holdings, LLC on the Transaction Settlement Date specified below.  This letter agreement is a “Confirmation” as described in the Master Spread Acquisition and MSR Servicing Agreement specified in paragraph 1 below.

The definitions and provisions contained in the Master Agreement are incorporated into this Confirmation.  In the event of any inconsistency between the Master Agreement and this Confirmation, this Confirmation will govern.  Capitalized terms used herein and not otherwise defined have the meanings set forth in the Master Agreement.  

1.This Confirmation supplements, forms part of and is subject to the Master Spread Acquisition and MSR Servicing Agreement dated as of September 15, 2016, between PennyMac Corp., as seller, and PennyMac Holdings, LLC, as purchaser, as amended and supplemented from time to time (the “Master Agreement”).  All provisions contained in the Master Agreement govern this Confirmation except as expressly modified below.

A-1

 

2.The terms of the Transaction to which this Confirmation relates are as follows: 

 

		
	
Primary Portfolio:
	
As set forth in Schedule I hereto.

	
Transaction Settlement Date:
	
___________, 20____.

	
Transaction Base Servicing Fee Rate:
	
[____] basis points (per annum)

	
Transaction Remittance Date:
	
[__]th day of each month

	
Transaction Purchase Price Percentage:
	
_______%

	
Transaction Excess Spread Percentage:
	
_______%

	
Transaction Asset Purchase Agreement:
	
 

	
Cut-off Date
	
___________, 20____.

	
Other:
	
In the event Seller, whether voluntarily or involuntarily, transfers the Servicing Rights related to the Mortgage Loans in any Primary Portfolio or Secondary Portfolio and receives any termination fee or other compensation or proceeds in connection with such transfer (the “Transfer Proceeds”), Seller shall remit to Purchaser an amount equal to the product of (a) such Transfer Proceeds, multiplied by (b) a fraction, the numerator of which is the Transaction Purchase Price allocable to the Primary Portfolio Excess Spread relating to such Servicing Rights and the denominator of which is the actual purchase price paid by the Seller for such Servicing Rights. 

 

 

A-2

 

Accepted and confirmed as of the date first written above: 

 

	
SELLER:
	
PENNYMAC CORP.

	
 
	
 
	
 
	
 

	
 
	
By:
	
 
	
 

	
 
	
Name:
	
 
	
 

	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 

	
PURCHASER:
	
PENNYMAC HOLDINGS, LLC

	
 
	
 
	
 
	
 

	
 
	
By:
	
 
	
 

	
 
	
Name:
	
 
	
 

	
 
	
Title:
	
 
	
 

 

 

 

 

SCHEDULE I

TO CONFIRMATION DATED __________, 20___

UNDER THE MASTER SPREAD ACQUISITION AND
MSR SERVICING AGREEMENT DATED AS OF [ ], 2015

 

 

 

 

 

EXHIBIT B

 

(Form of Assignment)

 

PennyMac Corp. (the “Transferor”), hereby assigns, conveys and otherwise transfers to PennyMac Holdings, LLC (the “Transferee”) all of the Transferor’s right, title and interest in, to and under the Primary Portfolio Excess Spread for the residential mortgage loans set forth in Annex A attached hereto.  Capitalized terms used and not defined in this instrument have the meanings assigned to them in the Master Spread Acquisition and MSR Servicing Agreement dated as of [ ], 2015, between PennyMac Corp. and PennyMac Holdings, LLC, as supplemented and amended by the Confirmation dated _____, between such parties. 

 

If the conveyance of such Primary Portfolio Excess Spread is characterized by a court or governmental authority as security for a loan rather than an absolute transfer or sale, the Transferor will be deemed to have granted to the Transferee, and the Transferor hereby grants to the Transferee, a security interest in all of its right, title and interest in, to and under such Primary Portfolio Excess Spread and all proceeds thereof as security for a loan in an amount equal to the value of such Primary Excess Spread.

 

	
PENNYMAC CORP.

	
(Transferor)

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

 

 

 

	
 
	
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EXHIBIT C

 

(Representations and Warranties of the Seller)

 

(a)Due Organization and Good Standing.  The Seller is duly organized, validly existing and in good standing as a limited liability company under the laws of the State of Delaware and has the power and authority to own its assets and to transact the business in which it is currently engaged.

(b)No Violation of Organizational Documents or Agreements.  The execution and delivery of this Agreement by the Seller, and the performance and compliance with the terms of this Agreement by the Seller, will not violate the Seller’s organizational documents or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material agreement or other instrument to which the Seller is a party or which is applicable to it or any of its assets.

(c)Full Power and Authority.  The Seller has the full power and authority to enter into and consummate all transactions contemplated by this Agreement, has duly authorized the execution, delivery and performance of this Agreement, and has duly executed and delivered this Agreement.

(d)Binding Obligation.  This Agreement, assuming due authorization, execution and delivery by the other parties hereto, constitutes a valid, legal and binding obligation of the Seller, enforceable against the Seller in accordance with the terms hereof, subject to (A) applicable bankruptcy, insolvency, reorganization, moratorium and other 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.

(e)No Violation of Law, Regulation or Order.  The Seller is not in violation of, and its execution and delivery of this Agreement and its performance and compliance with the terms of this Agreement will not constitute a violation of, any law, any order or decree of any court or arbiter, or, to the Seller’s knowledge, any order, regulation or demand of any federal, state or local governmental or regulatory authority, which violation, in the Seller’s good faith and reasonable judgment, is likely to affect materially and adversely either the ability of the Seller to perform its obligations under this Agreement or the financial condition of the Seller.

(f)No Material Litigation.  No litigation is pending or, to the best of the Seller’s knowledge, threatened against the Seller that, if determined adversely to the Seller, would prohibit the Seller from entering into this Agreement or that, in the Seller’s good faith and reasonable judgment, is likely to materially and adversely affect either the ability of the Seller to perform its obligations under this Agreement or the financial condition of the Seller.

(g)No Consent Required.  Any consent, approval, authorization or order of any court or governmental agency or body required under federal or state law for the execution, delivery and performance by the Seller of or compliance by the Seller with this Agreement or the consummation of the transactions contemplated by this Agreement has been obtained and is effective except where the lack of consent, approval, authorization or order would not have a material adverse effect on the performance by the Seller under this Agreement.

 

 

 

	
 
	
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EXHIBIT D

 

(Representations and Warranties of the Purchaser)

 

(a)Due Organization and Good Standing.  The Purchaser is duly organized, validly existing and in good standing under the laws of the state of its organization and has the power and authority to own its assets and to transact the business in which it is currently engaged.

(b)No Violation of Organizational Documents or Agreements.  The execution and delivery of this Agreement by the Purchaser, and the performance and compliance with the terms of this Agreement by the Purchaser, will not violate the Purchaser’s organizational documents or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material agreement or other instrument to which the Purchaser is a party or which is applicable to it or any of its assets.

(c)Full Power and Authority.  The Purchaser has the full power and authority to enter into and consummate all transactions contemplated by this Agreement, has duly authorized the execution, delivery and performance of this Agreement, and has duly executed and delivered this Agreement.

(d)Binding Obligation.  This Agreement, assuming due authorization, execution and delivery by the other parties hereto, constitutes a valid, legal and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with the terms hereof, subject to (A) applicable bankruptcy, insolvency, reorganization, moratorium and other 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.

(e)No Violation of Law, Regulation or Order.  The Purchaser is not in violation of, and its execution and delivery of this Agreement and its performance and compliance with the terms of this Agreement will not constitute a violation of, any law, any order or decree of any court or arbiter, or, to the Purchaser’s knowledge, any order, regulation or demand of any federal, state or local governmental or regulatory authority, which violation, in the Purchaser’s good faith and reasonable judgment, is likely to affect materially and adversely either the ability of the Purchaser to perform its obligations under this Agreement or the financial condition of the Purchaser.

(f)No Material Litigation.  No litigation is pending or, to the best of the Purchaser’s knowledge, threatened against the Purchaser that, if determined adversely to the Purchaser, would prohibit the Purchaser from entering into this Agreement or that, in the Purchaser’s good faith and reasonable judgment, is likely to materially and adversely affect either the ability of the Purchaser to perform its obligations under this Agreement or the financial condition of the Purchaser.

(g)No Consent Required.  Any consent, approval, authorization or order of any court or governmental agency or body required under federal or state law for the execution, delivery and performance by the Purchaser of or compliance by the Purchaser with this Agreement or the consummation of the transactions contemplated by this Agreement has been obtained and is effective except where the lack of consent, approval, authorization or order would not have a material adverse effect on the performance by the Purchaser under this Agreement.

 

 

			
	
 
	
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