Document:

Exhibit 10.18

 

EXECUTION VERSION

 

MASTER LOAN AND SECURITY AGREEMENT

 

Dated as of June 27, 2014

 

READYCAP LENDING, LLC

 

and

 

SUTHERLAND ASSET I, LLC,

 

as Borrowers

 

SUTHERLAND ASSET MANAGEMENT CORPORATION,

 

as Guarantor

 

and

 

JPMORGAN CHASE BANK, N.A., as Lender

 

 

TABLE OF CONTENTS

 

	
Section 1.
    	
Definitions and Accounting   Matters
    	
1
    
	
 
    	
 
    	
 
    
	
1.01
    	
Certain Defined Terms
    	
1
    
	
1.02
    	
Accounting Terms and   Determinations
    	
22
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Advances; Note and Prepayments
    	
22
    
	
 
    	
 
    	
 
    
	
2.01
    	
Advances
    	
22
    
	
2.02
    	
Notes
    	
23
    
	
2.03
    	
Procedure for Borrowing
    	
23
    
	
2.04
    	
Margin Amount   Maintenance; Mandatory Prepayments
    	
24
    
	
2.05
    	
Establishment of   Collection Accounts and Waterfall
    	
25
    
	
2.06
    	
Repayment of Advances;   Interest
    	
27
    
	
2.07
    	
Optional Prepayments
    	
28
    
	
2.08
    	
Limitation on Types of   Advances; Illegality
    	
28
    
	
2.09
    	
Requirements of Law
    	
28
    
	
2.10
    	
Taxes
    	
29
    
	
 
    	
 
    	
 
    
	
Section 3.
    	
Payments; Computations; Etc.
    	
33
    
	
 
    	
 
    	
 
    
	
3.01
    	
Payments
    	
33
    
	
3.02
    	
Computations
    	
33
    
	
3.03
    	
Commitment Fee
    	
33
    
	
 
    	
 
    	
 
    
	
Section 4.
    	
Collateral Security
    	
33
    
	
 
    	
 
    	
 
    
	
4.01
    	
Collateral; Security   Interest
    	
33
    
	
4.02
    	
Further Documentation
    	
35
    
	
4.03
    	
Changes in Locations,   Name, etc.
    	
35
    
	
4.04
    	
Lender’s Appointment as   Attorney-in-Fact
    	
35
    
	
4.05
    	
Performance by Lender   of Borrowers’ Obligations
    	
38
    
	
4.06
    	
Proceeds
    	
38
    
	
4.07
    	
Remedies
    	
39
    
	
4.08
    	
Limitation on Duties   Regarding Presentation of Collateral
    	
40
    
	
4.09
    	
Powers Coupled with an   Interest
    	
40
    
	
4.10
    	
Release of Security   Interest
    	
40
    
	
 
    	
 
    	
 
    
	
Section 5.
    	
Conditions Precedent
    	
40
    
	
 
    	
 
    	
 
    
	
5.01
    	
Loan Agreement; Initial   Advance
    	
40
    
	
5.02
    	
Initial and Subsequent   Advances
    	
42
    

 

i

 

	
Section 6.
    	
Representations and Warranties
    	
43
    
	
 
    	
 
    	
 
    
	
6.01
    	
Asset Schedule
    	
43
    
	
6.02
    	
Solvency
    	
43
    
	
6.03
    	
No Broker
    	
43
    
	
6.04
    	
Ability to Perform
    	
44
    
	
6.05
    	
Existence
    	
44
    
	
6.06
    	
Financial Statements
    	
44
    
	
6.07
    	
No Breach
    	
44
    
	
6.08
    	
Action
    	
45
    
	
6.09
    	
Approvals
    	
45
    
	
6.10
    	
Enforceability
    	
45
    
	
6.11
    	
Indebtedness
    	
45
    
	
6.12
    	
Material Adverse Effect
    	
45
    
	
6.13
    	
No Default
    	
45
    
	
6.14
    	
Real Estate Investment   Trust
    	
45
    
	
6.15
    	
Adverse Selection
    	
45
    
	
6.16
    	
Litigation
    	
45
    
	
6.17
    	
Margin Regulations
    	
46
    
	
6.18
    	
Taxes
    	
46
    
	
6.19
    	
Investment Company Act
    	
46
    
	
6.20
    	
Chief Executive   Office/Jurisdiction of Organization
    	
46
    
	
6.21
    	
Location of Books and   Records
    	
46
    
	
6.22
    	
True and Complete   Disclosure
    	
46
    
	
6.23
    	
ERISA
    	
47
    
	
6.24
    	
SBA Approvals
    	
47
    
	
6.25
    	
No Reliance
    	
48
    
	
6.26
    	
Plan Assets
    	
48
    
	
6.27
    	
Anti-Money Laundering   Laws
    	
48
    
	
6.28
    	
No Prohibited Persons
    	
48
    
	
6.29
    	
Collateral; Collateral   Security
    	
48
    
	
6.30
    	
Acquisition of SBC   Loans and Participation Interests
    	
49
    
	
 
    	
 
    	
 
    
	
Section 7.
    	
Covenants of the Borrowers
    	
49
    
	
 
    	
 
    	
 
    
	
7.01
    	
Preservation of   Existence; Compliance with Law
    	
49
    
	
7.02
    	
Taxes
    	
50
    
	
7.03
    	
Notice of Proceedings   or Adverse Change
    	
50
    
	
7.04
    	
Financial Reporting
    	
51
    
	
7.05
    	
Visitation and Inspection   Rights
    	
51
    
	
7.06
    	
Reimbursement of   Expenses
    	
52
    
	
7.07
    	
Further Assurances
    	
52
    
	
7.08
    	
True and Correct   Information
    	
52
    

 

ii

 

	
7.09
    	
ERISA Events
    	
52
    
	
7.10
    	
Adverse Selection
    	
53
    
	
7.11
    	
Insurance
    	
53
    
	
7.12
    	
Books and Records
    	
53
    
	
7.13
    	
Illegal Activities
    	
53
    
	
7.14
    	
Material Change in   Business
    	
53
    
	
7.15
    	
Limitation on Dividends   and Distributions
    	
53
    
	
7.16
    	
Disposition of Assets;   Liens
    	
54
    
	
7.17
    	
Transactions with   Affiliates
    	
54
    
	
7.18
    	
ERISA Matters
    	
54
    
	
7.19
    	
Consolidations, Mergers   and Sales of Assets
    	
55
    
	
7.20
    	
REIT Status
    	
55
    
	
7.21
    	
Asset Tape
    	
55
    
	
7.22
    	
No Amendment or Waiver
    	
55
    
	
7.23
    	
ReadyCap Assignments
    	
56
    
	
7.24
    	
Restrictions on Sale or   Other Disposition of Financed Assets
    	
56
    
	
 
    	
 
    	
 
    
	
Section 8.
    	
Events of Default
    	
56
    
	
 
    	
 
    	
 
    
	
8.01
    	
Payment Default
    	
56
    
	
8.02
    	
Representation and   Warranty Breach
    	
56
    
	
8.03
    	
Immediate Covenant   Defaults
    	
57
    
	
8.04
    	
Additional Covenant   Defaults
    	
57
    
	
8.05
    	
Judgments
    	
57
    
	
8.06
    	
Cross-Default
    	
57
    
	
8.07
    	
Insolvency Event
    	
57
    
	
8.08
    	
Enforceability
    	
57
    
	
8.09
    	
Liens
    	
58
    
	
8.10
    	
Material Adverse Effect
    	
58
    
	
8.11
    	
Change in Control
    	
58
    
	
8.12
    	
Going Concern
    	
58
    
	
8.13
    	
Inability to Perform
    	
58
    
	
8.14
    	
SBA Rules and   Regulations
    	
58
    
	
8.15
    	
Replacement of Services
    	
58
    
	
8.16
    	
Investment Manager
    	
59
    
	
8.17
    	
REIT Qualification
    	
59
    
	
 
    	
 
    	
 
    
	
Section 9.
    	
Remedies Upon Default
    	
59
    
	
 
    	
 
    	
 
    
	
9.01
    	
Remedies
    	
59
    
	
9.02
    	
Physical Possession
    	
59
    
	
9.03
    	
Lender’s Appointment as   Attorney-in-Fact
    	
60
    

 

iii

 

	
Section 10.
    	
No Duty of Lender
    	
60
    
	
 
    	
 
    	
 
    
	
Section 11.
    	
Indemnification And Expenses
    	
60
    
	
 
    	
 
    	
 
    
	
11.01
    	
Indemnification
    	
60
    
	
11.02
    	
Expenses
    	
61
    
	
11.03
    	
Full Recourse
    	
61
    
	
 
    	
 
    	
 
    
	
Section 12.
    	
Servicing
    	
61
    
	
 
    	
 
    	
 
    
	
12.01
    	
Servicing of SBC Loans
    	
61
    
	
12.02
    	
Collateral Assignee
    	
61
    
	
12.03
    	
Servicing Agreement
    	
62
    
	
12.04
    	
Event of Default
    	
62
    
	
 
    	
 
    	
 
    
	
Section 13.
    	
Recording Of Communications
    	
62
    
	
 
    	
 
    	
 
    
	
Section 14.
    	
Due Diligence
    	
62
    
	
 
    	
 
    	
 
    
	
Section 15.
    	
Assignability; Amendment
    	
63
    
	
 
    	
 
    	
 
    
	
15.01
    	
Assignment and   Acceptance
    	
63
    
	
15.02
    	
Participations
    	
64
    
	
15.03
    	
Disclosures
    	
64
    
	
15.04
    	
Amendment to Loan Agreement
    	
64
    
	
15.05
    	
Hypothecation or Pledge   of Pledged Assets
    	
64
    
	
 
    	
 
    	
 
    
	
Section 16.
    	
Transfer and Maintenance of   Register
    	
64
    
	
 
    	
 
    	
 
    
	
16.01
    	
Rights and Obligations
    	
64
    
	
16.02
    	
Register
    	
64
    
	
 
    	
 
    	
 
    
	
Section 17.
    	
Set-Off
    	
65
    
	
 
    	
 
    	
 
    
	
17.01
    	
Set-Off Rights
    	
65
    
	
17.02
    	
Suspension of Payments
    	
65
    
	
 
    	
 
    	
 
    
	
Section 18.
    	
Terminability
    	
65
    
	
 
    	
 
    	
 
    
	
Section 19.
    	
Notices And Other   Communications
    	
65
    
	
 
    	
 
    	
 
    
	
Section 20.
    	
Entire Agreement; Severability;   Single Agreement
    	
66
    
	
 
    	
 
    	
 
    
	
20.01
    	
Entire Agreement
    	
66
    
	
20.02
    	
Single Agreement
    	
66
    
	
 
    	
 
    	
 
    
	
Section 21.
    	
Governing Law; Submission to   Jurisdictions; Waivers
    	
66
    
	
 
    	
 
    	
 
    
	
21.01
    	
GOVERNING LAW
    	
66
    
	
21.02
    	
SUBMISSION TO   JURISDICTION; WAIVERS
    	
66
    

 

iv

 

	
Section 22.
    	
No Waivers, etc.
    	
67
    
	
 
    	
 
    	
 
    
	
Section 23.
    	
Confidentiality
    	
67
    
	
 
    	
 
    	
 
    
	
23.01
    	
Confidential Terms
    	
67
    
	
23.02
    	
Confidential   Information
    	
68
    
	
 
    	
 
    	
 
    
	
Section 24.
    	
Conflicts; Multiparty Agreement
    	
69
    
	
 
    	
 
    	
 
    
	
Section 25.
    	
Miscellaneous
    	
69
    
	
 
    	
 
    	
 
    
	
25.01
    	
Counterparts
    	
69
    
	
25.02
    	
Captions
    	
69
    
	
25.03
    	
Acknowledgment
    	
69
    
	
25.04
    	
Documents Mutually Drafted
    	
69
    

 

v

 

	
SCHEDULES
    	
 
    
	
 
    	
 
    
	
SCHEDULE 1-A
    	
Representations and Warranties re: SBC Loans
    
	
SCHEDULE 1-B
    	
Representations and Warranties re: Participation   Interests
    
	
SCHEDULE 2
    	
Filing Jurisdictions and Offices
    
	
SCHEDULE 3
    	
Duties of the Borrowers with Respect to the SBA   Loans
    
	
SCHEDULE 4
    	
List of Competitors
    
	
SCHEDULE 5
    	
Asset Schedule Fields
    
	
 
    	
 
    
	
EXHIBITS
    	
 
    
	
 
    	
 
    
	
EXHIBIT A-1
    	
Form of Tranche A Promissory Note
    
	
EXHIBIT A-2
    	
Form of Tranche B Promissory Note
    
	
EXHIBIT B
    	
Form of Request for Borrowing and Notice of   Pledge
    
	
EXHIBIT C
    	
Form of Remittance Report
    
	
EXHIBIT D
    	
Form of Section 7 Certificate
    
	
EXHIBIT E
    	
Asset File
    
	
EXHIBIT F
    	
Form of Servicer Notice
    

 

vi

 

MASTER LOAN AND SECURITY AGREEMENT

 

MASTER LOAN AND SECURITY AGREEMENT, dated as of June 27, 2014 between READYCAP LENDING, LLC, a Delaware limited liability company (“ReadyCap”), SUTHERLAND ASSET I, LLC, a Delaware limited liability company (“Sutherland”, together with ReadyCap, each a “Borrower” and, collectively, the “Borrowers”), SUTHERLAND ASSET MANAGEMENT CORPORATION, a Maryland corporation (the “Guarantor”) and JPMORGAN CHASE BANK, N.A. (the “Lender”).

 

RECITALS

 

WHEREAS, on or prior to the Effective Date, the Borrowers will acquire substantially all of the assets of CIT Small Business Lending Corporation, CIT Lending Services Corporation and certain loans of CIT Bank, including certain SBC Loans (as defined below) (collectively, the “Financed Assets”); and

 

WHEREAS, ReadyCap has requested that the Lender make loans to finance certain Eligible Assets (as defined below) that have been or will be acquired by ReadyCap and, Sutherland has requested that the Lender, make loans to finance certain Eligible Assets (as defined below) that have been or will be acquired by Sutherland;

 

WHEREAS, the Lender has agreed, subject to the terms and conditions of this Loan Agreement (as defined below), to provide such loans;

 

WHEREAS, as a condition to making loans to Borrowers, Lender has required Guarantor to guaranty the obligations hereunder;

 

NOW, THEREFORE, in consideration of the mutual provision and agreements made herein, the parties, intending to be legally bound, hereby agree as follows:

 

Section 1.                                           Definitions and Accounting Matters.

 

1.01                        Certain Defined Terms.  As used herein, the following terms have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Loan Agreement in the singular to have the same meanings when used in the plural and vice versa):

 

“2014 Public Offering” shall mean the issuance, on or before December 31, 2014, by the Guarantor of its equity interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S 8) pursuant to an effective registration statement filed with the U.S. Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended.

 

“Acquisition Cost” shall mean the cost to the Borrowers to acquire an SBC Loan under the Purchase Agreement.

 

“Advance(s)” shall mean a Tranche A Advance or Tranche B Advance, or if the context indicates, all such advances.

 

1

 

“Advance Amount” shall mean the Collateral Value of each Financed Asset on the Advance Date as such Advance Amount may be reduced from time to time in accordance with this Loan Agreement.

 

“Advance Date” shall mean the applicable date of an Advance.

 

“Affiliate” shall mean with respect to any Person, any “affiliate” of such Person, as such term is defined in the Bankruptcy Code.

 

“Amortization Event” shall mean (a) the failure of a Securitization Event or other disposition of at least thirty-five percent (35%) of the Financed Assets to occur on or before the ninetieth (90th) day following the initial Funding Date or (b) the occurrence of an Event of Default under Section 8 with respect to either Tranche.

 

“Amortization Period” shall mean the period commencing upon the occurrence of an Amortization Event.

 

“Anti-Money Laundering Laws” shall have the meaning set forth in Section 6.27 hereof.

 

“Applicable Margin” shall mean four percent (4%) per annum; provided that after the occurrence and continuation of an Amortization Event, four and one-half percent (4.5%) per annum.

 

“Asset File” shall mean the asset file as set forth on Exhibit E.

 

“Asset Schedule” shall mean a schedule of Eligible Assets containing the following information with respect to each Eligible Asset, to be delivered by the Borrowers to the Lender pursuant to Section 2.03(a) hereof as listed on Schedule 5.

 

“Asset Tape” shall mean have the meaning assigned thereto in Section 7.21 hereof.

 

“Assignment and Acceptance” shall have the meaning set forth in Section 15.01.

 

“Bank” shall mean Key Bank, in its capacity as bank with respect to the Tranche B Collection Account Control Agreement and the Tranche B Servicer Account Control Agreement, and JPMorgan Chase Bank, N.A., in its capacity as bank with respect to the Tranche A Collection Account Control Agreement.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code of 1978, as amended from time to time.

 

“Borrowers” shall have the meaning set forth in the preamble hereto.

 

“Borrower Party” shall have the meaning set forth in Section 11.01 hereof.

 

“Borrowing Base” shall mean, at any time, (i) with respect to Tranche A, the aggregate Collateral Value of all Eligible Tranche A Assets and (ii) with respect to Tranche B, the aggregate Collateral Value of all Eligible Tranche B Assets.

 

2

 

“Borrowing Base Deficiency” shall mean, at any time, (i) with respect to Tranche A or Tranche B, the amount that the Facility Amount with respect to such Tranche exceeds the Borrowing Base with respect to such Tranche, (ii) the amount that the aggregate outstanding principal balance of Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans, combined exceeds the Sublimit for Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans, (iii) the amount that the aggregate amount of Participation Interests exceeds the Sublimit for Participation Interests, (iv) the amount that the Tranche A Advances exceed the Tranche A Facility Amount, (v) the amount that the Tranche B Advances exceed the Trance B Facility Amount, or (vi) the amount that the Advances exceed the Maximum Facility Amount.

 

“Business Day” shall mean a day other than (i) a Saturday or Sunday, (ii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the State of New York or (iii) any day on which the New York Stock Exchange is closed.

 

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

 

“Cash Equivalents” shall mean (a) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of 90 days or less from the date of acquisition and overnight bank deposits of any commercial bank, which commercial bank is organized under the laws of the United States of America or any state thereof, having capital and surplus in excess of $500,000,000, and rated at least A-1 by S&P and P-1 by Moody’s, (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition and (d) commercial paper (having original maturities of not more than 91 days) of JPMorgan Chase & Co., but not its Affiliates provided that the commercial paper is United States Dollar denominated and amounts payable thereunder are not subject to any withholding imposed by any non-United States jurisdiction and is not issued by an asset backed commercial paper conduit or structured investment vehicle.

 

“Change in Control” shall mean:

 

(a)                                 any transaction or event as a result of which the Guarantor ceases to own, directly or indirectly 100% of the limited liability company interests of Sutherland or ReadyCap;

 

(b)                                 the sale, transfer, or other disposition of all or substantially all of any Loan Party’s assets (excluding any such action taken in connection with any securitization transaction); or

 

(c)                                  other than in connection with a 2014 Public Offering, the consummation of a merger or consolidation of any Loan Party with or into another entity or any other corporate

 

3

 

reorganization (in one transaction or in a series of transactions), if more than fifty-one percent (51%) of the combined voting power of the continuing or surviving entity’s stock outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not stockholders of such Loan Party immediately prior to such merger, consolidation or other reorganization; or

 

(d)                                 there is a change in the majority of the board of managers of any Loan Party during any twelve month period.

 

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

 

“Collateral” shall mean either the Tranche A Collateral or Tranche B Collateral or both as the context requires.

 

“Collateral Confirm” shall have the meaning set forth in the Custodial Agreement.

 

“Collateral Value” shall mean with respect to each Pledged Asset or portion thereof; provided, that

 

(a)                                 (1) for Performing Eligible SBC Loans and Participation Interests in Performing Eligible SBC Loans of the type described in clause (i) of the definition of Performing Advance Rate Percentage, the Performing Advance Rate Percentage set forth therein multiplied by the lesser of (x) the Borrowers’ Acquisition Cost and (y) the Market Value, as determined by the Lender, and (2) for all other Performing Eligible SBC Loans and Participation Interests in such other Performing Eligible SBC Loans of the type described in clause (ii) of the definition of Performing Advance Rate Percentage, the least of (A) ninety percent (90%) of S&P’s “A” credit enhancement level with respect to the pool as determined by the Lender in its good faith discretion, and (B) the Performing Advance Rate Percentage set forth therein multiplied by the Borrower’s Acquisition Cost and (C) the Performing Advance Rate Percentage set forth therein multiplied by the Market Value, as determined by Lender;

 

(b)                                 (1) with respect to Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans of the type described in clause (i) of the definition of Non-Performing Advance Rate Percentage, the Non-Performing Advance Rate Percentage set forth therein multiplied by the lesser of (x) the Borrowers’ Acquisition Cost and (y) the Market Value, as determined by the Lender, and (2) for all other Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans of the type described in clause (ii) of the definition of Non-Performing Advance Rate Percentage, the Non-Performing Advance Rate Percentage set forth therein multiplied by the lesser of (x) the Borrowers’ Acquisition Cost and (y) the Market Value, as determined by the Lender;

 

(c)                                  with respect to Participation Interests, the amount obtained pursuant to clause (a) or (b) above, shall (without duplication) be multiplied by the related Participation Percentage;

 

4

 

(d)                                 the Collateral Value of Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans, combined shall not exceed the related Sublimit for Non-Performing Eligible SBC Loans and Participation Interests;

 

(e)                                  the Collateral Value of Participation Interests shall not exceed the related Sublimit for Participation Interests;

 

(f)                                   the Collateral Value shall be deemed to be zero with respect to each Pledged Asset (1) in respect of which there is a breach of a representation and warranty set forth on Schedule 1-A or Schedule 1-B (assuming each representation and warranty is made as of the date Collateral Value is determined); and

 

(g)                                  in addition, the Collateral Value shall be deemed to be zero with respect to (1) each SBA 7(a) Loan pledged hereunder (x) with respect to which the SBA repudiates or, if not resolved within three (3) Business Days, challenges or otherwise calls into question its obligations under the SBA Guaranty Agreement or the related SBA Authorization and Loan Agreement, or (y) in respect of which the SBA 7(a) Loan Note has been released from the possession of the FTA in excess of 10 calendar days, (2) with respect to any other Pledged Asset pledged hereunder with respect to which the Obligor challenges, repudiates or otherwise calls into question its obligations or (3) with respect to each SBA 7(a) Loan pledged hereunder, if the Borrowers fail to deliver recorded assignments in the name of ReadyCap as set forth in Section 7.24 to the Custodian within one hundred and twenty (120) days of the Effective Date,

 

; provided further that the Collateral Value shall be adjusted as further set forth on Exhibit E with respect to Critical Exceptions and Fatal Exceptions.

 

“Collection Account Control Agreements” shall mean the Tranche A Collection Account Control Agreement and the Tranche B Collection Account Control Agreement.

 

“Collection Accounts” shall mean the Tranche A Collection Account and the Tranche B Collection Account.

 

“Commitment” shall mean the obligation of the Lender to make Advances to the Borrowers in an aggregate principal amount not exceeding the Maximum Facility Amount.

 

“Commitment Fee” shall mean two percent (2%) of the Maximum Facility Amount which amount shall be paid by the Borrowers to the Lender prior to the Effective Date.

 

“Commitment Letter” shall mean that certain Commitment Letter dated as of October 11, 2013, among the Borrowers, the Guarantor and the Lender.

 

“Competitors” shall mean competitors of the Borrowers, as set forth on Schedule 4.

 

“Condemnation Proceeds” shall mean all awards or settlements in respect of a Pledged Property, whether permanent or temporary, partial or entire, by exercise of the power of eminent

 

5

 

domain or condemnation, to the extent not required to be released to an Obligor in accordance with the terms of the related Asset File.

 

“Confidential Information” shall have the meaning set forth in Section 24.01 hereof.

 

“Confidential Terms” shall have the meaning set forth in Section 24.02 hereof.

 

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.

 

“Costs” shall have the meaning set forth in Section 11.01 hereof.

 

“Critical Exception” shall mean the exceptions identified as such in the Asset File definition set forth on Exhibit E.

 

“Custodial Agreement” shall mean that certain Custodial Agreement dated as of the date hereof by and between the Borrowers, the Lender, and the Custodian, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Custodian” shall mean The Bank of New York Mellon Trust Company, N.A., as custodian under the Custodial Agreement, or such other custodian as determined in accordance with the Custodial Agreement.

 

“Default” shall mean, with respect to either Tranche A or Tranche B, as applicable, an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.

 

“Default Rate” shall mean, with respect to either Tranche A or Tranche B, in respect of any principal of any Advance or any other amount under this Loan Agreement, the Note or any other Loan Document that is not paid when due to the Lender (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to three percent (3%) per annum plus the (a) the interest rate otherwise applicable to such Advance or other amount, or (b) if no interest rate is otherwise applicable, (i) the LIBOR Rate plus; (ii) seven percent (7%).

 

“Determination Date” shall mean the applicable date on which an Eligible Asset is funded under this Loan Agreement and thereafter as of the date of the most recent Remittance Report.

 

“Distribution” shall mean, for any Person, any dividends (other than dividend payable solely in common stock), distributions, return of capital to any stockholders, general or limited partners or members, other payments, distributions or delivery of property or cash to stockholders, general or limited partners or members, or any redemption, retirement, purchase or other acquisition, directly or indirectly, of any shares of any class of capital stock now or hereafter outstanding (or any options or warrants issued with respect to capital stock) general or limited partnership interest, or the setting aside of any funds for the foregoing; provided,

 

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however, that this shall not include payments in consideration of the delivery of goods and services provided that such goods and services are in the ordinary course of the Person’s business and are provided upon fair and reasonable terms no less favorable to the Person than it would obtain in a comparable arm’s length transaction with another Person which is not a stockholder, general partner or limited partner, or member.

 

“Dollars” and “$” shall mean lawful money of the United States of America.

 

“Due Diligence Review” shall mean the performance by the Lender or its designee of any or all of the reviews permitted under Section 14 hereof with respect to any or all of the SBC Loans, as desired by the Lender from time to time.

 

“Effective Date” shall mean the date upon which the conditions precedent set forth in Section 5.01 shall have been satisfied.

 

“Eligible Asset” shall mean an Eligible Tranche A Asset or an Eligible Tranche B Asset.

 

“Eligible Tranche A Asset” shall mean a Tranche A Asset which (i) is pledged to the Lender, (ii) is not otherwise assigned a zero value under the definition of Collateral Value, (iii) as to which the representations and warranties in Section 6.29 and Schedule 1-A and Schedule 1-B hereof are true and correct, (iv) was originated or acquired by the Originator in the ordinary course of business, (v) is not subject to a Fatal Exception, (vi) is not subject to an Environmental Issue and (vii) with respect to Participation Interests is (A) approved by the Lender in its sole discretion, (B) registered in the name of the applicable Borrower, (C) delivered with appropriate transfer documents executed by the applicable Borrower (which shall not be delivered by the Lender for re-registration unless an Event of Default shall have occurred and (D) any consent to transfer such Participation Interest to the Lender or any successor shall be delivered in form and substance acceptable to the Lender.

 

“Eligible Tranche B Asset” shall mean a Tranche B Asset which (i) is pledged to the Lender, (ii) is not otherwise assigned a zero value under the definition of Collateral Value, (iii) as to which the representations and warranties in Section 6.29 and Schedule 1-A and Schedule 1-B hereof are true and correct, (iv) is a first Lien loan secured by real property, (v) was originated or acquired by the Originator in the ordinary course of business, (vi) is not subject to a Fatal Exception, (vii) is not subject to an Environmental Issue.

 

“Environmental Assessment” shall mean with respect to any SBC Loan, an environmental assessment conducted by a third-party environmental firm mutually acceptable to Borrowers and Lender, which shall include, without limitation VERAcheck Environmental Risk Advisory, Inc. and Environmental Services, Inc.

 

“Environmental Issue” shall mean with respect to any SBC Loan, (a) as determined by the Lender in its good faith discretion, the violation of any federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or hazardous substances, materials or other pollutants, including, without limitation, the Comprehensive Environmental Response,

 

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Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; and any state and local or foreign analogues, counterparts or equivalents, in each case as amended from time to time, which adversely affects the value of such SBC Loan or (b) as determined by Lender in consultation with Borrowers after review of an Environmental Assessment.

 

“EO13224” shall have the meaning set forth in Section 6.28 hereof.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor thereto, and the regulations promulgated and rulings issued thereunder.

 

“ERISA Affiliate” shall mean any Person which, together with each Borrower or Guarantor is treated, as a single employer under Section 414(b) or (c) of the Code or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as a single employer described in Section 414 of the Code.

 

“Event of ERISA Termination” shall mean (i) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the PBGC has not by regulation waived the reporting of the occurrence of such event, or (ii) the withdrawal of a Borrower or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (iii) the failure by a Borrower or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date a required installment under Section 430(j) of the Code or Section 303(j) of ERISA, or (iv) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by a Borrower or any ERISA Affiliate thereof to terminate any Plan, or (v) the failure to meet the requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (vii) the receipt by a Borrower or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (vi) has been taken by the PBGC with respect to such Multiemployer Plan, or (viii) any event or circumstance exists which may reasonably be expected to constitute grounds for a Borrower or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412(b) or 430 (k) of the Code with respect to any Plan.

 

“Excluded Taxes” shall have the meaning set forth in Section 2.10(e) hereof.

 

“Event of Default” shall have the meaning set forth in Section 8 hereof.

 

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“Facility Amount” shall mean, at any time, the Tranche A Facility Amount or the Tranche B Facility Amount, as applicable.

 

“Fatal Exception” shall mean the exceptions identified as such in the Asset File definition set forth on Exhibit E.

 

“Fidelity Insurance” shall mean insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount acceptable to the Lender.

 

“Financed Assets” shall have the meaning set forth in recitals hereof.

 

“Financial Statements” shall mean those documents delivered pursuant to Section 7.04 hereof.

 

“Franchise” shall mean the franchise business of the Obligor, as more fully described in the Franchise Agreement, and the Obligor’s rights thereunder.

 

“Franchise Agreement” shall mean the agreement setting forth the rights and obligations of the Obligor with respect to the Franchise granted therein.

 

“FTA” shall mean Colson Services Corp., or any successor under the Multiparty Agreement appointed by the SBA.

 

“Funding Date” shall mean the date on which an Advance is made hereunder.

 

“Funding Period” shall mean a period of ninety (90) days from the closing of the final purchase of the SBC Loans from the Originators under the Purchase Agreement and the Effective Date.

 

“GAAP” shall mean generally accepted accounting principles in the United States of America, applied on a consistent basis and applied to both classification of items and amounts, and shall include, without limitation, the official interpretations thereof by the Financial Accounting Standards Board, its predecessors and successors.

 

“GLB Act” shall have the meaning set forth in Section 24.02.

 

“Governmental Authority” shall mean any nation or government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality or officer of any of the foregoing (including, without limitation, any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned by or controlled by the foregoing.

 

“Guarantee” shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the

 

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

 

“Guaranteed Portion” shall mean, as to any SBA 7(a) Loan or SBA 7(a) Loan Participation therein, the portion of the principal balance thereof together with interest thereon at a per annum rate in effect from time to time guaranteed by the SBA in accordance with the terms of the SBA Guaranty Agreement, the related SBA Authorization and Loan Agreement, and SBA Rules and Regulations.

 

“Guarantor” shall have the meaning set forth in the preamble hereto.

 

“Guaranty” shall mean that certain Guaranty made by the Guarantor in favor of the Lender, dated as of June 27, 2014, as amended from time to time.

 

“Income” shall mean, with respect to any Financed Asset, without duplication, all principal and income or dividends or distributions received with respect to such Financed Asset, including any sale or liquidation premiums, Liquidation Proceeds, insurance proceeds, interest, dividends or other distributions payable thereon or any fees or payments of any kind received by the related Servicer, but excluding (i) any amounts permitted to be retained by the Servicer pursuant to the Servicing Agreement and (ii) in respect of the Tranche A Assets, any amounts payable to the SBA or to the FTA pursuant to the Multiparty Agreement.

 

“Indebtedness” shall mean, with respect to any Person:  (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; and (i) Indebtedness of general partnerships of which such Person is a general partner; provided that Non-Recourse Debt associated with a securitization trust shall not be considered Indebtedness.

 

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“Indemnified Party” shall have the meaning set forth in Section 11.01 hereof.

 

“Insolvency Event” shall mean, for any Person:

 

(a)                                 that such Person or any Affiliate shall discontinue or abandon operation of its business; or

 

(b)                                 that such Person or any Affiliate shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or

 

(c)                                  proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of such Person or any Affiliate in an involuntary case under any applicable bankruptcy, insolvency, liquidation, reorganization or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person or any Affiliate, or for any substantial part of its property, or for the winding up or liquidation of its affairs and such decree shall remain unstayed for a period of thirty (30) days; or

 

(d)                                 the commencement by such Person or any Affiliate of a voluntary case under any applicable bankruptcy, insolvency or other similar Law now or hereafter in effect, or such Person’s or any Affiliate’s consent to the entry of an order for relief in an involuntary case under any such Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person, or for any substantial part of its property, or any general assignment for the benefit of creditors; or

 

(e)                                  that such Person or any Affiliate shall become insolvent; or

 

(f)                                   if such Person or any Affiliate is a corporation, such Person or any Affiliate, or any of their Subsidiaries, shall take any corporate action in furtherance of, or the action of which would result in any of the actions set forth in the preceding clauses (a), (b), (c), (d) or (e).

 

“Interest Income Asset” shall mean with respect to any Pledged Assets, interest income and other amounts accruing on such Pledged Assets, excluding the Servicing Fee as more described in the Multiparty Agreement.

 

“Interest Period” shall mean, with respect to any Advance, (i) initially, for any Advance, the period commencing on the Funding Date with respect to such Advance and ending on the last day of the calendar month in which such Funding Date occurs; and (ii) subsequent consecutive periods thereafter, beginning on the first day of each subsequent calendar month and ending on the earlier of (x) the last day of the same calendar month in which such Interest Period began and (y) the Termination Date.

 

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

 

“Investment Manager” shall mean Waterfall Asset Management, LLC, a Delaware limited liability company, and its successors in interest and assigns.

 

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“Lender” shall have the meaning set forth in the preamble hereto.

 

“Leverage” shall mean with respect to any Person and its consolidated Subsidiaries the ratio of Indebtedness to Tangible Net Worth.

 

“LIBOR Rate” shall mean, with respect to each day on which any Advance is outstanding (or if such day is not a Business Day, the next succeeding Business Day) and determined daily by the Lender, the offered rate for three (3) month U.S. dollar deposits, as the applicable rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on second Business Day before such date; provided that if the applicable rate does not appear on Reuters Screen LIBOR01 Page, the rate for such date will be based upon the offered rates of the reference banks selected by the Lender for U.S. dollar deposits as of 11:00 a.m. (London time) on second Business Day before such date.  In such event, Lender will request the principal London office of each of at least three reference banks selected by Lender to provide a quotation of its rate.  If on such date, two or more of such reference banks provide such offered quotations, LIBOR shall be the arithmetic mean of all such offered quotations (rounded to the nearest whole multiple of 1/100%).  If on such date, fewer than two of such reference banks provide such offered quotations, LIBOR shall be the higher of (i) LIBOR as determined on the immediately preceding day that LIBOR is available and (ii) the Reserve Interest Rate.  Upon determination of LIBOR by the Lender in accordance with the forgoing, the Agent shall communicate LIBOR to the Borrowers.

 

“Lien” shall mean any lien, claim, charge, restriction, pledge, security interest, mortgage, deed of trust or other encumbrance.

 

“Liquidated Asset” shall mean with respect to any Financed Asset, such Financed Asset has been sold or refinanced, was subject to a short sale or any other extinguishment of the Lien securing the Financed Asset.

 

“Liquidation Proceeds” shall mean all cash amounts received on account of a Liquidated Asset net of costs and expenses owed to the related Servicer under the Servicing Agreement.

 

“Liquidity” shall mean, with respect to any Person and its consolidated Subsidiaries, the sum of its (i) unrestricted cash, plus (ii) unrestricted Cash Equivalents, plus (iii) the aggregate amount of unused capacity available to such Person and its consolidated Subsidiaries (taking into account applicable haircuts) under committed mortgage loan warehouse and repurchase facilities and mortgage servicing right facilities for which such Person and its consolidated Subsidiaries have pledged the related unencumbered eligible collateral thereunder, plus (iv) net equity value of whole pool agency securities.

 

“Loan Agreement” shall mean this Master Loan and Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Loan Documents” shall mean, collectively, this Loan Agreement, the Notes, the Collection Account Control Agreements, the Tranche B Servicer Account Control Agreement, the Guaranty and the Multiparty Agreement, each as amended from time to time.

 

“Loan Party” shall mean any or all of the Borrowers and the Guarantor.

 

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“Margin Call” shall have the meaning set forth in Section 2.04(a) hereof.

 

“Margin Deficit” shall have the meaning set forth in Section 2.04(a) hereof.

 

“Margin Threshold” shall mean $100,000.

 

“Market Value” shall mean as of any date with respect to any SBC Loan or Participation Interest, the price at which such SBC Loan or Participation Interest could readily be sold as determined in good faith by the Lender in its sole discretion.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) (i) with respect to Tranche A, the Property, business, operations, financial condition or prospects of ReadyCap and (ii) with respect to Tranche B, the Property, business, operations, financial condition or prospects of the Guarantor or a Borrower, (b) (x) with respect to Tranche A, the ability of ReadyCap to perform its obligations under any of the Loan Documents to which it is a party and (y) with respect to Tranche B the Guarantor or a Borrower to perform its obligations under any of the Loan Documents to which it is a party, (c) the validity or enforceability of any of the Loan Documents, (d) the rights and remedies of the Lender under any of the Loan Documents, (e) the timely payment of the principal of or interest on the Advances or other amounts payable in connection therewith, or (f)(1) with respect to Tranche A, the Tranche A Collateral and (1) with respect to Tranche B, the Collateral.

 

“Maximum Facility Amount” shall mean $250,000,000.

 

“Monthly Payment” shall mean the scheduled monthly payment of principal and interest on an SBC Loan as adjusted in accordance with changes in the SBC Loan Interest Rate pursuant to the provisions of the SBC Loan Note for an adjustable rate SBC Loan.

 

“Mortgage” shall mean each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure debt, assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a first lien on commercial real property and other property and rights incidental thereto.

 

“Multiemployer Plan” shall mean, with respect to any Person, a “multiemployer plan” as defined in Section 3(37) of ERISA which is or was at any time during the current year or the immediately preceding five years contributed to (or required to be contributed to) by such Person or any ERISA Affiliate thereof on behalf of its employees and which is covered by Title IV of ERISA.

 

“Multiparty Agreement” shall mean, with respect to Tranche A and the Tranche A Collateral, the Multiparty Agreement, dated as of the date hereof, by and among the Lender, ReadyCap, the FTA, and the SBA in the form agreed to by the parties thereto, as amended from time to time.

 

“Net Worth” shall mean, as of a particular date, all amounts that would be included under capital on a balance sheet of the Borrowers at such date determined in accordance with GAAP.

 

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“Non-Excluded Taxes” shall have the meaning set forth in Section 2.10(a) hereof.

 

“Non-Exempt Lender” shall have the meaning set forth in Section 2.10(e) hereof.

 

“Non-Performing Advance Rate Percentage” shall mean (i) for Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans that are (a) SBA 504 Loans that are first lien SBC Real Estate Secured Loans, (b) SBA 7(a) Guaranteed Portions and (c) other SBC Loans (other than Unguaranteed Portions of such SBA Loans) that are first lien SBC Real Estate Secured Loans, sixty percent (60%) and (ii) for Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans other than those described in clause (i) and including Unguaranteed Portions of SBA Loans and Participation Interests therein, fifty percent (50%).

 

“Non-Performing Eligible SBC Loans and Participation Interests” shall mean an SBC Loan or Participation Interest in an SBC Loan that, as of the applicable Determination Date is (a) not a Performing Eligible SBC Loan and Participation Interest or (b) an SBC Loan or Participation Interest that has been modified subsequent to the Funding Date without the prior written consent of Lender regardless of whether it would otherwise satisfy the definition of Performing Eligible SBC Loan and Participation Interest.

 

“Non-Recourse Debt” shall mean liabilities for which the assets securing such obligations are the only source of repayment.

 

“Note” shall mean the Tranche A Note and/or the Tranche B Note.

 

“Obligor” shall mean any obligor on an SBC Loan Note, whether the original obligor, or whether by assumption or otherwise.

 

“OFAC” shall have the meaning set forth in Section 6.28 hereof.

 

“Originators” shall mean, collectively, CIT Small Business Lending Corporation, CIT Lending Services Corporation and CIT Bank.

 

“Other Taxes” shall have the meaning set forth in Section 2.10(b) hereof.

 

“Participant Loan” shall mean a loan in which an Originator acquired a Participation Interest from a third party that constitutes less than one hundred percent (100%) of the interests of the lenders in and to such loan.

 

“Participation Agreement” shall mean the agreement executed and delivered in connection with a Participation Interest.

 

“Participation Certificate” shall mean the original participation certificate, if any, that was executed and delivered in connection with a Participation Interest, which Participation Certificate may represent one or more Participation Interests.

 

“Participation Interest” shall mean a participation interest in an SBC Loan evidenced by a Participation Certificate.

 

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“Participation Percentage” shall mean the percentage of any Participation Interest.

 

“Payment Date” shall mean the 25th day of each month or if the 25th is not a Business Day, the next succeeding Business Day.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

 

“Performing Advance Rate Percentage” shall mean (i) for Performing Eligible SBC Loans and Participation Interests in Performing Eligible SBC Loans that are (a) SBA 504 Loans that are first lien SBC Real Estate Secured Loans, (b) SBA 7(a) Guaranteed Portions and (c) other SBC Loans (other than Unguaranteed Portions of SBA Loans) that are first lien SBC Real Estate Secured Loans, seventy-five percent (75%) and (ii) for Performing Eligible SBC Loans and Participation Interests in Performing Eligible SBC Loans other than those described in clause (i) and including Unguaranteed Portions of SBA Loans and Participation Interests therein, sixty-five percent (65%).

 

“Performing Eligible SBC Loans and Participation Interests” shall mean an SBC Loan or Participation Interest that as of the applicable Determination Date (a) is contractually current as of such Determination Date, (b) has (i) been contractually current for at least six (6) consecutive months immediately prior to such Determination Date (without regard to any delinquency that shall occur for no more than one (1) month and relate solely to the transfer of servicing, as evidenced by the Borrowers to the satisfaction of the Lender in its good faith discretion and (ii) the related Borrower has paid more than eighty percent (80%) of the principal and interest due on such Eligible Asset over the twelve (12) months prior to the Determination Date and (c) remains at all times after such Determination Date contractually current.

 

“Person” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association, or government (or any agency, instrumentality or political subdivision thereof), including, but not limited to, the Borrowers.

 

“Plan” shall mean, with respect to each Borrower, any employee benefit or similar plan that is or was at any time during the current year or immediately preceding five years established, maintained or contributed to by such Borrower or any ERISA Affiliate thereof and that is covered by Title IV of ERISA, other than a Multiemployer Plan.

 

“Pledged Assets” shall mean Pledged Tranche A Assets and Pledged Tranche B Assets.

 

“Pledged Property” shall mean (i) real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and/or (ii) any machinery or equipment (and all additions, alterations and replacements made at any time with respect to the foregoing) and/or (iii) any Franchise and/or (iv) all other collateral, in any case, securing repayment of the debt evidenced by an SBC Loan Note.

 

“Pledged Tranche A Assets” shall mean those Tranche A Assets owned by ReadyCap (excluding any interest therein previously sold by the Borrowers) and pledged by ReadyCap to

 

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the Lender as Collateral for Tranche A Advances made hereunder as specifically set forth in each Request for Borrowing delivered by ReadyCap to the Lender in accordance with Section 2.03(a) hereof.

 

“Pledged Tranche B Assets” shall mean those Tranche B Assets owned by Sutherland (excluding any interest therein previously sold by the Borrowers) and pledged by Sutherland to the Lender as Collateral for Tranche B Advances made hereunder as specifically set forth in each Request for Borrowing delivered by Sutherland to the Lender in accordance with Section 2.03(a) hereof.

 

“Principal Paydown Amounts” shall have the meaning set forth in Section 2.05 hereof.

 

“Prohibited Person” shall have the meaning set forth in Section 6.28 hereof.

 

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

 

“Purchase Agreement” shall mean that certain Asset Purchase Agreement dated as of October 11, 2013, by and among the Originators and the Borrowers.

 

“ReadyCap” shall have the meaning set forth in the preamble hereto.

 

“Recalculated Fee Amount” shall mean (i) two percent (2%) multiplied by (ii) the Maximum Facility Amount.

 

“REIT” shall mean a real estate investment trust under Section 856 through 860 of the Code.

 

“REIT Distribution Requirement” means for any taxable year, an amount of dividends sufficient to meet the requirements of Section 857(a) of the Code.

 

“Register” shall have the meaning set forth in Section 16.02.

 

“Relevant States” shall have the meaning set forth in Section 6.30 hereof.

 

“Remittance Report” shall mean the report in the form of Exhibit C hereto (as may be amended, restated or modified from time to time by the Borrowers with the approval of the Lender, which approval may not be unreasonably withheld) delivered by the Borrowers or the Servicers to the Lender on the Business Day prior to the related Payment Date.

 

“Repayment Amount” shall mean, with respect to any Advance, the Lender’s Advance Amount minus any cash applied to reduce the Lender’s Advance Amount plus accrued and unpaid interest and accrued and unpaid fees and expenses.

 

“Reportable Event” shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .21, .22, .24, .26, .27 or .28 of PBGC Reg. § 4043.

 

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“Request for Borrowing” shall have the meaning set forth in Section 2.03(a) hereof.

 

“Requirement of Law” shall mean as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule, regulation, procedure or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” shall mean, as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person; provided that in the event any such officer is unavailable at any time he or she is required to take any action hereunder, Responsible Officer shall mean any officer authorized to act on such officer’s behalf as demonstrated by a certificate of entity resolution or consent.

 

“SBA” shall mean the United States Small Business Administration, an agency of the United States government.

 

“SBA 504 Loan” shall mean any first lien mortgage loan which is originated in accordance with the SBA Rules and Regulations and pursuant to Title V of the Small Business Investment Act of 1958, as amended, codified at 15 U.S.C. 645 et. seq.

 

“SBA 504 Loan Note” shall mean the promissory note or other evidence of the indebtedness of an Obligor with respect to an SBA 504 Loan.

 

“SBA 7(a) Loan Note” shall mean the promissory note or other evidence of the indebtedness of an Obligor with respect to an SBA 7(a) Loan.

 

“SBA 7(a) Loan” shall mean any loan which is originated in accordance with the SBA Rules and Regulations and pursuant to Section 7(a) of the Small Business Act, as amended, codified at 15 U.S.C. 631 et. seq., which SBA Loan is partially guaranteed by the SBA.

 

“SBA 7(a) Loan Participation” shall mean a participation interests in the Unguaranteed Portion of SBA 7(a) Loans.

 

“SBA 7(a) Program Real Property Loan” shall mean any SBA Loan originated pursuant to Section 7(a) of the Small Business Act, as amended, codified at 15 U.S.C. 636(a) et. seq., which loan is a first lien partially guaranteed by the SBA, for which the underlying Pledged Property securing such loan is primarily real estate.

 

“SBA 7(a) Program non-Real Property Loan” shall mean any SBA Loan originated pursuant to Section 7(a) of the Small Business Act, as amended, codified at 15 U.S.C. 636(a) et. seq., which loan is a first, second or third lien partially guaranteed by the SBA, for which the underlying Pledged Property securing such loan is primarily (i) machinery or equipment (and all additions, alterations and replacements made at any time with respect to the foregoing), (ii) a Franchise, or (iii) collateral other than real property.

 

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“SBA Authorization and Loan Agreement” shall mean the Authorization and Loan Agreement (SBA Form 529 or other comparable form) issued with respect to each SBA 7(a) Loan between the SBA, the Originator, and the Obligor.

 

“SBA Guaranty Agreement” shall mean the SBA Loan Guaranty Agreement (SBA Form 750 or any comparable form), with respect to a SBA 7(a) Loan, between the SBA and the Originator as such agreement may be amended from time to time.

 

“SBA Loan” shall mean any SBA 7(a) Loan or SBA 504 Loan or both as the context requires.

 

“SBA Rules and Regulations” shall mean the Small Business Act, as amended, codified at 15 U.S.C. 631 et. seq., and the Small Business Investment Act of 1958, as amended, codified at 15 U.S.C. 661 et. seq., all rules and regulations promulgated from time to time thereunder and the SBA Guaranty Agreement.

 

“SBC Loan Interest Rate” shall mean the annual rate of interest, as determined from time to time, borne on an SBC Loan Note.

 

“SBC Loans” shall mean small business loans, including SBA Loans.

 

“SBC Non-Real Estate Secured Loans” shall mean an SBC Loan not secured by real estate as identified on the Asset Schedule.

 

“SBC Loan Note” shall mean the promissory note or other evidence of the indebtedness of an Obligor with respect to an SBC Loan and shall include an SBA 504 Loan Note, the SBA 7(a) Loan Note, or both as the context requires.

 

“SBC Real Estate Secured Loans” shall mean an SBC Loan secured by real estate as identified on the Asset Schedule.

 

“Second Lien Loan” shall have the meaning set forth in Part 1(10) of Schedule 1-A hereto.

 

“Secondary Market Sale” shall have the meaning set forth in Section 6.29(a) hereof.

 

“Section 7 Certificate” shall have the meaning set forth in Section 2.10(e)(ii) hereof.

 

“Secured Obligations” shall mean, with respect to each Tranche, the unpaid principal amount of, and interest on the related Advances, and all other obligations and liabilities of each Borrower to the Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with this Loan Agreement, the related Note, any other Loan Document and any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Lender that are required to be paid by the Borrowers pursuant to the terms hereof or thereof) or otherwise.  For purposes hereof, “interest” shall include, without limitation, interest accruing after the maturity of the Advances and interest

 

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accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrowers, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding.

 

“Securitization Event” shall mean the date on which the securitization or other similar public or private pass-through disposition of, or issuance of securities by, the Financed Assets that are Unguaranteed Portions and were originated under the SBA 7(a) Program occurs.

 

“Security Agreement” shall mean the mortgage, deed of trust, assignment of leases and rents or other instrument or security agreement securing obligations with respect to an SBC Loan, which creates a first, second or third Lien (as indicated on the Asset Tape) on a Pledged Property securing the SBC Loan Note.

 

“Servicer” shall mean (i) Key Bank and ReadyCap with respect to Performing Eligible SBC Loans and Participation Interests other than Performing Eligible SBC Loans and Participation Interests that are SBA 7(a) Loans, (ii) ReadyCap with respect to Non-Performing Eligible SBC Loans and Participation Interests that are not Participation Interests in respect of a Participant Loan, (iii) ReadyCap with respect to Performing Eligible SBC Loans and Participation Interests that are SBA 7(a) Loans; provided that Key Bank will perform certain servicing functions in respect of Performing Eligible SBC Loans and Participation Interests that are SBA 7(a) Loans pursuant to one or more services agreements with ReadyCap, as approved by the Lender in its sole discretion, and (iv) the current servicer in connection with the related Participation Agreement with respect to Participation Interests in respect of Participation Loans, each as approved by the Lender in its sole discretion.

 

“Servicer Accounts” shall mean the Tranche A Servicer Account and the Tranche B Servicer Account.

 

“Servicing Agreements” shall have the meaning set forth in Section 12.03 hereof.

 

“Servicing Records” shall have the meaning set forth in Section 12.02 hereof.

 

“Sublimit for Non-Performing SBC Loans and Participation Interests in Non-Performing SBC Loans” shall mean $35,000,000.

 

“Sublimit for Participation Interests” shall mean $50,000,000.

 

“Subsidiary” shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

 

“Sutherland” shall have the meaning set forth in the preamble hereto.

 

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“Tangible Net Worth” shall mean, as of any date of determination, the consolidated Net Worth of the Borrowers or Guarantor, as applicable, less the consolidated net book value of all assets of the Borrowers or Guarantor, as applicable, (to the extent reflected as an asset in the balance sheet of the Borrowers or Guarantor, as applicable, at such date) that will be treated as intangibles under GAAP.

 

“Taxes” shall have the meaning set forth in Section 2.10(a) hereof.

 

“Termination Date” shall mean June 26, 2015 or such earlier date on which this Loan Agreement shall terminate in accordance with the provisions hereof or by operation of law.

 

“Third Lien Loan” shall have the meaning set forth in Part 1(10) of Schedule 1-A hereto.

 

“Total Stockholder’s Equity” shall mean with respect to any Person and its consolidated Subsidiaries, an amount equal to, on a consolidated basis, such Person’s stockholder’s equity (determined in accordance with GAAP).

 

“Tranche” shall mean either Tranche A or Tranche B, or if the context indicates, all such tranches.

 

“Tranche A” shall mean the tranche of this facility pursuant to which Tranche A Advances are made.

 

“Tranche A Advance” shall mean a loan made by the Lender to ReadyCap pursuant to Section 2.01 hereof and secured by a Tranche A Asset.

 

“Tranche A Assets” shall mean any SBA 7(a) Loan and any SBA 7(a) Loan Participation as identified in the Asset Schedule.

 

“Tranche A Collateral” shall have the meaning set forth in Section 4.01(b) hereof.

 

“Tranche A Collection Account” shall mean a deposit account (the title of which shall indicate that the funds therein are being held in trust for the Lender) into which ReadyCap shall deposit Income (other than, for the avoidance of doubt, any amounts payable to the SBA or to the FTA pursuant to the Multiparty Agreement) with a financial institution acceptable to the Lender and subject to the Tranche A Collection Account Control Agreement.

 

“Tranche A Collection Account Control Agreement” shall mean a letter agreement among ReadyCap, the Lender and the Bank, in form and substance reasonably acceptable to the Lender, as the same may be amended from time to time.

 

“Tranche A Facility Amount” shall mean $187,000,000.

 

“Tranche A Note” shall mean the promissory note provided for by Section 2.02(a) hereof for Tranche A Advances and any promissory note delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time.

 

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“Tranche A Servicer Account” shall mean the segregated account established by and in the name of ReadyCap at a depository institution approved by the Lender into which all Income received on account of the Eligible Assets serviced or managed by such Servicer shall be deposited.

 

“Tranche B” shall mean that tranche of this facility pursuant to which Tranche B Advances are made.

 

“Tranche B Advance” shall mean a loan made by the Lender to Sutherland pursuant to Section 2.01 hereof, and secured by a Tranche B Asset.

 

“Tranche B Assets” shall mean any SBA 504 Loan, any Participation Interests and any other SBC Loans (other than Tranche A Assets) as identified in the Asset Schedule.

 

“Tranche B Collateral” shall have the meaning set forth in Section 4.01(c) hereof.

 

“Tranche B Collection Account” shall mean a deposit account (the title of which shall indicate that the funds therein are being held in trust for the Lender) into which Sutherland shall deposit Income with a financial institution acceptable to the Lender and subject to the Tranche B Collection Account Control Agreement.

 

“Tranche B Collection Account Control Agreement” shall mean a letter agreement among Sutherland, the Lender and the Bank, in form and substance reasonably acceptable to the Lender, as the same may be amended from time to time.

 

“Tranche B Facility Amount” shall mean $63,000,000.

 

“Tranche B Note” shall mean the promissory note provided for by Section 2.02(a) hereof for Tranche B Advances and any promissory note delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time.

 

“Tranche B Servicer Account” shall mean the segregated account established by and in the name of Sutherland at a depository institution approved by the Lender into which all Income received on account of the Eligible Assets serviced or managed by such Servicer shall be deposited.

 

“Tranche B Servicer Account Control Agreement” shall mean an account control agreement among each Servicer, the Lender and Sutherland, and the related Bank, in form and substance reasonably acceptable to the Lender, as the same may be amended from time to time.

 

“Transfer” shall have the meaning set forth in Section 7.16 hereof.

 

“Unguaranteed Portion” shall mean that portion of a SBA Loan, including interest, not guaranteed by the SBA pursuant to the SBA Rules and Regulations, the related SBA Authorization and Loan Agreement, or the SBA Guaranty Agreement, but only so much of such portion as has been pledged as Tranche A Collateral for Tranche A Advances made hereunder.

 

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“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

 

1.02                        Accounting Terms and Determinations.  For purposes of this Loan Agreement, except as otherwise expressly provided or unless the context otherwise requires:

 

(a)                                 the terms defined in this Loan Agreement have the meanings assigned to them in this Loan 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)                                 all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared, in accordance with GAAP;

 

(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 Loan 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;

 

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

 

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

 

(g)                                  all times specified herein or in any other Loan Document (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and

 

(h)                                 all references herein or in any Loan Document to “good faith” means good faith as defined in Section 1-201(19) of the Uniform Commercial Code in effect in the State of New York.

 

Section 2.                                           Advances; Note and Prepayments.

 

2.01                        Advances.

 

(a)                                 Subject to fulfillment of the conditions precedent set forth in Sections 5.01 and 5.02 hereof, the Lender agrees, on the terms and conditions of this Loan Agreement, to make Advances to the Borrowers in Dollars, on any Business Day, from and including the Effective Date during the Funding Period in an aggregate principal amount at any one time outstanding up

 

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to but not exceeding the lesser of (i) Maximum Facility Amount, (ii) the Borrowing Base, (iii) with respect to Tranche A Advances, the Tranche A Facility Amount, (iv) with respect to Tranche B Advances, the Tranche B Facility Amount, (v) with respect to Non-Performing Eligible SBC Loans and Participation Interests, the Sublimit for Non-Performing Eligible SBC Loans and Participation Interests in Non-Performing Eligible SBC Loans, as in effect from time to time and (vi) with respect to Participation Interests, the Sublimit for Participation Interests, as in effect from time to time.

 

(b)                                 Subject to the terms and conditions of this Loan Agreement, during the Funding Period the Borrowers may borrow hereunder.  Any amounts repaid, may not be reborrowed hereunder.

 

(c)                                  No later than the sixth (6th) Business Day preceding the Effective Date, the Borrowers will deliver to the Lender, in a format (including electronic transfer) acceptable to the Lender, the initial Asset Schedule.  The Borrowers will request the Lender to make a loan on the Effective Date by delivering to the Lender an irrevocable initial Request for Borrowing no later than 10:00 a.m. (New York City time) on the third (3rd) Business Day preceding the Effective Date.

 

2.02                        Notes.

 

(a)                                 The Tranche A Advances made by the Lender shall be evidenced by a single promissory note of the ReadyCap substantially in the form of Exhibit A-1 hereto (the “Tranche A Note”), dated the date hereof, payable to the Lender in a principal amount equal to the amount of $187,000,000 as in effect from time to time, and otherwise duly completed.  The Lender shall have the right to have its Tranche A Note subdivided, by exchange for promissory notes of lesser denominations or otherwise.

 

(b)                                 The Tranche B Advances made by the Lender shall be evidenced by a single promissory note of Sutherland substantially in the form of Exhibit A-2 hereto (the “Tranche B Note”), dated the date hereof, payable to the Lender in a principal amount equal to the amount of $63,000,000 as in effect from time to time, and otherwise duly completed.  The Lender shall have the right to have its Tranche B Note subdivided, by exchange for promissory notes of lesser denominations or otherwise.

 

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

 

2.03                        Procedure for Borrowing.

 

(a)                                 The applicable Borrower may request a borrowing to be secured by SBC Loans hereunder, on any Business Day during the period from and including the Effective Date through the end of the Funding Period, by delivering to the Lender, an irrevocable written

 

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request for borrowing substantially in the form of Exhibit B hereto (“Request for Borrowing”); provided that, the Borrowers may not deliver more than one (1) Request for Borrowing per Business Day.  Such Request for Borrowing must be received by the Lender prior to 10:00 a.m. New York City time at least three (3) Business Days prior to the requested Funding Date.  Such Request for Borrowing shall (i) specify the amount of the Advance, and shall further specify the amount of such Advance that shall be a Tranche A Advance and a Tranche B Advance and shall further specify the amount of such Advance, (ii) attach an Asset Schedule identifying the Eligible Assets that the Borrowers propose to pledge to the Lender and to be included in the respective Borrowing Bases in connection with such borrowing, (iii) specify the requested Funding Date, (iv) certify that the SBA 7(a) Loan Notes, if any, have been delivered to the FTA pursuant to the Multiparty Agreement, and (v) specify such other matters as may be specified on the form of the Request for Borrowing or as may be reasonably requested by Lender from time to time in accordance with the terms hereof.  The Borrowers shall indemnify Lender and hold it harmless against any Losses incurred by Lender as a result of any failure by Borrowers to timely deliver the Pledged Assets subject to such Request for Borrowing.  Subject to Section 5 hereof, such borrowing, will then be made available to the Borrowers by the Lender transferring, via wire transfer, to the account of ReadyCap and to the account of Sutherland, in each case, as set forth in the Request for Borrowing, in the aggregate amount of such borrowing, in funds immediately available to the Borrowers.

 

(b)                                 Upon the Borrowers’ Request for Borrowing pursuant to Section 2.03(a), the Lender shall, assuming all conditions precedent set forth in this Section 2.03 and in Sections 5.01 and 5.02 have been met make a Tranche A Advance to ReadyCap or a Tranche B Advance to Sutherland on the requested Funding Date, in the amounts so requested; provided that such amounts would not cause a Borrowing Base Deficiency.

 

2.04                        Margin Amount Maintenance; Mandatory Prepayments.

 

(a)                                 If at any time the aggregate Collateral Value of Financed Assets that constitute Tranche A Assets, is less than the Repayment Amount on account of the related Tranche A Advances (a “Tranche A Margin Deficit”) and such Tranche A Margin Deficit is greater than the Margin Threshold, then the Lender may by notice to the Borrowers (as such notice is more particularly set forth below, a “Tranche A Margin Call”), require the Borrowers to transfer to the Lender or its designee cash in an amount at least equal to the Tranche A Margin Deficit.

 

(b)                                 If at any time the aggregate Collateral Value of Financed Assets that constitute Tranche B Assets, is less than the Repayment Amount on account of the related Tranche B Advances (a “Tranche B Margin Deficit”, together with a Tranche A Margin Deficit, and each a “Margin Deficit”) and such Tranche B Margin Deficit is greater than the Margin Threshold, then the Lender may by notice to Sutherland (as such notice is more particularly set forth below, a “Tranche B Margin Call” together with a Tranche A Margin Call, and each a “Margin Call”), require the Sutherland to transfer to the Lender or its designee cash in an amount at least equal to the Tranche B Margin Deficit.

 

(c)                                  If the Lender delivers Margin Call to the Borrowers on or prior to 10:00 a.m. (Eastern time) on any Business Day, then the Borrowers shall transfer cash to the Lender no

 

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later than 5:00 p.m. (Eastern time) that day.  In the event the Lender delivers a Margin Call to the Borrowers after 10:00 a.m. (Eastern time) on any Business Day, the Borrowers shall be required to transfer cash no later than 10:00 a.m. (Eastern time) on the subsequent Business Day.  The Lender’s election, in its sole and absolute discretion, not to make a Margin Call at any time there is a Margin Deficit in excess of the Margin Threshold shall not in any way limit or impair its right to make a Margin Call at any time a Margin Deficit in excess of the Margin Threshold exists.

 

(d)                                 Any cash transferred to the Lender pursuant to Section 2.04(b) above shall promptly be applied to reduce the Lender’s Advance Amount related to the applicable Tranche of each Financed Asset on a pro rata basis (based on the Advance Amount related to the applicable Tranche of such Financed Asset).

 

(e)                                  The Lender hereby agrees that it will be responsible for calculations of the Collateral Value and Repayment Amount of each Financed Asset in order to determine the amount of payments due to the Lender under this Loan Agreement, including without limitation, pursuant to Section 2 hereof and the Lender will provide such calculations to the Borrowers upon request therefor.  The Lender’s determination of the Collateral Value and the Repayment Amount of each Financed Asset shall be conclusive absent manifest error.

 

(f)                                   If at any time there has occurred, or there is discovered, an Environmental Issue, the Borrowers shall promptly but in any event, within one (1) Business Day, notify the Lender in writing, and shall prepay the Advance related to the Financed Asset subject to the Environmental Issue and remove such Financed Asset from this Loan Agreement.

 

2.05                        Establishment of Collection Accounts and Waterfall.

 

(a)                                 The Borrowers shall each, and shall cause each Servicer to, hold for the benefit of, and in trust for, the Lender all Income, including, without limitation, all Income received by or on behalf of any Borrower with respect to the Eligible Assets owned by the Borrowers.  The Borrowers shall cause each Servicer to deposit all such Income received on account of the Eligible Assets serviced or managed by such Servicer, in the applicable Servicer Account no later than two (2) Business Days following receipt.  To the extent that a Borrower is holding any such Income, such Borrower shall deposit such Income (but excluding that portion of Income on account of any SBA Loan due to the SBA or the FTA, which portion of Income shall be remitted directly to the SBA or the FTA, as applicable) in the applicable Collection Account and subject to the applicable Collection Account Control Agreement.  The Borrowers shall cause each Servicer to remit to the applicable Collection Account all Income (but excluding that portion of Income on account of any SBA Loan due to the SBA or the FTA, which portion of Income shall be remitted directly to the SBA or the FTA, as applicable) held in the related Servicer Account on each day that the related Servicer remits any portion of Income to the SBA or the FTA, which remittance shall occur no less frequently than once per calendar week as long as there is Income on deposit in the related Servicer Account.  All Income shall be held in trust for the Lender and shall not be commingled with other property of the Borrowers or any Affiliate of the Borrowers.  Funds deposited in any Collection Account during any month shall be held therein, in trust for Lender, until the next Payment Date with respect to each Tranche.  Subject to the terms of the applicable Collection Account Control Agreement, funds on deposit in the

 

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Collection Accounts shall be remitted to the Lender and applied as follows with respect to each Tranche:  (x) first, from the Tranche A Collection Account on account of the Tranche A Advances in the following order of priority; (y) second, from the Tranche B Collection Account on account of the Tranche B Advances in the following order of priority and; (z) third from the Tranche B Collection Account to the extent that of any insufficient funds on account of the Tranche A Advances, prior to remittance to Sutherland pursuant to clause (vii) below, any additional funds in the Tranche B Collection Account to be applied on account of the Tranche A Advances in the following order of priority:

 

(i)                                     first, to the Lender for the Lender’s fees and reimbursable expenses then due and payable pursuant to any of the Loan Documents with respect to such Tranche;

 

(ii)                                  second, to the Lender for the interest then due and payable on the Advances for such Tranche made to a Borrower;

 

(iii)                               third, without limiting the rights of the Lender under Section 2.04 of this Loan Agreement, to the Lender, in the amount of any unpaid Margin Deficit with respect to such Tranche;

 

(iv)                              fourth, to the Lender in an amount equal to the principal amortization (including full and partial prepayments) relating to the Financed Assets for the prior calendar month (the “Principal Paydown Amounts”) and Liquidation Proceeds with respect to Liquidated Assets with respect to such Tranche as follows:

 

(A)                               with respect to Performing Eligible SBC Loans and Participation Interests, an amount equal to all Principal Paydown Amounts or Liquidation Proceeds, as applicable, multiplied by the Performing Advance Rate Percentage for each Eligible Asset based upon the type of Eligible Asset; and

 

(B)                               with respect to Non-Performing Eligible SBC Loans and Participation Interests, an amount equal to one hundred percent (100%) of all Principal Paydown Amounts or Liquidation Proceeds as applicable;

 

(v)                                 fifth, subsequent to an Amortization Event or the occurrence of an Event of Default with respect to such Tranche, one hundred percent (100%) of all Principal Paydown Amounts and Liquidation Proceeds and all other Income will be distributed to the Lender with respect to each Liquidated Asset.

 

(vi)                              sixth, all other Secured Obligations with respect to such Tranche;

 

(vii)                           seventh, to the applicable Borrower with respect to such Tranche.

 

(b)                                 Notwithstanding the preceding provisions, if an Event of Default has occurred and is continuing with respect to a Tranche, all funds in the Collection Account with respect to such Tranche shall be withdrawn and shall be applied as determined by Lender until all Secured Obligations with respect to such Tranche have been paid in full and then, paid to the applicable Borrower with respect to such Tranche.

 

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(c)                                  Principal Paydown Amounts and Liquidation Proceeds will be applied to reduce the Lender’s Advance Amount of the applicable Financed Asset to which it applies.  If the amount distributed to the Lender in accordance with the preceding sentence is greater than the Lender’s Advance Amount with respect to such Financed Asset then such excess will be applied to all other Financed Assets within the same Tranche to reduce the Lender’s Advance Amount on a pro rata basis.

 

2.06                        Repayment of Advances; Interest.

 

(a)                                 ReadyCap hereby promises to repay in full on the Termination Date the then aggregate outstanding principal amount of the Tranche A Advances and all other related Secured Obligations.  Sutherland hereby promises to repay in full on the Termination Date the then aggregate outstanding principal amount of the Tranche A Advances and the Tranche B Advances and all other Secured Obligations.

 

(b)                                 For each applicable Tranche the applicable Borrower hereby promises to pay to the Lender interest on the unpaid principal amount of each related Advance in such Tranche for each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such Tranche.  Notwithstanding the foregoing, for each Tranche, the applicable Borrower hereby promises to pay to the Lender interest at the applicable Default Rate on any principal of any related Advance in such Tranche and on any other amount payable by such Borrower hereunder or under the related Note that shall not be paid in full when due (whether at stated maturity, by acceleration or by mandatory prepayment or otherwise) for the period from and including the due date thereof to but excluding the date the same is paid in full.  For each Tranche, accrued interest on each Advance shall be payable monthly in arrears on each Payment Date and on the Termination Date.  Notwithstanding the foregoing, interest accruing at the Default Rate, with respect to either Tranche shall be payable to the Lender on demand.

 

(c)                                  With respect to each Tranche, it is understood and agreed that, unless and until a Default shall have occurred and be continuing, the Borrowers shall be entitled to the proceeds of the Pledged Assets (other than as expressly set forth in Section 2.05 hereof).

 

(d)                                 For the avoidance of doubt, (i) ReadyCap’s obligations extend solely to the Tranche A Advances and the related Secured Obligations with respect thereto, and (ii) Sutherland’s obligations extend to both the Tranche A Advances and the Tranche B Advances and the all Secured Obligations with respect thereto.  Accordingly Sutherland shall be jointly and severally liable for the full, complete and punctual performance and satisfaction of all obligations of either Borrower under this Loan Agreement.  Accordingly, Sutherland waives any and all notice of creation, renewal, extension or accrual of any of the obligations and notice of or proof of reliance by the Lender upon Sutherland’s joint and several liability.  Sutherland waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Sutherland with respect to the obligations.  When pursuing its rights and remedies hereunder against ReadyCap, the Lender may, but shall be under no obligation to, pursue such rights and remedies hereunder against ReadyCap or any other Person or against any collateral security for the obligations or any right of offset with respect thereto, and any failure by the Lender to pursue such other rights or remedies or to collect any payments from ReadyCap or any

 

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such other Person to realize upon any such collateral security or to exercise any such right of offset, or any release of ReadyCap or any such other Person or any such collateral security, or right of offset, shall not relieve Sutherland of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender against Sutherland.

 

2.07                        Optional Prepayments.  With respect to each Tranche, the Advances are prepayable at any time, in whole or in part.  Any amounts prepaid shall be applied to repay the outstanding principal amount of any Advances (together with interest thereon) until paid in full.  Amounts repaid may not be reborrowed.  If the Borrowers intend to prepay an Advance in whole or in part from a source other than the proceeds of the related Financed Assets, the Borrowers shall give two (2) Business Days’ prior written notice thereof to the Lender.  If such notice is given, the amount specified in such notice, shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid.

 

2.08                        Limitation on Types of Advances; Illegality.  Anything herein to the contrary notwithstanding, if, on or prior to the determination of any LIBOR Rate:

 

(a)                                 the Lender determines, which determination shall be conclusive, absent manifest error, that quotations of interest rates for the relevant deposits referred to in the definition of “LIBOR Rate” in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Advances as provided herein; or

 

(b)                                 it becomes unlawful for the Lender to honor its obligation to make or maintain Advances hereunder using a LIBOR Rate; then the Lender shall give the Borrowers prompt notice thereof and, so long as such condition remains in effect, the Lender shall be under no obligation to make additional Advances, and the Borrowers shall, in its discretion, either prepay all such Advances as may be outstanding or pay interest on such Advances at a rate per annum equal to a rate selected by the Lender which it determines in its sole discretion most closely approximates the LIBOR Rate plus the Applicable Margin.

 

2.09                        Requirements of Law.

 

(a)                                 If any Requirement of Law (other than with respect to any amendment made to the Lender’s certificate of incorporation and by-laws or other organizational or governing documents) or any change in the interpretation or application thereof or compliance by the Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

 

(i)                                     shall subject the Lender to any Tax or increased Tax of any kind whatsoever with respect to this Loan Agreement or any Transaction or change the basis of taxation of payments to the Lender in respect thereof;

 

(ii)                                  shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or other extensions of credit by, or any other

 

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acquisition of funds by, any office of the Lender which is not otherwise included in the determination of the LIBOR Rate hereunder;

 

(iii)                               shall impose on the Lender any other condition that has an adverse effect on the Lender;

 

and the result of any of the foregoing is to increase the cost to the Lender, by an amount which the Lender deems to be material, of entering, continuing or maintaining any Advance or to reduce any amount due or owing hereunder in respect thereof, then, in any such case, the Borrowers shall promptly pay the Lender such additional amount or amounts as calculated by the Lender in good faith as will compensate the Lender for such increased cost or reduced amount receivable.

 

(b)                                 If the Lender shall have determined that the adoption of or any change in any Requirement of Law (other than with respect to any amendment made to the Lender’s certificate of incorporation and by-laws or other organizational or governing documents) regarding capital adequacy or in the interpretation or application thereof or compliance by the Lender or any corporation controlling the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on the Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which the Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by the Lender to be material, then from time to time, the Borrowers shall promptly pay to the Lender such additional amount or amounts as calculated by the Lender in good faith as will compensate the Lender for such reduction.

 

(c)                                  If the Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrowers of the event by reason of which it has become so entitled.  A certificate as to any additional amounts payable pursuant to this Section submitted by the Lender to the Borrowers shall be conclusive in the absence of manifest error.

 

2.10                        Taxes.

 

(a)                                 Any and all payments by the Borrowers under or in respect of this Loan Agreement or any other Loan Documents to which each Borrower is a party shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, deductions, charges or withholdings and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any taxation authority or other Governmental Authority (collectively, “Taxes”), unless otherwise required by law.  If any Borrower shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Loan Agreement or any of the other Loan Documents to the Lender, (i) such Borrower shall make all such deductions and withholdings in respect of Taxes, (ii) such Borrower shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any applicable Requirement of Law, and (iii) the sum payable by such Borrower shall be increased as

 

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may be necessary so that after such Borrower has made all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this Section 2.10) the Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes.  For purposes of this Loan Agreement the term “Non-Excluded Taxes” are Taxes other than, in the case of the Lender, Taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of which the Lender is organized or of its applicable lending office, or any political subdivision thereof, unless such Taxes are imposed as a result of the Lender having executed, delivered or performed its obligations or received payments under, or enforced, this Loan Agreement or any of the other Loan Documents (in which case such Taxes will be treated as Non-Excluded Taxes).

 

(b)                                 In addition, each Borrower hereby agrees to pay any present or future stamp, recording, documentary, excise, property or value-added Taxes, or similar Taxes, charges or levies that arise from any payment made under or in respect of this Loan Agreement or any other Loan Document or from the execution, delivery or registration of, any performance under, or otherwise with respect to, this Loan Agreement or any other Loan Document (collectively, “Other Taxes”).

 

(c)                                  Each Borrower hereby agrees to indemnify the Lender for, and to hold it harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable by the Borrowers under this Section 2.10 imposed on or paid by the Lender, and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto.  The indemnity by the Borrowers provided for in this Section 2.10(c) shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes for which indemnification hereunder is sought have been correctly or legally asserted.  Amounts payable by any Borrower under the indemnity set forth in this Section 2.10(c) shall be paid within ten (10) days from the date on which the Lender makes written demand therefor.

 

(d)                                 Within thirty (30) days after the date of any payment of Taxes, the Borrowers (or any Person making such payment on behalf of the Borrowers) shall furnish to the Lender for its own account a certified copy of the original official receipt evidencing payment thereof.

 

(e)                                  For purposes of subsection (e) of this Section 2.10, the terms “United States” and “United States person” shall have the meanings specified in Section 7701 of the Internal Revenue Code.  Each Lender (including for avoidance of doubt any assignee, successor or participant) that either (i) is not incorporated under the laws of the United States, any State thereof, or the District of Columbia or (ii) name does not include “Incorporated,” “Inc.,” “Corporation,” “Corp.,” “P.C.,” “N.A.,” “National Association,” “insurance company,” or “assurance company” (a “Non-Exempt Lender”) shall deliver or cause to be delivered to the Borrowers the following properly completed and duly executed documents:

 

(i)                                     in the case of a Non-Exempt Lender that is not a United States person or is a foreign disregarded entity for U.S. federal income tax purposes that is entitled to provide such form, a complete and executed (x) U.S. Internal Revenue Form W-8BEN

 

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with Part II completed in which the Lender claims the benefits of a tax treaty with the United States providing for a zero or reduced rate of withholding (or any successor forms thereto), including all appropriate attachments or (y) a U.S. Internal Revenue Service Form W-8ECI (or any successor forms thereto); or

 

(ii)                                  in the case of an individual, (x) a complete and executed U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and a certificate substantially in the form of Exhibit D (a “Section 7 Certificate”) or (y) a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto); or

 

(iii)                               in the case of a Non-Exempt Lender that is organized under the laws of the United States, any State thereof, or the District of Columbia, a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto), including all appropriate attachments; or

 

(iv)                              in the case of a Non-Exempt Lender that (x) is not organized under the laws of the United States, any State thereof, or the District of Columbia and (y) is treated as a corporation for U.S. federal income tax purposes, a complete and executed U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and a Section 7 Certificate; or

 

(v)                                 in the case of a Non-Exempt Lender that (A) is treated as a partnership or other non-corporate entity, and (B) is not organized under the laws of the United States, any State thereof, or the District of Columbia, (x)(i) a complete and executed U.S. Internal Revenue Service Form W-8IMY (or any successor forms thereto) (including all required documents and attachments) and (ii) a Section 7 Certificate, and (y) without duplication, with respect to each of its beneficial owners and the beneficial owners of such beneficial owners looking through chains of owners to individuals or entities that are treated as corporations for U.S. federal income tax purposes (all such owners, “beneficial owners”), the documents that would be provided by each such beneficial owner pursuant to this section if such beneficial owner were the Lender; provided, however, that no such documents will be required with respect to a beneficial owner to the extent the actual Lender is determined to be in compliance with the requirements for certification on behalf of its beneficial owner as may be provided in applicable U.S. Treasury regulations, or the requirements of this clause (v) are otherwise determined to be unnecessary, all such determinations under this clause (v) to be made in the sole discretion of the Borrowers; provided, however, that the Lender shall be provided an opportunity to establish such compliance as reasonable; or

 

(vi)                              in the case of a Non-Exempt Lender that is disregarded for U.S. federal income tax purposes, the document that would be provided by its beneficial owner pursuant to this Section if such beneficial owner were the Lender; or

 

(vii)                           in the case of a Non-Exempt Lender that (A) is not a United States person and (B) is acting in the capacity as an “intermediary” (as defined in U.S. Treasury Regulations), (x)(i) a U.S. Internal Revenue Service Form W-8IMY (or any successor form thereto) (including all required documents and attachments) and (ii) a Section 7

 

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Certificate, and (y) if the intermediary is a “non-qualified intermediary” (as defined in U.S. Treasury Regulations), from each person upon whose behalf the “non-qualified intermediary” is acting the documents that would be provided by each such person pursuant to this Section if each such person were the Lender.

 

If the Lender provided a form pursuant to clause (e)(i)(x) and the form provided by the Lender at the time the Lender first becomes a party to this Loan Agreement or, with respect to a grant of a Participation Interest, the effective date thereof, indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be treated as Taxes other than “Non-Excluded Taxes” (“Excluded Taxes”) and shall not qualify as Non-Excluded Taxes unless and until the Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate shall be considered Excluded Taxes solely for the periods governed by such form.  If, however, on the date a Person becomes an assignee, successor or participant to this Loan Agreement, the Lender transferor was entitled to indemnification or additional amounts under this Section 2.10, then the Lender assignee, successor or participant shall be entitled to indemnification or additional amounts to the extent (and only to the extent), that the Lender transferor was entitled to such indemnification or additional amounts for Non-Excluded Taxes, and the Lender assignee, successor or participant shall be entitled to additional indemnification or additional amounts for any other or additional Non-Excluded Taxes.

 

(f)                                   For any period with respect to which the Lender has failed to provide the Borrowers with the appropriate form, certificate or other document described in subsection (e) of this Section 2.10 (other than (i) if such failure is due to a change in any applicable Requirement of Law, or in the interpretation or application thereof, occurring after the date on which a form, certificate or other document originally was required to be provided by the Lender or (ii) if it is legally inadvisable or otherwise commercially disadvantageous for the Lender to deliver such form, certificate or other document), the Lender shall not be entitled to indemnification or additional amounts under subsection (a) or (c) of this Section 2.10 with respect to Non-Excluded Taxes imposed by the United States by reason of such failure; provided, however, that should the Lender become subject to Non-Excluded Taxes because of its failure to deliver a form, certificate or other document required hereunder, the Borrowers shall take such steps as the Lender shall reasonably request, to assist the Lender in recovering such Non-Excluded Taxes.

 

(g)                                  Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.10 shall survive the termination of this Loan Agreement.  Nothing contained in this Section 2.10 shall require the Lender to make available any of its tax returns or any other information that it deems to be confidential or proprietary.

 

(h)                                 Each party to this Loan Agreement acknowledges that it is its intent for purposes of U.S. federal, state and local income and franchise taxes, to treat the Advances as indebtedness of the Borrowers that is secured by the Pledged Assets, and to treat the Pledged Assets as owned by the Borrowers for federal income tax purposes in the absence of a Default by the Borrowers.  All parties to this Loan Agreement agree to such treatment and agree to take no action inconsistent with this treatment, unless required by law.

 

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Section 3.                                           Payments; Computations; Etc.

 

3.01                        Payments.

 

(a)                                 Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrowers under this Loan Agreement and the Notes shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Lender at the following account maintained by the Lender:  Account No. 100381681, for the account of JPMC Bank RE Wire Transfer Clearing Account, JPMorgan Chase Bank, N.A., ABA No. 021-000-021, Reference:  Project Sable, Attn:  Sophia Redzaj not later than 4:00 p.m., New York City time, on the date on which such payment shall become due (and each such payment made after such time on such due date shall be deemed to have been made on the next succeeding Business Day).  The Borrowers acknowledge that they have no rights of withdrawal from the foregoing account.

 

(b)                                 Except to the extent otherwise expressly provided herein, if the due date of any payment under this Loan Agreement or any Note would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension.

 

3.02                        Computations.  Interest on the Advances shall be computed on the basis of a 360-day year for the actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable.

 

3.03                        Commitment Fee.  In addition to other fees and expenses to be paid by the Borrowers as provided herein, in the event that the Recalculated Fee Amount is greater than the amount paid prior to the Effective Date, then Borrowers shall remit the difference to the Lender on the Effective Date, and, if the Recalculated Fee Amount is less than the Commitment Fee, then the Lender shall remit the lesser of (i) the difference between the Commitment Fee and Recalculated Fee Amount and (ii) the excess, if any, of the Commitment Fee over $4,500,000 to the Borrowers on the Effective Date.

 

Section 4.                                           Collateral Security.

 

4.01                        Collateral; Security Interest.

 

(a)                                 The Custodian shall hold the Asset Files (except for the SBA 7(a) Loan Notes which shall be held by the FTA as bailee for the Lender), as bailee and agent for the Lender, the holders of the Guaranteed Portion, and the SBA, as their interests may appear.

 

(b)                                 Each of the following items of property, whether now owned or hereinafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the “Tranche A Collateral”:

 

(i)                                     all Pledged Tranche A Assets;

 

(ii)                                  to the extent of the Unguaranteed Portion or the Guaranteed Portion, as applicable, all Asset Files, including without limitation all promissory notes, and all

 

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Servicing Records (as defined in Section 12.02 below), Servicing Agreements (if any) and any other collateral pledged or otherwise relating to such Pledged Tranche A Asset, together with all files, documents, instruments, surveys, certificates, correspondence, appraisals, computer programs, computer storage media, accounting records and other books and records relating thereto;

 

(iii)                               all insurance (issued by governmental agencies or otherwise) and any insurance certificate or other document evidencing such insurance relating to any Pledged Tranche A Asset or the related Pledged Property and all claims and payments thereunder;

 

(iv)                              the Interest Income Asset with respect to such Pledged Tranche A Asset;

 

(v)                                 the Tranche A Collection Account and all monies from time to time on deposit in such Tranche A Collection Account;

 

(vi)                              all “general intangibles” as defined in the Uniform Commercial Code relating to or constituting any and all of the foregoing; and

 

(vii)                           any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing.

 

(c)                                  Each of the following items of property, whether now owned or hereinafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the “Tranche B Collateral”:

 

(i)                                     all Pledged Tranche B Assets;

 

(ii)                                  to the extent of the Unguaranteed Portion or the Guaranteed Portion, as applicable, all Asset Files, including without limitation all promissory notes, and all Servicing Records (as defined in Section 12.02 below), Servicing Agreements (if any) and any other collateral pledged or otherwise relating to such Pledged Tranche B Asset, together with all files, documents, instruments, surveys, certificates, correspondence, appraisals, computer programs, computer storage media, accounting records and other books and records relating thereto;

 

(iii)                               all insurance (issued by governmental agencies or otherwise) and any insurance certificate or other document evidencing such insurance relating to any Pledged Tranche B Asset or the related Pledged Property and all claims and payments thereunder;

 

(iv)                              the Interest Income Asset with respect to such Pledged Tranche B Asset;

 

(v)                                 the Tranche B Collection Account and the Tranche B Servicer Account and all monies from time to time on deposit in such Tranche B Collection Account and Tranche B Servicer Account;

 

(vi)                              all “general intangibles” as defined in the Uniform Commercial Code relating to or constituting any and all of the foregoing; and

 

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(vii)                           any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing.

 

(d)                                 ReadyCap hereby pledges to the Lender, and grants a security interest in favor of the Lender in, all of ReadyCap’s right, title and interest in, to and under the Tranche A Collateral, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to secure the respective Secured Obligations related to the Tranche A Advances.  Sutherland hereby pledges to the Lender, and grants a security interest in favor of the Lender in, all of Sutherland’s right, title and interest in, to and under the Tranche B Collateral, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to secure all of the Secured Obligations.  Each Borrower agrees to mark its computer records and tapes to evidence the interests granted to the Lender hereunder.

 

4.02                        Further Documentation.  At any time and from time to time, upon the written request of the Lender, and at the sole expense of the Borrowers, each Borrower will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as the Lender may reasonably request for the purpose of obtaining or preserving the full benefits of this Loan Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Liens created hereby.  Each Borrower also hereby authorizes the Lender to file any such financing or continuation statement without the signature of such Borrower to the extent permitted by applicable law.  A carbon, photographic or other reproduction of this Loan Agreement shall be sufficient as a financing statement for filing in any jurisdiction.

 

4.03                        Changes in Locations, Name, etc.  No Borrower shall (i) change the location of its chief executive office/chief place of business from that specified in Section 6.21 hereof, (ii) change its name, identity or corporate structure (or the equivalent) or change the location where it maintains its records with respect to the Collateral, or (iii) reincorporate or reorganize under the laws of another jurisdiction unless it shall have given the Lender at least thirty (30) days prior written notice thereof and shall have delivered to the Lender all Uniform Commercial Code financing statements and amendments thereto as the Lender shall request and taken all other actions deemed necessary by the Lender to continue its perfected status in the Collateral with at least the same priority.

 

4.04                        Lender’s Appointment as Attorney-in-Fact.

 

(a)                                 ReadyCap hereby irrevocably constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of ReadyCap and in the name of ReadyCap or in its own name, from time to time, in the Lender’s discretion, if an Event of Default with respect to Tranche A shall have occurred, and during its period of continuance, and for the purpose of carrying out the terms of this Loan Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Loan Agreement with respect to Tranche A, and, without limiting the generality of the foregoing, ReadyCap hereby gives the Lender the power and right, on behalf of ReadyCap, without assent by, but with notice to, ReadyCap, if an Event of

 

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Default with respect to Tranche A shall have occurred and be continuing, to take action pursuant to Section 9, including to do the following:

 

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

 

(ii)                                  to pay or discharge taxes and Liens levied or placed on or threatened against the Tranche A Collateral;

 

(iii)                               (A) to direct any party liable for any payment under any Tranche A Collateral to make payment of any and all moneys due or to become due thereunder directly to the Lender or as the Lender shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Tranche A Collateral; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any of the Tranche A Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Tranche A Collateral or any thereof and to enforce any other right in respect of any Tranche A Collateral; (E) to defend any suit, action or proceeding brought against ReadyCap with respect to any Tranche A Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Lender may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Tranche A Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and to do, at the Lender’s option and ReadyCap’s expense, at any time, and from time to time, all acts and things which the Lender deems necessary to protect, preserve or realize upon the Tranche A Collateral and the Lender’s Liens thereon and to effect the intent of this Loan Agreement, all as fully and effectively as ReadyCap might do; and

 

(iv)                              to deliver any notices to the SBA or FTA, including, but not limited to, notices required under the Multiparty Agreement.

 

ReadyCap hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable until all of the obligations of ReadyCap under each of the Loan Documents have been fully and finally repaid and performed.

 

ReadyCap also authorizes the Lender, at any time during the existence of an Event of Default with respect to Tranche A, to execute, in connection with any sale provided for in Section 4.07 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Tranche A Collateral.  It is understood and agreed that the exercise of

 

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the foregoing power of attorney by the Lender is subject to the restrictions set forth in the Multiparty Agreement.

 

(b)                                 Sutherland hereby irrevocably constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Sutherland and in the name of Sutherland or in its own name, from time to time, in the Lender’s discretion, if an Event of Default shall have occurred with respect to Tranche A or Tranche B, and during its period of continuance, and for the purpose of carrying out the terms of this Loan Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Loan Agreement with respect to Tranche B, and, without limiting the generality of the foregoing, Sutherland hereby gives the Lender the power and right, on behalf of Sutherland, without assent by, but with notice to, Sutherland, if an Event of Default with respect to Tranche A or Tranche B shall have occurred and be continuing, to take action pursuant to Section 9, including to do the following:

 

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

 

(ii)                                  to pay or discharge taxes and Liens levied or placed on or threatened against the Tranche B Collateral; and

 

(iii)                               (A) to direct any party liable for any payment under any Tranche B Collateral to make payment of any and all moneys due or to become due thereunder directly to the Lender or as the Lender shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Tranche B Collateral; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any of the Tranche B Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Tranche B Collateral or any thereof and to enforce any other right in respect of any Tranche B Collateral; (E) to defend any suit, action or proceeding brought against Sutherland with respect to any Tranche B Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Lender may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Tranche B Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and to do, at the Lender’s option and Sutherland’s expense, at any time, and from time to time, all acts and things which the Lender deems necessary to protect, preserve or realize upon the Tranche B Collateral and the Lender’s Liens thereon and to effect the intent of this Loan Agreement, all as fully and effectively as Sutherland might do.

 

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Sutherland hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable until all of the obligations of Sutherland under each of the Loan Documents have been fully and finally repaid and performed.

 

Sutherland also authorizes the Lender, at any time during the existence of an Event of Default with respect to Tranche A or Tranche B, to execute, in connection with any sale provided for in Section 4.07 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Tranche B Collateral.

 

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

 

4.05                        Performance by Lender of Borrowers’ Obligations.  If a Borrower fails to perform or comply with any of its agreements contained in the Loan Documents and the Lender may itself perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of the Lender incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Default Rate, shall be payable by the applicable Borrowers to the Lender on demand and shall constitute Secured Obligations.

 

4.06                        Proceeds.

 

(a)                                 If an Event of Default with respect to Tranche A shall occur and be continuing, (i) all proceeds of the Tranche A Collateral received by ReadyCap consisting of cash, checks and other near-cash items shall be held by ReadyCap in trust for the Lender, segregated from other funds of ReadyCap, and shall forthwith upon receipt by ReadyCap be turned over to the Lender in the exact form received by ReadyCap (duly endorsed by ReadyCap to the Lender, if required) and (ii) any and all such proceeds received by the Lender (whether from ReadyCap or otherwise) may, in the sole discretion of the Lender, be held by the Lender as collateral security for, and/or then or at any time thereafter may be applied by the Lender against, the Secured Obligations (whether matured or unmatured) related to the Tranche A Advances, such application to be in such order as the Lender shall elect.

 

(b)                                 If an Event of Default with respect to Tranche A or Tranche B shall occur and be continuing, (i) all proceeds of the Tranche B Collateral received by Sutherland consisting of cash, checks and other near-cash items shall be held by Sutherland in trust for the Lender, segregated from other funds of Sutherland, and shall forthwith upon receipt by Sutherland be turned over to the Lender in the exact form received by Sutherland (duly endorsed by Sutherland to the Lender, if required) and (ii) any and all such proceeds received by the Lender (whether from Sutherland or otherwise) may, in the sole discretion of the Lender, be held by the Lender as collateral security for, and/or then or at any time thereafter may be applied by the Lender against, the Secured Obligations (whether matured or unmatured), such application to be in such order as the Lender shall elect.

 

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(c)                                  Any balance of such proceeds remaining after the Secured Obligations shall have been paid in full and this Loan Agreement shall have been terminated shall be paid over to the applicable Borrower with respect to such Tranche or to whomsoever may be lawfully entitled to receive the same.  For purposes hereof, proceeds shall include, but not be limited to, all principal and interest payments, all prepayments and payoffs, insurance claims, Condemnation Proceeds, sale proceeds, real estate owned rents and any other income and all other amounts received with respect to the Collateral.

 

4.07                        Remedies.  If an Event of Default, with respect to a Tranche, shall occur and be continuing, the Lender may exercise, in addition to all other rights and remedies granted to it in this Loan Agreement with respect to such Tranche and in any other instrument or agreement securing, evidencing or relating to the related Secured Obligations, all rights and remedies of a secured party under the Uniform Commercial Code.  Without limiting the generality of the foregoing, the Lender without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon a Borrower or any other Person (each and all of which demands, presentments, protests, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral with respect to such Tranche, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral with respect to such Tranche, or any part thereof (or contract to do any of the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any exchange, broker’s board or office of the Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral with respect to such Tranche so sold, free of any right or equity of redemption in Borrowers, which right or equity is hereby waived or released.  Each Borrower further agrees, at the Lender’s request, to assemble the Collateral with respect to such Tranche and make it available to the Lender at places which the Lender shall reasonably select, whether at a Borrower’s premises or elsewhere.  The Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral with respect to such Tranche or in any way relating to the Collateral with respect to such Tranche or the rights of the Lender hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the Lender may elect, and only after such application and after the payment by the Lender of any other amount required or permitted by any provision of law, including, without limitation, Section 9-504(1) of the Uniform Commercial Code, need the Lender account for the surplus, if any, to the Borrowers.  To the extent permitted by applicable law, each Borrower waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by the Lender of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of the Lender.  If any notice of a proposed sale or other disposition of Collateral with respect to such Tranche shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.  Each Borrower shall remain liable for any deficiency (plus accrued interest thereon as contemplated pursuant to Section 2.06(b) hereof) if the proceeds of any sale or other

 

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disposition of the Collateral with respect to such Tranche are insufficient to pay the related Secured Obligations and the fees and disbursements of any attorneys employed by the Lender to collect such deficiency.  Because each Borrower recognizes that it may not be possible to purchase or sell all of the Collateral with respect to such Tranche on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Collateral with respect to such Tranche may not be liquid, each Borrower agrees that liquidation of the Collateral with respect to such Tranche does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner.  Accordingly, the Lender may elect, in its sole discretion, the time and manner of liquidating any Collateral with respect to such Tranche and nothing contained herein shall (A) obligate the Lender to liquidate any Collateral with respect to such Tranche on the occurrence of an Event of Default with respect to such Tranche or to liquidate all Collateral with respect to such Tranche in the same manner or on the same Business Day or (B) constitute a waiver of any of the Lender’s rights or remedies.

 

4.08                        Limitation on Duties Regarding Presentation of Collateral.  The Lender’s duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as the Lender deals with similar property for its own account.  Neither the Lender nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of a Borrower or otherwise.

 

4.09                        Powers Coupled with an Interest.  All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

 

4.10                        Release of Security Interest.  Upon termination of this Loan Agreement and repayment to the Lender of all Secured Obligations and the performance of all obligations under the Loan Documents, the Lender shall release its security interest in any remaining Collateral; provided that if any payment, or any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of a Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or a trustee or similar officer for, a Borrower or any substantial part of its Property, or otherwise, this Loan Agreement, all rights hereunder and the Liens created hereby shall continue to be effective, or be reinstated, as though such payments had not been made.  So long as no Default or Event of Default has occurred and is continuing and no Borrowing Base Deficiency would result therefrom, the Lender shall, at the written request of a Borrower given at least five (5) Business Days’ prior to the date of release and provided that the related proceeds of such SBC Loan are remitted to the applicable Collection Account and at least equal an allocation price mutually agreed to by the Lender and the Borrowers, release its security interest in a portion of the Collateral.

 

Section 5.                                           Conditions Precedent.

 

5.01                        Loan Agreement; Initial Advance.  The agreement of the Lender to enter into this Loan Agreement and to make the initial Advance requested to be made by it hereunder is subject

 

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to the satisfaction, immediately prior to or concurrently with execution of this Loan Agreement and the making of such Advance, of the condition precedent that the Lender shall have received from the Borrowers any fees and expenses payable hereunder on the date hereof, and all of the following conditions shall have been satisfied as determined by the Lender:

 

(a)                                 Loan Documents.  The Lender shall have received the Loan Documents, duly executed by the parties thereto;

 

(b)                                 Filings, Registrations, Recordings.  (i) Any documents (including, without limitation, financing statements) required to be filed, registered, or recorded in order to create, in favor of the Lender, a perfected, first-priority security interest in the Collateral, subject to no Liens other than those created hereunder, shall have been properly prepared and executed for filing (including the applicable county(ies) if the Lender determines such filings are necessary in its reasonable discretion), registration or recording in each office in each jurisdiction in which such filings, registrations and recordations are required to perfect such first-priority security interest, and (ii) UCC lien searches in such jurisdictions or shall be applicable to each Borrower and the Collateral and which results shall be satisfactory to the Lender;

 

(c)                                  Opinions of Counsel.  An opinion or opinions of counsel as to such matters as the Lender may reasonably request, including customary corporate and enforceability opinions and including, without limitation, a creation and perfection and priority opinion with respect to the Financed Assets, an opinion that no Borrower nor the Guarantor is an investment company under the Investment Company Act and standard opinions regarding enforceability;

 

(d)                                 Borrower and Guarantor Organizational Documents.  A certificate of existence of each Borrower and the Guarantor delivered to the Lender prior to the Effective Date and certified copies of the organizational documents of each Borrower and the Guarantor and of all corporate or other authority for each Borrower and the Guarantor with respect to the execution, delivery and performance of the Loan Documents and each other document to be delivered by each Borrower and the Guarantor from time to time in connection herewith;

 

(e)                                  Good Standing Certificates.  A certified copy of a good standing certificate (or its documentary equivalent) from the jurisdiction of organization of the Guarantor and each Borrower dated as of no earlier than the date ten (10) Business Days prior to the Effective Date;

 

(f)                                   Incumbency Certificates.  An incumbency certificate of each Borrower and the Guarantor certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Loan Documents;

 

(g)                                  Reserved.

 

(h)                                 Consents, Licenses, Approvals, etc.  The Lender shall have received copies certified by each Borrower of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by each Borrower of, and the validity and enforceability of, the Loan Documents, which consents, licenses and approvals shall be in full force and effect;

 

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(i)                                     Evidence of SBA Approval.  Evidence satisfactory to the Lender that (i) the SBA has approved the Loan Documents with respect to SBA 7(a) Loans, including but not limited to, the execution and delivery of the Multiparty Agreement, and (ii) ReadyCap is an SBA-approved non-bank lender as prescribed by the SBA Rules and Regulations;

 

(j)                                    Insurance.  The Lender shall have received evidence in form and substance satisfactory to the Lender showing compliance by the Borrowers as of such initial Funding Date with Section 7.11 hereof; and

 

(k)                                 Other Documents.  The Lender shall have received such other documents as the Lender or its counsel may reasonably request.

 

5.02                        Initial and Subsequent Advances.  With respect to each Tranche, the making of each, related Advance to the Borrowers (including the initial Advance) on any Business Day is subject to the satisfaction of the following further conditions precedent, both immediately prior to the making of such Advance and also after giving effect thereto and to the intended use thereof:

 

(a)                                 No Default.  No Default, Amortization Event, Event of Default or commencement of an Amortization Period with respect to either Tranche shall have occurred and be continuing under the Loan Documents;

 

(b)                                 Funding Period.  The Funding Period shall not have terminated;

 

(c)                                  Representations and Warranties.  Both immediately prior to the Advance and also after giving effect thereto and to the intended use thereof, the representations and warranties made by each Borrower in Section 6 hereof, shall be true, correct and complete on and as of the date of such Advance in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date);

 

(d)                                 Borrowing Base and Tranche Limits.  The aggregate outstanding principal amount of the Advances shall not exceed the Borrowing Base, and with respect to the Tranche A Advances, the Tranche A Facility Amount and, with respect to the Tranche B Advances, the Tranche B Facility Amount;

 

(e)                                  Reserved.

 

(f)                                   Trust Receipt; Asset Schedule; and Exception Report; Etc.  The Lender shall have received from the Custodian a Collateral Confirm in respect of all Pledged Assets to be pledged hereunder on such Business Day and a corresponding Asset Schedule and an Exception Report, with Exceptions in respect of such Pledged Assets acceptable to the Lender in its sole discretion, in each case dated such Business Day and duly completed.  The Custodian shall have received acceptable evidence that the Eligible Assets subject to the Advance are not subject to a Fatal Exception.  The Lender shall have received from the FTA in respect of each of the SBA 7(a) Loan Notes to be pledged hereunder on such Business Day, an executed receipt in the form of Exhibit A attached to the Multiparty Agreement;

 

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(g)                                  Other Documents.  The Lender shall also receive all of the documents required under Section 2.03 hereof;

 

(h)                                 Absence of Securities Market.  There shall not have occurred an event or events resulting in the effective absence of a “securities market” for securities backed by small business loans or an event or events shall have occurred resulting in the Lender not being able to sell securities backed by small business loans at prices which would have been reasonable prior to such event or events;

 

(i)                                     No Material Adverse Effect.  There shall not have occurred one or more events that, in the reasonable judgment of the Lender, constitutes or should reasonably be expected to constitute a Material Adverse Effect;

 

(j)                                    Requirements of Law.  The Lender shall not have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to the Lender has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for the Lender to enter into Transactions hereunder;

 

(k)                                 Other Documents.  Such other documents as the Lender may reasonably request, consistent with market practices, in form and substance reasonably acceptable to the Lender.

 

Section 6.                                           Representations and Warranties.

 

Each Borrower represents and warrants represents and warrants to the Lender that as of the Effective Date and the date of any Advance hereunder and at all times while the Loan Documents are in full force and effect:

 

6.01                        Asset Schedule.  The information set forth in the related Asset Schedule and all other information or data furnished by, or on behalf of, a Borrower to the Lender is complete, true and correct in all material respects, and each Borrower acknowledges that the Lender has not verified the accuracy of such information or data.

 

6.02                        Solvency.  The Loan Documents and each Advance is not entered into in contemplation of insolvency or with intent to hinder, delay or defraud any of the Borrowers’ creditors.  No Borrower is insolvent within the meaning of 11 U.S.C. Section 101(32) and the taking of an Advance pursuant hereto (i) will not cause a Borrower to become insolvent, (ii) will not result in any property remaining with a Borrower to be unreasonably small capital, and (iii) will not result in debts that would be beyond a Borrower’s ability to pay as same mature.  Each Borrower has received reasonably equivalent value in exchange for the transfer of the Pledged Assets.

 

6.03                        No Broker.  No Borrower has dealt with any broker, investment banker, agent, or other person, except for the Lender, who may be entitled to any commission or compensation in connection with this Loan Agreement.

 

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6.04                        Ability to Perform.  No Borrower believes, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in the Loan Documents to which it is a party on its part to be performed.

 

6.05                        Existence.  Each Borrower (a) is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware, (b) has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect; and (c) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify would not be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect.

 

6.06                        Financial Statements.  The Guarantor has heretofore furnished to the Lender a copy of its (a) consolidated balance sheet and the consolidated balance sheets of its consolidated Subsidiaries for the fiscal year ended December 31, 2013, and the related consolidated statements of income and retained earnings and of cash flows for Guarantor and its consolidated Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous year, with the opinion thereon of Deloitte & Touche LLP and (b) consolidated balance sheet and the consolidated balance sheets of its consolidated Subsidiaries for the such monthly periods of the Guarantor up until March 31, 2014, and the related consolidated statements of income and retained earnings and of cash flows for the Guarantor and its consolidated Subsidiaries for such monthly periods, setting forth in each case in comparative form the figures for the previous year.  All such financial statements are complete and correct and fairly present, in all material respects, the consolidated financial condition of the Guarantor and each Borrower and its Subsidiaries and the consolidated results of their operations as at such dates and for such monthly periods, all in accordance with GAAP applied on a consistent basis.  Since March 31, 2014, there has been no material adverse change in the consolidated business, operations or financial condition of the Guarantor and its consolidated Subsidiaries taken as a whole from that set forth in said financial statements nor is the Guarantor aware of any state of facts which (without notice or the lapse of time) would or could result in any such material adverse change or could have a Material Adverse Effect.  The Guarantor does not have, on March 31, 2014, any liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of the Guarantor except as heretofore disclosed to the Lender in writing.

 

6.07                        No Breach.  Neither (a) the execution and delivery of the Loan Documents nor (b) the consummation of the transactions therein contemplated to be entered into by a Borrower in compliance with the terms and provisions thereof will conflict with or result in a breach of the organizational documents of a Borrower, or any applicable law, rule or regulation, or any order, writ, injunction or decree of any Governmental Authority, or other material agreement or instrument to which a Borrower or any of its Subsidiaries is a party or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under

 

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any such material agreement or instrument or result in the creation or imposition of any Lien (except for the Liens created pursuant to the Loan Documents) upon any Property of a Borrower, or any of its Subsidiaries pursuant to the terms of any such agreement or instrument.

 

6.08                        Action.  Each Borrower has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Loan Documents, as applicable; the execution, delivery and performance by such Borrower of each of the Loan Documents have been duly authorized by all necessary corporate or other action on its part; and each Loan Document has been duly and validly executed and delivered by such Borrower, as applicable, and constitutes a legal, valid and binding obligation of such Borrower enforceable against such Borrower in accordance with its terms.

 

6.09                        Approvals.  No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any securities exchange are necessary for the execution, delivery or performance by a Borrower of the Loan Documents or for the legality, validity or enforceability thereof, except for filings and recordings in respect of the Liens created pursuant to the Loan Documents.

 

6.10                        Enforceability.  This Loan Agreement and all of the other Loan Documents executed and delivered by each Borrower in connection herewith are legal, valid and binding obligations of such Borrower and are enforceable against such Borrower in accordance with their terms except as such enforceability may be limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights generally and (ii) general principles of equity.

 

6.11                        Indebtedness.  No Borrower shall incur any Indebtedness (other than the Indebtedness outstanding under this Loan Agreement and the Loan Documents) without giving prior written notice to the Lender, which notice shall include a description of such Indebtedness in form and substance acceptable to Lender in its sole discretion.

 

6.12                        Material Adverse Effect.  Since March 31, 2014, there has been no development or event nor, to either Borrower’s knowledge, any prospective development or event, which has had or could have a Material Adverse Effect.

 

6.13                        No Default.  No Default or Event of Default has occurred and is continuing.

 

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

 

6.15                        Adverse Selection.  No Borrower has selected the Pledged Assets in a manner so as to adversely affect the Lender’s interest.

 

6.16                        Litigation.  There are no actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or

 

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arbitrable proceedings affecting the Guarantor, a Borrower, or any of its Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Loan Documents or any action to be taken in connection with the transactions contemplated hereby or (ii) (A) with respect to the Guarantor, makes a claim in an aggregate amount greater than $5,000,000, (B) with respect to ReadyCap, makes a claim in an aggregate amount greater than $1,000,000 or (C) with respect to Sutherland, makes a claim in an aggregate amount greater than $1,000,000.

 

6.17                        Margin Regulations.  The use of all funds acquired by each Borrower under this Loan Agreement will not conflict with or contravene any of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System as the same may from time to time be amended, supplemented or otherwise modified.

 

6.18                        Taxes.  (i) Each Borrower has and its Subsidiaries have timely filed all tax returns that are required to be filed by them and have timely paid all Taxes, the failure of which to timely pay would cause a Material Adverse Effect with respect to such Borrower, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided.  (ii) There are no Liens for Taxes, except for statutory liens for Taxes not yet due and payable.

 

6.19                        Investment Company Act.  Neither Borrower nor any of its Subsidiaries is an “investment company”, or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

6.20                        Chief Executive Office/Jurisdiction of Organization.  On the Effective Date, Sutherland’s chief executive office, is, and has been located at 1140 Avenue of the Americas, 7th Floor, New York, New York 10036 and ReadyCap’s chief executive office, is, and has been located at 114 Pacifica, Suite 400, Irvine, California 92618.  On the Effective Date, each Borrower’s jurisdiction of organization is Delaware.

 

6.21                        Location of Books and Records.  The location where each Borrower keeps its books and records, including all computer tapes and records related to the Pledged Assets is its chief executive office.

 

6.22                        True and Complete Disclosure.  The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of each Borrower to the Lender in connection with the negotiation, preparation or delivery of this Loan Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or, to a Borrower’s knowledge, omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.  All written information furnished after the date hereof by or on behalf of each Borrower to the Lender in connection with this Loan Agreement and the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified.  There is no fact known to a Responsible Officer of a Borrower, after due inquiry, that could reasonably be expected to have a Material Adverse Effect that has been disclosed herein,

 

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in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lender for use in connection with the transactions contemplated hereby or thereby.  Notwithstanding anything to the contrary in this provision, in the event that (i) a Borrower discovers any information provided to Lender that contains an untrue statement of material fact or omits to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading, and (ii) such Borrower provides correct information to Lender prior to any detrimental reliance by Lender, as determined by Lender, on the uncorrected information, no violation of this provision shall have occurred in respect of such information.

 

6.23                        ERISA.

 

(a)                                 No liability under Section 4062, 4063, 4064 or 4069 of ERISA has been or is expected to be incurred by either Borrower, the Guarantor, or any ERISA Affiliate thereof with respect to any Plan which is a Single-Employer Plan in an amount that could reasonably be expected to have a Material Adverse Effect.

 

(b)                                 No Plan which is a Single-Employer Plan had an accumulated funding deficiency, whether or not waived, as of the last day of the most recent fiscal year of such Plan ended prior to the date hereof, and no such plan which is subject to Section 412 of the Code failed to meet the requirements of Section 436 of the Code as of such last day.  Neither a Borrower, the Guarantor nor any ERISA Affiliate thereof is subject to a Lien in favor of such a Plan as described in Section 430(k) of the Code or Section 303(k) of ERISA.

 

(c)                                  Each Plan of each Borrower, the Guarantor or each of its Subsidiaries and each of its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code, except where the failure to comply would not result in any Material Adverse Effect.

 

(d)                                 Neither Borrower, the Guarantor nor any of its Subsidiaries has incurred a tax liability under Chapter 43 of the Code or a penalty under Section 502(i) of ERISA which has not been paid in full, except where the incurrence of such tax or penalty would not result in a Material Adverse Effect.

 

(e)                                  Neither Borrower, the Guarantor nor any of its Subsidiaries nor any ERISA Affiliate thereof has incurred or reasonably expects to incur any withdrawal liability under Section 4201 of ERISA as a result of a complete or partial withdrawal from a Multiemployer Plan in an amount that could reasonably be expected to have a Material Adverse Effect.

 

6.24                        SBA Approvals.  ReadyCap is approved by the SBA as an approved lender.  ReadyCap is in good standing, with no event having occurred or ReadyCap having any reason whatsoever to believe or suspect will occur, including, without limitation, a change in insurance coverage which would either make ReadyCap unable to comply with the eligibility requirements for maintaining all such applicable approvals or require notification to the SBA.  The SBA has approved the Loan Documents.

 

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

 

6.26                        Plan Assets.  Neither Borrower nor the Guarantor is an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Pledged Assets are not “plan assets” within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA, in a Borrower’s hands and transactions by or with either Borrower or a Guarantor are not subject to any state or local statute regulating investments of, or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

 

6.27                        Anti-Money Laundering Laws.  Each Borrower has complied with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 (collectively, the “Anti-Money Laundering Laws”); each Borrower has established, either directly or through the Manager, an anti-money laundering compliance program as required by the Anti-Money Laundering Laws.

 

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

 

6.29                        Collateral; Collateral Security.

 

(a)                                 No Borrower has assigned, pledged, or otherwise conveyed or encumbered any Pledged Asset to any other Person, and such Borrower was the sole owner of such Pledged Asset and had good and marketable title thereto, free and clear of all Liens, in each case except for Liens to be released simultaneously with the Liens granted in favor of the Lender hereunder.  Notwithstanding the preceding sentence, such Borrower may hereafter jointly own (a) a Pledged Asset with other parties through the sale of Participation Interests to one or more Loan Participants, or (b) any other interests of such Borrower in a Pledged Asset through the sale of the Guaranteed Portion in the secondary market (“Secondary Market Sale”); provided that such Borrower obtains the prior written consent of the Lender, which consent shall not be unreasonably withheld or delayed.

 

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(b)                                 The provisions of this Loan Agreement are effective to create in favor of the Lender a valid security interest in all right, title and interest of the Borrowers in, to and under the Collateral.

 

(c)                                  Pursuant to the Multiparty Agreement, upon receipt by the FTA of each SBA 7(a) Loan Note, and notice of the Lender’s Lien thereon, the Lender shall have a fully perfected first priority security interest therein, in the Pledged Tranche A Asset evidenced thereby and in ReadyCap’s interest in the related Pledged Property.

 

(d)                                 Upon receipt by the Custodian of each SBC Loan Note, the Lender shall have a fully perfected first priority security interest therein, in the Pledged Tranche B Asset evidenced thereby and in Sutherland’s interest in the related Pledged Property.

 

(e)                                  Upon the filing of financing statements on Form UCC-1 naming the Lender as “Secured Party” and such Borrower as “Debtor”, and describing the Collateral, in the jurisdictions and recording offices listed on Schedule 2 attached hereto, the security interests granted hereunder in the Collateral will constitute fully perfected first priority security interests under the Uniform Commercial Code in all right, title and interest of such Borrower in, to and under such Collateral which can be perfected by filing under the Uniform Commercial Code.

 

(f)                                   Upon execution and delivery of the Multiparty Agreement by all of the parties thereto, the Lender shall have a fully-perfected first priority security interest in each Pledged Asset that constitutes an SBA 7(a) Loan.

 

6.30                        Acquisition of SBC Loans and Participation Interests.  The SBC Loans and Participation Interests were acquired by a Borrower, and the origination and collection practices used with respect to the SBC Loans and Participation Interests have been, in all material respects legal, proper, prudent and customary in the commercial and multifamily SBC Loan servicing business.  Each of the SBC Loans and Participation Interests, as applicable, complies with the representations and warranties listed in Schedule 1-A or Schedule 1-B hereto.

 

Section 7.                                           Covenants of the Borrowers.  On and as of the date of this Loan Agreement and the date of each Advance and on each day until this Loan Agreement is no longer in force, each Borrower covenants as follows:

 

7.01                        Preservation of Existence; Compliance with Law.  Each Borrower shall:

 

(a)                                 Preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises necessary for the operation of its business;

 

(b)                                 Comply with the requirements of all applicable laws, rules, regulations and orders, whether now in effect or hereafter enacted or promulgated by any applicable Governmental Authority (including, without limitation, all environmental laws);

 

(c)                                  Maintain all material licenses, permits or other approvals, including all SBA licenses, permits or other approvals, necessary for such Borrower to conduct its business and to perform its obligations under the Loan Documents, and shall conduct its business strictly in accordance with applicable law;

 

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(d)                                 Keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied; and

 

(e)                                  Permit representatives of the Lender, upon reasonable notice (unless an Event of Default shall have occurred and is continuing, in which case, no prior notice shall be required), during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by the Lender.

 

7.02                        Taxes.  Each Borrower and its Subsidiaries shall timely file all tax returns that are required to be filed by them and shall timely pay all material Taxes due, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided.

 

7.03                        Notice of Proceedings or Adverse Change.  Each Borrower shall give notice to the Lender immediately (unless otherwise specified below) after a Responsible Officer of such Borrower has any knowledge of:

 

(a)                                 promptly upon receipt of notice or knowledge of the occurrence of any Default, Amortization Event or Event of Default;

 

(b)                                 with respect to any Eligible Asset pledged to the Lender hereunder, promptly upon receipt of any principal prepayment (in full or partial) of such Pledged Asset (which principal prepayment shall promptly be deposited in the applicable Collection Account);

 

(c)                                  with respect to any Eligible Asset pledged to the Lender hereunder, immediately upon receipt of notice or knowledge that the underlying Pledged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the Collateral Value of such Pledged Asset;

 

(d)                                 as soon as practicable, but, in any case, no more than two (2) Business Days, after a Borrower has obtained actual knowledge of the existence of any Critical Exception or Fatal Exception with respect to an SBC Loan, notice identifying the SBC Loan with respect to which such Critical Exception or Fatal Exception, as the case may be, exists and detailing the cause of such Critical Exception or Fatal Exception;

 

(e)                                  promptly upon receipt of notice or knowledge, but, in any case, no more than one (1) Business Day, after a Borrower has obtained actual knowledge of the existence of any Environmental Issue with respect to an SBA Loan, notice identifying the SBC Loan with respect to which such Environmental Issue exists and detailing the cause of such Environmental Issue and such Borrower shall, if a Pledged Property is subject to an Environmental Issue, direct the Servicer to immediately stop any foreclosure proceedings and not commence new foreclosure proceedings against such Pledged Property;

 

(f)                                   Promptly, but no later than five (5) Business Days, upon receipt of notice or knowledge of (i) any material default related to any Collateral, (ii) any material Lien or material security interest (other than security interests created hereby or by the other Loan

 

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Documents) on, or material claim asserted against, any of the Collateral or (iii) any event or change in circumstances which could reasonably be expected to have a Material Adverse Effect;

 

(g)                                  promptly, but no later than two (2) Business Days after a Borrower receives any of the same, deliver to the Lender a true, complete, and correct copy of any schedule, report, notice, or any other document delivered to a Borrower by any Person pursuant to, or in connection with, any of the SBC Loans; or

 

(h)                                 upon discovery by a Borrower or the Lender of any breach of any representation or warranty listed on Schedule 1-A or Schedule 1-B hereto applicable to any Eligible Asset, the party discovering such breach shall promptly give notice of such discovery to the other.

 

7.04                        Financial Reporting.  The Guarantor shall maintain a system of accounting established and administered in accordance with GAAP, and furnish to the Lender:

 

(a)                                 Within one hundred and twenty (120) days after the close of each fiscal year, Financial Statements, including a statement of income and changes in shareholders’ equity of the Guarantor for such year, and the related balance sheet as at the end of such year, all in reasonable detail and accompanied by an opinion of an accounting firm as to said financial statements;

 

(b)                                 Within forty-five (45) days after the close of each of the Guarantor’s first three fiscal quarters in each fiscal year unaudited balance sheets and income statements, for the period from the beginning of such fiscal year to the end of such quarter, subject, however, to year-end adjustments;

 

(c)                                  Simultaneously with the furnishing of each of the financial statements to be delivered pursuant to subsection (a) or (b) above a certificate in form and substance acceptable to the Lender in its sole discretion and certified by a Responsible Officer of a Guarantor;

 

(d)                                 If applicable, copies of any 10-Ks, 10-Qs, registration statements and other “corporate finance” SEC filings (other than 8-Ks) by Guarantor, within five (5) Business Days of their filing with the SEC; provided, that, Guarantor or any Affiliate will provide the Lender with a copy of the annual 10-K filed with the SEC by a Borrower or its Affiliates, no later than ninety (90) days after the end of the year; and

 

(e)                                  Promptly, from time to time, such other information regarding the business affairs, operations and financial condition of Guarantor as the Lender may reasonably request.

 

7.05                        Visitation and Inspection Rights.  Each Borrower, Guarantor and Investment Manager shall permit the Lender to inspect, and to discuss with such Borrower’s, Guarantor’s or Investment Manager’s, as applicable, officers, agents and auditors, the affairs, finances, and accounts of such Borrower, Guarantor or Investment Manager, as applicable, the SBC Loans, and such Borrower’s, Guarantor’s or Investment Manager’s, as applicable, books and records, and to make abstracts or reproductions thereof and to duplicate, reduce to hard copy or otherwise

 

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use any and all computer or electronically stored information or data, in each case, (i) during normal business hours, (ii) upon reasonable notice (provided, that upon the occurrence of an Event of Default, no notice shall be required), and (iii) at the expense of such Borrower, Guarantor or Investment Manager, as applicable, to discuss with its officers, its affairs, finances, and accounts.

 

7.06                        Reimbursement of Expenses.  On the date of execution of this Loan Agreement, Borrowers shall reimburse the Lender for all expenses incurred by the Lender on or prior to such date.  From and after such date, Borrowers shall promptly reimburse the Lender for all expenses as the same are incurred by the Lender and within thirty (30) days of the receipt of invoices therefor.

 

7.07                        Further Assurances.  Each Borrower shall execute and deliver to the Lender all further documents, financing statements, agreements and instruments, and take all further action that may be required under applicable law, or that the Lender may reasonably request, in order to effectuate the transactions contemplated by this Loan Agreement and the Loan Documents or, without limiting any of the foregoing, to grant, preserve, protect and perfect the validity and first-priority of the security interests created or intended to be created hereby.  Each Borrower shall do all things necessary to preserve the Collateral so that it remains subject to a first priority perfected security interest hereunder.  Without limiting the foregoing, each Borrower will comply with all rules, regulations, and other laws of any Governmental Authority and cause the Collateral to comply with all applicable rules, regulations and other laws.  Each Borrower will not allow any default for which such Borrower is responsible to occur under any Pledged Asset or any Loan Document and each Borrower shall fully perform or cause to be performed when due all of its obligations under any Pledged Asset or the Loan Documents.

 

7.08                        True and Correct Information.  All information, reports, exhibits, schedules, financial statements or certificates of the Guarantor, Investment Manager or a Borrower or any of its Affiliates thereof or any of their officers furnished to the Lender hereunder and during the Lender’s diligence of the Guarantor, Investment Manager and the Borrowers are and will be true and complete and will not, to a Borrower’s knowledge, omit to disclose any material facts necessary to make the statements therein or therein, in light of the circumstances in which they are made, not misleading.  All required financial statements, information and reports delivered by the Guarantor, Investment Manager or a Borrower to the Lender pursuant to this Loan Agreement shall be prepared in accordance with GAAP, or in applicable, to SEC filings, the appropriate SEC accounting requirements.  Notwithstanding anything to the contrary in this provision, in the event that (i) a Borrower discovers any information provided to Lender that contains an untrue statement of material fact or omits to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading, and (ii) such Borrower provides correct information to Lender prior to any detrimental reliance by Lender, as determined by Lender, on the uncorrected information, no violation of this provision shall have occurred in respect of such information.

 

7.09                        ERISA Events.

 

(a)                                 Promptly upon becoming aware of the occurrence of any Event of ERISA Termination which together with all other Events of ERISA Termination occurring within the

 

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prior 12 months involve a payment of money by or a potential aggregate liability of Borrowers and/or Guarantor or any ERISA Affiliate thereof or any combination of such entities in excess of $1,000,000 the Borrowers shall give the Lender a written notice specifying the nature thereof, what action such Borrower or Guarantor or any ERISA Affiliate thereof has taken and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;

 

(b)                                 Promptly upon receipt thereof, each Borrower shall furnish to the Lender copies of (i) all notices received by a Borrower or Guarantor or any ERISA Affiliate thereof of the PBGC’s intent to terminate any Plan or to have a trustee appointed to administer any Plan; (ii) all notices received by a Borrower or Guarantor or any ERISA Affiliate thereof from the sponsor of a Multiemployer Plan pursuant to Section 4202 of ERISA involving a withdrawal liability in excess of $1,000,000; and (iii) all funding waiver requests filed by a Borrower or Guarantor or any ERISA Affiliate thereof with the Internal Revenue Service with respect to any Plan, the accrued benefits of which exceed the present value of the plan assets as of the date the waiver request is filed by more than $1,000,000, and all communications received by a Borrower or Guarantor or any ERISA Affiliate thereof from the Internal Revenue Service with respect to any such funding waiver request.

 

7.10                        Adverse Selection.  No Borrower shall select Eligible Assets using any type of adverse selection or other selection criteria which would adversely affect the Lender.

 

7.11                        Insurance.  ReadyCap shall continue to maintain Fidelity Insurance in an aggregate amount at least equal to $2,000,000.  Sutherland, Investment Manager and Guarantor shall continue to maintain Fidelity Insurance in an aggregate amount at least equal to $10,000,000.  Each Borrower, Investment Manager and Guarantor shall maintain Fidelity Insurance in respect of its officers and employees, with respect to any claims made in connection with all or any portion of the Pledged Assets.  Each Borrower, Investment Manager and Guarantor shall notify the Lender of any material change in the terms of any such Fidelity Insurance.

 

7.12                        Books and Records.  Each Borrower shall, to the extent practicable, maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the SBC Loans in the event of the destruction of the originals thereof), and keep and maintain or obtain, as and when required, all documents, books, records and other information reasonably necessary or advisable for the collection of all SBC Loans.

 

7.13                        Illegal Activities.  No Borrower shall engage in any conduct or activity that could subject its assets to forfeiture or seizure.

 

7.14                        Material Change in Business.  Neither Borrower nor Guarantor shall make any material change in the nature of its business as carried on at the date hereof.

 

7.15                        Limitation on Dividends and Distributions.  Following the occurrence and during the continuation of an Event of Default or if an Event of Default would result therefrom, neither Borrower nor Guarantor shall make any payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition

 

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of any equity interest of such Borrower or Guarantor, whether now or hereafter outstanding, or make any other distribution or dividend in respect of any of the foregoing or to any shareholder or equity owner of such Borrower or Guarantor, either directly or indirectly, whether in cash or property or in obligations of such Borrower or Guarantor or any of such Borrower’s or Guarantor’s consolidated Subsidiaries; provided that the Guarantor shall be permitted to pay such dividends to the extent funds are distributed to the Guarantor and only in order to satisfy the REIT Distribution Requirement.

 

7.16                        Disposition of Assets; Liens.  No Borrower or Guarantor shall convey, sell, lease, assign, transfer or otherwise dispose of (collectively, “Transfer”), all or substantially all of its Property, business or assets (including, without limitation, receivables and leasehold interests) whether now owned or hereafter acquired (other than a Transfer that is an ordinary course securitization) or allow any Subsidiary (other than a special purpose entity established in accordance with customary secondary market procedures for the financing or sale of specified assets) to Transfer substantially all of its assets to any Person; provided that each Borrower or Guarantor may after prior written notice to the Lender allow such action with respect to any Subsidiary which is not a material part of the Borrowers’ overall business operations.

 

7.17                        Transactions with Affiliates.  No Borrower shall enter into any transaction, including, without limitation, the purchase, sale, lease or exchange of property or assets or the rendering or accepting of any service with any Affiliate, unless such transaction is (a) not otherwise prohibited in this Loan Agreement, (b) in the ordinary course of such Borrower’s business, (c) a securitization transaction entered into by a Borrower which does not include any Financed Assets financed under the Loan Documents (other than as permitted by this Loan Agreement) and (d) upon fair and reasonable terms no less favorable to such Borrower, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.

 

7.18                        ERISA Matters.

 

(a)                                 Neither Borrower nor Guarantor shall permit any event or condition which is described in any of clauses (i) through (viii) of the definition of “Event of ERISA Termination” to occur or exist with respect to any Plan or Multiemployer Plan if such event or condition, together with all other events or conditions described in the definition of Event of ERISA Termination occurring within the prior 12 months, involves the payment of money by or an incurrence of liability of a Borrower or Guarantor or any ERISA Affiliate thereof, or any combination of such entities in an amount in excess of $1,000,000.

 

(b)                                 Neither Borrower nor Guarantor shall be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and neither a Borrower nor Guarantor shall use “plan assets” within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA, to engage in this Loan Agreement or the Transactions hereunder, and transactions by or with either Borrower or Guarantor are not subject to any state or local statute regulating investments of, or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

 

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7.19                        Consolidations, Mergers and Sales of Assets.  No Borrower shall (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer all or substantially all of its assets to any other Person.

 

7.20                        REIT Status.  Guarantor shall maintain its status as a real estate investment trust under Section 856 of the Code, as amended, and shall be entitled to claim dividend paid deductions pursuant to Section 857 of the Code, as amended.

 

7.21                        Asset Tape.  Borrowers shall deliver to the Lender monthly, on or before fifteen (15) days after the end of each calendar month, (i) a schedule in computer-readable form, containing such information reasonably requested by the Lender, including, without limitation, servicing information, with those fields specified by the Lender from time to time, on a loan-by-loan basis and in the aggregate, with respect to the SBC Loans (other than Participant Loans) pledged hereunder by such Borrower or any other Servicer of the SBC Loans (if any), including any fields Lender may reasonably request in order to determine the Market Value of the Financed Assets and all data which the Lender is required to obtain for any regulatory reporting purposes and (ii) a status sheet schedule, containing such information reasonably requested by the Lender with those fields specified by the Lender from time to time, on a loan-by-loan basis and in the aggregate, with respect to the Participant Loans pledged hereunder by such Borrower, including any fields Lender may reasonably request in order to determine the Market Value of the Financed Assets and all data which the Lender is required to obtain for any regulatory reporting purposes (collectively, the “Asset Tape”).

 

7.22                        Financial Covenants.

 

(a)                                 The Guarantor shall not permit at any time Total Stockholder’s Equity to be less than the sum of (1) sixty percent (60%) of Total Stockholder’s Equity as of the Effective Date plus (2) fifty percent (50%) of the net proceeds of any equity issuance after the Effective Date.

 

(b)                                 The Guarantor shall maintain at all times a Leverage ratio of less than 2:1.

 

(c)                                  The Guarantor shall maintain at all times Liquidity of at least the lesser of (1) four percent (4%) of the sum of (without duplication) (A) any outstanding recourse Indebtedness plus (B) the aggregate amount of Indebtedness outstanding under this Loan Agreement and (2) $25,000,000.

 

7.23                        No Amendment or Waiver.  No Borrower will, nor will it permit or allow others to amend, modify, terminate or waive any provision of any Financed Asset to which such Borrower is a party in any manner which shall reasonably be expected to materially and adversely affect the value of such Financed Asset as Collateral unless the Lender consents in writing after being provided at least five (5) Business Days’ prior written notice from the Borrowers, together with a written summary, of such amendment, modification or termination.  After the Funding Date, until the Lien of any Pledged Asset is released by the Lender, no Borrower will have any right to materially modify or alter the terms of such SBA Loan except with the permission of the SBA in accordance with the SBA Guaranty Agreement and no Borrower will have any obligation or right to repossess such SBA Loan or substitute another

 

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SBA Loan.  In the event that such SBA Loan is modified, such Borrower shall forward a copy of such modification to the Lender.

 

7.24                        ReadyCap Assignments.  Within five (5) Business Days of the Effective Date, with respect to each SBA 7(a) Loan, the Borrowers shall send for recording:  (a) each assignment of Mortgage in recordable form in the name of ReadyCap, (b) each assignment of assignments of leases and rents in recordable form in the name of ReadyCap and (c) each UCC assignment in recordable form in the name of ReadyCap.

 

7.25                        Restrictions on Sale or Other Disposition of Financed Assets.  No Transfer of Financed Assets shall be permitted, (i) to the extent such Transfer would cause a Default or Event of Default, or (ii) following the occurrence of a Securitization Event, in the case of clause (ii), such that Borrowers must submit the terms of proposed sale to the Lender prior to consummation thereof, and the Lender shall have the right to re-determine the Market Value of the Financed Assets which would remain subsequent to the sale and require any resulting Margin Deficit payment be paid in conjunction with the proposed sale.

 

Section 8.                                           Events of Default.  With respect to each Tranche, each of the following events shall constitute an event of default (an “Event of Default”) with respect to such Tranche hereunder; provided that an Event of Default under this Section 8 related solely to Sutherland, the Guarantor or otherwise with respect to Tranche B shall not be an Event of Default with respect to Tranche A; provided, further, that an Event of Default under this Section 8 related to ReadyCap, Sutherland, the Guarantor or otherwise with respect to Tranche A or Tranche B shall be an Event of Default under this Section 8 with respect to Tranche B:

 

8.01                        Payment Default.  A Borrower shall fail, with respect to the related Tranche, to (i) pay interest which failure remains unremedied for one (1) Business Day following its due date, (ii) pay any principal payment, Margin Deficit or Repayment Amount when due, or (iii) pay fees or other amounts (related to such Tranche) not specified in clauses (i) or (ii) which failure remains unremedied for two (2) Business Days following the date on which they are due; or

 

8.02                        Representation and Warranty Breach.  Any representation, warranty or certification made or deemed made herein or in any other Loan Document by the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor or any certificate furnished to the Lender pursuant to the provisions hereof or thereof or any information with respect to the SBC Loans furnished in writing by on behalf of a the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor shall prove to have been untrue or misleading in any material respect as of the time made or furnished (other than the representations and warranties set forth in Schedule 1-A and Schedule 1-B which shall be considered solely for the purpose of determining the Market Value of the Assets; unless Lender determines that (i) the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or Guarantor shall have made any such representations and warranties with actual knowledge that they were materially false or misleading at the time made; (ii) any such representations and warranties have been materially false or misleading on a regular basis); provided that a breach of Section 6.14 shall not be an Event of Default with respect to Tranche A; or

 

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8.03                        Immediate Covenant Defaults.  The failure of the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor, to perform, comply with or observe any term, covenant or agreement applicable to a Borrower contained in any of Sections 7.01 (Preservation of Existence, Compliance with Law), 7.08 (True and Correct Information), 7.10 (No Adverse Selection), 7.13 (Illegal Activities), 7.14 (Material Change in Business), 7.15 (Limitation of Dividends and Distributions), 7.16 (Disposition of Assets; Liens), 7.17 (Transactions with Affiliates), 7.19 (Consolidations, Mergers and Sales of Assets), 7.20 (REIT Status), 7.21 (Asset Tape), 7.22 (Financial Covenants), 7.23 (No Amendment or Waiver), or 7.25 (Restrictions on Sale or Other Disposition of Financed Assets) hereof; provided that a breach of Section 7.20 (REIT Status) and Section 7.22 (Financial Covenants) shall not be an Event of Default with respect to Tranche A or

 

8.04                        Additional Covenant Defaults.  The applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor, shall fail to observe or perform any other covenant or agreement contained in this Loan Agreement (and not identified in Section 8.03) or any other Loan Document, and if such default shall be capable of being remedied, and such failure to observe or perform shall continue unremedied for a period of one (1) Business Day; or

 

8.05                        Judgments.  A judgment or judgments for the payment of money in excess of $1,000,000 in the aggregate shall be rendered against the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor in the aggregate by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof, and the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor shall not, within said period of thirty (30) days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal; or

 

8.06                        Cross-Default.  With respect to the Tranche B, (i) either Borrower or the Guarantor shall be in default under any Indebtedness of such Borrower or the Guarantor, including the Tranche A Note, in the aggregate amount of $1,000,000, which default (1) involves the failure to pay a matured obligation or (2) in respect of such Indebtedness would, with or without the giving of notice or lapse of time or both, permit its acceleration, or (ii) either Borrower or the Guarantor shall be in a payment default under any material agreement entered into by such Borrower or the Guarantor and the Lender or any of the Lender’s Affiliates or; or

 

8.07                        Insolvency Event.  An Insolvency Event shall have occurred with respect to the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor; or

 

8.08                        Enforceability.  With respect to the applicable Borrower and/or the applicable Tranche, for any reason this Loan Agreement at any time shall not to be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms against such Borrower, or with respect to Tranche B, against either Borrower or the Guarantor, or any Lien granted pursuant thereto with respect to such Tranche shall fail to be

 

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perfected and of first priority, or any Person (other than the Lender) shall contest the validity, enforceability, perfection or priority of any Lien granted pursuant thereto, or any party thereto (other than Lender) with respect to such Tranche shall seek to disaffirm, terminate, limit or reduce its obligations hereunder; or

 

8.09                        Liens.  The applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor, shall grant, or suffer to exist, any Lien on any Tranche A Assets or Tranche B Assets, as applicable (except any Lien in favor of the Lender); or the Liens contemplated hereby shall fail to be first priority perfected Liens on any Tranche A Assets or Tranche B Assets, as applicable and the related Collateral in favor of the Lender; or

 

8.10                        Material Adverse Effect.  As determined by Lender in its sole discretion, there shall have occurred (a) a Material Adverse Effect with respect to the applicable Borrower and/or the applicable Tranche and/or the related Tranche A Collateral or Tranche B Collateral, or, (b) with respect to Tranche B, either Borrower or the Guarantor and/or either Tranche and/or either the Tranche A Collateral or Tranche B Collateral; or

 

8.11                        Change in Control.  There shall have occurred (a) a Change in Control in the applicable Borrower with respect to the related Tranche or, (b) with respect to Tranche B, a Change in Control in either Borrower or the Guarantor; or

 

8.12                        Going Concern.  The applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor shall have audited financial statements or notes thereto or other opinions or conclusions stated therein that shall be qualified or limited by reference to the status of such Borrower or, with respect to Tranche B, either Borrower or the Guarantor as a “going concern” or reference of similar import; or

 

8.13                        Inability to Perform.  An officer of the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor, shall admit its inability to, or its intention not to, perform any of such Borrower’s or, with respect to Tranche B, either Borrower’s or Guarantor’s obligations; or

 

8.14                        SBA Rules and Regulations.  Any action by SBA, including without limitation, an amendment or modification of the SBA Rules and Regulations, which would reasonably be likely to materially and adversely affect Lender’s or ReadyCap’s rights under the SBC Loan Guaranty program; or

 

8.15                        Replacement of Services.  The failure of the applicable Borrower with respect to the related Tranche or, with respect to Tranche B, either Borrower or the Guarantor, to replace any Servicer in accordance with the applicable Servicing Agreement within the earlier of (1) the timeframe set forth in such Servicing Agreement or (2) thirty (30) days, in either case, upon a default of the Servicer thereunder or upon a failure to maintain required approval by the SBA; provided that, with respect to Tranche A Advances, such failure shall give rise to an Event of Default with respect to the Tranche A Advances only if such failure occurs following SBA consent to a transfer of servicing; or

 

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8.16                        Investment Manager.  With respect to the Tranche B Advances, any of the following shall occur with respect to the Investment Manager and the Investment Manager shall fail to be replaced within thirty (30) days thereof:  (i) Insolvency Event of the Investment Manager, (ii) a material adverse change in the financial condition of the Investment Manager or in the operations, or property of the Investment Manager and the Investment Manager shall fail to be replaced within thirty (30) days following request by the Lender, (iii) the Investment Manager fails to attain or comply with the terms of any registrations, authorizations or licenses or memberships with any federal or state or foreign regulatory authority or (iv) the Investment Manager ceases to have authority over the trading and investment activities of either Borrower or the Guarantor; or

 

8.17                        REIT Qualification.  With respect to the Tranche B Advances, Guarantor shall fail to maintain its status as a real estate investment trust under Section 856 of the Code, as amended or fails to be entitled to claim dividend paid deductions pursuant to Section 857 of the Code, as amended.

 

Notwithstanding any other provision of this Section 8 any grace or notice period provided herein in respect of a notice to be given or action to be taken by the Lender may be shortened or eliminated by the Lender if, in its sole discretion, it is unreasonable to do so under the circumstances, taking into consideration, among other things, the volatility of the market for the Financed Assets or other securities involved, the extent and nature or any Event of Default (or events which with the giving of such notice and passage of time would constitute Events of Default) and the risks inherent in deferring the exercise of remedies for the otherwise applicable grace or notice period.

 

Section 9.                                           Remedies Upon Default.

 

9.01                        Remedies.  Upon the occurrence of one or more Events of Default with respect to a Tranche then, and in every such event (other than an event described in Section 8.07) and at any time thereafter during the continuance of such event, the Lender may take any or all of the following actions, at the same or different times:  (i) terminate the Commitment with respect to such Tranche, whereupon the Commitment with respect to such Tranche shall terminate immediately, (ii) cease to make Advances with respect to such Tranche, (iii) declare the principal of and any accrued interest on the Advances with respect to such Tranche, and all other Secured Obligations with respect to such Tranche owing hereunder, to be, whereupon the same shall become, due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers, (iv) exercise all remedies contained in this Loan Agreement and any other Loan Document, and (v) exercise any other remedies available at law or in equity; and that, if an Event of Default specified in Section 8.07 shall occur, the Commitment shall automatically terminate, no further Advances shall be made and the principal of the Advances then outstanding, together with accrued interest thereon, and all fees, and all other Secured Obligations with respect to such Tranche shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.

 

9.02                        Physical Possession.  Upon the occurrence of one or more Events of Default, the Lender shall have the right to obtain physical possession of the Servicing Records, the SBC Loan

 

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Files and all other files of the Borrowers relating to the Collateral with respect to such Tranche and all documents relating to the Collateral which are then or may thereafter come in to the possession of a Borrower or any third party acting for a Borrower and the Borrowers shall deliver to the Lender such assignments as the Lender shall request; provided, however, that, with respect to the Tranche B Collateral, the Lender shall first obtain the prior written consent of the SBA as required by the Multiparty Agreement.  The Lender shall be entitled to specific performance of all agreements of the Borrowers contained in this Loan Agreement.

 

9.03                        Lender’s Appointment as Attorney-in-Fact.  To exercise such authority as it may have pursuant to Section 4.04 hereof.

 

Section 10.                                    No Duty of Lender.  The powers conferred on the Lender hereunder are solely to protect the Lender’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers.  The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to a Borrower for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

 

Section 11.                                    Indemnification And Expenses.

 

11.01                 Indemnification.  Each Borrower agrees to hold the Lender and each of its officers, directors, employees, advisors and agents (each, an “Indemnified Party”) harmless from and indemnify each Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind (including reasonable fees of counsel) which may be imposed on, incurred by or asserted against such Indemnified Party (collectively, “Costs”), relating to or arising out of this Loan Agreement, any other Loan Document or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Loan Agreement, any other Loan Document or any transaction contemplated hereby or thereby, that, in each case, results from anything other than the Indemnified Party’s gross negligence or willful misconduct; provided that Costs shall not include Costs of any claim made by an Indemnified Party if a court or arbitrator has made a final, non-appealable judgment in favor of such Borrower with respect to such claim; and provided further that ReadyCap shall only be liable for such Costs related to acts or omissions of ReadyCap or related to the Tranche A Advances or the Tranche A Collateral (the “ReadyCap Limitation on Liability”).  Without limiting the generality of the foregoing, but subject to the foregoing ReadyCap Limitation on Liability, each Borrower agrees to hold each Indemnified Party harmless from and indemnify such Indemnified Party against all Costs with respect to all SBC Loans relating to or arising out of (i) any Environmental Issue, (ii) the gross negligence, fraud or willful misconduct of a Borrower or any of its officers, directors, employees or agents (each a “Borrower Party”) arising out of, relating to, or in any way connected with, a Borrower’s representations, warranties, covenants, rights, obligations or liabilities under any Loan Document, including without limitation, the misappropriation of funds by any Borrower Party, (iii) any failure by a Borrower Party to properly apply insurance or Condemnation Proceeds on account of the applicable SBC Loan, or (iv) any failure to timely deliver any Asset File or document therein as required by the Custodial Agreement.  In any suit, proceeding or action brought by any Indemnified Party in connection with any SBC Loan for any sum owing thereunder, or to enforce any provisions of any SBC Loan, the Borrowers will save, indemnify and hold such Indemnified Party harmless

 

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from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by a Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from a Borrower.  Subject to the ReadyCap Limitation on Liability, each Borrower also agrees to reimburse any Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Party’s reasonable costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Party’s rights under this Loan Agreement, the Note, any other Loan Document or any transaction contemplated hereby or thereby, including, without limitation the reasonable fees and disbursements of its counsel.  Each Borrower hereby acknowledges that, notwithstanding the fact that the Note is secured by the related Collateral, the obligation of such Borrower under the related Note is a recourse obligation of such Borrower.

 

11.02                 Expenses.  Subject to the ReadyCap Limitation on Liability, each Borrower agrees to pay as and when billed by the Lender (a) all reasonable and documented out-of-pocket expenses of the Lender associated with the Facility (including but not limited to a collateral audit and originator/servicing review to be performed by a third party auditor/appraiser selected by Lender) and the preparation, execution, delivery and administration of this Loan Agreement and the Loan Documents and any amendment or waiver with respect thereto (including the reasonable fees, disbursements and other charges of counsel, (b) all reasonable and documented out-of-pocket expenses of the Lender and the Lender’s counsel (including the fees, disbursements and other charges of counsel) in connection with the enforcement of the Loan Documents, (c) reasonable and documented on-going audit and due diligence expenses (including small business loan file and appraisal or other valuation reviews and inspections) including, but not limited to, those costs and expenses incurred by the Lender pursuant to Section 14 hereof, (d) all documented fees and expenses of the Custodian and (e) all the Costs pursuant to Section 11.01.

 

11.03                 Full Recourse.  The obligations of each Borrower under its respective Tranche from time to time to pay the Repurchase Price, the Periodic Advance Repurchase Payments, and all other amounts due under this Loan Agreement shall be full recourse obligations of the related Borrower.

 

Section 12.                                    Servicing.

 

12.01                 Servicing of SBC Loans.  Each Borrower covenants to cause each Servicer of the SBC Loans to service, the SBC Loans in conformity with accepted and prudent servicing practices in the industry for the same type of SBC Loans as the Pledged Assets and in a manner at least equal in quality to the servicing the Borrowers provides for SBC Loans which it owns, including without limitation, those requirements set forth in the applicable Servicing Agreements.

 

12.02                 Collateral Assignee.  Each Borrower agrees that the Lender is the collateral assignee of all servicing records with respect to the Pledged Assets, including, but not limited to, any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the

 

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servicing of SBC Loans (the “Servicing Records”), and (ii) each Borrower grants the Lender a security interest in all of such Borrower’s rights relating to the Pledged Assets and all related Servicing Records to secure the Secured Obligations of such Borrower or its designee to service in conformity with this Section and any other obligation of such Borrower to the Lender.  Each Borrower covenants to safeguard such Servicing Records and to deliver them promptly to the Lender or its designee at the Lender’s request following the occurrence of an Event of Default.

 

12.03                 Servicing Agreement.  In the event a Borrower enters into any servicing agreement to service any or all of the SBC Loans (each, a “Servicing Agreement”), such Borrower (i) shall provide a copy of any Servicing Agreement to the Lender, which shall be subject to the review and approval of the Lender in its sole discretion, and (ii) hereby irrevocably assigns to the Lender and the Lender’s successors and assigns all right, title and interest of such Borrower in, to and under, and the benefits of, any Servicing Agreement with respect to the Pledged Assets.

 

12.04                 Event of Default.  Upon the occurrence and during the continuance of an Event of Default hereunder and in all events, with respect to Tranche A, subject to the Multiparty Agreement, the Lender shall have the right to immediately terminate and transfer the servicing in accordance with the terms of the related Servicing Agreement or the Participation Agreement, to the extent permitted thereunder.  Regardless of whether the Lender exercises such termination right, other than with respect to Participation Interests, the Lender will be named as an intended third-party beneficiary under such servicing, sub-servicing or master servicing agreement (or pursuant to a servicer direction letter with respect to such agreement in the form of Exhibit F) with, upon an Event of Default or a Borrower’s failure to enforce the related servicing agreement within three (3) Business Days following a breach, full enforcement rights as if a party thereto with respect to the SBC Loans.  Each Servicer will execute an acknowledgment of the Lender’s rights with respect to the SBC Loans and Participation Interests, as applicable.  Each Borrower shall cooperate in transferring the servicing or managing, as applicable, of the SBC Loans to a successor servicer or manager, as applicable, appointed by the Lender in its sole discretion.

 

Section 13.                                    Recording of Communications.  The Lender and each Borrower shall have the right (but not the obligation) from time to time to make or cause to be made tape recordings of communications between its employees and those of the other party with respect to Transactions upon notice to the other party of such recording.  The Lender and each Borrower consent to the admissibility of such tape recordings in any court, arbitration, or other proceedings.  The parties agree that a duly authenticated transcript of such a tape recording shall be deemed to be a writing conclusively evidencing the parties’ agreement.

 

Section 14.                                    Due Diligence.  Each Borrower acknowledges that the Lender has the right to perform continuing due diligence reviews with respect to the SBC Loans (which may include obtaining appraisals and performing compliance, legal, credit and servicing file reviews) for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and such Borrower agrees that upon reasonable (but no less than five (5) Business Day’s) prior notice to such Borrower (unless a Default shall have occurred, in which case no prior notice shall be required), the Lender or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the SBA Loan Files and any and all documents, records, agreements, instruments or information

 

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relating to such SBC Loans in the possession or under the control of such Borrower.  Each Borrower also shall make available to the Lender a knowledgeable financial or accounting officer for the purpose of answering questions respecting the SBC Loan Files and the SBC Loans.  Without limiting the generality of the foregoing, each Borrower acknowledges that the Lender may make Advances to such Borrower based solely upon the information provided by such Borrower to the Lender in the Asset Tape and the representations, warranties and covenants contained herein, and that the Lender, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the SBC Loans securing such Advance, including, without limitation, ordering new credit reports and new appraisals on the related Pledged Properties and otherwise re-generating the information used to originate such SBC Loan.  The Lender may underwrite such SBC Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting.  Each Borrower agrees to cooperate with the Lender and any third party underwriter in connection with such underwriting, including, but not limited to, providing the Lender and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such SBC Loans in the possession, or under the control, of such Borrower.  Each Borrower further agrees that such Borrower shall reimburse the Lender for any and all reasonable and documented out-of-pocket costs and expenses incurred by the Lender in connection with the Lender’s activities pursuant to this Section 14; provided that prior to the occurrence of an Event of Default, such reimbursement shall not exceed $25,000 for any one (1) year period (excluding any reimbursement for due diligence conducted prior to the Effective Date or otherwise associated with the initial closing and funding of this Loan Agreement).

 

Section 15.                                    Assignability; Amendment.

 

15.01                 Assignment and Acceptance.  The rights and obligations of the parties under this Loan Agreement shall not be assigned by a Borrower without the prior written consent of the Lender.  Subject to the foregoing, this Loan Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.  Nothing in this Loan Agreement express or implied, shall give to any Person, other than the parties to this Loan Agreement and their successors hereunder, any benefit of any legal or equitable right, power, remedy or claim under this Loan Agreement.  The Lender may from time to time assign (x) with respect to the Tranche A Advances, solely with the consent of the SBA and subject to the Multiparty Agreement, and (y) with respect to the Tranche B Advances subject to the following restrictions, all or a portion of its rights and obligations under this Loan Agreement and the Loan Documents pursuant to an executed assignment and acceptance by the Lender and assignee (“Assignment and Acceptance”), specifying the percentage or portion of such rights and obligations assigned; provided that to the extent no Event of Default shall have occurred and be continuing, the Lender shall not make an assignment to a Competitor.  Upon such assignment, (a) such assignee shall be a party hereto and to each Loan Document to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of the Lender hereunder, and (b) the Lender shall, to the extent that such rights and obligations have been so assigned by it be released from its obligations hereunder and under the Loan Documents.  Unless otherwise stated in the Assignment and Acceptance, each Borrower shall continue to take directions solely from the Lender unless otherwise notified by the Lender in writing.  The Lender may distribute to any prospective assignee any document or other information delivered to the Lender by a Borrower.

 

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15.02                 Participations.  The Lender may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Loan Agreement (x) with respect to the Tranche A Advances, solely with the consent of the SBA and subject to the Multiparty Agreement, and (y) with respect to the Tranche B Advances provided that (i) the Lender’s obligations under this Loan Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) each Borrower shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations under this Loan Agreement and the other Loan Documents except as provided in Section 2.10.

 

15.03                 Disclosures.  The Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 15, disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to a Borrower or any of its Subsidiaries that has been furnished to the Lender by or on behalf of a Borrower or any of its Subsidiaries; provided that such assignee or participant agrees to hold such information subject to the confidentiality provisions of this Loan Agreement.

 

15.04                 Amendment to Loan Agreement.  In the event the Lender assigns all or a portion of its rights and obligations under this Loan Agreement, the parties hereto agree to negotiate in good faith an amendment to this Loan Agreement to add agency provisions similar to those included in repurchase agreements for similar syndicated repurchase facilities.  This Loan Agreement may be amended be written agreement by the parties hereto; provided that any amendment related to ReadyCap or Tranche A or the Tranche A Assets shall be subject to the Multiparty Agreement.

 

15.05                 Hypothecation or Pledge of Pledged Assets.  Nothing in this Loan Agreement shall preclude the Lender from repledging the Financed Assets that constitute Tranche B Assets, or with the consent of the SBA and subject to the Multiparty Agreement, Financed Assets that constitute Tranche B Assets, in each case, in accordance with applicable law, but in the case of Participation Interests, subject to the restrictions set forth in the related Participation Agreement.  Nothing contained in this Loan Agreement shall obligate the Lender to segregate any Financed Assets delivered to the Lender by the Borrowers.

 

Section 16.                                    Transfer and Maintenance of Register.

 

16.01                 Rights and Obligations.  Subject to acceptance and recording thereof pursuant to paragraph (b) of this Section 16, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of the Lender under this Loan Agreement.  Any assignment or transfer by the Lender of rights or obligations under this Loan Agreement that does not comply with this Section 16 shall be treated for purposes of this Loan Agreement as a sale by such the Lender of a participation in such rights and obligations in accordance with Section 15.02 hereof.

 

16.02                 Register.  Each Borrower shall maintain a register (the “Register”) on which it will record the Lender’s rights hereunder, and each Assignment and Acceptance and participation.  The Register shall include the names and addresses of the Lender (including all

 

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assignees, successors and participants) and the percentage or portion of such rights and obligations assigned.  Failure to make any such recordation, or any error in such recordation shall not affect a Borrower’s obligations in respect of such rights.  If the Lender sells a participation in its rights hereunder, it shall provide the Borrowers, or maintain as agent of the Borrowers, the information described in this paragraph and permit the Borrowers to review such information as reasonably needed for the Borrowers to comply with its obligations under this Loan Agreement or under any applicable Requirement of Law.

 

Section 17.                                    Set-Off.

 

17.01                 Set-Off Rights.  In addition to any rights and remedies of the Lender hereunder and by law, the Lender shall have the right, without prior notice to Sutherland or the Guarantor, any such notice being expressly waived by Sutherland or the Guarantor to the extent permitted by applicable law to set-off and appropriate and apply against any obligation from Sutherland or the Guarantor thereof to the Lender or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from the Lender or any Affiliate thereof to or for the credit or the account of Sutherland or the Guarantor.  The Lender agrees promptly to notify Sutherland and the Guarantor, as applicable, after any such set-off and application made by the Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.

 

17.02                 Suspension of Payments.  The Lender shall at any time have the right, in each case until such time as the Lender determines otherwise, to retain, to suspend payment or performance of, or to decline to remit, any amount or property that the Lender would otherwise be obligated to pay, remit or deliver to the Borrowers hereunder if an Event of Default or Default.

 

Section 18.                                    Terminability.  Each representation and warranty made or deemed to be made in connection with an Advance, herein or pursuant hereto shall survive the making of such representation and warranty, and the Lender shall not be deemed to have waived any Default that may arise because any such representation or warranty shall have proved to be false or misleading, notwithstanding that the Lender may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time the Advance was made.  The obligations of the Borrowers under Section 11 hereof shall survive the termination of this Loan Agreement.

 

Section 19.                                    Notices And Other Communications.  Except as otherwise expressly permitted by this Loan Agreement, all notices, requests and other communications provided for herein (including without limitation any modifications of, or waivers, requests or consents under, this Loan Agreement) shall be given or made in writing (including without limitation by telecopy) delivered to the intended recipient at the “Address for Notices” specified below its name on the signature pages hereof or thereof); or, as to any party, at such other address as shall be designated by such party in a written notice to each other party.  Except as otherwise provided in this Loan Agreement and except for notices given under Section 2 (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted by telecopy or personally delivered or, in the case of a mailed notice, upon receipt, in each case

 

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given or addressed as aforesaid.  In all cases, to the extent that the related individual set forth in the respective “Attention” line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.

 

Section 20.                                    Entire Agreement; Severability; Single Agreement.

 

20.01                 Entire Agreement.  This Loan Agreement, together with the Loan Documents, constitute the entire understanding between the Lender and the Borrowers with respect to the subject matter they cover and shall supersede any existing agreements between the parties containing general terms and conditions for transactions involving Financed Assets.  By acceptance of this Loan Agreement, the Lender and the Borrowers acknowledge that they have not made, and are not relying upon, any statements, representations, promises or undertakings not contained in this Loan Agreement.  Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

 

20.02                 Single Agreement.  The Lender and each Borrower acknowledge that, and have entered hereinto and will enter into each Advance hereunder in consideration of and in reliance upon the fact that, all Advances hereunder constitute a single business and contractual relationship and that each has been entered into in consideration of the other Advances.  Accordingly, each of the Lender and each Borrower agrees (i) to perform all of its obligations in respect of each Advance hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Advances hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Advance against obligations owing to them in respect of any other Advance hereunder; (iii) that payments, deliveries, and other transfers made by either of them in respect of any Advance shall be deemed to have been made in consideration of payments, deliveries, and other transfers in respect of any other Advances hereunder, and the obligations to make any such payments, deliveries, and other transfers may be applied against each other and netted and (iv) to promptly provide notice to the other after any such set off or application.

 

Section 21.                                    Governing Law; Submission to Jurisdictions; Waivers.

 

21.01                 GOVERNING LAW.  THIS LOAN AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

 

21.02                 SUBMISSION TO JURISDICTION; WAIVERS.  THE LENDER, EACH BORROWER AND THE GUARANTOR EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY:

 

(a)                                 SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE GENERAL JURISDICTION

 

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OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

 

(b)                                 CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

 

(c)                                  AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED;

 

(d)                                 AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND

 

(e)                                  THE LENDER, EACH BORROWER AND THE GUARANTOR HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

Section 22.                                    No Waivers, etc.  No failure on the part of the Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.  An Event of Default shall be deemed to be continuing unless expressly waived by the Lender in writing.

 

Section 23.                                    Confidentiality.

 

23.01                 Confidential Terms.  The Lender and each Borrower hereby acknowledge and agree that all written or computer-readable information provided by one party to any other regarding the terms set forth in any of the Loan Documents (the “Confidential Terms”) shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent that (i) it is necessary to do so in working with legal counsel, auditors, taxing authorities or other governmental agencies or regulatory bodies or in order to comply with any applicable federal or state laws, (ii) any of the Confidential Terms are in the public domain other than due to a breach of this covenant, (iii) in the Event of a Default the

 

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Lender determines such information to be necessary or desirable to disclose to enforce or exercise the Lender’s rights hereunder, (iv) to any rating agency, (v) to any Affiliate of the Lender and any of the Lender’s accountants, legal counsel and other advisors, (vi) to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Loan Agreement or (vi) to any actual or prospective party to any securitization or other transaction under which payments are to be made by reference to the Borrower and its obligations, this Loan Agreement or payments hereunder.  Notwithstanding the foregoing or anything to the contrary contained herein or in any other Loan Document, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Advances, any fact relevant to understanding the federal, state and local tax treatment of the Advances, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that no Borrower may disclose the name of or identifying information with respect to the Lender or any pricing terms (including, without limitation, the Commitment Fee) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Advances and is not relevant to understanding the federal, state and local tax treatment of the Advances, without the prior written consent of the Lender.  The provisions set forth in this Section 24 shall survive the termination of this Loan Agreement.

 

23.02                 Confidential Information.  Notwithstanding anything in this Loan Agreement to the contrary, each Borrower shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Financed Assets and/or any applicable terms of this Loan Agreement (the “Confidential Information”).  Each Borrower understands that the Confidential Information may contain “nonpublic personal information”, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the “GLB Act”), and each Borrower agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws.  Each Borrower shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the “nonpublic personal information” of the “customers” and “consumers” (as those terms are defined in the GLB Act) of the Lender or any Affiliate of the Lender which the Lender holds (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information.  Each Borrower shall, at a minimum establish and maintain such data security program as is necessary to meet the objectives of the Interagency Guidelines Establishing Standards for Safeguarding Customer Information as set forth in the Code of Federal Regulations at 12 C.F.R. Parts 30, 208, 211, 225, 263, 308, 364, 568 and 570.  Upon request, each Borrower will provide evidence reasonably satisfactory to allow the Lender to confirm that each Borrower has satisfied its obligations as required under this Section.  Without limitation, this may include the Lender’s review of audits, summaries of test results, and other equivalent evaluations of each Borrower.  Each Borrower shall notify the Lender immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of the Lender or any Affiliate of the Lender provided directly to the Borrowers by the Lender or such Affiliate.  Each Borrower shall provide such notice to the Lender by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.

 

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Section 24.                                    Conflicts; Multiparty Agreement.  In the event of any conflict between the terms of this Loan Agreement and any other Loan Document (other than the Multiparty Agreement with respect to the Tranche A Facility), then the terms of this Loan Agreement shall prevail.  THE LENDER ACKNOWLEDGES THAT ALL PROVISIONS OF THIS LOAN AGREEMENT RELATED TO THE TRANCHE A FACILITY ARE SUBJECT TO THE MULTIPARTY AGREEMENT.  In the event of any conflict between the terms of this Loan Agreement and the Multiparty Agreement with respect to the Tranche A Facility, the terms of the Multiparty Agreement shall prevail.

 

Section 25.                                    Miscellaneous.

 

25.01                 Counterparts.  This Loan Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Loan Agreement by signing any such counterpart.

 

25.02                 Captions.  The captions and headings appearing herein are for included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Loan Agreement.

 

25.03                 Acknowledgment.  Each Borrower hereby acknowledges that:

 

(i)                                     it has been advised by counsel in the negotiation, execution and delivery of this Loan Agreement and the other Loan Documents;

 

(ii)                                  the Lender has no fiduciary relationship to the Borrowers; and

 

(iii)                               no joint venture exists between the Lender and the Borrowers.

 

25.04                 Documents Mutually Drafted.  Each Borrower and the Lender agree that this Loan Agreement each other Loan Document have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.

 

[SIGNATURE PAGE FOLLOWS]

 

69

 

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

 

	
 
    	
BORROWERS:
    
	
 
    	
 
    
	
 
    	
READYCAP LENDING, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jack Ross
    
	
 
    	
 
    	
Name: Jack Ross
    
	
 
    	
 
    	
Title: Authorized Person
    
	
 
    	
 
    
	
 
    	
Address for Notices:
    

 

 

	
 
    	
SUTHERLAND ASSET I, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jack Ross
    
	
 
    	
 
    	
Name: Jack Ross
    
	
 
    	
 
    	
Title: Authorized Person
    
	
 
    	
 
    
	
 
    	
Address for Notices:
    

 

 

	
 
    	
GUARANTOR:
    
	
 
    	
 
    
	
 
    	
SUTHERLAND ASSET MANAGEMENT CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jack Ross
    
	
 
    	
 
    	
Name: Jack Ross
    
	
 
    	
 
    	
Title: Authorized Person
    
	
 
    	
 
    
	
 
    	
Address for Notices:
    

 

 

	
 
    	
LENDER:
    
	
 
    	
 
    
	
 
    	
JPMORGAN CHASE BANK, N.A.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Winchester
    
	
 
    	
 
    	
Name: John Winchester
    
	
 
    	
 
    	
Title: Executive Director
    
	
 
    	
 
    
	
 
    	
Address for Notices:
    

 

 

Schedule 1-A

 

Representations and Warranties re:  SBC Loans

 

As to each SBC Loan included in the Borrowing Base on a Funding Date (and the related Security Agreement, SBC Loan Note, assignment of Security Agreement and Pledged Property), each Borrower shall be deemed to make the following representations and warranties to the Lender as of such date and as of each date Collateral Value is determined.  With respect to any representations and warranties made to the best of each Borrower’s knowledge or actual knowledge, in the event that it is discovered that the circumstances with respect to the related SBC Loan are not accurately reflected in such representation and warranty notwithstanding the knowledge or lack of knowledge of such Borrower, then, notwithstanding that such representation and warranty is made to the best of such Borrower’s knowledge, such SBC Loan shall be assigned a Collateral Value of zero:

 

(1)           Other than a Secondary Market Sale, such Borrower is the sole owner and holder of such SBC Loan subject to no liens, charges, mortgages encumbrances, or rights of others, except for the SBA with respect to SBA Loans;

 

(2)           Subject to SBA approval with respect to the Tranche A Assets, such Borrower has the full right and authority to sell, assign, pledge, and transfer such SBC Loan;

 

(3)           Such SBC Loan is not cross-collateralized with other Pledged Properties (other than pari passu loans originated as “piggyback loans” and identified in Borrower’s Disclosure Schedule I-(3)), not pledged as Collateral, and contains no equity participation by such Borrower; none of the SBC Loan Notes or Security Agreements provide for any contingent or additional interest in the form of participation in the cash flow of the Pledged Property or a sharing in the appreciation of the value of the Pledged Property.  The indebtedness evidenced by the SBC Loan Note is not convertible to an ownership interest in the Pledged Property of the Obligor; and such Borrower has not financed nor does it own, directly, any equity of any form in the Pledged Property or the Obligor;

 

(4)           Such SBC Loan was closed in accordance with the commitment letter between such Borrower and the Obligor and, with respect to an SBA Loan, the requirements of the SBA Authorization and Loan Agreement (the “ALA”), as such commitment letter and ALA may have been, modified in writing by such Borrower and the SBA.  The proceeds of the SBC Loan have been fully disbursed and there is no requirement for future advances thereunder and any and all requirements stated in such closing instructions, commitment letter, and, with respect to an SBA Loan, ALA as to the completion of any on-site or off-site improvements and as to the release of any escrow funds have been complied with.  With respect to an SBA Loan, all guarantee fees required by the SBA have been paid.  Any future advances made prior to the time such SBC Loan was pledged pursuant to the terms of the Loan Agreement have been consolidated with all outstanding amounts secured by the related Security Agreement and Pledged Property, as consolidated, has a single interest rate and single repayment term;

 

(5)           The origination and servicing practices used by Originator with respect to such SBC Loan have been in all respects legal, proper, and prudent, and have met (a) customary

 

 

standards utilized by lenders in their commercial loan origination and servicing business, (b) with respect to an SBA Loan, the SBA Rules and Regulations, and (c) all requirements of the Servicing Agreement;

 

(6)           Such SBC Loan was originated by Originator on the date of the related SBC Loan Note date and complies with all the terms, conditions, and requirements of the underwriting policies of such Borrower, with respect to an SBA Loan, the SBA and the ALA;

 

(7)           To the best of such Borrower’s knowledge, such SBC Loan, complied as of the date of origination with or are exempt from, applicable laws and regulations of any Government Authority, including, without limitation, usury, equal credit opportunity, disclosure and recording laws, and, with respect to an SBA Loan, the SBA Rules and Regulations;

 

(8)           To the best of such Borrower’s knowledge, with respect to such SBC Loan, each of the SBC Loan Note, the Security Agreement and other agreements executed in connection therewith is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).  To the best of such Borrower’s knowledge, all parties to the Security Agreement, the SBC Loan Note and all other documents evidencing, securing and guaranteeing such SBC Loan had legal capacity to enter into such documents;

 

(9)           The assignment of the Security Agreement, the assignment of the assignment of leases and rents, if any, and the UCC financing statement naming the Lender as assignee executed by such Borrower with respect to such SBC Loan are in recordable form and constitute the legal, valid and binding assignments of such Security Agreement, assignment of leases and rents, and UCC financing statements by such Borrower;

 

(10)         The Security Agreement relating to such SBC Loan is a valid and enforceable first priority lien on the related Pledged Property, which Pledged Property is free and clear of all Liens having priority over the lien of the Security Agreement, except for (a) liens for real estate taxes and special assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Security Agreement, such exceptions appearing of record being acceptable to mortgage lending institutions generally, (c) other matters to which like properties are commonly subject which do not, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by such Security Agreement, (d) with respect to an SBA Loan, such other Liens as permitted by the SBA and the Lender in writing and (e) exceptions that are generally acceptable to lending institutions in connection with their regular commercial lending activities and won’t materially adversely effect such activities other than as disclosed in Borrower’s Disclosure Schedule I-(10), the first priority Lien related thereto is in full force and effect; there is no default, breach, violation or event of acceleration existing under the first priority Security Agreement or the note relating thereto; and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration thereunder; and

 

 

(11)         Other than as disclosed in Borrower’s Disclosure Schedule I-(11) the terms of the SBC Loan Note relating to such SBC Loan and the related Security Agreement have not been waived, modified, altered, satisfied, canceled, or subordinated in any respect or rescinded, and the related Pledged Property has not been released from the Lien of such Borrower, nor has the Obligor been released from its obligations under the Security Agreement, in whole or in any part, in a manner which materially interferes with the benefits of the security intended to be provided by the Security Agreement or the use, enjoyment, value, or marketability of such Pledged Property, nor has any instrument been executed that would affect any such cancellation, subordination, rescission or release, with the exception of the written instruments which have been recorded in order to protect the interest of the SBA (with respect to an SBA Loan), the Lender and are part of such Borrower’s Asset File and approved by the SBA (with respect to an SBA Loan);

 

(12)         Other than as disclosed in Borrower’s Disclosure Schedule I-(12), such SBC Loan is not subject to any right of rescission, setoff, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the SBC Loan Note or the Security Agreement relating thereto, or the exercise of any right thereunder, render either the related SBC Loan Note or such Security Agreement unenforceable, in whole or in part, or subject to any right of rescission, setoff, counterclaim, or defense, including without limitation the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto;

 

(13)         If such SBC Loan is secured primarily by real property, such Pledged Property consists of a fee simple estate in real property and improvements thereon and the SBC Loan is either (a) not secured by a ground lease; or (b) if the Pledged Property is a leasehold estate and the fee owner does not encumber its fee interest with the related Security Agreement (i.e., does not execute the Security Agreement or “subordinate” its fee interest), the ground lease is a “financeable” ground lease and provides, among other things (1) for a remaining term of no less than ten (10) years from the maturity of the related SBC Loan, (2) that the lease will not be terminated until the Obligor has received notice of a default and has had a reasonable opportunity to cure or complete foreclosure, and fails to do so, (3) for a new lease on the same terms to the Obligor as tenant if the ground lease is terminated for any reason, (4) for non-merger of fee and leasehold interests, and (5) that insurance proceeds and condemnation proceeds (from the fee interest as well as the leasehold interest) will be applied pursuant to the terms of the Security Agreement).  In addition, an estoppel and/or subordination and attornment agreement executed by the fee owner and satisfactory to the Lender has been obtained (unless specifically waived in writing by the Lender);

 

(14)         There are no defaults in complying with the terms of the Security Agreement with respect to such SBC Loan, and all taxes, governmental assessments, insurance premiums, water, sewer, and municipal charges which previously became due and owing with respect to the related Pledged Property have been paid.

 

(15)         All escrow deposits and payments relating to such SBC Loan, as applicable, are in the possession, or under the control, of such Borrower or its agent or bailee (with notice of the interest of such Borrower) and, except as disclosed on such Borrower’s Disclosure Schedule I-(15), there are no deficiencies in connection therewith;

 

 

(16)         The information set forth in the Asset Schedule and the completed Asset Tape, is true and correct in all material respects;

 

 

(17)         To the best of such Borrower’s knowledge, there is no proceeding pending for the total or partial condemnation of the Pledged Property relating to such SBC Loan.  Such Pledged Property is being used for the purpose set forth in the Obligor’s loan application, or such other documents that such Borrower and the SBA (with respect to an SBA Loan) required at origination, and it is in good repair and free and clear of any damage that would affect materially and adversely the value of the Pledged Property as security for the SBC Loan or the use for which the premises were intended;

 

(18)         The Pledged Property relating to such SBC Loan is free and clear of any material mechanics’ and material-men’s liens in the nature thereof, and no rights are outstanding that under law could give rise to any such liens, any of which liens are or may be prior to, or equal with, the Lien of such Borrower, except those which are insured against by such Borrower’s title insurance policy referred to in paragraph (24) below, and to the extent there exist non-material mechanics’ or material-men’s liens, such Borrower is diligently working to discharge;

 

(19)         Reserved;

 

(20)         At origination, the Obligor is in possession of all licenses, permits, and other authorizations necessary and required by applicable law for the conduct of its business.  To the best of such Borrower’s knowledge, without investigation, all such licenses, permits, and authorizations are valid and in full force and effect.  To the best of such Borrower’s knowledge, without investigation, all conditions on the Obligor’s part to be fulfilled under the terms of any lease of the Pledged Property have been satisfied;

 

(21)         To the best of such Borrower’s knowledge, the Pledged Property relating to such SBC Loan is in compliance with and lawfully used and occupied by the owner thereof and/or by tenants under leases under any applicable zoning, building, or environmental law or regulation and all inspections, licenses and certificates required, whether by law, regulation or insurance standards to be made or issued with respect to such Pledged Property and with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriter certificates, have been made by or issued by the appropriate Governmental Authorities having jurisdiction over the Pledged Property.  Such Borrower has not received notification from any Governmental Authority that the Pledged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be.  Such Borrower has not received notice of any violation or failure to conform with any such law, ordinance, regulation, standard, license, or certificate;

 

(22)         If such SBC Loan is secured primarily by real property, the Obligor is the owner and holder of the landlord’s interest under any lease for use and occupancy of all or any portion of the Pledged Property, as applicable.  Each Security Agreement relating thereto provides for the appointment of a receiver for rents in the event of default or allows the mortgagee thereunder to enter into possession to collect the rents.  Neither such Borrower nor the Obligor has made any assignments of the landlord’s interest in any such lease or any portion of the rents, additional

 

 

rents, charges, issues, or profits due and payable or to become due and payable under any such lease, which assignments are presently outstanding and have priority over such Security Agreement or any assignment of leases, rents, and profits given in connection with the origination of the SBC Loan, other than as may be disclosed in such Borrower’s title insurance policy referred to in paragraph (24) below.  An assignment of leases and/or rents and any security agreement, chattel mortgage, or equivalent document related to and delivered in connection with the SBC Loan establishes and creates a valid and enforceable (a) Lien with the priority set forth on the SBC Loan Schedule and (b) security interest on the Pledged Property described therein; except as enforceability may be limited by bankruptcy or other laws affecting creditor’s rights generally or by the application of the rules of equity.  If the Pledged Property covers furniture, fixtures, equipment or personal property, financing statements to create a valid Lien (with the priority set forth on the SBC Loan Schedule) against such Property have been filed and/or recorded;

 

(23)         Reserved;

 

(24)         If such SBC Loan is secured primarily by real property, the related Pledged Property is covered by a lender’s title insurance policy, insuring that the related Security Agreement is a valid Lien on such Pledged Property with the priority set forth on the SBC Loan Schedule, subject only to the exceptions stated therein and to the exceptions contained in paragraph (10) of this Part 1 of Schedule 1.  Such title insurance policy is in full force and effect, is freely assignable and will inure to the benefit of the owner of the SBC Loan.  Such title insurance policy insures the Pledged Property for the original principal amount of the SBC Loan after all advances of principal.  The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses and has either deleted the standard survey exception or has been marked to replace the standard survey exception with a specific survey leading.  No person has done any act, either by commission or omission, and such Borrower has no knowledge of any fact, which would materially impair the coverage of any such title insurance policy.  The title policy has been marked to delete the intervening lien exception.  Such Borrower, its successors or assigns shall be the only named insured of such lender’s title insurance policy;

 

(25)         The Pledged Property relating to such SBC Loan is insured by a fire and extended perils insurance policy issued by a generally acceptable carrier, providing coverage consistent with the Originator’s normal lending practices and as required by the SBA (with respect to an SBA Loan) against other risks insured against by persons operating like properties in the locality of the Pledged Property, in an amount not less than the amount required by the SBA (with respect to an SBA Loan).  If the SBC Loan is secured by an interest in real property and any portion of such Pledged Property is in an area identified in the Federal Register by the Flood Emergency Management Agency as having special flood hazards, and flood insurance is available, a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (w) the outstanding principal balance of the SBC Loan that has a first priority Lien, (x) the full insurable value of the Pledged Property, and (y) the maximum amount of insurance available under the National Flood Insurance Act of 1968, as amended, but a least (z) the amount required by the SBA (with respect to an SBA Loan).  All such insurance policies (each, a “Hazard Insurance Policy”) shall contain a standard

 

 

“New York” mortgagee clause naming such Borrower, its successors and assigns (including without limitation, subsequent owners of such SBC Loan), as mortgagee.  All premiums on any Hazard Insurance Policy have been paid.  Each Hazard Insurance Policy requires prior notice to the insured of termination or cancellation, and no such notice has been received.  The Security Agreement relating to such SBC Loan obligates the related Obligor to maintain all such insurance at the Obligor’s sole cost and expense.  There have been no acts or omissions that would impair the coverage of any such Hazard Insurance Policy or the benefits of the to the Security Agreement or any Hazard Insurance Policy endorsement;

 

(26)         To such Borrower’s best knowledge, solely with respect to each Performing Eligible SBC Loan and except as disclosed in Borrower’s Disclosure Schedule I-(26), there is no pending litigation or other legal proceedings involving the Obligor that can reasonably be expected to adversely affect the current value or marketability of such Pledged Property or the SBC Loan;

 

(27)         Reserved;

 

(28)         Other than as disclosed in Borrower’s Disclosure Schedule I-(28), there is no default, breach, violation, or event of acceleration existing under the Security Agreement or the SBC Loan Note relating to such SBC Loan and no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event of acceleration.  Neither such Borrower nor any other Person has waived any material default, breach, violation or event of acceleration of any of the foregoing, and, pursuant to the terms of the SBC Loan, such Security Agreement or such SBC Loan Note, no Person other than the holder of such SBC Loan Note may declare an event of default or accelerate the indebtedness under the SBC Loan, the Security Agreement, or the SBC Loan Note.  The Obligor is not in default on any debt obligation owed or owing to such Borrower.

 

(29)         The SBC Loan Note and the related Security Agreement contain customary and enforceable provisions such as to render the rights and remedies of the holder thereof or the secured party thereunder adequate for the realization against the Pledged Property of the benefits of such security, including but not limited to the following:  (a) if such Security Agreement is a deed of trust, by trustee’s sale, including the power of sale and/or (b) by judicial or, if applicable, non-judicial foreclosure, and there is no exemption available to the Obligor which would interfere with such right to foreclose;

 

(30)         Such Borrower has inspected or has caused to be inspected the related Pledged Property no earlier than twelve (12) months prior to the initial Funding Date;

 

(31)         Other than as disclosed in Borrower’s Disclosure Schedule I-(31), such Borrower has no knowledge, nor has it received any notice, that any Obligor is a debtor in any state or federal bankruptcy or insolvency proceeding or, if such Borrower has such knowledge or received such a notice, such fact was disclosed to the Lender in writing prior to the Lender’s acceptance of such SBC Loan and the origination;

 

 

(32)         At the time of the origination of such SBC Loan, (a) all amenities, access routes or other items crucial to the appraised value of (the Pledged Property were under the direct control of the Obligor or are public property, and (b) the Pledged Property was contiguous to a physically open, dedicated all-weather public street, had all necessary permits and approvals for ingress and egress, was adequately serviced by public water, sewer systems and utilities and was on a separate tax parcel, separate and apart from any other Property owned by the Obligor or any other person;

 

(33)         If the Security Agreement relating to such SBC Loan is a deed of trust, a trustee, duly qualified under applicable law to serve as such, has either been properly designated and currently so serves or may be substituted in accordance with applicable law.  Except in connection with a trustee’s sale after default by the Obligor, no fees or expenses are payable by such Borrower or the Lender to such trustee;

 

(34)         To the best of such Borrower’s knowledge, there exists no violation of any local, state or federal environmental law, rule or regulation;

 

(35)         To the best of such Borrower’s knowledge, the Security Agreement relating to such SBC Loan contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the SBC Loan in the event that the Pledged Property relating thereto is sold or transferred without the prior written consent of the mortgagee or pledgee thereunder;

 

(36)         The appraisal of the Pledged Property relating to such SBC Loan signed prior to the closing of the SBC Loan by a qualified appraiser and the appraisal and appraiser both satisfy the requirements of Title XI of the Financial Institutions Reform Recovery and Enforcement Act of 1989, as amended, and the regulations promulgated thereunder, all as in effect on the date the SBC Loan was originated; provided, however, that such requirement shall be waived if the Pledged Property is not used in the calculation of combined loan to value for purposes of the definitions of “Eligible Tranche A Asset” and “Eligible Tranche B Asset”;

 

(37)         To the best of such Borrower’s knowledge, if such SBC Loan is secured by Pledged Property which is primarily real property occupied by commercial tenants under Leases, each such tenant, at origination, was conducting business only in that portion of the Pledged Property covered by its Lease.  To the best of such Borrower’s knowledge, no commercial tenant has the benefit of a non-disturbance or similar recognition agreement, or if such agreement exists, there are no circumstances or conditions with respect to such tenant or the applicable lease that could cause a prudent lender to refuse to grant such agreement; and

 

(38)         No Performing Eligible SBC Loan has no more than two (2) monthly payments delinquent (i.e., no single monthly payment was more than 59 days past due).

 

 

Schedule 1-B

 

Representations and Warranties re:  Participation Interests

 

As to each Participation Interest included in the Borrowing Base on a Funding Date (and the related Participation Agreement), each Borrower shall be deemed to make the following representations and warranties to the Lender as of such date and as of each date Collateral Value is determined.  With respect to any representations and warranties made to the best of each Borrower’s knowledge or actual knowledge, in the event that it is discovered that the circumstances with respect to the related Participation Interest are not accurately reflected in such representation and warranty notwithstanding the knowledge or lack of knowledge of such Borrower, then, notwithstanding that such representation and warranty is made to the best of such Borrower’s knowledge, such Participation Interest shall be assigned a Collateral Value of zero:

 

(1)                                 To the best of such Borrower’s knowledge, if the Participation Interest represents a Participation Interest in an SBC Loan (other than a Participant Loan), the representations and warranties with respect to the related SBC Loan set forth on Schedule 1-A are true and correct in all material respects;

 

(2)                                 To the best of such Borrower’s knowledge, the Participation Interest is evidenced by a Participation Certificate, which Participation Certificate may represent one or more additional Participation Interests;

 

(3)                                 To the best of such Borrower’s knowledge, each Borrower had good and marketable title to, and was the sole owner and holder of, such Participation Interest, each Borrower is transferring such Participation Interest free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such Participation Interest, other than the first priority security interest of the Lender granted pursuant to this Loan Agreement, and no Participation Interest document is subject to any assignment (other than assignments to such Borrower), participation, or pledge;

 

(4)                                 To the best of such Borrower’s knowledge, other than as disclosed in Borrower’s Disclosure Schedule II-(4), no default or event of default has occurred under any agreement pertaining to any lien or other interest that ranks pari passu with or senior to the interests of the holder of such Participation Interest unless such interests are subject to an Advance hereunder and there is no provision in any such agreement which would provide for any increase in the principal amount of any such lien or other interest;

 

(5)                                 To the best of such Borrower’s knowledge, other than as disclosed in Borrower’s Disclosure Schedule II-(5), no (i) monetary default, breach or violation exists with respect to any agreement or other document governing or pertaining to such Participation Interest, (ii) material non-monetary default, breach or violation exists with respect to such Participation Interest, or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration;

 

(6)                                 To the best of such Borrower’s knowledge, none of the Participation Interests (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly

 

 

provides that it is a Security governed by Article 8 of the UCC, (iii) is Investment Property, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset.  None of the Underlying Mortgage Loan documents for the Participation Interest consists of Instruments.  For purposes of this paragraph (6), capitalized terms undefined in this Loan Agreement have the meaning given to such term in the Uniform Commercial Code;

 

(7)                                 To the best of such Borrower’s knowledge, no issuer of the Participation Certificate is a debtor in any state or federal bankruptcy or insolvency proceeding;

 

(8)                                 To the best of such Borrower’s knowledge, the Obligor related to a Participation Interest is not an Affiliate of either Borrower;

 

(9)                                 To the best of such Borrower’s knowledge, (i) there is no material default, breach, or violation existing under the related Participation Interest documents, and no event has occurred (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, or violation, provided, however, that this representation and warranty does not cover any default, breach, or violation that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by Sellers in this Schedule 1(e), and (ii) Sellers have not waived any material default, breach, or violation under such Participation Interest documents, in the case of either (i) or (ii), materially and adversely affects the value of the Participation Interest, provided, however, that this representation and warranty does not cover any default, breach, or violation that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by the Sellers in this Schedule 1(e).  Pursuant to the terms of the related Participation Interest documents no Person or party other than the holder of such Participation Interest may declare any event of default under such Participation Interest documents; and

 

(10)                          To the best of such Borrower’s knowledge, the Asset File delivered by the Borrowers with respect to such Participation Interest (i) represents a true and correct copy of the documents contained therein and each Asset Schedule, together with all other information contained therein prepared by the Borrowers or its respective Affiliates and delivered by the Borrowers to the Lender immediately prior to the date of the Advance, (ii) is true and correct, (iii) conforms in all material respects to the diligence materials previously provided to the Lender and pursuant to which the Lender has elected to make an Advance, and (iv) constitutes all material documents evidencing and/or securing such Participation Interest and such documents have not been materially amended or modified except as set forth in the documents contained in the Asset File delivered by the Borrowers.

 

 

Schedule 2

 

Filing Jurisdiction and Offices

 

The State of Delaware

 

 

Schedule 3

 

Duties of Borrowers with Respect to the SBA Loans

 

1.                                      Accepted Servicing Standards.

 

Each Borrower shall employ customary and usual standards of prudent institutional commercial loan services with the objective of maximizing the timely recovery of interest and principal, regardless of (a) relationship of such Borrower to the related mortgagor, or (b) such Borrower’s right to receive compensation for its services.  Such procedures shall be subject to (in the priority set forth herein) and in compliance with applicable law, SBA Rules and Regulations and Accepted Servicing Practices, and shall be acceptable to the Lender.

 

Each Borrower shall cause all financing statements, continuation statements and other instruments to be executed and delivered, and take such other actions as required or advisable to maintain, preserve and protect such Borrower’s interest and the Lender’s security interest in the Collateral for the benefit of the Lender.

 

2.                                      Documents, Records and Funds in Possession of each Borrower to be Held in Trust.

 

Each Borrower shall maintain a servicing file for each SBA Loan held as Collateral.  Further, each Borrower will grant a security interest in all rights relating to such servicing files to the extent of the Unguaranteed Portion to the Lender.  Upon termination of a Borrower’s activities with respect to any Collateral, such Borrower shall promptly deliver the related servicing file to the successor servicer and directed by the SBA (as required).

 

All documents and funds collected by, held by, or under the control of each Borrower in respect of the Unguaranteed Portion of any SBA Loan, shall be held by such Borrower for and on behalf of the Lender, as secured party, and shall be forwarded as required under the Collection Account Control Agreements and shall remain the sole and exclusive property of such Borrower subject to the Lien of the Lender.

 

3.                                      Release of SBA Loan Files.

 

Each Borrower shall report each payment in full received in respect of any SBA Loan to Lender on a monthly basis on the monthly Remittance Report.  Upon such payment in full, each Borrower is authorized to give, as agent, bailee and custodian for the Lender, an instrument of satisfaction regarding the Pledged Property subject to the security interest created under the related Security Agreement to the person(s) entitled to such instrument.  The release of the SBA Loan File shall also be done consistently with the SBA Rules and Regulations.

 

4.                                      Tax Reporting.

 

Each Borrower shall comply with all tax reporting requirements of the Obligor with respect to the SBA Loans.

 

 

5.                                      Reports to the Lender.

 

Each Borrower shall, by electronic transmission, furnish to the Lender on behalf of such Borrower, twenty-five (25) days after the end of each calendar month in form reasonably satisfactory to the Lender, the payment history and collateral tape (substantially in the form agreed upon by the parties).

 

In addition, each Borrower shall maintain all operating statements, rent rolls and financial statements of the Obligor and provide such statements to the Lender upon request (or otherwise provide the Lender access to such statements upon reasonable notice).  Each Borrower shall diligently pursue receipt of all financial information required from the Obligor.

 

6.                                      Reports of each Borrower Annual Officer’s Certificate.

 

Each Borrower will deliver to the Lender an “Officer’s Certificate” executed by a Responsible Officer by April 30th of each year certifying compliance by such Borrower with Accepted Servicing Practices in the prior calendar year.

 

7.                                      Independent Review of Borrowers’ Operations.

 

Upon the request of the Lender, each Borrower shall cause a nationally recognized firm of independent certified public accountants to furnish a statement to the Lender to the effect that such firm has examined certain records and documents relating to such Borrower’s performance of its servicing obligations under Accepted Servicing Practices with respect to the SBA Loans and that, on the basis of such examination, such servicing has been conducted in compliance with Accepted Servicing Practices.  Such request shall be made no more frequently than annually.  The cost of such report shall be borne by the Borrowers.

 

8.                                      Fidelity Bond, Errors and Omissions Policy and Security Agreement Impairment Insurance.

 

Each Borrower shall maintain, at its sole cost and expense, a fidelity bond and an errors and omissions insurance policy which affords coverage to all directors, officers and employees.  Such policy shall be in a form and in the amount that would meet the requirements of the SBA (as appropriate) and in such form as is customary for servicers of commercial loans.  Each Borrower shall immediately report in writing to the Lender any material changes which may occur in such policy.  Further, each Borrower shall immediately report to the Lender any embezzlement, fraud or irregularities relating to the servicing of the SBA Loans.

 

Each Borrower shall cause insurance to be maintained on the Pledged Property securing the SBA Loans in accordance with the SBA Rules and Regulations.  In the event that a Borrower shall obtain and maintain a blanket policy (which policy and insurer shall be acceptable to the Lender) insuring against losses arising from fire and hazards covered under extended coverage on all of the Pledged Property securing the SBA Loans, then, to the extent such policy provides coverage in an amount equal to the amount required pursuant the SBA Rules and Regulations and otherwise complies with the SBA Rules and Regulations, it shall conclusively be deemed to have satisfied its obligations as set forth in this paragraph.  Upon request of the Lender, each Borrower shall cause to be delivered to the Lender a certified true copy of such policy and a statement from

 

 

the insurer thereunder that such policy shall in no event be terminated or materially modified without thirty (30) days’ prior written notice to the Lender.

 

All insurance carriers with respect to the SBA Rules and Regulations must be fully licensed in the applicable jurisdiction(s) and otherwise be acceptable to the Lender.  Currently, the Lender’s standards require the insurance carriers to be “A” rated for claims paying ability by Moody’s Investors Service, Standard & Poor’s Ratings Group, Fitch Investors Service L.P., or Duff & Phelps Credit Rating Co.  If not rated by these rating agencies, each insurer is required to have a minimum policy rating of “A” and a minimum financial class of “VIII” by A.M. Best Co.

 

 

Schedule 4

 

List of Competitors

 

Lone Star Funds

Garrison Capital Inc.

Apollo Global Management

Cerberus Capital Management

A10 Capital

Fortress Investment Group

Newcastle Investment Group

Ranieri Partners

Velocity Commercial Capital

Rialto Capital Management

LNR Property

Starwood Property Trust

Colony Capital

NorthStar Realty Finance Corp.

Arbor Commercial Mortgage

Blackstone

CWCapital

TPG Capital

Capital Crossing

Bayview Asset Management

Roosevelt Management Company

Shellpoint Partners

PNC Mortgage

Guggenheim Partners

Oaktree Capital Management

Sabal Financial Group

CarVal Investors

Varde Partners

First City Mortgage

Carrington Mortgage Services

Ocwen Financial Corporation

LoanCore Capital

 

 

Schedule 5

 

Asset Schedule Fields

 

	
Category
    	
 
    	
Update Field
    	
 
    	
Origination Fields
    
	
General
    	
 
    	
x
    	
 
    	
Cut-off Date
    
	
General
    	
 
    	
x
    	
 
    	
Loan Number
    
	
General
    	
 
    	
x
    	
 
    	
Product Type
    
	
General
    	
 
    	
x
    	
 
    	
Amortization Type
    
	
General
    	
 
    	
 
    	
 
    	
Note Date
    
	
General
    	
 
    	
 
    	
 
    	
Closing Date
    
	
General
    	
 
    	
 
    	
 
    	
Payment Day Count Method
    
	
General
    	
 
    	
 
    	
 
    	
First Payment Date
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
SIC CODE
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
SIC Description
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
Franchise Code
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
Franchise Name
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
Pari Passu Base Flag
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
Pari Passu Loan ID #1
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
Pari Passu Loan ID #2
    
	
SBC Specific
    	
 
    	
 
    	
 
    	
Pari Passu Loan ID #3
    
	
Amort
    	
 
    	
x
    	
 
    	
Original Term to Maturity
    
	
Amort
    	
 
    	
x
    	
 
    	
Original Amortization Term
    
	
Amort
    	
 
    	
x
    	
 
    	
Original Mortgage Interest Rate
    
	
Amort
    	
 
    	
x
    	
 
    	
Original Loan Amount
    
	
Amort
    	
 
    	
x
    	
 
    	
Original P&I Amount
    
	
Amort
    	
 
    	
x
    	
 
    	
Original PITI Amount
    
	
Amort
    	
 
    	
x
    	
 
    	
Original Interest Only Term
    
	
Amort
    	
 
    	
x
    	
 
    	
Servicing Rate
    
	
Amort
    	
 
    	
 
    	
 
    	
Balloon Flag
    
	
Amort
    	
 
    	
 
    	
 
    	
Balloon Date
    
	
ARMs
    	
 
    	
x
    	
 
    	
ARM Flag
    
	
ARMs
    	
 
    	
x
    	
 
    	
Index Type
    
	
ARMs
    	
 
    	
x
    	
 
    	
Margin
    
	
ARMs
    	
 
    	
x
    	
 
    	
Initial Fixed Rate Period
    
	
ARMs
    	
 
    	
x
    	
 
    	
Subsequent Interest Rate Reset Period
    
	
ARMs
    	
 
    	
x
    	
 
    	
ARM First Interest Rate Change Date
    
	
ARMs
    	
 
    	
x
    	
 
    	
ARM Next Interest Rate Change Date
    
	
ARMs
    	
 
    	
x
    	
 
    	
Initial Interest Rate Cap
    
	
ARMs
    	
 
    	
x
    	
 
    	
Subsequent Interest Rate Cap
    
	
ARMs
    	
 
    	
x
    	
 
    	
Life Floor
    
	
ARMs
    	
 
    	
x
    	
 
    	
Life Cap
    
	
ARMs
    	
 
    	
x
    	
 
    	
ARM Look-back Days
    
	
LTV
    	
 
    	
 
    	
 
    	
Orig LTV
    
	
LTV
    	
 
    	
 
    	
 
    	
Orig CLTV
    
	
Location
    	
 
    	
 
    	
 
    	
Property Address
    
	
Location
    	
 
    	
 
    	
 
    	
Property City
    
	
Location
    	
 
    	
 
    	
 
    	
Property State
    
	
Location
    	
 
    	
 
    	
 
    	
Property Zip Code
    

 

 

	
Location
    	
 
    	
 
    	
 
    	
Property MSA
    
	
Borrower
    	
 
    	
 
    	
 
    	
Property Type
    
	
Borrower
    	
 
    	
 
    	
 
    	
Occupancy Flag
    
	
Borrower
    	
 
    	
 
    	
 
    	
Loan Purpose
    
	
Borrower
    	
 
    	
 
    	
 
    	
Self Employment
    
	
Penalty
    	
 
    	
 
    	
 
    	
Prepay Penalty Flag
    
	
Penalty
    	
 
    	
 
    	
 
    	
Prepay Penalty Term
    
	
Penalty
    	
 
    	
 
    	
 
    	
Prepay Penalty Type
    
	
Misc
    	
 
    	
 
    	
 
    	
Escrow Flag
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #1
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #1 Asset Type
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #1 Asset Lien position
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #2
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #2 Asset Type
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #2 Asset Lien position
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #3
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #3 Asset Type
    
	
Collateral
    	
 
    	
x
    	
 
    	
Collateral File ID #3 Asset Lien position
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Category
    	
 
    	
 
    	
 
    	
Post-Origination Fields
    
	
Market Value
    	
 
    	
 
    	
 
    	
Acquisition Price
    
	
Updated Amort
    	
 
    	
 
    	
 
    	
Remaining Term
    
	
Updated Amort
    	
 
    	
x
    	
 
    	
Current Mortgage Interest Rate
    
	
Updated Amort
    	
 
    	
x
    	
 
    	
Current Loan Amount
    
	
Updated Amort
    	
 
    	
x
    	
 
    	
Current P&I Payment
    
	
Updated Amort
    	
 
    	
x
    	
 
    	
Current PITI Payment
    
	
Updated Amort
    	
 
    	
x
    	
 
    	
Current Interest Only Remaining Term
    
	
Collat Valuation
    	
 
    	
x
    	
 
    	
Subsequent Valuation Flag
    
	
Collat Valuation
    	
 
    	
x
    	
 
    	
Most Recent Property Valuation Type
    
	
Collat Valuation
    	
 
    	
x
    	
 
    	
Most Recent Property Valuation Date
    
	
Collat Valuation
    	
 
    	
x
    	
 
    	
Most Recent Property Value (As Is)
    
	
Collat Valuation
    	
 
    	
x
    	
 
    	
Most Recent Property Value (Liquidation Value)
    
	
LTV
    	
 
    	
 
    	
 
    	
Current LTV
    
	
LTV
    	
 
    	
 
    	
 
    	
Current CLTV
    
	
Borrower Credit
    	
 
    	
 
    	
 
    	
Current Fico1
    
	
Borrower Credit
    	
 
    	
 
    	
 
    	
Current Fico1 Date
    
	
Borrower Credit
    	
 
    	
 
    	
 
    	
Current Fico2
    
	
Borrower Credit
    	
 
    	
 
    	
 
    	
Current Fico2 Date
    
	
Modification
    	
 
    	
x
    	
 
    	
Modification Flag
    
	
Modification
    	
 
    	
x
    	
 
    	
Modification Amortization Type
    
	
Modification
    	
 
    	
x
    	
 
    	
Modification Date (First)
    
	
Modification
    	
 
    	
x
    	
 
    	
Modification Date (Last)
    
	
Modification
    	
 
    	
x
    	
 
    	
Principal Forborne
    
	
Modification
    	
 
    	
x
    	
 
    	
Principal Forgiven
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Loan Delinquency Status
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Delinquency Method
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Next Due Date
    

 

 

	
Delinquency
    	
 
    	
x
    	
 
    	
Current Interest Paid Through Date
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (1)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (1)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (2)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (2)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (3)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (3)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (4)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (4)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (5)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (5)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (6)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (6)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (7)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (7)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (8)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (8)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (9)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (9)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (10)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (10)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (11)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (11)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date (12)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Previous Interest Paid Through Date Payment Amount   (12)
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Months in Delinquency
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Non-Accrual Flag
    
	
Delinquency
    	
 
    	
x
    	
 
    	
Non-Accrual Date
    
	
Delinquency
    	
 
    	
x
    	
 
    	
x30
    
	
Delinquency
    	
 
    	
x
    	
 
    	
x60
    
	
Delinquency
    	
 
    	
 
    	
 
    	
T&I Escrow Balance
    
	
Delinquency
    	
 
    	
 
    	
 
    	
T&I Escrow Advances
    
	
Delinquency
    	
 
    	
 
    	
 
    	
Corporate Advances
    
	
Foreclosure
    	
 
    	
x
    	
 
    	
FC Flag
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Status Code
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Setup Date
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Judgment Date
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Referral Date
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Start Date (Actual)
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Suspend Date
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Suspense Reason
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Removal Date
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Removal Reason
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Sale Scheduled Date
    
	
Foreclosure
    	
 
    	
 
    	
 
    	
FC Sale Date
    
	
REO
    	
 
    	
x
    	
 
    	
REO Flag
    
	
REO
    	
 
    	
x
    	
 
    	
REO acquisition date
    
	
REO
    	
 
    	
x
    	
 
    	
List Price
    
	
REO
    	
 
    	
x
    	
 
    	
List Date
    

 

 

	
REO
    	
 
    	
x
    	
 
    	
REO expected Sale Date
    
	
BK
    	
 
    	
x
    	
 
    	
BK Flag
    
	
BK
    	
 
    	
 
    	
 
    	
BK File Date
    
	
BK
    	
 
    	
 
    	
 
    	
BK Status Code
    
	
BK
    	
 
    	
 
    	
 
    	
BK Chapter Type
    
	
BK
    	
 
    	
 
    	
 
    	
BK Case Number
    
	
BK
    	
 
    	
 
    	
 
    	
BK Relief Filing Date
    
	
BK
    	
 
    	
 
    	
 
    	
BK Relief Granted Date
    
	
BK
    	
 
    	
 
    	
 
    	
BK Removal Date
    
	
BK
    	
 
    	
 
    	
 
    	
BK Post Petition Due Date
    
	
BK
    	
 
    	
 
    	
 
    	
BK Removal Reason
    
	
Liquidations
    	
 
    	
x
    	
 
    	
Loan Balance at Charge-off
    
	
Liquidations
    	
 
    	
x
    	
 
    	
Net Recovery from Property Sale
    

 

 

EXHIBIT A-1

 

FORM OF TRANCHE A
 PROMISSORY NOTE

 

	
$[                       ]
    	
June 27, 2014
    
	
 
    	
New York, New York
    

 

FOR VALUE RECEIVED, READYCAP LENDING, LLC, a Delaware limited liability company (the “Borrower”) hereby promises to pay to the order of JPMORGAN CHASE BANK, N.A. (the “Lender”), at the principal office of the Lender at [                                               ], in lawful money of the United States, and in immediately available funds, the principal sum of [                                               ] DOLLARS ($[                  ]) (or such lesser amount as shall equal the Tranche A Facility Amount), on the dates and in the principal amounts provided in the Loan Agreement, and to pay interest on the unpaid principal amount of each such Tranche A Advance, at such office, in like money and funds, for the period commencing on the date of such Tranche A Advance until such Tranche A Advance shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement.

 

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

 

This Tranche A Note is one of the Notes referred to in that certain Master Loan and Security Agreement, dated as June 27, 2014, among the Borrower, Sutherland Asset I, LLC, Sutherland Asset Management Corporation, and the Lender (as such agreement may be amended or modified from time to time, herein called the “Loan Agreement”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.  Upon occurrence of any Event of Default with respect to Tranche A, the principal hereof, and all accrued interest thereon, may be declared or shall automatically become, due and payable pursuant to the Loan Agreement.

 

The Borrower agrees to pay all the Lender’s costs of collection and enforcement (including reasonable attorneys’ fees and disbursements of Lender’s counsel) in respect of this Tranche A Note when incurred, including, without limitation, reasonable attorneys’ fees through appellate proceedings.

 

Notwithstanding the pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees that the Borrower’s obligations under this Tranche A Note are recourse obligations of the Borrower to which the Borrower pledges its full faith and credit.

 

The Borrower, and any endorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayments

 

 

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

 

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

 

Any enforcement action relating to this Note may be brought by motion for summary judgment in lieu of a complaint pursuant to Section 3213 of the New York Civil Practice Law and Rules.  The Borrower hereby submits to New York jurisdiction with respect to any action brought with respect to this Tranche A Note and waives any right with respect to the doctrine of forum non conveniens with respect to such transactions.

 

[SIGNATURE PAGE TO FOLLOW]

 

 

This Tranche A Note shall be governed by and construed under the laws of the State of New York (without reference to choice of law doctrine but with reference to Section 51401 of the New York General Obligations Law, which by its terms applies to this Tranche A Note) whose laws the Borrower expressly elects to apply to this Tranche A Note.  The Borrower agrees that any action or proceeding brought to enforce or arising out of this Tranche A Note may be commenced in the Supreme Court of the state of New York, Borough of Manhattan, or in the District Court of the United States for the Southern District of New York.

 

	
 
    	
READYCAP LENDING, LLC, as Borrower
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

Sutherland Asset I, LLC, a Delaware limited liability company (“Sutherland”), acknowledges and agrees that it shall be jointly and severally liable for the full, complete and punctual performance and satisfaction of all obligations of ReadyCap Lending LLC, a Delaware limited liability company (“ReadyCap”, together with Sutherland, each a “Borrower” and, collectively, the “Borrowers”), under this Tranche A Note.  Accordingly, each Borrower waives any and all notice of creation, renewal, extension or accrual of any of the obligations and notice of or proof of reliance by the Lender upon such Borrower’s joint and several liability.  Each Borrower waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon such Borrower with respect to the obligations.  When pursuing its rights and remedies hereunder against either Borrower, the Lender may, but shall be under no obligation to, pursue such rights and remedies hereunder against either Borrower or any other Person or against any collateral security for the obligations or any right of offset with respect thereto, and any failure by the Lender to pursue such other rights or remedies or to collect any payments from such Borrower or any such other Person to realize upon any such collateral security or to exercise any such right of offset, or any release of such Borrower or any such other Person or any such collateral security, or right of offset, shall not relieve such Borrower of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender against such Borrower.

 

	
SUTHERLAND ASSET I, LLC, as Borrower
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

SCHEDULE OF ADVANCES

 

This Tranche A Note evidences Tranche A Advances made under the within-described Loan Agreement to the Borrower, on the dates, in the principal amounts and bearing interest at the rates set forth below, and subject to the payment and prepayments of principal set forth below:

 

	
Date Made
    	
 
    	
Principal Amount
   of Advance
    	
 
    	
Interest
   Rate
    	
 
    	
Amount Paid
   or Prepaid
    	
 
    	
Unpaid Principal
   Amount
    	
 
    	
Notation
   Made by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

EXHIBIT A-2

 

FORM OF TRANCHE B
 PROMISSORY NOTE

 

	
$[                         ]
    	
June 27, 2014
    
	
 
    	
New York, New York
    

 

FOR VALUE RECEIVED, SUTHERLAND ASSET I, LLC, a Delaware limited liability company (the “Borrower”) hereby promises to pay to the order of JPMORGAN CHASE BANK, N.A.(the “Lender”),at the principal office of the Lender at [                                               ], in lawful money of the United States, and in immediately available funds, the principal sum of [                                               ] DOLLARS ($[                  ]) (or such lesser amount as shall equal the Tranche B Facility Amount), on the dates and in the principal amounts provided in the Loan Agreement, and to pay interest on the unpaid principal amount of each such Tranche B Advance, at such office, in like money and funds, for the period commencing on the date of such Tranche B Advance until such Tranche B Advance shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement.

 

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

 

This Tranche B Note is one of the Notes referred to in that certain Master Loan and Security Agreement, dated as June 27, 2014, among the Borrower, ReadyCap Lending LLC, Sutherland Asset Management Corporation and the Lender (as such agreement may be amended or modified from time to time, herein called the “Loan Agreement”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.  Upon occurrence of any Event of Default with respect to Tranche B, the principal hereof, and all accrued interest thereon, may be declared or shall automatically become, due and payable pursuant to the Loan Agreement.

 

The Borrower agrees to pay all the Lender’s costs of collection and enforcement (including reasonable attorneys’ fees and disbursements of Lender’s counsel) in respect of this Tranche B Note when incurred, including, without limitation, reasonable attorneys’ fees through appellate proceedings.

 

Notwithstanding the pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees that the Borrower’s obligations under this Tranche B Note are recourse obligations of the Borrower to which the Borrower pledges its full faith and credit.

 

The Borrower, and any endorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayments

 

 

of this Tranche B Note, (b) expressly agree that this Tranche B Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further Collateral, the release of any Collateral for this Tranche B Note, the release of any party primarily or secondarily liable hereon, and (c) expressly agree that it will not be necessary for the Lender, in order to enforce payment of this Tranche B Note, to first institute or exhaust the Lender’s remedies against the Borrower or any other party liable hereon or against any Collateral for this Tranche B Note.  No extension of time for the payment of this Tranche B Note, or any installment hereof, made by agreement by the Lender with any person now or hereafter liable for payment of this Tranche B Note, shall affect the liability under this Tranche B Note of the Borrower, even if the Borrower is not a party to such agreement; provided, however, that the Lender and the Borrower.

 

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

 

Any enforcement action relating to this Note may be brought by motion for summary judgment in lieu of a complaint pursuant to Section 3213 of the New York Civil Practice Law and Rules.  The Borrower hereby submits to New York jurisdiction with respect to any action brought with respect to this Tranche B Note and waives any right with respect to the doctrine of forum non conveniens with respect to such transactions.

 

[SIGNATURE PAGE TO FOLLOW]

 

 

This Tranche B Note shall be governed by and construed under the laws of the State of New York (without reference to choice of law doctrine but with reference to Section 5-1401 of the New York General Obligations Law, which by its terms applies to this Tranche B Note) whose laws the Borrower expressly elects to apply to this Tranche B Note.  The Borrower agrees that any action or proceeding brought to enforce or arising out of this Tranche B Note may be commenced in the Supreme Court of the state of New York, Borough of Manhattan, or in the District Court of the United States for the Southern District of New York.

 

	
 
    	
SUTHERLAND ASSET I, LLC, as Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

SCHEDULE OF ADVANCES

 

This Tranche B Note evidences Tranche B Advances made under the within-described Loan Agreement to the Borrower, on the dates, in the principal amounts and bearing interest at the rates set forth below, and subject to the payment and prepayments of principal set forth below:

 

	
Date Made
    	
 
    	
Principal Amount
   of Advance
    	
 
    	
Interest
   Rate
    	
 
    	
Amount Paid
   or Prepaid
    	
 
    	
Unpaid Principal
   Amount
    	
 
    	
Notation
   Made by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

EXHIBIT B-1

 

FORM OF REQUEST FOR BORROWING AND NOTICE OF PLEDGE

 

Reference is made to the Master Loan and Security Agreement, dated as of June 27, 2014 (the “Loan Agreement”) among READYCAP LENDING, LLC and SUTHERLAND ASSET I, LLC (each a “Borrower” and collectively the “Borrowers”), SUTHERLAND ASSET MANAGEMENT CORPORATION (the “Guarantor”) and JPMORGAN CHANSE BANK, N.A. (the “Lender”) as such agreement may be amended or modified from time to time.  In accordance with Section 2.03 of the Loan Agreement, the undersigned Borrowers hereby request that you, the Lender, make Advances to us in connection with our delivery of Pledged Assets as provided below.

 

	
Lender:
    	
JPMORGAN CHASE BANK, N.A.
    
	
 
    	
 
    
	
Borrowers:
    	
READYCAP LENDING, LLC and SUTHERLAND ASSET I, LLC
    
	
 
    	
 
    

 

	
 
    	
 
    	
 
    
	
Requested Funding Date:
    	
June 27, 2014
    	
 
    
	
 
    	
 
    	
 
    
	
Transmission Date:
    	
June 27, 2014
    	
 
    
	
 
    	
 
    	
 
    
	
Transmission Time:
    	
 
    	
 
    

 

	
 
    	
 
    
	
Wire Instructions:
    	
Wire to ReadyCap Lending, LLC (Tranche A)
    
	
 
    	
 
    

 

	
 
    	
 
    	
 
    

 

	
 
    	
ABA#
    	
 
    	
 
    
	
 
    	
GLA#
    	
 
    	
 
    

 

	
 
    	
For further credit: TAS#
    	
 
    	
 
    

 

	
 
    	
Account Name:
    	
 
    	
 
    

 

	
 
    	
Attn:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Wire to Sutherland Asset I, LLC (Tranche B)
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
					

 

	
 
    	
ABA#
    	
 
    	
 
    
	
 
    	
GLA#
    	
 
    	
 
    

 

	
 
    	
For further credit: TAS#
    	
 
    	
 
    

 

	
 
    	
Account Name:
    	
 
    	
 
    

 

	
 
    	
Attn:
    	
 
    	
 
    

 

 

	
Aggregate Request
    	
 
    
	
 
    	
 
    
	
Advance Amount:
    	
$
    
	
 
    	
 
    
	
Number of Eligible Assets to be Pledged:
    	
 
    
	
 
    	
 
    
	
UPB of Eligible Assets to be Pledged:
    	
$
    
	
 
    	
 
    
	
Tranche A
    	
 
    
	
 
    	
 
    
	
Advance Amount:
    	
$
    
	
 
    	
 
    
	
Number of Eligible Tranche A Assets to be   Pledged:
    	
 
    
	
 
    	
 
    
	
UPB of Eligible Tranche A Assets to be Pledged:
    	
$
    
	
 
    	
 
    
	
Tranche B
    	
 
    
	
 
    	
 
    
	
Advance Amount:
    	
$
    
	
 
    	
 
    
	
Number of Eligible Tranche B Assets to be   Pledged:
    	
 
    
	
 
    	
 
    
	
UPB of Eligible Tranche B Assets to be Pledged:
    	
$
    

 

Attached hereto is an Asset Schedule identifying the Eligible Assets to be pledged to the Lender as Collateral for the Advance requested hereby and to be included in the respective Borrowing Bases in connection with the Advance requested hereby.

 

Each Borrower hereby certifies by making this Request for Borrowing and Notice of Pledge that (a) all information contained herein and in any schedules attached hereto are true, accurate and complete, (b) all conditions precedent to making an Advance required under the Loan Agreement shall be satisfied by the Funding Date, (c) no Default, Amortization Event or Event of Default has occurred and is continuing on the date hereof nor will occur after giving effect to such Advance as a result of such Advance, (d) each of the representations and warranties made by each Borrower in or pursuant to the Loan Documents is true and correct in all material respects on and as of such date (in the case of the representations and warranties in respect of Eligible Assets, solely with respect to Eligible Assets being included the Borrowing Base on the Funding Date) as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date), (e) each Borrower is in compliance with all governmental licenses and authorizations and is qualified to do business and is in good standing in all required jurisdictions, (f) the Pledged Tranche A Assets have been delivered to the FTA pursuant to the Multiparty Agreement, (g) the Pledged

 

 

Tranche B Assets have been delivered to the Custodian pursuant to the Custodial Agreement and (h) such Advance will not cause a Borrowing Base Deficiency.

 

Each Borrower agrees to indemnify the Lender and hold it harmless against any Losses incurred by the Lender as a result of any failure by the Borrowers to timely deliver the Pledged Assets subject to this Request for Borrowing and Notice of Pledge.

 

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

 

[Signature Page Follows]

 

 

	
Requested by:
    	
 
    
	
 
    	
 
    
	
READYCAP LENDING, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SUTHERLAND ASSET I, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

EXHIBIT C

 

FORM OF REMITTANCE REPORT

 

 

EXHIBIT D

 

FORM OF SECTION 7 CERTIFICATE

 

Reference is hereby made to the Master Loan and Security Agreement dated as of June 27, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), between READYCAP LENDING, LLC and SUTHERLAND ASSET I, LLC (each a “Borrower” and together, the “Borrowers”), SUTHERLAND ASSET MANAGEMENT CORPORATION (the “Guarantor”) and JPMORGAN CHASE BANK, N.A. (the “Lender”).  Pursuant to the provisions of Section 7 of the Agreement, the undersigned hereby certifies that:

 

1.             It is a       natural individual person,          treated as a corporation for U.S. federal income tax purposes,          disregarded for federal income tax purposes (in which case a copy of this Section 7 Certificate is attached in respect of its sole beneficial owner), or          treated as a partnership for U.S. federal income tax purposes (one must be checked).

 

2.             It is the beneficial owner of amounts received pursuant to the Agreement.

 

3.             It is not a bank, as such term is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”), or the Agreement is not, with respect to the undersigned, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of such section.

 

4.             It is not a 10-percent shareholder of either Borrower within the meaning of Section 871(h)(3) or 881(c)(3)(B) of the Code.

 

5.             It is not a controlled foreign corporation that is related to either Borrower within the meaning of Section 881(c)(3)(C) of the Code.

 

6.             Amounts paid to it under the Facility Documents are not effectively connected with its conduct of a trade or business in the United States.

 

	
 
    	
[NAME OF UNDERSIGNED]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    

 

,

 

 

EXHIBIT E

 

ASSET FILE

 

A.            With respect to each SBC Loan that is not subject to a Participation, the loan file related to such SBC Loan shall include each of the following items, as applicable:

 

(i)                                     the original SBC Loan Note, or a lost note affidavit in the form approved by the Lender, including a complete chain of endorsements from the originator of such SBC Loan Note endorsed in blank, with respect to any non-SBA 7(a) Loan, or in the name of ReadyCap, with respect to any SBA 7(a) Loan; provided that the Borrowers may deliver lost note affidavits in form and substance acceptable to Lender for the SBC Loan Notes not to exceed ten percent (10%) of the aggregate Lender’s Advance Amount outstanding;*

 

(ii)                                  an original or copy of the Mortgage with evidence of recording thereon;*

 

(iii)                               an original or copy of each intervening assignment thereof, evidencing an unbroken chain of title from the originator of such Mortgage, with evidence of recording thereon;*

 

(iv)                              an original or a copy of each assignment of the Mortgage in blank in recordable form, with respect to any non-SBA 7(a) Loan, or in the name of ReadyCap, with respect to any SBA 7(a) Loan;**

 

(v)                                 an original or copy of the assignment of leases and rents (if such item is a document separate from the Mortgage) with evidence of recording thereon;*

 

(vi)                              an original or copy of each intervening assignment of assignment of leases and rents, with evidence of recording thereon, evidencing a complete chain of title from the originator of such Mortgage;*

 

(vii)                           an original or a copy of each assignment of assignment of leases and rents in blank in recordable form, with respect to any non-SBA 7(a) Loan, or in the name of ReadyCap, with respect to any SBA 7(a) Loan;**

 

(viii)                        an original or certified true copy of any security agreement, chattel mortgage or equivalent document (if any such item is a document separate from the Mortgage, if any) executed in connection with such SBC Loan to the extent such document secures property backing more than fifty percent (50%) of the principal balance of such SBC Loan;*

 

(ix)                              an original or copy of any consolidation, extension or modification agreement with evidence of recording thereon;**

 

(x)                                 an original title insurance policy or a copy thereof, or a commitment to issue title insurance related to each Mortgage;***

 

(xi)                              an original of any guarantee on SBA Form 148 or 148L, if applicable or an original or a copy of any personal guarantee required by the originator of the loan;**

 

 

(xii)                           an original of any loan agreement, indemnity, escrow agreement, replacement reserve agreement, cash management or lockbox agreement, or any other similar instrument or agreement, in each case if a part of and as executed in connection with the SBC Loan Note or any Mortgage;

 

(xiii)                        an original or copy of the UCC-1 Financing Statement, if any, sufficient to perfect the security interest held by the originator of the SBC Loan in and to the personalty of the Borrowers with evidence of recording/filing thereon in the form returned by the jurisdiction;

 

(xiv)                       an original or copy of each intervening UCC assignment, with evidence of recording/filing thereon in the form returned by the jurisdiction, evidencing a complete chain of title of the UCC Financing Statement from the originator of such SBC Loan;

 

(xv)                          an original UCC assignment in blank in recordable form, with respect to any non-SBA 7(a) Loan, or in the name of ReadyCap, with respect to any SBA 7(a) Loan;

 

(xvi)                       an original power of attorney, if any, (with evidence of recording thereon) granted by the Borrowers if the SBC Loan Note, any Mortgage or any other document or instrument referred to herein was not signed by the Borrowers; and

 

(xvii)                    any assumption agreement.

 

B.            With respect to each SBC Loan that is subject to a Participation, the loan file related to such SBC Loan shall include each of the following items, as applicable:

 

(i)                                     an original or copy of the fully executed Participation Agreement relating to the purchase or sale, as applicable, of an interest in the non-guaranteed portion of the loan, and all intervening assignments;* and

 

(ii)                                  an assignment of the Participation Agreement to ReadyCap.*

 

C.            With respect to Transferred 7(a) Loans, the loan file related to each Transferred 7(a) Loan shall also include each of the following items, as applicable:

 

(i)                                     For loans originated by the Originator under the SBA’s Preferred Lender Participation Program, the Loan Eligibility Checklist;** and

 

(ii)                                  an original or copy of the (a) SBA Loan Authorization and (b) the loan agreement with all related amendments thereto.*

 

NOTATION KEY

 

*Fatal Exceptions if missing.  Market Value of zero until delivered.

 

**Critical Exceptions if missing.  Advance 50% of calculated Lender’s Advance Amount for 30 days.  If not delivered within 30 days, becomes Fatal Exception and is reduced to a Market Value of zero until delivered.

 

***Title Policy Exception.  If there exists no evidence of title insurance at all, then it will be considered a Fatal Exception and the Market Value will be zero until title policy is delivered.  If there exists a commitment to issue a title insurance policy, Advance 50% of

 

 

calculated Lender’s Advance Amount for 60 days.  If title policy is not delivered within 60 days, becomes Fatal Exception and is reduced to a Market Value of zero until delivered.

 

No asterisk indicates no reduction if missing.

 

 

EXHIBIT F

 

FORM OF SERVICER NOTICE

 

[Date]

 

[                        ], as Servicer

[ADDRESS]

Attention:

 

Re:                             Master Loan and Security Agreement, dated as of June 27, 2014 (the “Loan Agreement”), by and between READYCAP LENDING, LLC and SUTHERLAND ASSET I, LLC (each a “Borrower” and, collectively, the “Borrowers”), SUTHERLAND ASSET MANAGEMENT CORPORATION (the “Guarantor”)] and JPMorgan Chase Bank, N.A. (the “Lender”).

 

Ladies and Gentlemen:

 

[                                     ] (the “Servicer”) is servicing certain small business loans for the Borrowers pursuant to that certain Servicing Agreement between the Servicer and the Borrowers.  Pursuant to the Loan Agreement between the Lender and the Borrowers, the Servicer is hereby notified that the Borrowers have pledged to the Lender certain small business loans, which are serviced by Servicer which are subject to a security interest in favor of the Lender.

 

Upon receipt of a notice of Event of Default from the Lender in which the Lender shall identify the small business loans which are then pledged to the Lender under the Loan Agreement (the “SBC Loans”), the Servicer shall segregate all amounts collected on account of such SBC Loans, hold them in trust for the sole and exclusive benefit of the Lender, and remit such collections in accordance with the Lender’s instructions below.  Servicer shall follow the instructions of the Lender with respect to the SBC Loans, and shall deliver to the Lender any information with respect to the SBC Loans reasonably requested by the Lender.  Each Borrower hereby notifies and instructs the Servicer and the Servicer is hereby authorized and instructed to remit any and all amounts which would be otherwise payable to the Borrowers with respect to the SBC Loans to the following account which instructions are irrevocable without the prior written consent of the Lender:

 

	
 
    	
[                                ]

[                                ]

Account No.    [                ]

ABA No.    [                ]

Account Name:    [                ]

Attention:    [                ]
    

 

Upon written notice following the occurrence and during the continuance of an Event of Default, the Lender shall have the right to immediately terminate Servicer’s right to service the SBC Loans without payment of any penalty or termination fee under the Servicing Agreement.  Upon receipt of such notice, the Borrowers and the Servicers shall cooperate in transferring the

 

 

 

applicable servicing of the SBC Loans to a successor servicer appointed by the Lender in its sole discretion.

 

Notwithstanding any contrary information which may be delivered to the Servicer by the Borrowers, the Servicer may conclusively rely on any information or notice of Event of Default delivered by the Lender, and the Borrowers shall indemnify and hold the Servicer harmless for any and all claims asserted against it for any actions taken in good faith by the Servicer in connection with the delivery of such information or notice of Event of Default.

 

The Lender shall be an intended third-party beneficiary of the Servicing Agreement.

 

Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to the Lender promptly upon receipt.  Any notices to the Lender should be delivered to the following address:  JPMorgan Chase Bank, N.A., 383 Madison Avenue, New York, New York 10179, Attention:  John G. Winchester, Telephone:  212.834.4998, E-mail: john.g.winchester@jpmorgan.com.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
READYCAP LENDING, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SUTHERLAND ASSET I, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

	
 
    	
ACKNOWLEDGED:
    
	
 
    	
 
    
	
 
    	
[SERVICER],
   as Servicer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:Exhibit 10.19

 

EXECUTION COPY

 

MASTER REPURCHASE AGREEMENT

 

 

Dated as of December 18, 2014

 

 

by and among

 

READYCAP COMMERCIAL, LLC and

SUTHERLAND ASSET I, LLC,

 

as Sellers, together with the other Sellers that may from time to time be added hereto in accordance with the provisions hereof

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Depository

 

 

and

 

 

DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH,

 

 

as Buyer

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
1.
    	
APPLICABILITY
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
3.
    	
INITIATION;   CONFIRMATION; TERMINATION; FEES; EXTENSION
    	
31
    
	
 
    	
 
    	
 
    
	
4.
    	
MARGIN MAINTENANCE
    	
36
    
	
 
    	
 
    	
 
    
	
5.
    	
INCOME PAYMENTS AND   PRINCIPAL PAYMENTS
    	
38
    
	
 
    	
 
    	
 
    
	
6.
    	
SECURITY INTEREST
    	
41
    
	
 
    	
 
    	
 
    
	
7.
    	
PAYMENT, TRANSFER AND   CUSTODY
    	
42
    
	
 
    	
 
    	
 
    
	
8.
    	
SALE, TRANSFER,   HYPOTHECATION OR PLEDGE OF PURCHASED LOANS
    	
46
    
	
 
    	
 
    	
 
    
	
9.
    	
REPRESENTATIONS
    	
46
    
	
 
    	
 
    	
 
    
	
10.
    	
NEGATIVE COVENANTS OF   SELLER
    	
51
    
	
 
    	
 
    	
 
    
	
11.
    	
AFFIRMATIVE COVENANTS   OF SELLER
    	
53
    
	
 
    	
 
    	
 
    
	
12.
    	
[Intentionally Omitted]
    	
57
    
	
 
    	
 
    	
 
    
	
13.
    	
EVENTS OF DEFAULT;   REMEDIES
    	
57
    
	
 
    	
 
    	
 
    
	
14.
    	
[INTENTIONALLY OMITTED]
    	
64
    
	
 
    	
 
    	
 
    
	
15.
    	
RECORDING OF   COMMUNICATIONS
    	
64
    
	
 
    	
 
    	
 
    
	
16.
    	
NOTICES AND OTHER   COMMUNICATIONS
    	
64
    
	
 
    	
 
    	
 
    
	
17.
    	
ENTIRE AGREEMENT;   SEVERABILITY
    	
65
    
	
 
    	
 
    	
 
    
	
18.
    	
ASSIGNABILITY
    	
65
    
	
 
    	
 
    	
 
    
	
19.
    	
GOVERNING LAW
    	
66
    
	
 
    	
 
    	
 
    
	
20.
    	
NO WAIVERS, ETC.
    	
67
    
	
 
    	
 
    	
 
    
	
21.
    	
USE OF EMPLOYEE PLAN   ASSETS
    	
67
    
	
 
    	
 
    	
 
    
	
22.
    	
INTENT
    	
67
    
	
 
    	
 
    	
 
    
	
23.
    	
DISCLOSURE RELATING TO   CERTAIN FEDERAL PROTECTIONS
    	
69
    
	
 
    	
 
    	
 
    
	
24.
    	
CONSENT TO   JURISDICTION; WAIVER OF JURY TRIAL
    	
69
    
	
 
    	
 
    	
 
    
	
25.
    	
NO RELIANCE
    	
70
    
	
 
    	
 
    	
 
    
	
26.
    	
INDEMNITY
    	
71
    
	
 
    	
 
    	
 
    
	
27.
    	
DUE DILIGENCE
    	
73
    
	
 
    	
 
    	
 
    
	
28.
    	
SERVICING
    	
74
    
	
 
    	
 
    	
 
    
	
29.
    	
TAXES
    	
76
    
	
 
    	
 
    	
 
    
	
30.
    	
MISCELLANEOUS
    	
78
    
				

 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

	
ANNEX I
    	
 
    	
Names and Addresses for Communications between   Parties
    
	
 
    	
 
    	
 
    
	
EXHIBIT I
    	
 
    	
Form of Confirmation — Purchased Loans
    
	
 
    	
 
    	
 
    
	
EXHIBIT II
    	
 
    	
Form of Additional Seller Joinder Agreement
    
	
 
    	
 
    	
 
    
	
EXHIBIT III
    	
 
    	
Authorized Representatives of Seller
    
	
 
    	
 
    	
 
    
	
EXHIBIT IV
    	
 
    	
Form of Custodial Delivery
    
	
 
    	
 
    	
 
    
	
EXHIBIT V
    	
 
    	
Form of Power of Attorney
    
	
 
    	
 
    	
 
    
	
EXHIBIT VI
    	
 
    	
Representations and Warranties Regarding Individual   Purchased Loans
    
	
 
    	
 
    	
 
    
	
EXHIBIT VII
    	
 
    	
Organizational Chart
    
	
 
    	
 
    	
 
    
	
EXHIBIT VIII
    	
 
    	
[Reserved]
    
	
 
    	
 
    	
 
    
	
EXHIBIT IX
    	
 
    	
Form of Servicer Notice and Agreement
    
	
 
    	
 
    	
 
    
	
EXHIBIT X
    	
 
    	
Prohibited Transferees
    
	
 
    	
 
    	
 
    
	
EXHIBIT XI
    	
 
    	
Underwriting Criteria
    
	
 
    	
 
    	
 
    
	
EXHIBIT XII
    	
 
    	
Conventional Concentration Limit Table
    
	
 
    	
 
    	
 
    
	
EXHIBIT XIII
    	
 
    	
Eligibility Matrices
    
	
 
    	
 
    	
 
    
	
EXHIBIT XIV
    	
 
    	
TI/LC Tracking Schedule
    
	
 
    	
 
    	
 
    
	
EXHIBIT XV
    	
 
    	
Form of Funding Certification
    
	
 
    	
 
    	
 
    
	
EXHIBIT XVI
    	
 
    	
Form of Available Amount Certificate
    
	
 
    	
 
    	
 
    
	
EXHIBIT XVII
    	
 
    	
Form of Data Tape
    
	
 
    	
 
    	
 
    
	
EXHIBIT XVIII
    	
 
    	
Form of CREFC Reports
    

 

 

THIS MASTER REPURCHASE AGREEMENT (this “Agreement”) is dated as of December 18, 2014, by and among READYCAP COMMERCIAL, LLC (“Originator”), a Delaware limited liability company, SUTHERLAND ASSET I, LLC (“Sutherland”, and together with Originator and any Additional Seller, “Sellers”, and each individually, a “Seller”), U.S. BANK NATIONAL ASSOCIATION (“Depository”), a national banking association, and DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH, a branch of a foreign banking institution (“Buyer”).

 

1.                                      APPLICABILITY

 

From time to time, the parties hereto may enter into transactions in which Sellers agree to transfer to Buyer certain Eligible Loans (as hereinafter defined), in each case, against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Sellers such Eligible Loans at a date certain or on demand, as applicable, against the transfer of funds by Sellers.  Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any exhibits identified herein as applicable hereunder.

 

2.                                      DEFINITIONS

 

(a)                                 As used in this Agreement, the following terms shall have the following meanings:

 

“1934 Act” shall have the meaning specified in Section 23(a).

 

“Accelerated Repurchase Date” shall have the meaning specified in Section 13(b)(i) of this Agreement.

 

“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, the obligation of a Servicer to service and administer the Purchased Loans in accordance with “Accepted Servicing Practices”, as defined in the applicable Servicing Agreement.

 

“Act of Insolvency” shall mean with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any Bankruptcy Law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commencement of any such case or proceeding against such party, seeking such an appointment or election, or the filing against such party of an application for a protective decree under the provisions of SIPA, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or election, the issuance of such a protective decree or the entry of an order having a similar effect against such party, or (C) is not dismissed within 60 days, (iii) the making by such party of a general assignment for the benefit of its creditors, or (iv) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due.

 

“Actual Original Purchase Percentage” shall mean, with respect to any Transaction, a percentage equal to the lesser of (x) the Maximum Original Purchase Percentage for such

 

 

Transaction and (y) a percentage designated by the applicable Seller in its sole and absolute discretion, and set forth in the Confirmation for such Transaction.

 

“Additional Advance” shall have the meaning specified in Section 3(p) of this Agreement.

 

“Additional Advance Available Amount” shall have the meaning specified in Section 3(p) of this Agreement.

 

“Additional Advance Date” shall have the meaning specified in Section 3(p) of this Agreement.

 

“Additional Advance Diligence Package” shall mean, with respect to any Future Advance, all documents related to such Future Advance, including, but not limited to, executed leases, updated occupancy and aggregate rent information, updated third-party reports or valuations obtained by the Originator in connection with the Future Advance, the related TI/LC Tracking Schedule and emails or other correspondence with the related Borrower, in each case, to the extent such information is in the Originator’s possession.  If the Future Advance is the final Future Advance with respect to a project, such package shall also include confirmation in form satisfactory to the Originator that the project has been completed to the Originator’s satisfaction.

 

“Additional Advance Pre-Funding Diligence” shall have the meaning set forth in Section 27.

 

“Additional Amounts” shall have the meaning specified in Section 29(b) of this Agreement.

 

“Additional Seller Joinder Agreement” shall mean an Additional Seller Joinder Agreement, substantially in the form of Exhibit II, duly executed and delivered by each party thereto.

 

“Additional Sellers” shall mean, with respect to any Transaction, any additional party or parties entering into this Agreement in its capacity as seller that has executed and delivered an Additional Seller Joinder Agreement.

 

“Affiliate” shall mean, with respect to any specified Person, any other Person controlling or controlled by, or under common control with, such Person.  For the purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”), when used with respect to any specified Person means the possession, direct or indirect, of the power to vote 20% or more of the voting securities of such Person or to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract or otherwise.

 

“Affiliated Hedge Counterparty” shall mean Deutsche Bank AG or any Affiliate of Buyer, as counterparty to any Hedging Transaction.

 

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“Affiliated Hedging Transaction” shall mean a Hedging Transaction entered into by any Seller or Guarantor with an Affiliated Hedge Counterparty.

 

“Aggregate Repurchase Price” shall mean, as of any date of determination, the aggregate Repurchase Price with respect to all Purchased Loans on such date of determination.

 

“Agreement” shall mean this Master Repurchase Agreement, dated as of December 18, 2014 by and among each Seller from time to time party hereto, Depository and Deutsche Bank AG, Cayman Islands Branch, as same may be amended, modified and/or restated from time to time.

 

“Allocable Percentage” shall mean, with respect to any Principal Payment on any Purchased Loan, a fraction (expressed as a percentage) the numerator of which is the Repurchase Price with respect to such Purchased Loan as in effect immediately prior to such Principal Payment (net of any accrued Price Differential and, unless an Event of Default has occurred and is continuing, excluding any other amounts then owing to Buyer), and the denominator of which is the outstanding principal balance of such Purchased Loan immediately prior to such Principal Payment.

 

“Alternative Rate” shall have the meaning specified in Section 3(f) of this Agreement.

 

“Alternative Rate Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the Alternative Rate.

 

“Applicable Servicer Account” shall mean, with respect to each Purchased Loan, the account(s) established by the applicable Servicer into which principal, interest and other payments made by the related Mortgagor or other obligor with respect to such Purchased Loan under the related Loan Documents are remitted (directly or indirectly).

 

“Applicable Spread” shall mean, with respect to each Transaction (i) prior to the occurrence of an Event of Default, 2.25% and (ii) following an Event of Default, 5.25%; provided, however, that with respect to each Transaction related to a Purchased Loan that, as of any date of determination, was originated at least nine (9) months prior to such date of determination, the Applicable Spread shall mean (i) 2.50% prior to the occurrence of an Event of Default and (ii) 5.50% following an Event of Default.

 

“Appraisal” shall mean an appraisal which (i) satisfies the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the guidelines of the Uniform Standards of Professional Appraisal Practice, each as in effect on the date of such appraisal, (ii) was conducted by an appraiser who (A) is certified by the state in which such appraiser is located, (B) (x) has received an MAI designation from the Appraisal Institute or (y) is named on the Originator’s approved list of appraisers (which list may be updated from time to time with the prior consent of the Buyer) and (C) is satisfactory to the Buyer in its reasonable discretion and (iii) is not based on assumptions provided by or influenced by any Seller Party, any equity holder in any Seller Party, or any Affiliates of the foregoing, other than in accordance with customary market practices.

 

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“Approved Hedging Transaction” shall mean a Hedging Transaction which has been collaterally assigned to Buyer in accordance with the terms of the underlying Hedging Transaction pursuant to documentation which provides Buyer with the right to exercise termination rights and receive funds directly and which is otherwise in form and substance satisfactory to Buyer in its reasonable discretion.

 

“As-Is Debt Service Coverage Ratio” shall mean, with respect to any Mortgage Loan on any date of determination, the ratio obtained by dividing (a) the As-Is Net Operating Income of the related Mortgaged Property or Properties by (b) the product of (i) the Principal Balance of such Mortgage Loan and (ii) the related Assumed Interest Rate.

 

“As-Is Debt Yield” shall mean, as of any date of determination and with respect to any Mortgage Loan, the ratio of the As-Is Net Operating Income of the Mortgaged Property related to such Mortgage Loan to the Principal Balance of such Mortgage Loan.

 

“As-Is Net Operating Income” shall mean, with respect to any Mortgaged Property or Properties as of any date of determination, the amount of annualized cash flow available “as-is” for debt service, based on the most recent financial statements of the related Mortgagor.

 

“Assignment of Leases” shall mean, with respect to any Purchased Loan, an assignment of leases and rents thereunder, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the Mortgaged Property is located to reflect the assignment of leases.

 

“Assignment of Mortgage” shall mean, with respect to any Purchased Loan, an assignment of the mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the assignment and pledge of the Mortgage, subject to the terms, covenants and provisions of this Agreement.

 

“Assumed Interest Rate” shall mean, as of any date of determination, and with respect to any Mortgage Loan (i) that is a fixed-rate Mortgage Loan, the fixed rate of interest on such Mortgage Loan as of such date of determination and (ii) that is an adjustable-rate Mortgage Loan, the greater of (A) the initial fixed rate of interest on such Mortgage Loan and (B) the variable rate of interest on such Mortgage Loan, assuming an index equal to the swap rate at the duration of the related Mortgage Loan without regard to pre-payments.

 

“Availability Fee” shall have the meaning given thereto in the Letter Agreement.

 

“Available Amount” shall have the meaning set forth in the Letter Agreement.

 

“Available Amount Certificate” shall have the meaning specified in Section 3(a).

 

“Available Income” shall mean, all Income other than (a) the Underlying Purchased Loan Reserves, and (b) Qualified Servicing Expenses.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code (11 U.S.C. § 101 et seq.), as amended from time to time or any successor statute or rule promulgated thereto.

 

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“Bankruptcy Laws” shall mean the Bankruptcy Code or any other United States bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or any similar statute, law, rules, regulations or similar legal requirements of any other applicable jurisdiction, in each case, as amended from time to time.

 

“Base Amount” shall mean an amount equal to the greater of (i) the aggregate Eligible Loan Amount for all Purchased Loans and (ii) the Maximum Amount.

 

“Base Maximum Original Purchase Percentage” shall mean, with respect to any Transaction, the percentage specified as the Base Maximum Original Purchase Percentage in the Confirmation for such Transaction which percentage shall be as follows:

 

(i)                                     if the subject of such Transaction is a Conventional Multifamily Loan, the Conventional Multifamily Loan Maximum Original Purchase Percentage; or

 

(ii)                                  if the subject of such Transaction is a Conventional Commercial Loan, the Conventional Commercial Loan Maximum Original Purchase Percentage; or

 

(iii)                               if the subject of such Transaction is an Investor Bridge Loan, the Investor Bridge Loan Maximum Original Purchase Percentage.

 

“Bid Process” shall have the meaning specified in Section 4(h) of this Agreement.

 

“Bid Process Differential Amount” shall mean, as of any date of determination, an amount equal to the excess, if any, of the fair market value of the Purchased Loans as determined by the Bid Process over the Market Value of the Purchased Loans as determined by Buyer.

 

“Bid Process Limit” shall mean, as of any date of determination, the Bid Process Limit shall have been met if a Bid Process was not a Successful Bid Process on two (2) or more occasions.

 

“Business Day” shall mean a day other than (i) a Saturday or Sunday, or (ii) a day in which the New York Stock Exchange or banks in the States of New York, Illinois or Minnesota are authorized or obligated by law or executive order to be closed.  When used with respect to a Pricing Rate Determination Date, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banks in London, England are closed for interbank or foreign exchange transactions.

 

“Buyer” shall mean Deutsche Bank AG, Cayman Islands Branch, or any successor or assignee thereof.

 

“Capital Expenditure” shall mean, with respect to any Mortgage Loan that is an Investor Bridge Loan, any capital expenditures associated with the related Mortgage Property that have been funded by Additional Advances and verified by the Verification Agent, but which have not been included in the Mortgaged Property Valuation.

 

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“Cash” shall mean such coin or currency of the United States of America as at the time shall be legal tender for payment of all public and private debts.

 

“Cash Management Account” shall mean a segregated interest bearing account, entitled “ReadyCap Commercial, LLC and Sutherland Asset I, LLC, as Sellers, Cash Management Account for the benefit of Deutsche Bank AG, Cayman Islands Branch, as Buyer”, established at the Depository, bearing account number 173245000.

 

“Change of Control” shall mean the occurrence of any of the following events with respect to any Seller or the Guarantor: (1) the sale, transfer or other disposition of all or substantially all of such Seller or Guarantor’s assets or (2) any Person or group of Persons shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the beneficial owner, directly or indirectly, of (i) 25% or more of the total voting power of all classes of equity interests of such Seller or the Guarantor entitled to vote generally in the election of the directors of such Seller or the Guarantor, as appropriate, or (ii) 25% or more of the total voting power of all classes of equity interests of an ultimate beneficial owner of such Seller or the Guarantor, as applicable, that is the beneficial owner of 25% or more of the total voting power of all classes of equity interests of such Seller or the Guarantor, as applicable, entitled to vote generally in the election of the directors of such Seller or the Guarantor, as applicable.

 

“Change in Law” shall have the meaning specified in Section 3(i) of this Agreement.

 

“Closing Date” shall mean the date hereof.

 

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

 

“Collateral” shall have the meaning specified in Section 6 of this Agreement.

 

“Collection Period” shall mean the period commencing on (and including) the first day of each calendar month (or if such day is not a Business Day, then the next succeeding Business Day) and ending on (and excluding) the first day of the next succeeding calendar month (or if such day is not a Business Day, then the next succeeding Business Day).

 

“Concentration Limits” shall mean, on any date of determination, and unless otherwise agreed by the Buyer in its sole and absolute discretion, the Concentration Limits shall be satisfied if:

 

a)                                     The aggregate Eligible Loan Amount for all Purchased Loans (x) related to a single Mortgagor or (y) cross-defaulted with any other Purchased Loan shall not exceed $25,000,000;

 

b)                                     The aggregate Eligible Loan Amount for all Purchased Loans that are Conventional Commercial Loans and Conventional Multifamily Loans exceeding $5,000,000 in Principal Balance shall not exceed 40% of the Base Amount;

 

c)                                      The aggregate Eligible Loan Amount for all Purchased Loans that are Conventional Commercial Loans and Conventional Multifamily Loans exceeding $7,000,000 in Principal Balance shall not exceed 30% of the Base Amount;

 

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d)                                     The minimum number of Purchased Loans that are Eligible Loans as of any date of determination shall be at least:

 

i.                  20 Eligible Loans, if the Aggregate Repurchase Price is greater than 50% of the Maximum Amount;

 

ii.               30 Eligible Loans, if the Aggregate Repurchase Price is greater than 75% of the Maximum Amount; and

 

iii.            40 Eligible Loans, if the Aggregate Repurchase Price is equal to 100% of the Maximum Amount.

 

e)                                      The aggregate Eligible Loan Amount for all Purchased Loans secured by the same property type shall not exceed the greater of (i) $48,750,000 and (ii) 65% of the Base Amount;

 

f)                                       The aggregate Eligible Loan Amount for all Purchased Loans secured by unanchored retail property shall not exceed 25% of the Base Amount;

 

g)                                      The Weighted Average As-Is Debt Yield for Purchased Loans secured by unanchored retail property shall be at least 11.25%;

 

h)                                     The aggregate Eligible Loan Amount for all Purchased Loans secured by self-storage property shall not exceed 7% of the Base Amount;

 

i)                                         The Weighted Average As-Is Debt Yield for Purchased Loans secured by self-storage property shall be at least 11%;

 

j)                                        The aggregate Eligible Loan Amount for all Purchased Loans secured by Mortgaged Properties located in (A) California shall not exceed the greater of (i) $75,000,000 and (ii) 50% of the Base Amount as of such date of determination, (B) each of Texas, New York and Illinois shall not individually exceed the greater of (i) $60,000,000 and (ii) 40% of the Base Amount as of such date of determination and (C) in any other state shall not individually exceed the greater of (i) $45,000,000 and (ii) 30% of the Base Amount as of such date of determination;

 

k)                                     The aggregate Eligible Loan Amount for Purchased Loans which are Sub-Performing Mortgage Loans or Defaulted Mortgage Loans shall not exceed the greater of (i) $15,000,000 and (ii) 10% of the Base Amount as of such date of determination;

 

l)                                         For all Purchased Loans that are Conventional Commercial Loans and Conventional Multifamily Loans, (i) the Weighted Average LTV shall not exceed the Conventional Maximum Weighted Average LTV, (ii) the Weighted Average As-Is Debt Yield shall be no less than the Conventional Minimum Weighted Average Debt Yield and (iii) the Weighted Average As-Is Debt Service Coverage Ratio shall be no less than the Conventional Minimum Weighted Average DSCR;

 

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m)                                 For all Purchased Loans that are Investor Bridge Loans, (i) the Weighted Average LTV shall not exceed 63%, (ii) the Weighted Average Stabilized Debt Yield shall be no less than 11.00% and (iii) the Weighted Average Stabilized Debt Service Coverage Ratio shall be no less than 1.4;

 

n)                                     The aggregate Eligible Loan Amount for all Purchased Loans which are classified in geographic risk score categories 4 or 5 at origination shall not exceed the greater of (i) $15,000,000 and (ii) 10% of the Base Amount as of such date of determination; and

 

o)                                     The aggregate Eligible Loan Amount for all Purchased Loans with an As-Is Debt Yield less than 9% shall not exceed 20% of the Base Amount.

 

“Confirmation” shall have the meaning specified in Section 3(b) of this Agreement.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

“Controlled Account Agreement” shall mean that certain Securities Account Control Agreement, dated as of the date hereof, among Buyer, the Seller Parties and the Depository, relating to the Cash Management Account, the Margin Account and the Reserve Account, as the same may be amended, modified and/or restated from time to time.

 

“Conventional Commercial Loan” shall have the meaning specified in the Underwriting Criteria.

 

“Conventional Commercial Loan Maximum Original Purchase Percentage” shall mean with respect to any Transaction the subject of which is a Conventional Commercial Loan, eighty percent (80%).

 

“Conventional Concentration Limit Table” shall mean the table attached hereto as Exhibit XII.

 

“Conventional Maximum Weighted Average LTV” shall mean, as of any date of determination, the weighted average of the values set forth in the column “Max WA LTV” in the Conventional Concentration Limit Table.

 

“Conventional Minimum Weighted Average Debt Yield” shall mean, as of any date of determination, the weighted average of the values set forth in the column “Min WA DY” in the Conventional Concentration Limit Table.

 

“Conventional Minimum Weighted Average DSCR” shall mean, as of any date of determination, the weighted average of the values set forth in the column “Min WA DSCR” in the Conventional Concentration Limit Table.

 

“Conventional Multifamily Loans” shall have the meaning specified in the Underwriting Criteria.

 

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“Conventional Multifamily Loan Maximum Original Purchase Percentage” shall mean with respect to any Transaction the subject of which is a Conventional Multifamily Loan, eighty percent (80%).

 

“Credit Event” shall mean, with respect to any Purchased Loan, the occurrence of any of the following events (individually or collectively): (i) the occurrence and continuance of a monetary or material non-monetary Loan Event of Default with respect to such Purchased Loan; (ii) a material decline in As-Is Net Operating Income of the related Mortgagor; (iii) a material decline in the Mortgaged Property Valuation of the related Mortgaged Property; or (iv) a Material Adverse Event with respect to such Purchased Loan.

 

“Current Appraisal” shall mean, with respect to each Mortgaged Property, an Appraisal of such Mortgaged Property issued no more than (i) sixty (60) days prior to the related Purchase Date (other than the Initial Purchased Loans), (ii) twelve (12) months prior to any date of determination, (iii) with respect to any Sub-Performing Mortgage Loan, within thirty (30) days of such Purchased Loan becoming a Sub-Performing Mortgage Loan, and (iv) with respect to any Defaulted Loan, within thirty (30) days of such Purchased Loan becoming a Defaulted Loan.

 

“Custodial Agreement” shall mean the Custodial Agreement, dated as of the date hereof, by and among the Custodian, the Seller Parties and Buyer, as the same may be amended, modified and/or restated from time to time.

 

“Custodial Delivery” shall mean the form executed by the applicable Seller in order to deliver the Loan Schedule and the Loan File with respect to any Purchased Loan to Buyer or its designee (including the Custodian) pursuant to Section 7, a form of which is attached hereto as Exhibit IV.

 

“Custodian” shall mean U.S. Bank National Association, or any successor Custodian appointed by Buyer with the prior written consent of Sellers (which consent shall not be unreasonably withheld or delayed).

 

“Default” shall mean any event which, with the giving of notice, the passage of the applicable cure period, if any, or both, would constitute an Event of Default.

 

“Defaulted Loan” shall mean a Mortgage Loan with respect to which (a)(i) any payment is 120 days or more delinquent or (ii) the applicable Seller determines that it is reasonably likely that the Mortgagor will not be able to make a delinquent payment within 180 days after such payment was due, (b) the Mortgagor is subject to an Act of Insolvency , (c) there exists a default, other than a payment default, that the applicable Seller determines is reasonably likely to result, or that has resulted, in the acceleration of such Mortgage Loan, (d) the applicable Seller has determined that a default, other than a payment default, that is reasonably likely to result in the acceleration of such Mortgage Loan is imminent, (e) the related Mortgaged Property is an REO Property or (f) has been subject to any Material Modification on two (2) or more occasions within any twenty four (24) month period.

 

“Depository” shall mean U.S. Bank National Association, or any successor Depository appointed by Buyer with the prior written consent of Sellers (which consent shall not be unreasonably withheld or delayed).

 

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“Diligence Event” shall mean any of the following events:

 

(i)                                     a Default; or

 

(ii)                                  a Servicer Termination Event; or

 

(iii)                               any other event which, in the reasonable good-faith determination of the Buyer, would have a material and adverse impact on the interests of the Buyer.

 

“Discount Factor” shall mean, with respect to (i) any Mortgage Loan that is a Performing Mortgage Loan, 100% and (ii) any Mortgage Loan that is a Sub-Performing Mortgage Loan, 70%.

 

“Early Repurchase” shall have the meaning specified in Section 3(d) of this Agreement.

 

“Early Repurchase Date” shall have the meaning specified in Section 3(d) of this Agreement.

 

“Eligibility Compliant Ratio” shall mean, as of any date of determination, a condition which will be satisfied if (i) with respect to any Mortgage Loan that is an Investor Bridge Loan, both (A) the LTC of such Mortgage Loan is less than or equal to 80% and (B) the LTV of such Mortgage Loan is less than or equal to 95% and (ii) with respect to any Mortgage Loan that is a Conventional Multifamily Loan or a Conventional Commercial Loan, the LTV of such Mortgage Loan is less than or equal to 90%.

 

“Eligibility Matrices” shall mean the matrices attached hereto as Exhibit XIII.

 

“Eligible Loan” shall mean a Mortgage Loan that is eligible to be purchased by the Buyer hereunder.  As of any date of determination, and with respect to each Mortgage Loan, the Buyer shall have the right to determine if such Mortgage Loan is an Eligible Loan based on the criteria set forth below, such determination to be made by the Buyer in its reasonable sole discretion.

 

A Mortgage Loan shall be an Eligible Loan if:

 

a)                                     it is a senior, secured Mortgage Loan with a first priority perfected security interest in a Mortgaged Property;

 

b)                                     it was originated by the Originator in material compliance with the Underwriting Criteria and the terms of which comply with the Underwriting Criteria as of the related Purchase Date; provided, however, that any Mortgage Loan that complies with the Underwriting Criteria as a result of compensating factors shall be an Eligible Loan subject to the Buyer’s sole and absolute discretion;

 

c)                                      it complies, as of the related Purchase Date, with the Eligibility Matrices;

 

d)                                     it is (i) with respect to any New Collateral, performing and current with respect to all scheduled principal and interest payments due on or before the related Purchase Date and (ii) not a Defaulted Loan;

 

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e)                                      it is directly secured by a Mortgaged Property that is an Eligible Mortgaged Property Type, free and clear of any subordinate liens and with Loan Documents that prohibit subordinate liens;

 

f)                                       it was originated in conformance with and remains in compliance with all local, state and federal statutes, rules and regulations in all material respects; provided, that a Mortgage Loan in compliance with local, state and federal statutes due to an applicable “grandfather provision”, shall be considered eligible for purposes of this clause (f);

 

g)                                      its related Mortgagor is an Eligible Mortgagor;

 

h)                                     it is denominated in U.S. dollars;

 

i)                                         it requires the related Mortgagor to make interest payments no less frequently than monthly;

 

j)                                        it is a Mortgage Loan for which, in connection with its origination, the Originator obtained all appraisals, title insurance, environmental reports and engineering reports that are required in accordance with the Underwriting Criteria;

 

k)                                     its related Loan File was, or will be, delivered to the Custodian in accordance with the Custodial Agreement and subject to any grace and/or cure periods provided herein;

 

l)                                         it is not a participation interest in any loan;

 

m)                                 it is not secured by unimproved land or real property that is undergoing ground-up construction, other than rehabilitation or the construction of tenant improvements;

 

n)                                     it is a Mortgage Loan for which all Loan Documents conform in all respects with the Form Documents other than any Non-Material Deviations or deviations approved by the Buyer in its sole and absolute discretion;

 

o)                                     the Loan Representations are true and correct in all material respects, subject to any exceptions to such representations and warranties that are approved by the Buyer;

 

p)                                     it was originated on an arm’s-length basis;

 

q)                                     a Current Appraisal has been posted to the website www.box.com or otherwise delivered to the Buyer and the Verification Agent in respect of such Purchased Loan;

 

r)                                        it has not been subject to any Material Modification;

 

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s)                                       it would not be deemed to be uncollectable in accordance with ordinary business practices;

 

t)                                        it is an Origination Product;

 

u)                                     with respect to any New Collateral, it has a Principal Balance no less than $750,000 and no greater than $10,000,000;  and

 

v)                                     it satisfies the Eligibility Compliant Ratio test;

 

provided, however, that a Mortgage Loan that does not meet such criteria may nevertheless be an Eligible Loan if the Buyer in its sole and absolute discretion consents to such Mortgage Loan being an Eligible Loan.

 

“Eligible Loan Amount” shall mean, with respect to a Mortgage Loan that is an Eligible Loan, the lesser of: (i) the Principal Balance of such Eligible Loan, (ii) the Market Value of such Eligible Loan (iii) 80% of the Mortgaged Property Valuation of such Eligible Loan and (iv) solely with respect to an Eligible Loan that is an Investor Bridge Loan, 75% of an amount equal to the sum of (A) the Mortgaged Property Valuation of such Eligible Loan plus (B) any Capital Expenditures made with respect to such Eligible Loan since the most recent Current Appraisal Date; provided, however, that if, as of any date of determination, any Concentration Limit shall not have been satisfied, then the Eligible Loan Amount of one or more Eligible Loans shall be reduced, in an amount determined by the applicable Seller to the extent necessary so that all Concentration Limits shall be satisfied as of such date of determination; provided, further, that for each Mortgage Loan that is not an Eligible Loan, the Eligible Loan Amount shall be $0.

 

“Eligible Margin Collateral” shall mean any of (i) Cash, (ii) bonds, debentures, treasury bills, notes or other securities issues by the government of the United States of America and (iii) other securities agreed to by both the Buyer and the Sellers.

 

“Eligible Mortgaged Property Type” shall mean a Mortgaged Property that is primarily used as a retail, office, industrial, multifamily property, warehouse, self-storage, or a mixed use property involving any combination of such uses.

 

“Eligible Mortgagor” shall mean a Mortgagor that (i) is an entity whose jurisdiction of formation and principal place of business are located in the United States and (ii) is not an Affiliate of (A) any Seller Party, (B) any holder of an Equity Interest in any Seller Party or (C) any director, manager, member or officer of any Seller Party.

 

“Environmental Law” shall mean any present or future federal, state or local law, statute, regulation or ordinance, any judicial or administrative order or judgment thereunder, pertaining to health, industrial hygiene, hazardous substances or the environment, including, but not limited to, each of the following, as enacted as of the date hereof or as hereafter amended:  the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq.; the Toxic Substance Control Act, 15 U.S.C. §§ 2601 et seq.; the Water Pollution Control Act (also known as the Clean Water Act, 22 U.S.C. §§ 1251 et seq.), the Clean Air Act,

 

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42 U.S.C. §§ 7401 et seq. and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq.

 

“Equity Interests” shall mean, any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

“ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which any Seller is a member and (ii) solely for purposes of potential liability under Section 302(b)(2) of ERISA and Section 412(b)(2) of the Code and the lien created under Section 303(k) of ERISA and Section 430(k) of the Code, described in Section 414(m) or (o) of the Code of which any Seller is a member.

 

“ERISA Event” shall mean (a) a Reportable Event with respect to a Plan; (b) a withdrawal by the Seller or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Seller or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Seller or any ERISA Affiliate.

 

“Excluded Taxes” shall have the meaning specified in Section 29(b) of this Agreement.

 

“Event of Default” shall have the meaning specified in Section 13(a).

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.

 

“FDIA” shall have the meaning specified in Section 22(c).

 

“FDICIA” shall have the meaning specified in Section 22(d).

 

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“Federal Funds Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Buyer from three (3) federal funds brokers of recognized standing selected by it; provided, that such selected brokers shall be the same brokers as selected for all of Buyer’s other repurchase customers where the Federal Funds Rate is to be applied, to the extent such brokers are available.

 

“Filings” shall have the meaning specified in Section 6 of this Agreement.

 

“Form Documents” shall mean the Originator’s standard commercial mortgage loan documents as in effect on the Closing Date, which documents shall not be modified without the prior written consent of the Buyer, other than with respect to any changes that would constitute a Non-Material Deviation.

 

“Funding Certification” shall have the meaning specified in Section 3(a).

 

“Funding Compliant Ratio” shall mean, as of any Purchase Date, a condition which will be satisfied if (i) with respect to any Mortgage Loan that is an Investor Bridge Loan, both (A) the LTC of such Mortgage Loan is less than or equal to 75% and (B) the LTV of such Mortgage Loan is less than or equal to 95% and (ii) with respect to any Mortgage Loan that is a Conventional Multifamily Loan or a Conventional Commercial Loan, the LTV of such Mortgage Loan is less than or equal to 80%.

 

“Future Advance” shall mean, with respect to any Mortgage Loan, any advance of funds made pursuant to the terms of the related Loan Documents after the origination of such Mortgage Loan.

 

“Future Advance Obligation” shall mean, with respect to any Mortgage Loan and any date of determination, the aggregate amount (without duplication) of unfunded Future Advances relating to such Mortgage Loan.

 

“GAAP” shall mean United States generally accepted accounting principles consistently applied as in effect from time to time.

 

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

“Guarantor” shall mean Sutherland Partners, L.P., in its capacity as guarantor under the Guaranty.

 

“Guaranty” shall mean the Guaranty, dated as of the date hereof, from the Guarantor to Buyer, as the same may be amended, modified and/or restated from time to time.

 

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“Hazardous Materials” shall mean oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants” under Environmental Laws.

 

“Hedge Counterparty” shall mean an Affiliated Hedge Counterparty or any other counterparty to a Hedging Transaction approved by Buyer in its reasonable discretion.

 

“Hedging Transaction” shall mean, with respect to any Purchased Loan, any short sale of U.S. Treasury Securities or mortgage-related securities, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, or which otherwise hedges the value of a Purchased Loan, either generally or under specific contingencies, entered into by any Seller or Guarantor (or an Affiliate of Guarantor) with a Hedge Counterparty and which has been collaterally assigned to Buyer in accordance with the terms hereof.

 

“Income” shall mean, with respect to any Purchased Loan at any time, the sum of (x) payments of principal, interest, dividends or other similar distributions or collections, (y) all net sale proceeds received by the Seller Parties or any Affiliate of either of them in connection with a sale of such Purchased Loan, other than any origination fees that were earned and paid prior to the related Purchase Date and (z) payments or other distributions received pursuant to any related Hedging Transaction for such Purchased Loan.

 

“Indemnified Amounts” shall have the meaning specified in Section 26.

 

“Indemnified Parties” shall have the meaning specified in Section 26.

 

“Investment Manager” shall mean Waterfall Asset Management, LLC.

 

“Investor Bridge Loan” shall have the meaning specified in the Underwriting Criteria.

 

“Investor Bridge Loan Maximum Original Purchase Percentage” shall mean with respect to any Transaction the subject of which is an Investor Bridge Loan, seventy-five percent (75%).

 

“Letter Agreement” shall mean that certain letter agreement, dated as of the date hereof, among Buyer and the Seller Parties, as the same may be amended, modified and/or restated from time to time.

 

“LIBOR” shall mean, with respect to each Pricing Rate Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/1000 of 1%) for deposits in U.S. dollars, for a three-month period, that appears on Reuters Screen LIBOR03 (or the successor thereto) as of 11:00 a.m., London time, on the related Pricing Rate Determination Date.  If such rate does not appear on Reuters Screen LIBOR03 as of 11:00 a.m., London time, on such Pricing Rate Determination Date, Buyer shall request the principal London office of any four major reference banks in the London

 

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interbank market selected by Buyer to provide such bank’s offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a three-month period as of 11:00 a.m., London time, on such Pricing Rate Determination Date for amounts of not less than the Repurchase Price of the Transaction.  If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations.  If fewer than two such quotations are so provided, Buyer shall request any three major banks in New York City selected by Buyer to provide such bank’s rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a three-month period as of approximately 11:00 a.m., New York City time on the applicable Pricing Rate Determination Date for amounts of not less than the Repurchase Price of the Transaction.  If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates.  LIBOR shall be determined by Buyer or its agent, which determination shall be conclusive absent manifest error.

 

“Loan Documents” shall mean, with respect to a Purchased Loan, the documents included or required to be included, as the context may require, in the related Loan File and Servicing File.

 

“Loan Event of Default” shall mean for any Purchased Loan, an “Event of Default” as defined in the Loan Documents for such Purchased Loan (or such other term as is used in such documents to describe events the occurrence of which gives the lender the right to accelerate (or causes the automatic acceleration of) such Purchased Loan); provided, however, that no default under the Loan Documents for any Purchased Loan shall become a Loan Event of Default hereunder unless such default is not cured within any applicable grace and cure periods (if any) under the applicable Loan Documents or is waived by applicable Seller, as lender thereunder, with Buyer’s written consent.

 

“Loan File” shall mean the documents specified as the “Loan File” in Section 7(b), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

 

“Loan Representations” shall mean with respect to any Purchased Loan or prospective Purchased Loan, the representations and warranties set forth on Exhibit VI attached hereto or, if different, the representations and warranties applicable to such Purchased Loan as set forth on Schedule 2 to the Confirmation for such Purchased Loan, in each case, as modified by any exceptions to such representations and warranties disclosed in writing by the applicable Seller which are approved by Buyer in its sole and absolute discretion and set forth on Schedule 3 to the related Confirmation.

 

“Loan Schedule” shall mean a schedule of Purchased Loans attached to each Trust Receipt and Custodial Delivery.

 

“LTC” shall mean, as of any date of determination and with respect to any Mortgage Loan, the ratio of the Principal Balance of such Mortgage Loan to the sum of (i) the Mortgaged Property Valuation of the related Mortgaged Property and (ii) any Capital Expenditures made with respect to such Mortgage Loan since the date of the most recent Current Appraisal.

 

“LTV” shall mean, as of any date of determination and with respect to any Mortgage Loan, the ratio of the Principal Balance of such Mortgage Loan to the Mortgaged Property Valuation of the related Mortgaged Property.

 

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“Mandatory Early Repurchase” shall have the meaning specified in Section 3(l).

 

“Mandatory Early Repurchase Date” shall have the meaning specified in Section 3(l).

 

“Mandatory Early Repurchase Event” shall mean, with respect to any Purchased Loan, the occurrence of any of the following:

 

(i)                                     such Mortgage Loan ceases to be an Eligible Loan;

 

(ii)                                  such Mortgage Loan violates the Concentration Limits;

 

(iii)                               a voluntary or involuntary bankruptcy petition is filed with respect to the related Mortgagor or guarantor of such Purchased Loan;

 

(iv)                              all or a material portion of the Mortgaged Properties securing such Purchased Loan shall be (A) materially damaged or destroyed by fire or other casualty or (B) taken by any Governmental Authority having jurisdiction over such Mortgaged Properties as the result, in lieu or in anticipation of the exercise of the right of condemnation or eminent domain; or

 

(v)                                 any other event or condition specifically designated as a Mandatory Early Repurchase Event in the applicable Confirmation for such Purchased Loan.

 

“Margin Account” shall mean a segregated interest bearing account, entitled “ReadyCap Commercial, LLC and Sutherland Asset I, LLC, as Sellers, Margin Account for the benefit of Deutsche Bank AG, Cayman Islands Branch, as Buyer”, established at the Depository, bearing account number 173245001.

 

“Margin Deficit” shall have the meaning specified in Section 4(a) hereof.

 

“Margin Payment Date” shall have the meaning as defined in Section 4(b).

 

“Market Value” shall mean, as of any date of determination and for any Eligible Loan, the bid-side fair market value in an arms-length transaction between two consenting parties of such Eligible Loan, expressed as a Dollar amount, as determined (i) prior to a Successful Bid Process, by the Buyer in its sole discretion acting in good faith and (ii) following a Successful Bid Process but prior to a new determination of the Market Value by the Buyer, by the Valuation Agent pursuant to the Bid Process.  The Buyer shall determine the Market Value of the Eligible Loans under clause (i) above at such intervals as determined by the Buyer in its sole discretion, using the same methodology used to determine the market value of its own assets similar to the Eligible Loans, acting in good faith.  The Buyer’s election, in its sole and absolute discretion, not to determine the Market Value of an Eligible Loan at any time shall not in any way limit or impair its right to make such determination in the future.  Unless otherwise agreed by the Buyer in its sole discretion, the Market Value of each Mortgage Loan that is not an Eligible Loan shall be $0.

 

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“Market Value Percentage” shall mean, with respect to any Eligible Loan or Purchased Loan, as of any date, the fraction, expressed as a percentage and rounded to the next highest hundredth of a percent, the numerator of which is the then current Market Value of such Eligible Loan or Purchased Loan, and the denominator of which is the then current Principal Balance of such Eligible Loan or Purchased Loan.

 

“Material Adverse Effect” shall mean a material adverse effect on or material adverse change in or to (a) the property, assets, business, operations, financial condition or credit quality of the Originator or Guarantor (taken as a whole), (b) the ability of any Seller or Guarantor to pay or perform its obligations under any of the Transaction Documents to which it is a party, (c) the validity or enforceability of any of the Transaction Documents, (d) the rights and remedies of Buyer under any of the Transaction Documents, or (e) the value of one or more Purchased Loans.

 

“Material Adverse Event” shall mean any act of God, outbreak of hostility or war, or material adverse change or material disruption in current financial, banking or capital market conditions, in each case, which could reasonably be excepted to cause the Purchased Loans to become delinquent or to adversely affect the Mortgaged Property Valuation of the Purchased Loans.

 

“Material Modification” shall mean any modification, waiver or amendment of any term of, or any other acts with respect to, any Mortgage Loan that would:

 

(i)                                     (A) affect the amount or timing of any related payment of principal, interest or other amount payable (other than penalty charges) under such Mortgage Loan, (B) materially and adversely affect the security for such Mortgage Loan or (C) not constitute a Non-Material Deviation;

 

(ii)                                  release the related guarantor or otherwise materially modify the terms of the related guaranty;

 

(iii)                               result in the addition or substitution of any collateral for an outstanding Mortgage Loan; or

 

(iv)                              result in any subordinated or mezzanine debt with respect to such Mortgage Loan or the related Mortgaged Property.

 

“Maximum Amount” shall have the meaning set forth in the Letter Agreement.

 

“Maximum Original Purchase Percentage” shall mean, with respect to any Transaction, the percentage specified as the Maximum Original Purchase Percentage in the Confirmation for such Transaction which percentage shall equal the product of (i) the Base Maximum Original Purchase Price Percentage and (ii) the applicable Discount Factor.

 

“Modified Mortgage Loan” shall mean any Mortgage Loan with respect to which a Material Modification has occurred.

 

“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first lien on or a first priority ownership interest in an estate in

 

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fee simple or ground lease interest in real property and the improvements thereon, securing a Mortgage Note.

 

“Mortgage Loan” shall mean a loan evidenced by a Mortgage Note and secured by a Mortgage on a Mortgaged Property.

 

“Mortgage Loan Documents” shall mean for any Mortgage Loan, the Mortgage Note, Mortgages and all other documents evidencing and/or securing such Mortgage Loan.

 

“Mortgage Loan Pre-Funding Diligence” shall have the meaning specified in Section 27.

 

“Mortgage Note” shall mean a note or other evidence of indebtedness of a Mortgagor secured by one or more Mortgages.

 

“Mortgaged Properties” shall mean, with respect to any Eligible Loan or Purchased Loan, the properties securing such Eligible Loan or Purchased Loan.

 

“Mortgaged Property Valuation” shall mean, as of any date of determination, with respect to any Mortgaged Property related to a Mortgage Loan the “as-is” appraised value of such Mortgaged Property based on the most recent Current Appraisal of such Mortgaged Property; provided, however, if a Credit Event has occurred with respect to such Mortgage Loan, after providing written notice of such intention to the applicable Seller, the Buyer shall have the right to direct the applicable Seller to direct the applicable Servicer to obtain a new or updated Appraisal of such Mortgaged Property, at the applicable Seller’s expense, which new or updated Appraisal when received shall be used to determine the Mortgaged Property Valuation of such Mortgaged Property; provided, further, if, following the Closing Date, the Property Value Index declines by 5% or more from its value as of the Closing Date, the Buyer shall have the right to direct the applicable Seller to direct the applicable Servicer to obtain a Sample Valuation.  In the event that the Sample Valuation shows a decrease of 10% or more in the weighted average property value of the sampled Mortgaged Properties, the Buyer shall have the right to direct the applicable Seller to direct the applicable Servicer to obtain a new or updated Appraisal for each of the Purchased Loans.  If at any time the Property Value Index declines an additional 5% from its value as of the date of the previous Sample Valuation, the Buyer shall have the right to direct the applicable Seller to direct the Servicer to obtain a new Sample Valuation.

 

“Mortgagor” shall mean the obligor on a Mortgage Note and the mortgagor/grantor under the related Mortgage(s).

 

“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by any Seller or any ERISA Affiliate and which is covered by Title IV of ERISA.

 

“Net Market Value Decrease” shall mean, with respect to any Purchased Loan, as of any date of determination, an amount equal to the greater of (a) zero and (b) (i) if the difference between (x) the Purchase Date Market Value Percentage of such Purchased Loan, and (y) the then current Market Value Percentage of such Purchased Loan (such difference, the “Market Value Percentage Decrease”), as of such date of determination, is not greater than 10%, the product of (1) the then current Principal Balance of such Purchased Loan, (2) the Market Value

 

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Percentage Decrease of such Purchased Loan and (3) the Maximum Original Purchase Percentage for such Purchased Loan or (ii) if the Market Value Percentage Decrease of such Purchased Loan, as of such date of determination, is greater than 10%, the product of (1) the then current Principal Balance of such Purchased Loan and (2) the Market Value Percentage Decrease of such Purchased Loan, as of such date of determination.

 

“New Collateral” shall mean a Mortgage Loan that any Seller proposes to be included as Collateral.

 

“Non-Material Deviation” shall mean, with respect to any Loan Document, a deviation in the terms or conditions of such Loan Document from the Form Documents (A) arising solely out of (i) changes to deal-specific economic terms such as pricing, the party against whom recourse is available, whether or not recourse is available and maturity date or (ii) changes required by applicable federal, state and/or local laws and regulations, (B) that does not have a material and adverse effect on (x) the security intended to be provided to the Buyer hereunder or (y) the rights and remedies of the Buyer for the practical realization against the collateral (including any guaranty) securing such Mortgage Loan or (C) that creates or alters any material obligation of any Seller Party.

 

“OFAC” shall have the meaning specified in the definition of Prohibited Person.

 

“OFAC Laws” shall have the meaning specified in the definition of Prohibited Person.

 

Omnibus Assignment” shall mean, with respect to any Mortgage Loan, an assignment of the Mortgage, assignment of leases and rents (unless such item is a document separate from the Mortgage) and all other documents related to such Mortgage Loan.

 

“Origination Product” shall mean either a Conventional Commercial Loan, a Conventional Multifamily Loan or an Investor Bridge Loan originated by the Originator in accordance with the Underwriting Criteria.

 

“Originator” shall have the meaning specified in the preliminary statement.

 

“Other Connection Taxes” means, with respect to Buyer, Taxes imposed as a result of a present or former connection between Buyer and the jurisdiction imposing such Tax (other than connections arising from Buyer having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any Transaction Document).

 

“Other Financing Agreement” shall mean any financing agreement or other credit facility with respect to small business loans or mortgage loans with any Person other than Buyer or an Affiliate of Buyer; provided that, prior to May 7, 2015, the term “Other Financing Agreement” shall not include that certain Master Repurchase Agreement among Sutherland Asset I, LLC and an affiliated entity, as sellers, and Citibank, N.A., as buyer, scheduled to terminate on May 7, 2015.

 

“Participant Register” shall have the meaning specified in Section 18(d).

 

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“Performing Mortgage Loan” shall mean any Eligible Loan that, as of any date of determination, is 29 days or less delinquent and is not a Sub-Performing Mortgage Loan or a Defaulted Mortgage Loan.

 

“Permitted Encumbrance” shall mean, with respect to any Mortgaged, (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record; (c) the exceptions (general and specific) and exclusions set forth in the related title policy; (d) other matters to which like properties are commonly subject; (e) the rights of tenants (as tenants only) under leases (including subleases) pertaining to the related Mortgaged Property and condominium declarations and (f) if the related Mortgage Loan constitutes a cross-collateralized Mortgage Loan, the lien of the Mortgage for another Mortgage Loan contained in the same cross-collateralized group, provided that none of which items (a) through (f), individually or in the aggregate, materially and adversely interferes with the current use or net operating income of the Mortgaged Property or the security intended to be provided by such Mortgage or the related Mortgagor’s ability to pay its obligations when they become due

 

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, unincorporated organization, or other entity, or a federal, state or local government or any agency or political subdivision thereof or other entity.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Plan” shall mean an employee benefit plan established or maintained by any Seller or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which any Seller or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions and that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, other than a Multiemployer Plan.

 

“Plan Assets” shall have the meaning specified in Section 21(a).

 

“Plan Party” shall have the meaning specified in Section 21(a).

 

“Portfolio Interest Certificate” shall have the meaning specified in Section 29(c).

 

“Preliminary Due Diligence Package” shall mean with respect to any New Collateral, the following documents:

 

(i)                                     all of the documents presented to the Originator’s Loan Committee in connection with the approval of such Mortgage Loan, including the credit memorandum for the related Mortgage Loan,

 

(ii)                                  a Current Appraisal of the related Mortgaged Property;

 

(iii)                               any other third party reports related to such Mortgage Loan, including, but not limited to, environmental site assessments (such as Phase I

 

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assessments, Phase 2 assessments, or database searches) and property condition reports,

 

(iv)                              executed copies of all documents to be included in the Loan File for such Mortgage Loan (along with blacklines of such documents marked to show changes from the Form Documents),

 

(v)                                 operating statements of the related Mortgagor,

 

(vi)                              evidence of insurance for the related Mortgaged Property,

 

(vii)                           a copy of the final HUD-1 settlement statement related to such Mortgage Loan,

 

(viii)                        the results of the review conducted by legal counsel to the Originator to confirm any exceptions with respect to (a) the Underwriting Criteria and (b) the Loan Representations,

 

(ix)                              a data tape containing information regarding such Mortgage Loan, substantially in the form attached hereto as Exhibit XVII, and

 

(x)                                 any other information or documents reasonably requested by the Buyer prior to the related Purchase Date.

 

“Price Differential” shall mean, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate to the Repurchase Price for such Transaction (as adjusted from time to time by reductions in the Repurchase Price pursuant to Sections 3(k), 4(b), 5(c)(iii), 5(d)(iii), 5(d)(v), and 5(e)(iii) and increases in the Repurchase Price as applicable, pursuant to Section 3(p)) on a 360-day-per-year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by the applicable Seller to Buyer with respect to such Transaction).

 

“Pricing Rate” shall mean for each Pricing Rate Period, an annual rate equal to LIBOR for such Pricing Rate Period plus the relevant Applicable Spread for such Transaction and shall be subject to adjustment and/or conversion as provided in Sections 3(f), 3(g) and 3(h) of this Agreement.

 

“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate Period with respect to any Transaction, the second (2nd) Business Day preceding the first day of such Pricing Rate Period.

 

“Pricing Rate Period” shall mean, (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and excluding the following Remittance Date, and (b) in the case of any subsequent Pricing Rate Period in respect of any Transaction, (x) the period commencing on and including such Remittance Date and ending on and excluding the following Remittance

 

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Date; provided, however, that in no event shall any Pricing Rate Period for any Transaction end subsequent to the Repurchase Date for such Transaction.

 

“Principal Balance” shall mean, at any date of determination and with respect to any Mortgage Loan, the lesser of (i) the then current outstanding principal balance of such Mortgage Loan and (ii) if the applicable Seller intends to acquire or acquires such Mortgage Loan at a discount, the purchase price paid or to be paid by such Seller, for such Mortgage Loan less all Principal Payments received thereon.

 

“Principal Payment” shall mean, with respect to any Mortgage Loan, any payment or prepayment of principal received by the applicable Seller, any Affiliate of such Seller, the applicable Servicer or the Depository in respect thereof and the proceeds of any sale of such Mortgage Loan or any interest therein received by the applicable Seller, any Affiliate of such Seller, the applicable Servicer or the Depository.

 

“Prohibited Person” shall mean (1) any person or entity who is on the Specially Designated Nationals list (the “SDN List”) maintained by the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”), (2) any person or entity owned, controlled or acting on behalf of a person on the SDN List and (3) any person or entity otherwise the target of the economic sanctions laws, regulations, and Executive Orders administered by OFAC (collectively, the “OFAC Laws”) such that the entry into this Agreement or the performance of the obligation contemplated hereby would be prohibited if conducted by a U.S. person as that term is defined in the OFAC Laws.

 

“Protective Advance” shall mean a cash advance to pay all customary, reasonable and necessary “out of pocket” costs and expenses (including reasonable out-of-pocket attorneys’ fees and fees and expenses of real estate brokers) incurred in connection with:

 

(i)                                     the servicing and administration of a Mortgage Loan, if a default is imminent thereunder or a default, delinquency or other unanticipated event has occurred; or

 

(ii)                                  the preparation of any appraisals, property condition assessments and environmental assessments required to be obtained pursuant to the applicable Servicing Agreement.

 

“Purchase Date” shall mean the date on which a Purchased Loan is to be transferred by the applicable Seller to Buyer.

 

“Purchase Date Market Value” shall mean, with respect to any Purchased Loan, the Market Value of such Purchased Loan as of the related Purchase Date, and which Purchase Date Market Value shall be set forth in the Confirmation for the related Transaction.

 

“Purchase Date Market Value Percentage” shall mean, with respect to any Purchased Loan, the fraction, expressed as a percentage and rounded to the next highest hundredth of a percent, the numerator of which is the Purchase Date Market Value of such Purchased Loan, and the denominator of which is the Principal Balance as of the related Purchase Date, and which Purchase Date Market Value Percentage shall be set forth in the Confirmation for the related Transaction.

 

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“Purchase Price” shall mean, with respect to any Purchased Loan, the price at which such Purchased Loan is transferred by the applicable Seller to Buyer on the applicable Purchase Date. The Purchase Price as of any Purchase Date for any Purchased Loan shall be an amount (expressed in dollars) equal to the product obtained by multiplying (i) the Eligible Loan Amount of such Purchased Loan, by (ii) the Actual Original Purchase Percentage for such Purchased Loan.

 

“Purchased Loans” shall mean (i) with respect to any Transaction, the Eligible Loan or Eligible Loans sold by the related Seller to Buyer in such Transaction and (ii) with respect to the Transactions in general, all Eligible Loans sold by any Seller to Buyer, together with all Loan Documents, Servicing Agreements, Servicing Records, Servicing Rights, insurance, collection and escrow accounts and Hedging Transactions relating to any such Eligible Loans.

 

“Qualified Servicing Expenses” shall mean any fees, compensation and expenses payable to any third-party Servicer that is not an Affiliate of any Seller Party, which fees, compensation and expenses are netted by such Servicer out of collections pursuant to a Servicing Agreement that has been approved by Buyer in writing in its sole and absolute discretion applied in good faith, and which Servicer shall have entered into a Servicer Notice and Agreement substantially in the form attached hereto as Exhibit IX.

 

“Real Estate Settlement Procedures Act” shall mean the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601 et seq.

 

“Register” shall have the meaning specified in Section 18(c) of this Agreement.

 

“Registrar” shall have the meaning specified in Section 18(c) of this Agreement.

 

“Regulatory Event” shall mean, with respect to the Buyer, any event that results in (i) any explicit or implicit charge, assessment, cost or expense by reason of the amount or type of assets, capital or supply of funding the Buyer or any of its Affiliates is required to maintain in connection with the Transactions, without regard to whether it is determined in reference to a reduction in the rate of return on the Buyer’s or any Affiliate’s assets or capital, an inherent cost of the establishment or maintenance of a reserve of stable funding, a reduction in the amount of any sum received or receivable by the Buyer or its Affiliates or otherwise, or (ii) any other imputed cost or expense arising by reason of the actual or anticipated compliance by the Buyer or any of its Affiliates with the Basel III regulations in connection with its maintenance of the Transactions, and in each case, such charge, assessment, cost or expenses is charged to other similarly situated mortgage finance borrowers of the Buyer.

 

“Remittance Date” shall mean the twenty-fifth (25th) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day, or such other day as is mutually agreed to by the Sellers and Buyer.

 

“Reportable Event” shall mean any of the events set forth in Section 4043(c) of ERISA other than events for which the 30 day notice period has been waived.

 

“Repurchase Date” shall have the meaning set forth in the Letter Agreement.

 

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“Repurchase Obligations” shall have the meaning specified in Section 6.

 

“Repurchase Price” shall mean, with respect to any Purchased Loan as of any date, the price at which such Purchased Loan is to be transferred from Buyer to the applicable Seller upon termination of the related Transaction; such price will be determined in each case as the sum of (i) the Purchase Price of such Purchased Loan, (ii) the accrued but unpaid Price Differential with respect to such Purchased Loan as of the date of such determination and (iii) any Additional Advances made by Buyer to the applicable Seller with respect to such Purchased Loan pursuant to Section 3(p) of this Agreement, minus any cash actually received by Buyer in respect of the Repurchase Price of such Transaction pursuant to Sections 3(k), 4(b), 5(c)(iii), 5(d)(iii), 5(d)(v) and 5(e)(iii) of this Agreement or other amounts applied to reduce the Repurchase Price hereunder.

 

“Repurchase Price Cap” shall mean, with respect to any Purchased Loan, an amount equal to (i) the product of (x) the then current Principal Balance (after giving effect to Future Advances) of such Purchased Loan, (y) the Purchase Date Market Value Percentage of such Purchased Loan, and (z) the Maximum Original Purchase Percentage of such Purchased Loan, less (ii) Net Market Value Decrease of such Purchased Loan.

 

“Required Number of Days” shall mean no less than three (3) Business Days.

 

“Requirement of Law” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other Governmental Authority whether now or hereafter enacted or in effect.

 

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

 

“REO Property” shall mean any Mortgaged Property acquired through foreclosure, deed-in-lieu of foreclosure or otherwise.

 

“Reserve Account” shall mean a segregated interest bearing account, entitled “ReadyCap Commercial, LLC and Sutherland Asset I, LLC, as Sellers, Reserve Account for the benefit of Deutsche Bank AG, Cayman Islands Branch, as Buyer”, established at the Depository, bearing account number 173245002.

 

“SAMC” shall mean Sutherland Asset Management Corporation, a Maryland corporation.

 

“SDN List” shall have the meaning specified in the definition of Prohibited Person.

 

“SEC” shall have the meaning specified in Section 23(a).

 

“Seller” shall have the meaning set forth in the introductory statement.

 

“Seller Operating Agreements” shall mean, with respect to (i) the Originator, the Amended and Restated Limited Liability Company Agreement of Originator, dated as of

 

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November 1, 2012, (ii) Sutherland, the Limited Liability Company Agreement of Sutherland, dated as of January 24, 2012 and (iii) with respect to any Additional Seller, the by-laws, limited liability company agreement, limited partnership agreement or similar operating agreement in effect as of the date such Additional Seller executes the related Additional Seller Joinder Agreement, in each case, as the same may be amended, modified and/or restated with Buyer’s prior written consent.

 

“Seller Parties” shall mean each Seller and the Guarantor.

 

“Servicer” shall mean the servicer under any Servicing Agreement.

 

“Servicer Notice and Agreement” shall have the meaning specified in Section 28(a).

 

“Servicer Termination Event” with respect to any Servicer, shall mean any “Event of Default” or similar term, as defined in the applicable Servicing Agreement.

 

“Servicing Agreement” shall have the meaning specified in Section 28(a).

 

“Servicing File” shall mean, with respect to each Purchased Loan, all documents (other than documents required to be part of the related Loan File, but including copies of such documents required to be part of the related Loan File), information and records relating to such Purchased Loan that are necessary to enable the applicable Servicer to perform its duties and service the Purchased Loan in compliance with the terms of this Agreement and the applicable Servicing Agreement, and any additional documents or information related thereto maintained or created by the Servicer.

 

“Servicing Records” shall have the meaning specified in Section 28(b).

 

“Servicing Rights” shall mean each Seller Party’s right, title and interest in and to any and all of the following, in each case as the same may be subject to the terms of any applicable Servicing Agreements and the provisions of the documentation for the applicable Purchased Loans:  (a) any and all rights of such Seller Party to service the Purchased Loans or to appoint (or terminate the appointment of) any third party as servicer of the Purchased Loans; (b) any payments to or monies received by or payable to any Seller Party (as opposed to any third-party servicer) as compensation for servicing the Purchased Loans (including, without limitation, workout fees, consent fees, liquidation fee, late fees, penalties or similar amounts payable to such Seller Party); (c) all agreements or documents creating, defining or evidencing any such servicing rights to the extent they relate to such servicing rights and all rights of such Seller Party (individually or as servicer) thereunder (including all rights to set the compensation of any third-party servicer); (d) the right, if any, to appoint a special servicer or liquidator of the Purchased Loans; and (e) all rights of such Seller Party to give directions with respect to the management and distribution of any collections, escrow accounts, reserve accounts or other similar payments or accounts in connection with the Purchased Loans.

 

“SIPA” shall have the meaning specified in Section 23(a).

 

“Stabilized Debt Service Coverage Ratio” shall mean, with respect to any Mortgage Loan on any date of determination, the ratio obtained by dividing (a) the Stabilized Net Operating

 

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Income of the related Mortgaged Property or Properties by (b) the product of (i) the sum of (x) the Principal Balance of such Mortgage Loan plus (y) the Future Advance Obligations of such Mortgage Loan and (ii) the related Assumed Interest Rate.

 

“Stabilized Debt Yield” shall mean, as of any date of determination and with respect to any Mortgage Loan, the ratio of (i) the Stabilized Net Operating Income of the Mortgaged Property related to such Mortgage Loan to (ii) the sum of (A) the Principal Balance of such Mortgage Loan plus (B) the Future Advance Obligations of such Mortgage Loan.

 

“Stabilized Net Operating Income” shall mean, with respect to any Mortgaged Property or Properties as of any date of determination, the amount of annualized cash flow available for debt service once the related Mortgage Property has stabilized, based on the most recent Appraisal.

 

“Sub-Performing Mortgage Loan” shall mean any Mortgage Loan, as of any date of determination, (i) with respect to which any scheduled principal or interest payment is more than 29 days contractually delinquent but is not a Defaulted Loan or (ii) that is a Modified Mortgage Loan.

 

“Successful Bid Process” shall mean any Bid Process that results in a Bid Process Differential Amount greater than $0.

 

“Sutherland” shall have the meaning specified in the preliminary statement.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“TI/LC Tracking Schedule” shall mean a schedule for tracking certain information related to Future Advances, substantially in the form of Exhibit XIV.

 

“Transaction” shall have the meaning specified in Section 1.

 

“Transaction Conditions Precedent” shall mean, with respect to each proposed Transaction,

 

(i)                                     Each Mortgage Loan to be acquired in such Transaction shall be an Eligible Loan;

 

(ii)                                  Immediately prior to such Transaction, and immediately after giving effect to such Transaction, each Purchased Loan that is an Eligible Loan immediately prior to such Transaction shall continue to be an Eligible Loan;

 

(iii)                               Immediately prior to such Transaction, and after giving effect to such Transaction, no portion of the Transaction shall relate to Mortgage Loans in excess of the Concentration Limits;

 

(iv)                              With respect to any New Collateral, proposed funds to be advanced shall be no less than $250,000;

 

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(v)                                 Immediately after giving effect to such Transaction, the excess of the Maximum Amount over the Aggregate Repurchase Price shall not be less than the aggregate Future Advance Obligations for all Purchased Loans;

 

(vi)                              Immediately prior to such Transaction, and after giving effect to such Transaction, the Aggregate Repurchase Price shall be no greater than the Maximum Amount;

 

(vii)                           Immediately prior to such Transaction, and immediately after giving effect to such Transaction, no Default or Event of Default shall exist and be continuing;

 

(viii)                        Immediately prior to such Transaction, and immediately after giving effect to such Transaction, no Margin Deficit shall exist and be continuing;

 

(ix)                              Immediately prior to such Transaction, and immediately after giving effect to such Transaction, no Servicer Termination Event shall exist and be continuing, and no notice of removal or resignation of any Servicer shall have been given;

 

(x)                                 The applicable Seller shall have delivered a Funding Certification in accordance with the provisions of Section 3(a);

 

(xi)                              The applicable Seller shall have delivered an Available Amount Certificate in accordance with the provisions of Section 3(a);

 

(xii)                           With respect to each Mortgage Loan to be acquired in such Transaction, the Buyer shall have completed its Mortgage Loan Pre-Funding Diligence;

 

(xiii)                        With respect to each Additional Advance to be made in connection with such Transaction, the Buyer shall have completed its Additional Advance Pre-Funding Diligence;

 

(xiv)                       The Buyer shall have determined, in its commercially reasonable discretion, that the Funding Certification delivered by the applicable Seller is true and correct in all material respects;

 

(xv)                          The Loan File for the related Mortgage Loan shall have been delivered to the Custodian;

 

(xvi)                       No Regulatory Event shall exist and be continuing;

 

(xvii)                    No Material Adverse Event shall have occurred;

 

(xviii)                 With respect to each Additional Advance to be made in connection with such Transaction, proposed funds to be advanced shall be no less than $50,000;

 

(xix)                       The Funding Compliant Ratio has been satisfied;

 

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(xx)                          No Act of Insolvency shall have occurred with respect to any Seller Party; and

 

(xxi)                       If required by Buyer in its sole and absolute discretion, the applicable Seller shall have entered into an Approved Hedging Transaction with respect to the related Eligible Loan.

 

provided, however, that any Transaction Condition Precedent may be waived in writing (which written waiver may be in the form of an email) by the Buyer in its sole and absolute discretion.

 

“Transaction Documents” shall mean, collectively, this Agreement, the Letter Agreement, the Guaranty, the Custodial Agreement, the Controlled Account Agreement, all Confirmations executed pursuant to this Agreement in connection with specific Purchased Loans, the Servicing Agreement(s), and any and all other documents and agreements executed and delivered by any Seller and/or Guarantor in connection with this Agreement or any Transactions hereunder, as may be amended, modified and/or restated from time to time.

 

“Transfer” shall have the meaning specified in Section 10(b).

 

“Treasury Regulations” shall mean the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time.

 

“Trust Receipt” shall mean a trust receipt issued by Custodian to Buyer confirming the Custodian’s possession of certain Loan Files which are the property of and held by Custodian for the benefit of Buyer (or any other holder of such trust receipt) or a bailment arrangement with counsel or other third party acceptable to Buyer in its sole discretion.

 

“Truth in Lending Act” shall mean the Truth in Lending Act of 1968, 15 U.S.C. §§1601 et seq.

 

“UCC” shall have the meaning specified in Section 6 of this Agreement.

 

“Underlying Purchased Loan Reserves” shall mean, with respect to any Purchased Loan, the escrows, reserve funds or other similar amounts properly retained in accounts maintained by the Servicer of such Purchased Loan unless and until such funds are, pursuant to the terms of related Loan Documents, released or otherwise available to the applicable Seller (but not if such funds are used for the purpose for which they were maintained, or if such funds are released to the related Mortgagor in accordance with the relevant loan documents).

 

“Underwriting Criteria”  shall mean the Credit and Collection Guidelines used by the Originator in originating commercial mortgage loans, as in effect as of the Closing Date and attached hereto as Exhibit XI, which underwriting criteria may be modified from time to time solely with the consent of the Buyer (such consent not to be unreasonably withheld or delayed).

 

“Valuation Agent” shall mean Raymond James Financial, Inc., or such other valuation agent mutually agreed to by the Buyer and the Sellers.

 

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“Valuation Agent Agreement” shall mean that certain Valuation Agent Agreement, to be dated on or about December 19, 2014 by and among the Sellers and the Valuation Agent, in form and substance reasonably satisfactory to the Buyer, as the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Valuation Agent Differential Amount” shall mean, as of any date of determination, with respect to any Purchased Loan, an amount equal to the excess, if any, of the fair market value of such Purchased Loan as determined by the Valuation Agent over the Market Value of such Purchased Loan as determined by Buyer.

 

“Verification Agent” shall mean TDRE Consultants, LLC, or such other third-party diligence provider designated by the Buyer from time to time.

 

“Weighted Average As-Is Debt Service Coverage Ratio” shall mean, as of any date of determination, the sum for each Purchased Loan of (i) the product of (A) the As-Is Debt Service Coverage Ratio of such Purchased Loan multiplied by (B) the Principal Balance of such Purchased Loan divided by (ii) the aggregate Principal Balance for all Purchased Loans.

 

“Weighted Average As-Is Debt Yield” shall mean, as of any date of determination, the sum for each Purchased Loan of (i) the product of (A) the As-Is Debt Yield of such Purchased Loan multiplied by (B) the Principal Balance of such Purchased Loan divided by (ii) the aggregate Principal Balance for all Purchased Loans.

 

“Weighted Average LTV” shall mean, as of any date of determination, the sum for each Purchased Loan of (i) the product of (A) the LTV of such Purchased Loan multiplied by (B) the Principal Balance of such Purchased Loan divided by (ii) the aggregate Principal Balance for all Purchased Loans.

 

“Weighted Average Stabilized Debt Service Coverage Ratio” shall mean, as of any date of determination, the sum for each Purchased Loan of (i) the product of (A) the Stabilized Debt Service Coverage Ratio of such Purchased Loan multiplied by (B) the sum of (x) the Principal Balance of such Purchased Loan plus (y) the Future Advance Obligations for such Purchased Loan divided by (ii) the sum of (a) the aggregate Principal Balance for all Purchased Loans plus (b) the aggregate Future Advance Obligations for all Purchased Loans.

 

“Weighted Average Stabilized Debt Yield” shall mean, as of any date of determination, the sum for each Purchased Loan of (i) the product of (A) the Stabilized Debt Yield of such Purchased Loan multiplied by (B) the sum of (x) the Principal Balance of such Purchased Loan plus (y) the Future Advance Obligations for such Purchased Loan divided by (ii) the sum of (a) the aggregate Principal Balance for all Purchased Loans plus (b) the aggregate Future Advance Obligations for all Purchased Loans.

 

(b)                                 Under this Agreement, all accounting terms not specifically defined herein shall be construed in accordance with GAAP and all accounting determinations made and all financial statements prepared hereunder shall be made and prepared in accordance with GAAP.  All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.  The words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole, including the exhibits and schedules hereto, as the same may from time to time be amended or supplemented and not to any particular paragraph, section, subsection, or clause contained in this Agreement.  Each of the

 

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definitions set forth in Section 2 hereof shall be equally applicable to both the singular and plural forms of the defined terms.  Unless specifically stated otherwise, all references herein to any agreements, documents or instruments shall be references to the same as amended, restated, supplemented or otherwise modified from time to time.

 

3.                                      INITIATION; CONFIRMATION; TERMINATION; FEES; EXTENSION

 

(a)                                 Subject to the terms and conditions set forth in this Agreement (including, without limitation, the satisfaction of the Transaction Conditions Precedent set forth herein), Buyer agrees to consider entering into Transactions from time to time pursuant to written request at the initiation of a Seller as provided in this Agreement.  No later than 4:00 p.m. (New York City time) no less than the Required Number of Days prior to the requested Purchase Date, the applicable Seller shall deliver to the Buyer (i) a certification (each, a “Funding Certification”, substantially in the form specified in Exhibit XV hereto) containing a list of each Transaction Condition Precedent (other than the conditions set forth in clauses (xii) through (xiv) of the definition of “Transaction Condition Precedents”) and presenting a yes or no answer beside each such Transaction Condition Precedent indicating whether such Transaction Condition Precedent will be satisfied on such requested Purchase Date and specifying the Purchase Price to be funded on such requested Purchase Date, (ii) a report (each, an “Available Amount Certificate”, substantially in the form specified in Exhibit XVI hereto), which report may be in electronic form and (iii) proposed Confirmation to be entered into with respect to the related Transaction.  Buyer shall have the right to review all Eligible Loans proposed to be sold to Buyer in any Transaction and to conduct its own due diligence investigation of such Eligible Loans as Buyer determines in accordance with Section 27.  In addition, Buyer shall not be required to enter into any Transaction if an Event of Default has occurred and is continuing with respect to any Transaction Documents.

 

(b)                                 Upon agreeing to enter into a Transaction hereunder, provided each of the Transaction Conditions Precedent shall have been satisfied or waived, as determined by Buyer in its sole and absolute discretion, Buyer shall promptly deliver to the applicable Seller a written confirmation (which shall also be in electronic form) in the form of Exhibit I attached hereto of each Transaction (a “Confirmation”).  Such Confirmation shall describe each Purchased Loan to be included in such Transaction, shall identify Buyer and the related Seller, and shall set forth:

 

(i)                                     the Purchase Date,

 

(ii)                                  the Principal Balance,

 

(iii)                               the Purchase Date Market Value,

 

(iv)                              Purchase Date Market Value Percentage,

 

(v)                                 the Actual Original Purchase Percentage,

 

(vi)                              the Base Maximum Original Purchase Percentage;

 

(vii)                           the Maximum Original Purchase Percentage,

 

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(viii)                        the Purchase Price,

 

(ix)                              the Repurchase Date,

 

(x)                                 the initial Pricing Rate (including the Applicable Spread) applicable to the Transaction, and

 

(xi)                              any additional terms or conditions required by Buyer in connection with the Transaction.

 

With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction, and shall be reset on each Pricing Rate Determination Date for the next succeeding Pricing Rate Periods for such Transaction.  Buyer or its agent shall determine the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify the applicable Seller of such rate for such period on such Pricing Rate Determination Date.

 

(c)                                  Each Confirmation shall be mutually agreed upon between the applicable Seller and Buyer and, together with this Agreement, shall be conclusive evidence of the terms of the Transactions covered thereby.  In the event of any conflict between the terms of such Confirmation and the terms of this Agreement, the Confirmation shall prevail.

 

(d)                                 Except upon the occurrence and during the continuance of an Event of Default, each Seller shall be entitled to terminate any Transaction relating to a Purchased Loan on demand, in whole or in part, and repurchase any or all of the Purchased Loans subject to such Transaction (each an “Early Repurchase”) on any Business Day prior to the Repurchase Date therefor (an “Early Repurchase Date”); provided, however, that:

 

(A)                               such Seller notifies Buyer in writing of its intent to terminate such Transaction and repurchase such Purchased Loan(s) no later than five (5) Business Days prior to such Early Repurchase Date; and

 

(B)                               on such Early Repurchase Date, such Seller pays to Buyer an amount equal to the sum of the Repurchase Price for such Transaction, and any other amounts payable under this Agreement (including, without limitation, any amounts payable under Section 3(h) of this Agreement) with respect to such Transaction against transfer to such Seller or its agent of such Purchased Loan(s); and

 

(C)                               on such Early Repurchase Date, such Seller shall have paid any and all amounts then due and payable to Buyer.

 

(e)                                  On the applicable Repurchase Date for any Transaction, termination of such Transaction will be effected by transfer to the applicable Seller or its agent of the applicable Purchased Loan(s) and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of the applicable Seller pursuant to Section 5 of this Agreement) against the simultaneous transfer of the Repurchase Price for such Transaction to an account of Buyer.  Immediately following such payment, Buyer shall be

 

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deemed to have released all of its direct and indirect interests in such Purchased Loan, without further action by any Person and Buyer shall direct Custodian to release the related Loan File to the applicable Seller or its designee pursuant to the Custodial Agreement.  Notwithstanding anything to the contrary contained herein or in any other Transaction Document, Buyer shall not release any of its right, title or interest in any Purchased Loan unless and until the applicable Seller has irrevocably paid in full the Repurchase Price for each Purchased Loan and satisfied all of the Repurchase Obligations hereunder, whereupon Buyer shall promptly direct Custodian to return the original Loan Files and all applicable transfer documents to the applicable Seller.

 

(f)                                   If prior to the first day of any Pricing Rate Period with respect to the Transaction, (i) Buyer shall have reasonably determined (which determination shall be conclusive and binding upon each Seller) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining LIBOR for such Pricing Rate Period, or (ii) LIBOR determined or to be determined for such Pricing Rate Period will not adequately and fairly reflect the cost to Buyer (as determined and certified by Buyer) of making or maintaining Transactions during such Pricing Rate Period, and Buyer has made the same determination for all similarly situated mortgage loan repo clients, Buyer shall give telecopy, e-mail or telephonic notice thereof to each Seller as soon as practicable thereafter.  If such notice is given, the Pricing Rate with respect to such Transaction for such Pricing Rate Period, and for any subsequent Pricing Rate Periods until such notice has been withdrawn by Buyer, shall be a per annum rate equal to (i) the Federal Funds Rate plus (ii) 0.25% plus (iii) the Applicable Spread (the “Alternative Rate”).

 

(g)                                  Notwithstanding any other provision herein, if Buyer shall have reasonably determined that the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for Buyer to effect or continue Transactions as contemplated by the Transaction Documents, and Buyer has made the same determination for all similarly situated mortgage loan repo clients, (a) the commitment of Buyer hereunder to enter into new Transactions and to continue Transactions as such shall forthwith be canceled, and (b) the Transactions then outstanding shall be converted automatically to Alternative Rate Transactions on the last day of the then current Pricing Rate Period or within such earlier period as may be required by law. If any such conversion of a Transaction occurs on a day which is not the last day of the then current Pricing Rate Period with respect to such Transaction, the applicable Seller shall pay to Buyer such amounts, if any, as may be required pursuant to Section 3(h) of this Agreement

 

(h)                                 Upon demand by Buyer, a Seller shall indemnify Buyer and hold Buyer harmless from any net actual, out of pocket loss or expense (not to include any lost profit or opportunity) (including, without limitation, reasonable actual attorneys’ fees and disbursements) which Buyer may sustain or incur as a consequence of (i) default by such Seller in terminating any Transaction after such Seller has given a notice in accordance with Section 3(d) of a termination of a Transaction, (ii) any payment of all or any portion of the Repurchase Price for any Purchased Loan on any day other than a Remittance Date or the Repurchase Date for such Purchased Loan (including, without limitation, any actual out of pocket loss, cost or expense arising from reemployment of funds obtained by Buyer to maintain Transactions hereunder or from customary and reasonable fees payable to terminate deposits from which such funds were obtained) or (iii) conversion of the Transaction to an Alternative Rate Transaction pursuant to

 

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Section 3(f) of this Agreement on a day which is not the last day of the then current Pricing Rate Period.  A certificate as to such actual costs, losses, damages and expenses, setting forth the calculations therefor shall be submitted promptly by Buyer to such Seller and shall be prima facie evidence of the information set forth therein.

 

(i)                                     If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority having jurisdiction over Buyer made subsequent to the date hereof (any of the foregoing, a “Change in Law”):

 

(i)                                     shall subject the Buyer to any tax of any kind whatsoever with respect to the Transaction Documents (excluding income taxes, branch profits taxes, franchise taxes or similar taxes imposed on the Buyer as a result of any present or former connection between the Buyer and the United States, other than any such connection arising solely from the Buyer having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement) or change the basis of taxation of payments to Buyer in respect thereof; shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or other extensions of credit by, or any other acquisition of funds by, any office of the Buyer which is not otherwise included in the determination of LIBOR hereunder; or

 

(ii)                                  shall impose on Buyer any other condition;

 

and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of continuing to perform its obligations hereunder or to reduce any amount due or owing hereunder in respect thereof, or (in the case of any change in a Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any Person controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof) shall have the effect of reducing the rate of return on Buyer’s or such controlling Person’s capital as a consequence of its obligations as under the Transaction Documents to a level below that which Buyer or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such controlling Person’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then, in any such case, Buyer may, within thirty (30) days of the event resulting in such increased costs or reduced amount, invoice the Sellers for such additional amount or amounts as calculated by Buyer in good faith as will compensate Buyer for such increased cost or reduced amount and include with such invoice an explanation of the event that gave rise to such increased costs or reduced amount, and such invoiced amount shall be payable to Buyer on the Remittance Date following such invoice; provided, that no payment will be required hereunder in respect of any tax that is imposed under FATCA; provided, further, that Buyer shall use its reasonable efforts to minimize any increased costs payable pursuant to this Section 3.(i).

 

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(j)                                    If Buyer shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of increasing the amount of capital to be held by Buyer in respect of any Transaction hereunder or reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer, in the exercise of its reasonable business judgment, to be material, and Buyer has made the same determination for all similarly situated mortgage loan repo clients, then from time to time, after submission by Buyer to the applicable Seller of a written request therefor, the applicable Seller shall pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction.  Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to the applicable Seller and shall be prima facie evidence of such additional amounts.  This covenant shall survive the termination of this Agreement and the repurchase by Sellers of any or all of the Purchased Loan.

 

(k)                                 Any Seller shall have the right at any time, upon one (1) Business Day prior notice to Buyer, to transfer cash to Buyer for the purpose of reducing the Repurchase Price of, but not terminating, any Transaction.

 

(l)                                     Upon the occurrence of a Mandatory Early Repurchase Event with respect to any Purchased Loan, Buyer may, upon written notice to the applicable Seller, accelerate the Repurchase Date of such Purchased Loan to the date (the “Mandatory Early Repurchase Date”) which is two (2) Business Days following such notice, provided that such notice is sent by 6:00 p.m. (New York City time), or three (3) Business Days following such notice if such notice is sent after 6:00 p.m. (New York City time) (or such earlier date as may be required pursuant to the last sentence of this Section 3(l)), and require that the applicable Seller repurchase such Purchased Loan from Buyer on such Mandatory Early Repurchase Date (a “Mandatory Early Repurchase”), which repurchase or release by the applicable Seller shall be conducted pursuant to and in accordance with clauses (ii) and (iii) of Section 3(d) and Section 3(e).

 

(m)                             If Buyer shall exercise its rights under Sections 3(f), 3(g), 3(i) or 3(j), then Sellers shall have the right, at any time thereafter (unless Buyer has at such time waived any claims pursuant to such Sections or such Sections no longer apply) to terminate this Agreement or all Transactions hereunder and, in connection with any such termination, notwithstanding anything to the contrary contained herein or in any other Transaction Document, there shall be no prepayment fee, premium, breakage fee or similar payment due to Buyer or payable by Sellers.

 

(n)                                 [Intentionally Omitted].

 

(o)                                 [Intentionally Omitted].

 

(p)                                 In the event that, after the initial Purchase Date for a Purchased Loan, the applicable Seller (or the applicable Servicer on behalf of such Seller) approves a Future Advance

 

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with respect to such Purchased Loan, then Buyer shall recalculate the Repurchase Price Cap for such Purchased Loan (after giving effect to such Future Advance).  If the Repurchase Price Cap for such Purchased Loan, as so recalculated, shall exceed the outstanding Repurchase Price for such Purchased Loan (the amount by which such revised Repurchase Price Cap exceeds such outstanding Repurchase Price, the “Additional Advance Available Amount”), then upon the applicable Seller’s written request and provided that (i) no Default or Event of Default shall exist as of the date of such request and as of the date of funding of the Additional Advance, (ii) the Aggregate Repurchase Price immediately after the making of such Additional Advance does not exceed the Maximum Amount and (iii) the applicable Transaction Conditions Precedent shall have been satisfied or waived with respect to the making of such Additional Advance, Buyer shall make an additional advance (an Additional Advance”) to the applicable Seller on the date (the “Additional Advance Date”) that is two (2) Business Days after Buyer’s receipt of the applicable Seller’s written request therefor in an amount up to the Additional Advance Available Amount and such Additional Advance shall be added to the Repurchase Price of such Purchased Loan.  The applicable Seller and Buyer shall execute and deliver an amended Confirmation for such Purchased Loan as of the Additional Advance Date reflecting the increase of the Maximum Original Purchase Percentage for such Purchased Loan and the increase of the Repurchase Price of such Purchased Loan for such Additional Advance.  It is acknowledged and agreed that, notwithstanding the foregoing or anything to the contrary contained herein, Buyer shall have no obligation to make Future Advances with respect to any Purchased Loan.

 

4.                                      MARGIN MAINTENANCE

 

(a)                                 Buyer shall determine the Repurchase Price Cap of each Purchased Loan on each Business Day and shall determine the amount, if any, by which the Repurchase Price Cap is less than the Repurchase Price (excluding Price Differential and Exit Fees) for each Purchased Loan (a “Margin Deficit”).

 

(b)                                 If at any time a Margin Deficit exists with respect to a Purchased Loan, then Buyer may by notice (which notice shall include a copy sent by electronic mail in accordance with Section 16 hereof) (a “Margin Notice”) to the applicable Seller, with a copy to the Depository, require the applicable Seller to transfer to Depository for deposit into the Margin Account Eligible Margin Collateral in the amount of the Margin Deficit for such Purchased Loan by no later than the date (“Margin Payment Date”) that is (i) if notified by the Buyer before 11:00 AM EST on a Business Day, then by 5:00 PM EST the next Business Day or (ii) if notified by the Buyer on or after 11:00 AM EST on a Business Day, then by 5:00 PM the second following Business Day. Notwithstanding the foregoing, SAMC or any of its subsidiaries shall enter into any Other Financing Agreement containing a margin call period shorter than provided under this Section 4(b), then Buyer may, in its sole and absolute discretion, amend the Margin Payment Date under this Section 4(b) to reflect such provisions under such Other Financing Agreement.  Any Seller’s failure to cure any Margin Deficit as required by this paragraph shall constitute an Event of Default.

 

(c)                                  [Intentionally omitted]

 

(d)                                 The failure of, or delay by, Buyer on any one or more occasions, to exercise its rights under Sections 4(b) of this Agreement shall not (i) change or alter the terms and conditions

 

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to which this Agreement is subject, (ii) limit the right of Buyer to do so at a later date, (iii) limit Buyer’s rights under this Agreement or otherwise existing by law, or (iv) in any way create additional rights for such party.

 

(e)                                  If a Seller transfers cash to Buyer on account of Margin Deficits relating to more than one Purchased Loan, but such cash is insufficient to fully satisfy such Margin Deficits, Buyer shall have the right to designate the Purchased Loan(s) and Margin Deficit(s) to which such payments shall be applied, in its sole and absolute discretion.

 

(f)                                   [Intentionally Omitted].

 

(g)                                  Notwithstanding anything contained in Section 16 to the contrary, Margin Notices may be delivered by Buyer via email to finance@waterfallam.com and to such other email address(es) hereinafter provided by Sellers to Buyer for this purpose, without the need to also deliver such notice by any of the other means set forth in Section 16, and shall be deemed received upon the sending of such email; provided that the transmitting party did not receive an electronic notice of a delivery failure.

 

(h)                                 If (i) a Seller has cured a Margin Deficit pursuant to Section 4(b), (ii) the Valuation Agent Differential Amount is equal to at least 5% of the aggregate Eligible Loan Amount and (iii) the Valuation Agent has been appointed pursuant to the terms of the Valuation Agent Agreement, then Sellers shall have the right to dispute Buyer’s calculation of the aggregate Market Value of the Purchased Loans. In the event of such a dispute, the aggregate Market Value of the Purchased Loans shall be determined in the following manner (the “Bid Process”): the Valuation Agent shall solicit a minimum of three (3) legitimate, arm’s length, impartial and executable bids for the Purchased Loans. The Market Value of the Purchased Loans shall be equal to the average of the bid side quotes. If the Valuation Agent is unable to obtain three (3) legitimate bids as described above, but is able to obtain two (2) such bids, the Market Value of the Purchased Loans shall be equal to the lower of the bid side quotes on the basis of such two (2) bids. If the Valuation Agent is unable to obtain at least two (2) legitimate bids as described above, or if Buyer does not agree, in its reasonable discretion, that the bids obtained are legitimate, arm’s length, impartial and executable, the aggregate Market Value of the Purchased Loans shall be equal to the aggregate Market Value determined by Buyer.  Sellers shall be responsible for payment of all fees, costs and expenses payable to the Valuation Agent in connection with any Bid Process.

 

(i)                                     Notwithstanding anything to the contrary herein, if the Bid Process Limit shall have been met, Sellers shall be prohibited from undertaking additional Bid Processes to determine the Market Value of the Purchased Loans and the Market Value of the Purchased Loans shall be determined solely by Buyer.

 

(j)                                    If the Bid Process for any Purchased Loan is a Successful Bid Process, Buyer, upon notice (which notice may be delivered via email) from the applicable Seller, shall remit to such Seller an amount equal to the lesser of (i) the Bid Process Differential Amount and (ii) the Margin Deficit amount transferred by the applicable Seller to Buyer with respect to such Purchased Loan pursuant to Section 4(b); provided, however, that Buyer shall not remit any

 

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amount to any Seller if, after giving effect to such remittance, (i) a Margin Deficit shall exist or (ii) a Default or Event of Default shall exist.

 

5.                                      INCOME PAYMENTS AND PRINCIPAL PAYMENTS

 

(a)                                 On each Remittance Date, each Seller shall be obligated to pay to Buyer (to the extent not paid on such date through the distributions required pursuant to Sections 5(c), (d) and (e) hereof) the accrued but unpaid Price Differential for each Transaction due as of such Remittance Date (along with any other amounts then due and payable), by wire transfer in immediately available funds.  A Cash Management Account shall be established by Sellers at the Depository.  Buyer shall have sole dominion and control over the Cash Management Account.  All Available Income in respect of the Purchased Loans shall be deposited by the Sellers or the applicable Servicer directly into the Cash Management Account without any further action of Buyer.  All such amounts transferred into the Cash Management Account shall be remitted by the Depository in accordance with the applicable provisions of Sections 5(c), 5(d), 5(e) and 13(b)(iii) of this Agreement.

 

(b)                                 Each Seller shall cause the Servicer of each Purchased Loan to enter into a Servicer Notice and Agreement in the form attached as Exhibit IX to this Agreement, which provides, inter alia, that the Servicer shall deposit all Available Income with respect to such Purchased Loan that is received by Servicer into the Cash Management Account.  If a Servicer forwards any Available Income with respect to a Purchased Loan to any Seller or any of their respective Affiliates rather than directly to the Cash Management Account, such Seller shall (or shall cause such Affiliate to) (i) redeliver an executed copy of the Servicer Notice and Agreement to the applicable Servicer, and make other commercially reasonable efforts to cause such Servicer to forward such amounts directly to the Cash Management Account, (ii) hold such amounts in trust for the benefit of Buyer and (iii) within two (2) Business Days after receipt thereof deposit in the Cash Management Account any such amounts.

 

(c)                                  So long as no Event of Default shall have occurred and be continuing, all Available Income received by the Depository in respect of the Purchased Loans (other than Principal Payments and net sale proceeds) during each Collection Period shall be applied by the Depository on the related Remittance Date in the following order of priority:

 

(i)                                     first, to remit to (a) the Custodian an amount equal to any accrued and unpaid custodial fees and expenses due and payable under the Custodial Agreement, and (b) the Depository an amount equal to any accrued and unpaid fees and expenses due and payable under the Controlled Account Agreement;

 

(ii)                                  second, to remit to the Valuation Agent (a) the amount of any “VA Fee” (as defined in the Valuation Agent Agreement) due to the Valuation Agent pursuant to the Valuation Agent Agreement for the related Collection Period and (b) the amount of any other unpaid fees and expenses due or reimbursable to the Valuation Agent under the Valuation Agent Agreement (including indemnification amounts);

 

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(iii)                               third, to remit to Buyer an amount equal to the aggregate Price Differential which has accrued and is outstanding in respect of all of the Purchased Loans as of such Remittance Date;

 

(iv)                              fourth,  to make a payment to Buyer on account of any Margin Deficit;

 

(v)                                 fifth, to remit to Buyer any Availability Fee then due and any other unpaid fees, costs, expenses, indemnity amounts and any and all other amounts due from Sellers under this Agreement or the other Transaction Documents; and

 

(vi)                              sixth, to remit to the applicable Seller the remainder, if any.

 

(d)                                 So long as no Event of Default shall have occurred and be continuing, (A) any unscheduled Principal Payment (including net sale proceeds) in respect of a Purchased Loan which is a portion of the Available Income received by the Depository during each Collection Period shall be applied by the Depository on the Business Day following the day on which such funds are deposited in the Cash Management Account and (B) any scheduled Principal Payment shall be applied by the Depository on the related Remittance Date in the following order of priority:

 

(i)                                     first, to remit to (a) the Custodian an amount equal to any accrued and unpaid custodial fees and expenses due and payable under the Custodial Agreement, and (b) the Depository an amount equal to any accrued and unpaid fees and expenses due and payable under the Controlled Account Agreement (in each case, to the extent not paid pursuant to Section 5(c)(i) above);

 

(ii)                                  second, to remit to the Valuation Agent (a) the amount of any “VA Fee” (as defined in the Valuation Agent Agreement) due to the Valuation Agent pursuant to the Valuation Agent Agreement for the related Collection Period and (b) the amount of any other unpaid fees and expenses due or reimbursable to the Valuation Agent under the Valuation Agent Agreement (including indemnification amounts) (in each case, to the extent not paid pursuant to Section 5(c)(ii) above);

 

(iii)                               third, to remit to Buyer an amount equal to the aggregate Price Differential which has accrued and is outstanding in respect of all of the Purchased Loans as of such Remittance Date (to the extent not paid pursuant to Section 5(c)(iii) above);

 

(iv)                              fourth, to make a payment to Buyer on account of any Margin Deficit (to the extent not paid pursuant to Section 5(c)(iv) above);

 

(v)                                 fifth, to remit to Buyer any Availability Fee then due and any other unpaid fees, costs, expenses, indemnity amounts and any and all other amounts due from Sellers under this Agreement or the other Transaction Documents (to the extent not paid pursuant to Section 5(c)(v) above);

 

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(vi)                              sixth, to make a payment to Buyer on account of the Repurchase Price of each of the Purchased Loans in respect of which such Principal Payment(s) have been received, in an amount equal to such Principal Payment(s) multiplied by the respective Allocable Percentages applicable thereto; and

 

(vii)                           seventh, to remit to the applicable Seller the remainder of such Principal Payment or net sale proceeds.

 

(e)                                  If an Event of Default shall have occurred and be continuing, all Available Income (including Principal Payments and net sales proceeds from the sale of any Purchased Loan) received by Buyer or the Depository in respect of the Purchased Loans during each Collection Period shall be applied by Buyer or the Depository on the Business Day following the day on which such funds are deposited in the Cash Management Account as follows:

 

(i)                                     first, to remit to (a) the Custodian in an amount equal to any accrued and unpaid custodial fees and expenses due and payable under the Custodial Agreement, and (b) the Depository in an amount equal to any accrued and unpaid fees and expenses due and payable under the Controlled Account Agreement;

 

(ii)                                  second, to remit to the Valuation Agent (a) the amount of any “VA Fee” (as defined in the Valuation Agent Agreement) due to the Valuation Agent pursuant to the Valuation Agent Agreement for the related Collection Period and (b) the amount of any other unpaid fees and expenses due or reimbursable to the Valuation Agent under the Valuation Agent Agreement (including indemnification amounts);

 

(iii)                               third, to remit to Buyer an amount equal to the aggregate Price Differential which has accrued and is outstanding in respect of all of the Purchased Loans as of such Business Day;

 

(iv)                              fourth, to make a payment to Buyer in an amount equal to (A) the Repurchase Price of each of the Purchased Loans until the Repurchase Price for each of such Purchased Loans has been reduced to zero (Buyer may allocate amounts under this Section 5(e)(iii) to the Repurchase Price(s) of one or more of such Purchased Loans in such amounts as Buyer may determine in its sole and absolute discretion);

 

(v)                                 fifth, to remit to Buyer any Availability Fee then due and any other unpaid fees, costs, expenses, indemnity amounts and any and all other amounts due from Sellers under this Agreement or the other Transaction Documents; and

 

(vi)                              sixth, to remit to the applicable Seller the remainder, if any.

 

(f)                                   All Underlying Purchased Loan Reserves for any Purchased Loan must be held with the applicable Servicer in accordance with Section 28 in segregated accounts held for the

 

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benefit of Sellers or otherwise subject to control agreements approved by the Buyer.  In the event that no Servicer holds any such Underlying Purchased Loan Reserves for a Purchased Loan and the applicable Seller would otherwise hold the Underlying Purchased Loan Reserves directly, it shall forward such Underlying Purchased Loan Reserves to the Reserve Account to be held and applied in accordance with the applicable Loan Documents.

 

6.                                      SECURITY INTEREST

 

Buyer and Sellers intend, for all purposes other than those described in Section 22(e), that all Transactions hereunder be sales to Buyer of the Purchased Loans and not loans from Buyer to Sellers secured by the Purchased Loans.  However, in the event any such Transaction is deemed to be a loan (except in the case of the grant of security interests by Sellers under clause (b) below, which shall be unconditional as of the date hereof), each Seller hereby pledges all of its right, title, and interest in, to and under and grants a lien on, and security interest in (which lien and security interest shall be of first priority), all of its right, title, and interest in the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the “Collateral”) to Buyer to secure the payment and performance of all other amounts or obligations owing to Buyer pursuant to this Agreement and the other Transaction Documents (the “Repurchase Obligations”) (it being understood that the grant of security interest in any items described below which are otherwise sold to Buyer pursuant to any Transaction hereunder is made to secure Buyer’s interest therein in the event any such Transaction is deemed to be a loan):

 

(a)                                 the Purchased Loans, Servicing Agreements, Servicing Records, Servicing Rights, insurance relating to the Purchased Loans, all Hedging Transactions related to the Purchased Loans, and collection and escrow accounts relating to the Purchased Loans;

 

(b)                                 the Cash Management Account and all monies from time to time on deposit in the Cash Management Account;

 

(c)                                  all “general intangibles”, “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing; and

 

(d)                                 all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

 

For purposes of the grant of the security interest pursuant to Section 6 of this Agreement, this Agreement shall be deemed to constitute a security agreement under the New York Uniform Commercial Code (the “UCC”).  Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and the other laws of the State of New York.  In furtherance of the foregoing, (a) each Seller, at such Seller’s sole cost and expense, shall cause to be filed in such locations as may be reasonably necessary to perfect and maintain perfection and priority of the security interest granted hereby, UCC financing statements and continuation statements (collectively, the “Filings”), and (b) Sellers shall from time to time take such further actions as may be reasonably requested by Buyer to maintain and continue the perfection and priority of the security interest granted hereby.

 

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Each Seller hereby irrevocably authorizes Buyer at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements and amendments thereto that (1) indicate the Collateral (i) as all Purchased Loans or words of similar effect, regardless of whether the description of the Purchased Loans in such financing statements includes every component set forth in the definition, or (ii) as being of an equal or lesser scope or with greater detail, and (2) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including whether such Seller is an organization, the type of organization and any organization identification number issued to such Seller.  Each Seller also ratifies its authorization for Buyer to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.  Without limiting the foregoing, each Seller also hereby irrevocably authorizes the Buyer and its counsel to file UCC financing statements in form and substance satisfactory to the Buyer.

 

Buyer’s security interest in a Purchased Loan, or the Collateral as a whole, shall terminate only upon (i) in the case of an individual Purchased Loan, the repurchase or release thereof in accordance with this Agreement and (ii) in the case of the Collateral as a whole, the termination of the applicable Seller’s obligations under this Agreement and the documents delivered in connection herewith and therewith.  Upon any such termination, Buyer shall authorize the applicable Seller to file such UCC termination statements and other release documents as may be commercially reasonable to evidence the release of Buyer’s lien on and security interest in the applicable Purchased Loan, or the Collateral, as applicable and to return the Loan Documents for the Purchased Loan to the applicable Seller.

 

7.                                      PAYMENT, TRANSFER AND CUSTODY

 

(a)                                 On the Purchase Date for each Transaction, ownership of the Purchased Loans shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer to an account of the applicable Seller, specified in the Confirmation relating to such Transaction of the difference between (i) the Purchase Price for the Purchased Loan(s) minus (ii) any and all fees, costs and expenses including, without limitation, reasonable attorneys’ fees and disbursements payable to Buyer pursuant to Section 27 or Section 30(d) in connection with such Transaction.

 

(b)                                 On or before such Purchase Date, the applicable Seller shall deliver or cause to be delivered to Buyer or its designee the Custodial Delivery in the form attached hereto as Exhibit IV.  In connection with each sale, transfer, conveyance and assignment of a Purchased Loan, on or prior to each Purchase Date with respect to such Purchased Loan, the applicable Seller shall deliver or cause to be delivered and released to the Custodian, and shall cause the Custodian to deliver a Trust Receipt on the Purchase Date concerning the receipt of, the following documents (collectively, the “Loan File”) pertaining to each of the Purchased Loans identified in the Custodial Delivery delivered therewith; provided, that the applicable Seller shall deliver a certificate of an Authorized Representative of such Seller certifying that any copies of documents delivered represent true and correct copies of the originals of such documents:

 

(A)                               the original executed Mortgage Note together with any applicable riders, endorsed on its face or by allonge attached thereto, without recourse, in

 

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blank and otherwise showing a complete, unbroken chain of endorsement from the initial lender (or, if such original Mortgage Note has been lost, an affidavit to such effect from the applicable Seller or another prior holder and a customary indemnity from the applicable Seller in favor of the Buyer for any costs, losses or damages arising from the failure to deliver the original Mortgage Note, together with a copy of such Mortgage Note),

 

(B)                               the original or (to the extent that such original is retained by the relevant public recording office) a copy of the Mortgage, together with an original or (to the extent that such original is retained by the relevant public recording office) a copy of any intervening assignments of the Mortgage showing a complete chain of assignment from the originator of such Mortgage Loan to the applicable Seller,

 

(C)                               the original or (to the extent that such original is retained by the relevant public recording office) a copy of any Assignment of Leases (if such item is a document separate from the Mortgage) and of any intervening assignments of such Assignment of Leases showing a complete chain of assignment from the originator of such Mortgage Loan to the applicable Seller,

 

(D)                               an original executed Omnibus Assignment from the applicable Seller in blank and in recordable form (except for missing recording information not yet available if the instrument being assigned has not been returned from the applicable recording office),

 

(E)                                an original executed assignment of any Assignment of Leases (if such item is a document separate from the Mortgage) from the applicable Seller in blank and in recordable form (except for missing recording information not yet available if the instrument being assigned has not been returned from the applicable recording office),

 

(F)                                 originals or (to the extent that such originals are retained by the relevant public recording office) copies of all modification agreements in those instances in which the terms or provisions of the Mortgage have been modified, in each case (unless the particular item has not been returned from the applicable recording office) with evidence of recording indicated thereon if the instrument being modified is a recordable document,

 

(G)                               originals of all modification agreements in those instances in which the terms or provisions of the Mortgage Note have been modified,

 

(H)                              the original policy or certificate of lender’s title insurance issued in connection with the origination of such Mortgage Loan, together with its endorsements or, if such policy has not been issued, an irrevocable, binding commitment (which may be an agreement to provide the same pursuant to binding escrow instructions executed by an authorized representative of the title company) to issue such title insurance policy,

 

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(I)                                   a copy of any ground lease and any ground lessor estoppels,

 

(J)                                   if such Mortgage Loan contains a Future Advance Obligation, an original of the related loan agreement,

 

(K)                               an original of any guaranty of payment under such Mortgage Loan,

 

(L)                                an original of any environmental indemnity,

 

(M)                            an original copy of any escrow agreements,

 

(N)                               copies of any UCC financing statements in favor of the originator of such Mortgage Loan or in favor of any assignee prior to the applicable Seller and UCC-3 assignment financing statements in favor of the applicable Seller, in each case (unless the particular item has not been returned from the applicable filing office), with evidence of filing indicated thereon or certified by the applicable filing office,

 

(O)                               UCC-3 assignment financing statements from the applicable Seller in blank,

 

(P)                                 an original of any subordination agreement or intercreditor agreement,

 

(Q)                               if the Mortgage Note or Mortgage was executed pursuant to a power of attorney or other instrument that authorized or empowered such person to sign, an original of such power of attorney or other instrument, and

 

(S)                                 an original of any property management agreement executed in connection with the related Mortgaged Property.

 

(c)                                  In addition, with respect to each Purchased Loan, if not expressly required pursuant to the Loan Documents or if the related Mortgagor has not already been instructed to make remittances to the Servicer,  the applicable Seller shall deliver an instruction letter from the applicable Seller to the borrower under each Purchased Loan, instructing the borrower to remit all sums required to be remitted to the holder of the Purchased Loan under the related Loan Documents to the Servicer for deposit in the Applicable Servicer Account or to any other restricted account required pursuant to the applicable Loan Documents. If the borrower under any Purchased Loan remits any sums required to be remitted to the holder of such Purchased Loan under the related Loan Documents to any Seller or its Affiliate, such Seller shall, within two (2) Business Days after receipt thereof, (i) remit such sums (other than Underlying Purchased Loan Reserves) to the Depository for deposit in the Cash Management Account as set forth in Section 5 hereof or as otherwise directed in the written notice signed by such Seller and Buyer, and (ii) deliver (or cause Servicer to deliver) an additional instruction letter from such Seller or Servicer, as applicable, to the borrower under the applicable Purchased Loan, instructing the borrower to remit all sums required to be remitted to the holder of the Purchased Loan under the related Loan Documents to the Servicer for deposit in the Applicable Servicer Account or as otherwise directed in a written notice signed by the applicable Seller and Buyer.

 

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(d)                                 From time to time, each Seller shall forward to the Custodian additional original documents or additional copies of documents evidencing any assumption, modification, consolidation or extension of a Purchased Loan approved in accordance with the terms of this Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents as Custodian shall request from time to time.  With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to the applicable Seller in time to permit their delivery hereunder at the time required, in lieu of delivering such original documents, such Seller shall deliver to Buyer a true copy thereof with an officer’s certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation.  The applicable Seller shall deliver such original documents to Buyer or its designee within five (5) Business Days after they are received.  With respect to all of the Purchased Loans delivered by a Seller to Buyer or its designee (including the Custodian), the applicable Seller shall execute an omnibus power of attorney substantially in the form of Exhibit V, attached hereto irrevocably appointing Buyer its attorney-in-fact with full power to, during the continuance of an Event of Default, (i) complete and record all Assignments of Mortgage, (ii) complete the endorsements of the Mortgage Notes and (iii) take such other steps as may be reasonably necessary or desirable to enforce Buyer’s rights against such Purchased Loans and the related Loan Files and the Servicing Records.  Buyer shall deposit the Loan Files representing the Purchased Loans, or direct that the Loan Files be deposited directly, with the Custodian.  The Loan Files shall be maintained in accordance with the Custodial Agreement.  Any Loan Files not delivered to Buyer or its designee (including the Custodian) are and shall be held in trust by the applicable Seller or their designees for the benefit of Buyer as the owner thereof.  Sellers or their designees shall maintain a copy of the Loan File and the originals of the Loan Files not delivered to Buyer or its designee.  The possession of the Loan Files by the Sellers or their designees is at the will of Buyer for the sole purpose of servicing the related Purchased Loans, and such retention and possession by the Sellers or their designees is in a custodial capacity only.  The books and records (including, without limitation, any computer records or tapes) of the Sellers or their designees with respect to each Purchased Loan shall be marked appropriately to reflect clearly the interest of Buyer hereunder with respect to the related Purchased Loan.  Each Seller or its designee (including the Custodian) shall release its custody of the Loan Files only in accordance with written instructions from Buyer and in accordance with the provisions of the Custodial Agreement, unless such release is required as incidental to the servicing of the Purchased Loans is in connection with a repurchase of any Purchased Loan by the applicable Seller or as otherwise required by law.

 

(e)                                  Unless an Event of Default shall have occurred and be continuing, the applicable Seller shall exercise all voting, consent, corporate and decision-making rights with respect to the Purchased Loans, provided that no Seller shall enter into any amendment or modification, or grant any waivers under, any Loan Documents, to the extent any of same constitute a Material Modification, without Buyer’s prior written consent thereto, which consent may be given or withheld by Buyer in its sole and absolute discretion. Upon the occurrence and during the continuation of an Event of Default, Buyer shall be entitled to exercise all voting, consent, corporate, and decision-making rights with respect to the Purchased Loans without regard to any Seller Party’s instructions.

 

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8.                                      SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS

 

(a)                                 Title to all Purchased Loans shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Loans, subject, however, to the terms of this Agreement.  Subject to Section 18(b), nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase transactions with the Purchased Loans or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Loans, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Loans to Sellers pursuant to Section 3 of this Agreement or of Buyer’s obligation to credit or pay Available Income to, or apply Available Income to the obligations of, Sellers pursuant to Section 5 hereof.

 

(b)                                 Nothing contained in this Agreement or any other Transaction Document shall obligate Buyer to segregate any Purchased Loans delivered to Buyer by Sellers.  Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, no Purchased Loan shall remain in the custody of any Seller or an Affiliate of any Seller.

 

9.                                      REPRESENTATIONS

 

(a)                                 Buyer represents and warrants to each Seller as follows:

 

(i)                                     Organization.  Buyer has the power and authority to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

 

(ii)                                  Due Execution; Enforceability.  The Transaction Documents have been duly executed and delivered by Buyer, for good and valuable consideration.  The Transaction Documents constitute the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

 

(iii)                               Non-Contravention.  None of the execution and delivery of the Transaction Documents, the consummation by Buyer of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Buyer with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms, conditions or provisions of (i) the organizational documents of Buyer, (ii) any contractual obligation to which Buyer is now a party or by which it is otherwise bound or to which the assets of Buyer are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of Buyer, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Buyer, or (iv) any applicable Requirement of Law (with respect to ERISA, this representation from Buyer assumes the accuracy of the Seller’s negative covenant in Section 10(l) or, if applicable, its no prohibited transaction representation required by Section

 

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21 of this Agreement), in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a material adverse effect upon Buyer’s ability to perform its obligations hereunder.

 

(b)                                 Each Seller represents and warrants to Buyer, severally and not jointly, that as of the Closing Date, as of each Purchase Date (and with respect to the representations and warranties under paragraph (viii) of this Section 9(b) below) and at all times while this Agreement and any Transaction is in effect:

 

(i)                                     Organization.  Such Seller is duly formed, validly existing and in good standing under the laws and regulations of the state of such Seller’s formation and is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of such Seller’s business, except to the extent such failure would not reasonably be expected to result in a Material Adverse Effect.  Such Seller has the power to own and hold the assets it purports to own and hold, to carry on its business as now being conducted and proposed to be conducted, and to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

 

(ii)                                  Due Execution; Enforceability.  The Transaction Documents have been duly executed and delivered by such Seller, for good and valuable consideration.  The Transaction Documents constitute the legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

 

(iii)                               Non-Contravention.  None of the execution and delivery of the Transaction Documents, the consummation by such Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by such Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms, conditions or provisions of (i) the organizational documents of such Seller, (ii) any contractual obligation to which such Seller is now a party or by which it is otherwise bound or to which the assets of such Seller are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of such Seller, other than pursuant to the Transaction Documents, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to such Seller, or (iv) any applicable Requirement of Law, in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a Material Adverse Effect.  Such Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Purchased Loans, and for the performance of its obligations under the Transaction Documents except to the extent the failure to have any such

 

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licensees, permits or consents would not result in a Material Adverse Effect.

 

(iv)                              Litigation; Requirements of Law.  There is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of such Seller, threatened against such any Seller Party or any of their respective assets which may result in a Material Adverse Effect.  Such Seller is in compliance in all material respects with all Requirements of Law applicable to such Seller.  None of the Seller Parties is in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

 

(v)                                 No Broker.  Such Seller has not dealt with any broker, investment banker, agent, or other Person (other than Buyer or an Affiliate of Buyer) who may be entitled to any commission or compensation in connection with the sale of Purchased Loans pursuant to any of the Transaction Documents.

 

(vi)                              Good Title to Purchased Loans.  On the date hereof and immediately prior to (A) the purchase of any Purchased Loan by Buyer from such Seller and (B) Buyer’s funding of any Additional Advance with respect to any Purchased Loan, such Seller owned such Purchased Loan in each case, free and clear of any lien, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC), and such Seller is the record and beneficial owner of and has good and marketable title to and the right to sell and transfer such Purchased Loan to Buyer and, upon transfer of such Purchased Loan to Buyer, Buyer shall be the owner of such Purchased Loan free of any adverse claim, subject to the rights of such Seller pursuant to the terms of this Agreement.  In the event that any Transaction is characterized as a secured financing of the related Purchased Loans, the provisions of this Agreement are effective to create in favor of Buyer a valid “security interest” (as defined in Section 1-201(b)(37) of the UCC) in all rights, title and interest of such Seller in, to and under the Collateral and Buyer shall have a valid perfected first priority security interest in such Purchased Loans.

 

(vii)                           No Default.  No Event of Default or, to the knowledge of such Seller, Default exists under or with respect to the Transaction Documents.

 

(viii)                        Representations and Warranties Regarding the Purchased Loans; Delivery of Preliminary Due Diligence Package and Loan File.  With respect to each Purchased Loan sold or transferred in a Transaction hereunder, each of the Loan Representations applicable to such Purchased Loan are true and correct, except as disclosed to Buyer in writing prior to the Purchase Date for the applicable Purchased Loan and approved by Buyer in its sole and absolute discretion (and, if approved, set forth on Schedule 3 to the Confirmation for such Purchased Loan).  It is understood and agreed that

 

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the Loan Representations shall survive delivery of the respective Loan File to Buyer or its designee (including the Custodian) and shall remain true and correct at all times while this Agreement is in effect.  With respect to each Purchased Loan, the Preliminary Due Diligence Package delivered to Buyer in connection with such Purchased Loan is complete, true and accurate in all material respects (including, but not limited to, complete, true and accurate in all material respects with respect to the disclosure of any direct or indirect ownership interests of such Seller or its Affiliates in the Mortgagor), and does not omit to state a material fact necessary to make the statements therein not misleading.  With respect to each Purchased Loan, the Mortgage Note, the Mortgages, the Assignments of Mortgage, the Pledge Agreement, in each case, as applicable, and any other documents required to be delivered under this Agreement and the Custodial Agreement for such Purchased Loan have been delivered to Buyer or the Custodian on its behalf.  Such Seller or its designee is in possession of a complete, true and accurate Loan File with respect to each Purchased Loan, except for such documents the originals of which have been delivered to the Custodian.

 

(ix)                              Adequate Capitalization; No Fraudulent Transfer.  Such Seller has, as of the Purchase Date, adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.  Such Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due.  Such Seller is not insolvent nor will such Seller be made insolvent by virtue of such Seller’s execution of or performance under any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of the United States, the State of New York or any other jurisdiction under which such Seller is organized or qualified to do business.  Such Seller has not entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

 

(x)                                 Consents.  No consent, approval or other action of, or filing by such Seller with any Governmental Authority or any other Person is required to authorize, or is otherwise required in connection with, the execution, delivery and performance by such Seller of any of the Transaction Documents (other than consents, approvals and filings that have been obtained or made, as applicable).

 

(xi)                              Ownership.  The direct, and to the extent depicted, the indirect, ownership interests in such Seller and Guarantor are as set forth on the organizational chart attached hereto as Exhibit VII hereto.

 

(xii)                           Organizational Documents.  Such Seller has delivered to Buyer certified copies of its organizational documents, together with all amendments thereto, if any.

 

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(xiii)                        No Encumbrances.  Subject to the terms of this Agreement, there are (i) no outstanding rights, options, warrants or agreements on the part of such Seller for a purchase, sale or issuance, in connection with the Purchased Loans, and (ii) no agreements on the part of such Seller to issue, sell or distribute the Purchased Loans.

 

(xiv)                       Federal Regulations.  Such Seller is not required to register as an “investment company” under the Investment Company Act of 1940, as amended.

 

(xv)                          Taxes.  Such Seller has filed or caused to be filed all federal and other material Tax returns which would be delinquent if they had not been filed on or before the date hereof and has paid all Taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other Taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP; no Tax liens have been filed against any of such Seller’s assets and, to the best knowledge of such Seller, no claims are being asserted with respect to any such Taxes, fees or other charges.

 

(xvi)                       ERISA.  No Seller Party nor any of their respective ERISA Affiliates sponsors, maintains, contributes to, or has within the immediately preceding five calendar years sponsored, maintained or contributed to, any Plans or Multiemployer Plans, the liability for which would reasonably be expected in the aggregate to result in a Material Adverse Effect.

 

(xvii)                    Judgments/Bankruptcy.  Except as disclosed in writing to Buyer there are no judgments against any Seller Party unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to any Seller Party.

 

(xviii)                 [RESERVED].

 

(xix)                       Financial Information.  All financial data concerning such Seller that has been delivered by or on behalf of such Seller to Buyer is true, complete and correct in all material respects and has been prepared in accordance with GAAP.  Since the delivery of such data, except as otherwise disclosed in writing to Buyer, there has been no change in the financial position of such Seller, or in the results of operations of such Seller, which change is reasonably likely to result in a Material Adverse Effect.

 

(xx)                          Reserved.

 

(xxi)                       Notice Address; Jurisdiction of Organization.  On the date of this Agreement, such Seller’s address for notices is as set forth on Annex I

 

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attached hereto.  Such Seller’s jurisdiction of formation is Delaware. The location where such Seller keeps its books and records, including all computer tapes and records relating to the Collateral, is its notice address.

 

(xxii)                    Prohibited Person.  None of the funds or other assets of such Seller constitute property of, or are, to such Seller’s knowledge, beneficially owned, directly or indirectly, by a Prohibited Person with the result that the investment in such Seller (whether directly or indirectly), is prohibited by law or the entering into this Agreement by Buyer is in violation of law; (b) to such Seller’s knowledge, no Prohibited Person has any interest of any nature whatsoever in such Seller with the result that the investment in such Seller (whether directly or indirectly), is prohibited by law or the entering into this Agreement is in violation of law; (c) to such Seller’s knowledge, none of the funds of such Seller have been derived from any unlawful activity with the result that the investment in such Seller (whether directly or indirectly), is prohibited by law or the entering into this Agreement is in violation of law; (d) to such Seller’s knowledge, such Seller has not conducted and will not conduct any business and has not engaged and will not engage in any transaction dealing with any Prohibited Person; and (e) such Seller is not a Prohibited Person and has not been convicted of a felony or a crime which if prosecuted under the laws of the United States of America would be a felony.

 

(c)                                  On the Purchase Date for any Transaction, each Seller shall be deemed to have made all of the representations set forth in this Section 9 as of such Purchase Date.

 

10.                               NEGATIVE COVENANTS OF SELLER

 

During the term of this Agreement and so long as any Transaction is in effect hereunder, no Seller shall without the prior written consent of Buyer:

 

(a)                                 take any action which would directly or indirectly impair or adversely affect Buyer’s title or interest to any of the Purchased Loans;

 

(b)                                 transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge, encumber or hypothecate, directly or indirectly (any of the foregoing, a “Transfer”), any interest in the Purchased Loans (or any of them) to any Person other than Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Loans (or any of them) with any Person other than Buyer;

 

(c)                                  change its name or its jurisdiction of organization from the jurisdiction referred to in Section 9(b)(xxi) unless it shall have provided Buyer thirty (30) days’ prior written notice of such change;

 

(d)                                 create, incur or permit to exist any lien, encumbrance or security interest in or on any of the Purchased Loans or the other Collateral, except for any Permitted Encumbrances or liens created in favor of Buyer under this Agreement or the other Transaction Documents;

 

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(e)                                  materially modify or terminate its Seller Operating Agreement or any of the organizational documents of such Seller;

 

(f)                                   enter into, consent or assent to any amendment or supplement to, or termination of, or waiver of any provision of, any of the Loan Documents relating to any Purchased Loan to the extent any of same constitutes a Material Modification except in accordance with the terms and provisions of this Agreement;

 

(g)                                  transfer or permit to be transferred any direct or indirect ownership interests in any Seller Party, or take any action or permit any action to be taken, if any such transfers and/or actions, individually or in the aggregate, would result in a Change of Control;

 

(h)                                 [Intentionally Omitted];

 

(i)                                     after the occurrence and during the continuation of any Event of Default, make any distribution, payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or ownership interest of such Seller, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of such Seller (unless the same is necessary for SAMC to maintain its status as a REIT under the Code or to prevent the imposition of taxes on SAMC pursuant to Sections 857 or 4981 of the Code);

 

(j)                                    send a payment redirection letter to the Mortgagor of any Purchased Loan, or otherwise instruct any Mortgagor to make any payment due on a Purchased Loan to any account, other than a restricted or other similar account established pursuant to the applicable Loan Documents, the Applicable Servicer Account or Cash Management Account;

 

(k)                                 sponsor or maintain any Plans or have an obligation to contribute to any Plan or Multiemployer Plan; or permit any ERISA Affiliate to sponsor or maintain any Plans or make any contributions to, or have any liability or obligation (direct or contingent) with respect to, any Plan or Multiemployer Plan that could possibly result in material liability for any Seller;

 

(l)                                     subject to Section 21 of this Agreement, become an entity deemed to hold Plan Assets;

 

(m)                             make any future advances under any Purchased Loan to any underlying obligor that are not expressly provided for by the related Loan Documents;

 

(n)                                 seek its dissolution, liquidation or winding up, in whole or in part;

 

(o)                                 exercise any remedies under the Loan Documents for any Purchased Loan as to which a Loan Event of Default has occurred and has not been waived, including, without limitation, the commencement or prosecution of any foreclosure proceeding, the exercise of any power of sale, the taking of a deed-in-lieu of foreclosure or other realization upon the security for any Purchased Loan;

 

(p)                                 [Intentionally Omitted];

 

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(q)                                 [Intentionally Omitted];

 

(r)                                    conduct any business, or engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order 13224 issued on September 24, 2001. Each Seller further covenants and agrees to deliver (from time to time) to Buyer any such certification or other evidence as may be requested by Buyer in its sole and absolute discretion, confirming that such Seller has not, to its knowledge, engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or

 

(s)                                   cause any Purchased Loan to be serviced by any servicer other than a Servicer expressly approved in writing by Buyer or enter into or materially modify any Servicing Agreement except in accordance with Section 28.

 

11.                               AFFIRMATIVE COVENANTS OF SELLER

 

During the term of this Agreement and so long as any Transaction is in effect hereunder:

 

(a)                                 Each Seller shall promptly notify Buyer of any Material Adverse Effect; provided, however, that nothing in this Section 11 shall relieve any Seller of its obligations under this Agreement.

 

(b)                                 Each Seller shall provide Buyer with copies of such documents as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 9.

 

(c)                                  Each Seller (i) shall defend the right, title and interest of Buyer in and to the Collateral against, and take such other action as is necessary to remove, the liens, security interests, claims and demands of all Persons (other than security interests by or through Buyer) and (ii) shall, at Buyer’s reasonable request, take all action necessary to ensure that Buyer will have a first priority security interest in the Purchased Loans subject to any of the Transactions in the event such Transactions are recharacterized as secured financings.

 

(d)                                 Each Seller shall notify Buyer and the Depository of the occurrence of any Default or Event of Default as soon as possible but in no event later than the second (2nd) Business Day after obtaining actual knowledge of such event.

 

(e)                                  Each Seller shall give notice to Buyer of the following (except in the case of clause (i) below, accompanied by an officer’s certificate setting forth details of the occurrence referred to therein and stating what actions such Seller has taken or proposes to take with respect thereto):

 

(i)                                     with respect to any Purchased Loan subject to a Transaction hereunder, promptly (and in any event within two (2) Business Days) following receipt of any unscheduled Principal Payment (in full or in part);

 

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(ii)                                  with respect to any Purchased Loan sold to Buyer hereunder, promptly (and in any event within two (2) Business Days) following receipt by such Seller of notice or knowledge that any related Mortgaged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as, in each case, to materially and adversely affect the value of such Mortgaged Property;

 

(iii)                               promptly (and in any event within two (2) Business Days) following receipt of notice by such Seller or knowledge of (i) the occurrence of any payment default or other material default under the Loan Documents for any Purchased Loan, (ii) any lien or security interest (other than security interests created hereby) on, or claim asserted against, any Purchased Loan or, to the best knowledge of such Seller, the underlying collateral therefor or (iii) any event or change in circumstances that has or could reasonably be expected to have a material and adverse effect on the Market Value of a Purchased Loan; and

 

(iv)                              promptly, and in any event within three (3) Business Days after service of process on any of the following, give to Buyer notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or arbitrable proceedings directly affecting such Seller or directly affecting any of the assets of such Seller before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Transaction Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim or claims in an aggregate amount greater than $1,000,000, or (iii) which, individually or in the aggregate, if adversely determined could reasonably be likely to have a Material Adverse Effect.

 

(f)                                   Each Seller shall deliver to Buyer (i) notice of the occurrence of any Loan Event of Default promptly (and in any event not later than two (2) Business Days) after the earlier of the date that such Seller receives notice or has actual knowledge thereof and (ii) any other information with respect to any Purchased Loan as may be reasonably requested by Buyer from time to time.

 

(g)                                  Each Seller will permit Buyer or its designated representative to inspect such Seller’s records with respect to the Collateral and the conduct and operation of its business related thereto upon reasonable prior written notice from Buyer or its designated representative, at such reasonable times and with reasonable frequency (but not more than once in any calendar year so long as no Event of Default or Diligence Event exists), and to make copies of extracts of any and all thereof, subject to the terms of any confidentiality agreement between Buyer and the applicable Seller.

 

(h)                                 At any time from time to time upon the reasonable request of Buyer, at the sole expense of the applicable Seller, each Seller will promptly and duly execute and deliver to Buyer such further instruments and documents and take such further actions as Buyer may reasonably

 

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request for the purposes of obtaining or preserving the full benefits of this Agreement including the security interests granted hereunder and of the rights and powers herein granted (including, among other things, filing such UCC financing statements as Buyer may reasonably request).  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to Buyer, duly endorsed in a manner reasonably satisfactory to Buyer, to be held as Collateral pursuant to this Agreement, and the documents delivered in connection herewith.

 

(i)                                     Each Seller shall provide Buyer with the following financial and reporting information (which shall be provided by email to each of the parties listed as “Buyer Reporting Parties” on Annex I attached hereto):

 

(i)                                     Within 45 days after the last day of each of the first three fiscal quarters in any fiscal year, Guarantor’s consolidated and unaudited and such Seller’s unaudited statements of income and statements of changes in cash flow for such quarter and balance sheets as of the end of such quarter, in each case presented fairly in accordance with GAAP and certified as being true and correct by an officer’s certificate;

 

(ii)                                  Within 90 days after the last day of its fiscal year, Guarantor’s consolidated and audited, and such Seller’s unaudited, statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year, in each case presented fairly in accordance with GAAP, and accompanied, in all cases, by an unqualified report of a nationally recognized independent certified public accounting firm reasonably acceptable to Buyer;

 

(iii)                               If not provided by the Servicer, within 30 days after the last day of each calendar month, any and all property level financial information (including without limitation rent rolls and operating statements) received with respect to the Purchased Loans by such Seller or an Affiliate during such calendar month;

 

(iv)                              Within 45 days after the last day of each of the first, second and third quarters and within 60 days after the last day of the fourth quarter in any fiscal year, an officer’s certificate from such Seller addressed to Buyer certifying that, as of the end of such quarter, (x) such Seller is in compliance with all of the terms, conditions and requirements of this Agreement, (y) no Default or Event of Default exists and (z) Guarantor is in compliance with the financial covenants set forth in Section 8 of the Guaranty (including a calculation of each such financial covenant); and

 

(v)                                 The Sellers shall cause the Servicer, no later than the fourth Business Day preceding each Payment Date (as defined in the Servicing Agreement), to provide reports substantially in the form attached hereto as Exhibit XVIII.

 

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(j)                                    Each Seller shall at all times comply in all material respects with all laws, ordinances, rules and regulations of any federal, state, municipal or other public authority having jurisdiction over such Seller or any of its assets and such Seller shall do or cause to be done all things reasonably necessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.

 

(k)                                 Each Seller shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

 

(l)                                     Each Seller shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Transaction Documents.  Each Seller shall pay and discharge all Taxes, levies, liens and other charges on its assets and on the Collateral that, in each case, in any manner would create any lien or charge upon the Collateral, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP in all material respects.  Each Seller shall timely file all Tax returns required to be filed by it or with respect to all or any portion of the Collateral.

 

(m)                             Each Seller shall advise Buyer in writing of the opening of any new chief executive office or the closing of any such office and of any change in such Seller’s name or organizational structure or the places where the books and records pertaining to the Purchased Loan are held not less than thirty (30) days prior to taking any such action.  Each Seller shall also give Buyer prompt written notice of any transfer of more than 20% of the direct or indirect ownership interests in any Seller Party.

 

(n)                                 Each Seller will maintain records with respect to the Collateral and the conduct and operation of its business with no less a degree of prudence than if the Collateral were held by such Seller for its own account and will furnish Buyer, upon reasonable request by Buyer or its designated representative, with reasonable information reasonably obtainable by such Seller with respect to the Collateral and the conduct and operation of its business.

 

(o)                                 Each Seller shall provide Buyer with reasonable access to any operating statements, any occupancy status and any other property level information, with respect to the Mortgaged Properties, plus any such additional reports as Buyer may reasonably request, in each case, to the extent same is in such Seller’s possession or reasonably obtainable by such Seller.

 

(p)                                 Each Seller shall maintain its existence as a limited liability company organized solely and in good standing under the law of the State of Delaware (unless such Seller shall have given Buyer at least thirty (30) days’ prior written notice that such Seller intends to change the jurisdiction of its organization) and shall not dissolve, liquidate, merge with or into any other Person or otherwise change its organizational structure or documents or incorporate or organize in any other jurisdiction, without the prior written approval of Buyer, which approval shall not be unreasonably withheld, conditioned or delayed.

 

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(q)                                 Each Seller shall promptly provide Buyer with notice of any Other Financing Agreements entered into by SAMC or any of its subsidiaries.  Upon request of Buyer, the applicable Seller shall provide Buyer with copies (on a no-name basis) of the relevant provisions of such Other Financing Agreements (including any Other Financing Agreements entered into as of the date hereof) in order to comply with the provisions of Section 4(b) of this Agreement and Section 8(k) of the Guaranty.

 

12.                               [Intentionally Omitted]

 

13.                               EVENTS OF DEFAULT; REMEDIES

 

(a)                                 After the occurrence and during the continuance of an Event of Default, each Seller hereby appoints Buyer as attorney-in-fact of such Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest.

 

Each of the following shall constitute an “Event of Default”:

 

(i)                                     Any Seller fails to repurchase a Purchased Loan upon the applicable Repurchase Date therefor, and such failure continues for more than one (1) Business Day;

 

(ii)                                  Any Seller fails to pay any Margin Deficit with respect to a Purchased Loan when required pursuant to Section 4 hereof;

 

(iii)                               [Reserved];

 

(iv)                              an Act of Insolvency occurs with respect to any Seller Party;

 

(v)                                 any Seller Party shall admit in writing its inability to, or its intention not to, perform any of its monetary payment obligations hereunder;

 

(vi)                              either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any adverse claim (other than the rights of a Seller pursuant to this Agreement) of any of the Purchased Loans, or (B) the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of Buyer in any of the Purchased Loans, and such circumstance continues for more than fifteen (15) Business Days;

 

(vii)                           subject to the provisions of Section 5(e), the failure of Buyer to receive on any Remittance Date the accrued and unpaid Price Differential for a Transaction;

 

(viii)                        failure of any Seller Party to make any other payment owing to Buyer which has become due under this Agreement or any other Transaction Document, whether by acceleration or otherwise under the terms of this

 

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Agreement or the other Transaction Documents, which failure is not remedied within five (5) Business Days;

 

(ix)                              any governmental, regulatory, or self-regulatory authority shall have taken any action to remove, limit, restrict, suspend or terminate the rights, privileges, or operations of any Seller Party, which suspension results in or is reasonably likely to result in a Material Adverse Effect;

 

(x)                                 a Change of Control shall have occurred that has not been consented to by Buyer in writing;

 

(xi)                              any representation (other than a Loan Representation or representation under Section 9(b)(viii)) made by a Seller Party in this Agreement or the other Transaction Documents shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, which incorrect or untrue representation, to the extent such breach is reasonably susceptible to cure, is not cured within ten (10) days after notice of the default or breach (except if such breach is curable and the applicable Seller Party diligently attempts to cure such default, and such breach continues for thirty (30) days after notice of the default or breach);

 

(xii)                           any Loan Representation or representation under Section 9(b)(viii) made by any Seller in this Agreement shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, which incorrect or untrue representation, to the extent such breach is reasonably susceptible to cure, is not cured within, or such Seller terminates the related Transaction and repurchases the related Purchased Loan(s) within ten (10) Business Days after written notice thereof to the applicable Seller, or its successors or assigns (except if such breach is curable and such Seller diligently attempts to cure such breach, and such breach continues for thirty (30) days after notice of the breach);

 

(xiii)                        either (A) Guarantor shall fail to observe any of the financial covenants set forth in the Guaranty or shall have defaulted or failed to perform under the Guaranty, and such breach is not cured within five (5) Business Days or (B) the Guaranty shall have been revoked, rescinded or otherwise cease to be in full force and effect;

 

(xiv)                       a final non-appealable judgment by any competent court in the United States of America for the payment of money in an amount greater than $5,000,000 shall have been rendered against any Seller Party, and remained undischarged or unpaid for a period of thirty (30) days, during which period execution of such judgment is not effectively stayed by bonding over or other means acceptable to Buyer, unless adequate funds have been reserved or set aside for the payment thereof in a segregated account pledged to the Buyer as security for such Seller Party’s

 

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obligations and subject to an account control agreement, reasonably acceptable to the Buyer, among the Depository and the applicable Seller;

 

(xv)                          any Seller Party shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, repurchase agreement, swap agreement or any other contract, agreement or transaction to which it is a party, which default (A) involves the failure to pay a monetary obligation of $5,000,000 or more, or (B) permits the acceleration of the maturity of obligations, or the declaration of a mandatory early repurchase date or termination date with respect to indebtedness or obligations of $5,000,000 or more, by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, repurchase agreement, swap agreement or any other contract, agreement or transaction, provided, however, that any such default, failure to perform or breach shall not constitute an Event of Default if such Seller Party cures such default, failure to perform or breach, as the case may be, within the grace period, if any, provided under the applicable agreement;

 

(xvi)                       if (A) any Seller Party or any Affiliate of a Seller Party defaults beyond any applicable grace period in paying any amount or performing any obligation due to an Affiliated Hedge Counterparty under any Affiliated Hedging Transaction or (B) any Seller Party defaults beyond any applicable grace period in paying any amount or performing any obligation due to Buyer or any Affiliate of Buyer under any other financing, swap, hedging, security or credit agreement between such Seller Party or any Affiliate of such Seller Party and Buyer or any Affiliate of Buyer;

 

(xvii)                    any breach under Sections 10(b), (d), (e), (g), (i), (l) (o), (r) or (s) or under Section 21, and, to the extent such breach is subject to cure, such breach is not cured within one (1) Business Day of notice thereof;

 

(xviii)                 any breach under Section 10(f); provided, however, that any such breach by such Seller under Section 10(f) shall not be considered an Event of Default hereunder provided such Seller terminates the related Transaction and repurchases the related Purchased Loan(s) on an Early Repurchase Date no later than two (2) Business Days after notice from Buyer to such Seller of such breach provided that such notice from Buyer is sent by 6:00 p.m. (New York City time), or three (3) Business Days following the date of receipt of such notice if such notice is sent after 6:00 p.m. (New York City time) on such date;

 

(xix)                       if any Seller Party shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement or any other Transaction Document, other than as specifically otherwise referred to in this definition of “Event of Default”, and such breach or failure to perform is not remedied within ten (10) Business Days after written notice thereof

 

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to such Seller by Buyer, or its successors or assigns (except if such default or breach is curable and such Seller diligently attempts to cure such default, and such default or breach continues for thirty (30) days after notice of the default or breach) (unless this Agreement or such other Transaction Document expressly provides that such breach or failure constitutes an immediate Event of Default, in which case no notice or cure period shall apply);

 

(xx)                          failure of a Servicer to make any Protective Advance required to be made under the Transaction Documents, which failure materially impairs the value of the related Mortgaged Property, and such failure continues for more than two (2) Business Days;

 

(xxi)                       any Seller Party or the Collateral becomes an investment company required to be registered under the Investment Company Act of 1940, as amended;

 

(xxii)                    the applicable Seller fails to appoint a successor Servicer within one hundred and twenty (120) days of its receipt of a valid notice of removal or retirement of any Servicer given pursuant to the applicable Servicing Agreement;

 

(xxiii)                 a failure to maintain Available Amounts equal to (i) 100% of the aggregate Future Advance Obligations for all Purchased Loans less (ii) amounts on deposit in a segregated account pledged to the Buyer as security for the obligations of the Seller Parties and subject to an account control agreement, reasonably acceptable to the Buyer, between the Depository and the applicable Seller, and such failure continues for more than five (5) Business Days;

 

(xxiv)                a failure by any party to deliver any report required under Section 27 or under any Servicing Agreement, and such failure continues for more than ten (10) Business Days after written request for such report;

 

(xxv)                   SAMC ceases to be the general partner of the Guarantor;

 

(xxvi)                The Investment Manager ceases to be the investment manager of the Guarantor, pursuant to an investment management agreement;

 

(xxvii)             Thomas Capasse and Jack Ross cease to be involved in the day-to-day operations of the Guarantor or the Investment Manager;

 

(xxviii)          The occurrence of one or more ERISA Events that results or is reasonably expected to result in liability of the Seller under Title IV of ERISA to the Plan, Multiemployer Plan or the PBGC, and such event, together with all other ERISA Events, if any, is reasonably expected to result in a Material Adverse Effect; or

 

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(xxix)     SAMC fails (i) to qualify as a REIT, and such failure gives rise to any tax liability or penalty in excess of $5,000,000 or (ii) to satisfy any of the income or asset tests required to be satisfied by a REIT, unless such failure is subject to a cure or corrective period permitted under the Code or does not give rise to any tax liability or penalty in excess of $5,000,000; provided that no such cure or corrective period or material liability or penalty qualification shall apply where the failure to satisfy such tests occurs more than once in any tax year.

 

(b)                                 If an Event of Default shall occur and be continuing, the following rights and remedies shall be available to Buyer:

 

(i)                                     At the option of Buyer, exercised by written notice to each Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (the date on which such option is exercised or deemed to have been exercised being referred to hereinafter as the “Accelerated Repurchase Date”).

 

(ii)                                  If Buyer exercises or is deemed to have exercised the option referred to in Section 13(b)(i) of this Agreement:

 

(A)                               each Seller’s obligations hereunder to repurchase all Purchased Loans shall become immediately due and payable on and as of the Accelerated Repurchase Date; and

 

(B)                               the Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall include the accrued and unpaid Price Differential with respect to each Purchased Loan accrued at the Pricing Rate applicable upon the occurrence of an Event of Default; and

 

(C)                               the Custodian shall, upon the request of Buyer, deliver to Buyer all Loan Documents, instruments, certificates and other documents then held by the Custodian relating to the Purchased Loans.

 

(iii)                               Upon the occurrence of an Event of Default, Buyer may (upon making reasonable effort to provide prior notice to the Sellers; provided, however, than any failure by Buyer to deliver such notice shall in no way impair Buyer’s right to exercise remedies under this Article 13) (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as Buyer may deem satisfactory in its sole and absolute discretion any or all of the Purchased Loans or (B) in its sole and absolute discretion elect, in lieu of selling all or a portion of such Purchased Loans, to give the applicable Seller credit for such Purchased Loans in an amount equal to the Market Value of such Purchased Loans

 

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against the aggregate unpaid Repurchase Price for such Purchased Loans and any other amounts owing by the Seller Parties under this Agreement or the Transaction Documents.  The proceeds of any disposition of Purchased Loans effected pursuant to this Section 13(b)(iii) shall be applied, (v) first, to the costs and expenses incurred by Buyer in connection with Sellers’ defaults; (w) second, to any and all amounts due under Section 3(h), including, but not limited to, costs of cover, if any; (x) third, to the aggregate Repurchase Price of the Purchased Loans; and (y) fourth, to return any excess to the applicable Seller.

 

(iv)                              The parties acknowledge and agree that (1) the Purchased Loans subject to Transactions hereunder are not instruments traded in a recognized market, and, in the absence of a generally recognized source for prices or bid or offer quotations for any Purchased Loans, Buyer may establish the source therefor in its sole and absolute discretion and (2) all prices, bids and offers shall be determined together with accrued Available Income (except to the extent contrary to market practice with respect to the relevant Purchased Loans).  The parties recognize that it may not be possible to purchase or sell all of the Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Loans may not be liquid at such time.  In view of the nature of the Purchased Loans, the parties agree that liquidation of a Transaction, the Purchased Loans pursuant to this Section 13(b) does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner.  Accordingly, Buyer may elect, in its sole and absolute discretion, the time and manner of liquidating any Purchased Loans pursuant to this Section 13(b) and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Loans on the occurrence and during the continuance of an Event of Default or to liquidate any or all of the Purchased Loans in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer.

 

(v)                                 Each Seller shall be liable to Buyer for (A) the amount of all expenses, including reasonable out-of-pocket legal fees and expenses, actually incurred by Buyer in connection with or as a consequence of an Event of Default and (B) any other actual out-of-pocket loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default.

 

(vi)                              Buyer shall have, in addition to its rights and remedies under the Transaction Documents, all of the rights and remedies provided by applicable federal, state and local laws (including, without limitation, if the Transactions are characterized as secured financings, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual

 

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debt and claim), in equity, and under any other agreement between Buyer and the Seller Parties.  Without limiting the generality of the foregoing, Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Loans against all of the Seller Parties’ obligations to Buyer under this Agreement and the other Transaction Documents, whether or not such obligations are then due, without prejudice to Buyer’s right to recover any deficiency.

 

(vii)                           Subject to the notice and grace periods set forth herein, Buyer may exercise any or all of the remedies available to Buyer immediately upon the occurrence of an Event of Default and at any time during the continuance thereof.  Except as expressly required herein or in the other Transaction Documents, Buyer shall not be required to give notice to the Seller Parties or any other Person prior to exercising any remedy in respect of an Event of Default.  All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies which Buyer may have.

 

(viii)                        Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and each Seller hereby expressly waives any defenses such Seller might otherwise have to require Buyer to enforce its rights by judicial process.  Each Seller also waives any defense such Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Loans, or from any other election of remedies.  Each Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

 

(ix)                              Upon the designation of any Accelerated Repurchase Date, Buyer may, without prior notice to the Seller Parties, set off any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by the Seller Parties to Buyer or any Affiliate of Buyer against any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by Buyer or any Affiliate of Buyer to the Seller Parties.  Buyer will give notice to the other party of any set off effected under this Section 13(b)(ix).  If a sum or obligation is unascertained, Buyer may estimate in good faith that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.  Nothing in this Section 13(b)(ix) shall be effective to create a charge or other security interest.  This Section 13(b)(ix) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other rights to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).

 

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(x)                                 Each Seller shall within two (2) Business Days following Buyer’s written request, to execute and deliver to Buyer such documents, instruments, certificates, assignments and other writings, and do such other acts as Buyer may reasonably request for the purposes of assuring, perfecting and evidencing Buyer’s ownership of and security interests in the Purchased Loans, including without limitation: (i) forwarding, to Buyer or Buyer’s designee (including, if applicable, the Custodian), any payments such Seller may hereafter receive on account of the Purchased Loans, in each case promptly upon receipt thereof; (ii) delivering to Buyer or such designee any originals of certificates, instruments, documents, notices or files evidencing or relating to the Purchased Loans which are in such Seller’s possession or under its control; (iii) delivering to Buyer underwriting summaries, credit memos, assets summaries, status reports or similar documents relating to the Purchased Loans and in such Seller’s possession or under its control.

 

14.                               [INTENTIONALLY OMITTED]

 

15.                               RECORDING OF COMMUNICATIONS

 

EACH OF BUYER AND EACH SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN ITS EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO TRANSACTIONS; PROVIDED, HOWEVER, THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL BE LIMITED TO COMMUNICATIONS OF EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF THE APPLICABLE PARTY.  EACH OF BUYER AND EACH SELLER HEREBY CONSENTS TO THE ADMISSIBILITY OF SUCH TAPE RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, AND AGREE THAT A DULY AUTHENTICATED TRANSCRIPT OF SUCH A TAPE RECORDING SHALL BE DEEMED TO BE A WRITING CONCLUSIVELY EVIDENCING THE PARTIES’ AGREEMENT.

 

16.                               NOTICES AND OTHER COMMUNICATIONS

 

Unless otherwise provided in this Agreement, all notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if delivered by email together with delivery by one of the following methods: (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, or (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, to the address specified in Annex I hereto or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 16.  A notice shall be deemed to have been given when delivered by email upon delivery, provided that (i) such email notice was also delivered by one of the means set forth in (a), (b) or (c) above (which may arrive after such email), and (ii) the transmitting party did not receive an electronic notice of a transmission failure; provided, however, that if a party shall fail to deliver

 

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such email notice, notice shall nevertheless be deemed to be given (a) in the case of hand delivery, at the time of delivery, (b) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day, or (c) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day.  A party receiving a notice which does not comply with the technical requirements for notice under this Section 16 may elect to waive any deficiencies and treat the notice as having been properly given.

 

17.                               ENTIRE AGREEMENT; SEVERABILITY

 

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions.  Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

 

18.                               ASSIGNABILITY

 

(a)                                 The rights and obligations of the Seller Parties under this Agreement and the other Transaction Documents and under any Transaction shall not be assigned by the Seller Parties without the prior written consent of Buyer, which consent may be granted or withheld in Buyer’s sole discretion.

 

(b)                                 Buyer shall not sell, assign or otherwise transfer any interest or obligation under this Agreement and the other Transaction Documents and/or under any Transaction without the prior written consent of the Sellers, which consent shall not be unreasonably withheld, conditioned or delayed (a “Restricted Transfer”); provided, however, that in no event shall any such assignment, sale or transfer be to any of the parties listed on Exhibit X attached hereto or their respective Affiliates (collectively, “Prohibited Transferees”) without the prior written consent of the Sellers. Buyer may sell participations or synthetic interests in any interest or obligation under this Agreement and the other Transaction Documents and/or under any Transaction to one or more Persons in or to all or a portion of its rights as Buyer; provided, however, that (A) such Person’s obligations under this Agreement and the Transaction Documents shall remain unchanged, (B) such Person shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Sellers shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement and the other Transaction Documents.  For the avoidance of doubt, the transfer restrictions described above regarding Restricted Transfers shall not apply, and the interests and obligations shall be freely transferable (A) following the occurrence of a Regulatory Event (a “Regulatory Transfer”), (B) following the occurrence and continuation of an Event of Default or (C) to any Affiliate of Buyer (clauses (B) and (C) together, an “Unrestricted Transfer”).  Buyer shall notify the Seller at least twenty (20) Business Days prior to any Restricted Transfer or Regulatory Transfer, and at least five (5) Business Days prior to an Unrestricted Transfer.  Buyer may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 18(b), disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to any Seller Party or to any aspect of the transactions contemplated by the Transaction Documents that has been furnished to Buyer by or on behalf of any Seller Party; provided that such assignee or participant agrees to hold such

 

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information subject to the confidentiality provisions of this Agreement and any confidentiality provisions applicable to any of the documents related thereto.

 

(c)                                  Buyer shall, acting for this purpose as a non-fiduciary agent of Sellers (the “Registrar”), maintain a record of ownership (the “Register”) on which is entered the name and address of all assignees of Buyer and each such assignee’s interest in the rights and obligations under this Agreement and the other Transaction Documents. All assignments pursuant to Section 18 hereof shall be recorded on the Register. This provision is intended to be interpreted so that the indebtedness (for federal income tax purposes, as set forth in Section 22(e)) evidenced by the Transaction Documents is treated as being in registered form in accordance with Section 5f.103-1(c) of the Treasury Regulations. The Register shall be available for inspection by Sellers at any reasonable time and from time to time upon reasonable prior notice.  The entries in the Register shall be conclusive absent manifest error, and Buyer and Sellers shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Buyer hereunder for all purposes of this Agreement and any other Transaction Document notwithstanding notice to the contrary, subject to the provisions of this Section 18.  Buyer may, at any time, designate any other Person, including a Seller, to be the successor Registrar.

 

(d)                                 If Buyer sells a participation, Buyer shall, acting for this purpose as a non-fiduciary agent of Sellers, maintain a register on which is entered the name and address of each participant and such participant’s interest in the rights and obligations under this Agreement and the other Transaction Documents (the “Participant Register”) and no participation shall be effective until recorded on the Participant Register; provided that, Buyer shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any rights or obligations under this Agreement and the other Transaction Documents) to any Person except to the extent that such disclosure is necessary to establish that such rights or obligations are in registered form in accordance with Section 5f.103-1(c) of the Treasury Regulations.  The entries in each Participant Register shall be conclusive absent manifest error, and Buyer shall treat each Person whose name is recorded in such Participant Register as the owner of the related rights and obligations for all purposes of this Agreement notwithstanding notice to the contrary, subject to the provisions of this Section 18.

 

(e)                                  Subject to the foregoing, this Agreement and the other Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.  Nothing in this Agreement or the other Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors and permitted assigns, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

 

19.                               GOVERNING LAW

 

This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

 

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20.                               NO WAIVERS, ETC.

 

No express or implied waiver of any Default or Event of Default by Buyer shall constitute a waiver of any other Default or Event of Default and no exercise of any right or remedy hereunder by Buyer shall constitute a waiver of its right to exercise any other right or remedy hereunder.  No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto.  Without limitation of the foregoing, the failure to give a notice pursuant to Section 4(b) hereof will not constitute a waiver of any right to do so at a later date.

 

21.                               USE OF EMPLOYEE PLAN ASSETS

 

No plan assets within the meaning of 29 C.F.R. § 2510.3-101, as modified in operation by Section 3(42) of ERISA, or plan assets of any employee benefit plan that is subject to any federal, state or local laws, rules or regulations that are substantially similar to Section 406 of ERISA or Section 4975 of the Code (collectively, “Plan Assets”) shall be used in connection with any Transaction.  If any such assets are intended to be used by either party hereto (the “Plan Party”) in the Transaction, the Plan Party shall so notify the other party prior to the Transaction.  The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA, Section 4975 of the Code or any substantially similar law or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

 

22.                               INTENT

 

(a)                                 The parties intend, agree and acknowledge that: (i) each Transaction involving a Purchased Loan with a Repurchase Date less than one year after the Purchase Date qualifies as a “repurchase agreement” as that term is defined in Section 101(47) of the Bankruptcy Code, (ii) each Transaction involving a Purchased Loan qualify as a “securities contract” as that term is defined in Section 741(7) of the Bankruptcy Code, (iii) each payment under this Agreement has been made by, to or for the benefit of a financial institution as defined in section 101(22) of the Bankruptcy Code, a financial participant as defined in section 101(22A) of the Bankruptcy Code or repo participant as defined in section 101(46) of the Bankruptcy Code, (iv) the grant of a security interest set forth in Section 6 hereof to secure the rights of Buyer hereunder also constitutes a “repurchase agreement” (where applicable) as contemplated by Section 101(47)(A)(v) of the Bankruptcy Code and a “securities contract” as contemplated by Section 741(7)(A)(xi) of the Bankruptcy Code and are a part of this Agreement and (v) each of the Purchased Loans shall constitute a “security” as defined in Section 101(49) of the Bankruptcy Code, a mortgage loan or an interest in a mortgage loan.  It is further understood that this Agreement is intended to constitute a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code, as amended, with respect to each Transaction so constituting a “repurchase agreement” (where applicable), or “securities contract”.  Each party hereto hereby further agrees that it shall not challenge the characterization of this Agreement as a “repurchase agreement,” “securities contract” and/or “master netting agreement” within the meaning of the Bankruptcy Code.

 

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(b)                                 The parties intend, agree and acknowledge that either party’s right to accelerate or terminate this Agreement or to liquidate the Purchased Loans delivered to it in connection with the Transaction hereunder or to exercise any other remedies pursuant to Section 13 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended.  It is further understood and agreed that either party’s right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement or any Transaction hereunder is a contractual right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement as described in Section 561 of the Bankruptcy Code.

 

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

 

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

 

(e)                                  The parties intend, agree and acknowledge that it is its intent for U.S. federal, state and local income and franchise tax purposes to treat the Transactions as indebtedness of the Seller Parties that is secured by the Purchased Loans, and the Purchased Loans as owned by Sellers for such purposes, and agrees to take no action inconsistent with such treatment, unless required by law, in which case such party shall promptly notify the other party of such requirement.

 

(f)                                   In light of the intent set forth above in this Section 22, Each Sellers agrees that, from time to time upon the written request of Buyer, such Sellers will execute and deliver any supplements, modifications, addendums or other documents as may be necessary or desirable, in Buyer’s sole discretion, in order to cause this Agreement and the Transactions contemplated hereby to qualify for, comply with the provisions of, or otherwise satisfy, maintain or preserve the criteria for safe harbor treatment under the Bankruptcy Code for “repurchase agreements” (where applicable), “securities contracts” and “master netting agreements”; provided, however, that Buyer’s failure to request, or Buyer’s or any Seller’s failure to execute, such supplements, modifications, addendums or other documents does not in any way alter or otherwise change the intention of the parties hereto that this Agreement and the Transactions hereunder constitute “repurchase agreements” (where applicable), “securities contracts” and/or a “master netting agreement” as such terms are defined in the Bankruptcy Code.

 

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23.                               DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

 

The parties acknowledge that they have been advised that:

 

(a)                                 in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934 (“1934 Act”), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

 

(b)                                 in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

 

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

 

24.                               CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

 

(a)                                 Each party irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of any United States Federal or New York State court sitting in Manhattan, and any appellate court from any such court, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement and (ii) waives, to the fullest extent it may effectively do so, any defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and any right of jurisdiction on account of its place of residence or domicile.

 

(b)                                 To the extent that any party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement.

 

(c)                                  The parties hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and irrevocably consent to the service of any summons and complaint and any other process by the mailing of copies of such process to them at their respective address specified herein.  The parties hereby agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Section 24 shall affect the right of any party to serve legal process in any other manner permitted by law or affect the right of any party to bring any action or proceeding against the other party or its property in the courts of other jurisdictions.

 

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

 

25.                               NO RELIANCE

 

(a)                                 Buyer and each Seller hereby acknowledges, represents and warrants that, in connection with the negotiation of, the entering into, and the performance under, this Agreement and the Transaction Documents and each Transaction hereunder and thereunder:

 

(i)                                     It is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the other party to the Transaction Documents, other than the representations expressly set forth in the Transaction Documents;

 

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

 

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

 

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

 

(v)                                 It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other party and has not given the other party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits (either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder.

 

(b)                                 Each determination by Buyer of the Market Value with respect to each Purchased Loan or the communication to the Seller Parties of any information pertaining to Market Value under this Agreement shall be subject to the following disclaimers:

 

(i)                                     Buyer has assumed and relied upon, with the Seller Parties’ consent and without independent verification, the accuracy and completeness of the information provided by Seller Parties and reviewed by Buyer.  Except as expressly set forth herein,

 

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Buyer has not made any independent inquiry of any aspect of the New Collateral, Purchased Loans or the underlying collateral.  Buyer’s view is based on economic, market and other conditions as in effect on, and the information made available to Buyer as of, the date of any such determination or communication of information, and such view may change at any time without prior notice to the Seller Parties.

 

(ii)                                  Market Value determinations and other information provided to the Seller Parties by the Buyer constitute a statement of Buyer’s view of the value of one or more loans or other assets at a particular point in time and neither (A) constitute a bid for a particular trade, (B) indicate a willingness on the part of Buyer or any Affiliate thereof to make such a bid, nor (C) reflect a valuation for substantially similar assets at the same or another point in time, or for the same assets at another point in time.

 

(iii)                               Market Value determinations and other information provided to the Seller Parties may vary significantly from valuation determinations and other information that may be obtained from other sources.

 

(iv)                              Market Value determinations and other information provided to the Seller Parties by the Buyer are communicated to the Seller Parties solely for their use and may not be relied upon by any other person and may not be disclosed or referred to publicly or to any third party without the prior written consent of Buyer, which consent Buyer may withhold or delay in its sole and absolute discretion.

 

(v)                                 Buyer makes no representations or warranties with respect to any Market Value determinations or other information provided to the Seller Parties by the Buyer.  Buyer shall not be liable for any incidental or consequential damages arising out of any inaccuracy in such valuation determinations and other information provided to the Seller Parties by the Buyer, including as a result of any act of gross negligence or breach of any warranty.

 

(vi)                              Market Value determinations and other information provided to the Seller Parties by the Buyer in connection therewith are only indicative of the initial Market Value of the Purchased Loan submitted to Buyer for consideration hereunder, and may change without notice to the Seller Parties prior to, or subsequent to, the Purchase Date for the applicable Transaction.  No indication is provided as to Buyer’s expectation of the future value of such Purchased Loan or the underlying collateral.

 

(vii)                           Initial Market Value determinations and other information provided to the Seller Parties by the Buyer in connection therewith are to be used by the Seller Parties for the sole purpose of determining whether to proceed in accordance with Section 3 hereof and for no other purpose.

 

26.                               INDEMNITY

 

Each Seller, severally and not jointly, hereby agrees to indemnify, defend and hold harmless Buyer, Buyer’s Affiliates, Depository, and each of their respective officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, actual out-of-pocket losses, actual out-of-pocket damages, actual out-of-pocket

 

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penalties, actions, judgments, suits, actual out-of-pocket taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement and the Transaction Documents and the documents delivered in connection herewith and therewith, other than income or similar taxes of Buyer), actual out-of-pocket fees, actual out-of-pocket costs, actual out-of-pocket expenses (including reasonable, third-party attorneys fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as this Agreement, the Transaction Documents shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement, the Transaction Documents or any Transactions hereunder or thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided, that no Seller shall be liable for Indemnified Amounts resulting from the bad faith, gross negligence or willful misconduct of any Indemnified Party.  Without limiting the generality of the foregoing, each Seller agrees to indemnify, defend and hold Buyer and the other Indemnified Parties harmless from and indemnify Buyer and the other Indemnified Parties against all Indemnified Amounts with respect to all Purchased Loans relating to or arising out of any (A) breach of any representation or warranty relating to Environmental Law or Hazardous Materials made by such Seller hereunder or under any Transaction Document or any violation or alleged violation of any Environmental Law or (B) any violation or alleged violation of any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, except to the extent same results from an Indemnified Party’s bad faith, gross negligence or willful misconduct.  In any suit, proceeding or action brought by Buyer in connection with any Purchased Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Loan, the applicable Seller will save, indemnify and hold Buyer harmless from and against all actual out-of-pocket costs and expenses (including reasonable attorneys’ fees), losses or damages suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by any Seller Party of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from a Seller Party.  Each Seller also agrees to reimburse Buyer as and when billed by Buyer for (i) all Buyer’s actual out-of-pocket costs and expenses incurred in connection with the initial preparation and negotiation of this Agreement and the Transaction Documents and the closing of the transactions contemplated hereby and thereby, including, without limitation, the reasonable out-of-pocket fees and disbursements of its counsel and (ii) all Buyer’s actual out-of-pocket expenses incurred in connection with Buyer’s due diligence reviews with respect to the Purchased Loans or any loan which is proposed by such Seller as a Purchased Loan, including without limitation, those incurred under Section 27 and the reasonable fees and disbursements of its counsel, subject in all cases under this clause (ii), to the terms and conditions of Section 27.  Additionally, each Seller also agrees to reimburse Buyer as and when billed by Buyer for all of Buyer’s actual out-of-pocket costs and expenses incurred in connection with the enforcement or the preservation of Buyer’s rights under this Agreement and the Transaction Documents or any Transaction contemplated hereby or thereby, including, without limitation, the reasonable fees and disbursements of its counsel.

 

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27.                               DUE DILIGENCE

 

(a)                                 Pre-Funding Diligence for Mortgage Loans.  No later than the Friday (or the preceding Business Day) that is no less than six (6) Business Days prior to the Purchase Date with respect to New Collateral, the Buyer (or, at the option of the Buyer, the Verification Agent) shall have the opportunity to review and confirm each item in the Preliminary Due Diligence Package with respect to each Mortgage Loan (the “Mortgage Loan Pre-Funding Diligence”), all such items to be delivered by the applicable Seller by posting to the website www.box.com, or through other method of information exchange reasonably acceptable to the Sellers and the Buyer.

 

(b)                                 Pre-Funding Diligence for Additional Advances.  No later than the Friday (or the preceding Business Day) that is no less than six (6) Business Days prior to funding any Additional Advance Date, the Buyer (or, at the option of the Buyer, the Verification Agent) shall have the opportunity to review and confirm each item in the Additional Advance Diligence Package with respect to each Additional Advance (the “Additional Advance Pre-Funding Diligence”), all such items to be delivered by the related Seller by posting to the website www.box.com, or through other method of information exchange reasonably acceptable to the Sellers and the Buyer.

 

(c)                                  Post-Funding Asset Diligence.  The Buyer (or, at the option of the Buyer, the Verification Agent), at the expense of the applicable Seller, shall at any time, have the opportunity to conduct the following diligence with respect to any Purchased Loan:

 

(i)                                     verify (A) that all recorded legal documents have been received by the Custodian in accordance with the terms of this Agreement and the Custodial Agreement and subject to any cure and/or grace periods provided herein, (B) that the endorsement or allonge in blank to any Mortgage Note, the assignment of Mortgage in blank and the Assignment of Leases, if any, in blank are included in the Loan File and (C) the receipt by the Custodian of any other documents required to be included in the Loan File held by the Custodian that were not previously delivered to the Custodian;

 

(ii)                                  review the title policy or certificate of lender’s title insurance for accuracy and confirm (A) that such title policy insures the first priority lien of the related Mortgage, which lien is subject only to Permitted Encumbrances, (B) the policy is in an amount equal to the principal balance of the Mortgage Loan (or with respect to a Mortgage Loan secured by multiple Mortgaged Properties, an amount equal to at least the allocated loan amount with respect to the title policy for each such Mortgaged Property) and (C) there are no unexpected liens, unexpected judgments or other unexpected impediments that are senior or co-equal with the lien of the related Mortgage;

 

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(iii)                               conduct a review of any Purchased Loan to confirm that it complies with the Loan Representations made with respect thereto (as of the date of such Loan Representations and subject to any exceptions thereto);

 

(iv)                              verify compliance with the Underwriting Criteria;

 

(v)                                 review updated valuations or appraisals obtained by the applicable Servicer at the direction of the Buyer given in accordance with the definition of “Mortgaged Property Valuation”; and

 

(vi)                              any other due diligence reasonably requested on reasonable advance notice by the Buyer and without additional cost to the applicable Seller.

 

(d)                                 Facility, Servicer & Seller Party Diligence.  The Buyer (or its designee) shall, at the expense of the applicable Seller, have the opportunity to conduct the following diligence:

 

(i)                                     no more than once per calendar year except following a Diligence Event, audit any Servicer’s or any Seller Party’s cash controls and operational procedures; and

 

(ii)                                  at any time following a Diligence Event, conduct a general inspection of any Servicer’s or any Seller Party’s books and records; provided, that any expenses incurred by the Buyer or its designee in connection with any due diligence conducted pursuant to clause (iii) of the definition of “Diligence Event” shall be the sole responsibility of the Buyer.

 

28.                               SERVICING

 

(a)                                 Each Seller and Buyer agree that all Servicing Rights with respect to the Purchased Loans will be transferred hereunder to Buyer on the applicable Purchase Date and such Servicing Rights shall be transferred by Buyer to the applicable Seller upon such Seller’s payment of the Repurchase Price for such Purchased Loans.  Notwithstanding the transfer and pledge of Servicing Rights to Buyer, the applicable Seller shall be entitled to exercise all discretion with respect to any directions or consents to be given to the Servicer of the Purchased Loans (other than Material Modifications of the Purchased Loans) and to appoint a servicer for each Purchased Loan subject to the prior written consent of Buyer, which consent may be given by Buyer in its reasonable discretion; provided, however, that upon the occurrence and during the continuance of an Event of Default, each Seller Party’s rights to exercise such discretion with respect to the Purchased Loans shall automatically terminate and be of no further force and effect.  Any amendment, modification or termination, or waiver of any term or provision, of any Purchased Loan or Loan Documents constituting a Material Modification shall require Buyer’s prior written consent in accordance with Section 7(e) of this Agreement. Buyer hereby agrees that KeyBank National Association (“KeyBank”), or any other third party servicer otherwise approved by Buyer in writing (KeyBank or any such third party servicer, a “Servicer”) may service the Purchased Loans for the benefit of Buyer in accordance with the terms and conditions of the servicing agreement in effect for each such Servicer, provided that each such Servicing Agreement shall have been approved in writing by Buyer in its sole and absolute discretion applied in good faith and, if Buyer shall exercise its rights to pledge or hypothecate the

 

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Purchased Loans pursuant to Section 8, Buyer’s assigns (each such servicing agreement that has been approved by Buyer (and, if applicable, Buyer’s assigns), a “Servicing Agreement” and, collectively, the “Servicing Agreements”); and provided, further, that any such Servicer shall have entered into a Servicer Notice and Agreement substantially in the form of Exhibit IX attached hereto (a “Servicer Notice and Agreement”) acknowledging Buyer’s interests in the related Purchased Loans and its rights to sell such Purchased Loans on a servicing-released basis, agreeing that it shall deposit all Available Income and any other sums required to be remitted to the holder of the Purchased Loans under the related Loan Documents to the Depository for deposit in the Cash Management Account as set forth in Section 5 hereof or as otherwise directed in a written notice signed by Buyer for so long as such Purchased Loan is subject to this Agreement, and Buyer’s right to terminate the term of such servicing rights with respect to any Purchased Loans from and after an Event of Default.  Each Seller shall cause the Purchased Loans to be serviced in accordance with Accepted Servicing Practices.

 

(b)                                 Sellers agrees that Buyer is the owner of all servicing records, including but not limited to any and all Servicing Agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing servicing (collectively, the “Servicing Records”) of Purchased Loans so long as the Purchased Loans are subject to this Agreement.  Sellers covenant to safeguard all Servicing Records relating to the Purchased Loans (if any are in a Seller Parties’ possession) and to deliver them promptly to Buyer or its designee (including the Custodian) at Buyer’s request.

 

(c)                                  Upon the occurrence and during the continuance of an Event of Default, Buyer may, in its sole and absolute discretion, subject to Section 13 and any terms in the applicable Servicing Agreements approved by Buyer (i) sell its rights to any or all of the Purchased Loans on a servicing released basis or (ii) terminate any Servicer or sub-servicer of any or all of the Purchased Loans, with or without cause, in each case without payment of any termination fee.  Each Seller shall cause each Servicer to cooperate with Buyer in effecting such termination and transferring all authority to service such Purchased Loans to the successor servicer, including requiring such Servicer to (i) promptly transfer all data in its possession relating to the applicable Purchased Loans to the successor servicer in such electronic format as the successor servicer may reasonably request, (ii) promptly transfer to the successor servicer, Buyer or Buyer’s designee, the Loan File and all other files, records, correspondence and documents in its possession relating to the applicable Purchased Loans and (iii) use commercially reasonable efforts to cooperate and coordinate with the successor servicer and/or Buyer to comply with any applicable so-called “goodbye” letter requirements or other applicable requirements of the Real Estate Settlement Procedures Act or other applicable legal or regulatory requirement associated with the transfer of the servicing of the applicable Purchased Loans.  Each Seller agrees that if any Seller Party or any such Servicer fails to cooperate with Buyer or any successor servicer in effecting the termination of such Servicer as servicer of any Purchased Loan or the transfer of all authority to service such Purchased Loan to such successor servicer in accordance with the terms hereof and the Servicing Agreement, Buyer will be irreparably harmed and entitled to injunctive relief.

 

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(d)                                 The payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement, other than the payment of Qualified Servicing Expenses.

 

29.                               TAXES

 

(a)                                 Transfer taxes, stamp taxes, documentary, filing, recording and all similar costs with respect to the transfer of Collateral or in connection with any of the transactions contemplated by this Agreement and the other Transaction Documents, and the documents delivered in connection herewith and therewith, other than any such taxes and costs that are attributable to an assignment or grant of a participation by Buyer pursuant to Section 18 (but only if no Event of Default has occurred and is continuing), shall be paid by the applicable Seller.

 

(b)                                 All amounts payable by each Seller Party to Buyer in respect of any transaction under the Transaction Documents shall be paid free and clear of, and without withholding or deduction for, any Taxes, unless the withholding or deduction of such Tax is required by law.  In that event, if such Tax is not an Excluded Tax, the applicable Seller shall pay such additional amounts (for purposes of this Section 29, the “Additional Amounts”) as will result in the net amounts received by Buyer (after taking account of such withholding or deduction) being equal to such amounts as would have been received by Buyer had no such Tax been required to be withheld or deducted. For purposes of this Agreement, the term “Excluded Tax” shall mean (i)  any Taxes imposed on or measured by net income (however denominated), franchise Taxes or branch profits Taxes (A) imposed as a result of Buyer being organized under the laws of, or having its principal office located in, the jurisdiction (or any political subdivision thereof) imposing such Tax or (B) that are Other Connection Taxes; (ii) Taxes that would have not arisen but for the failure of Buyer to comply with the requirements of Section 29(c) or Section 29(d); and (iii) U.S. federal withholding Taxes imposed under FATCA, or any U.S. federal withholding Taxes imposed on amounts payable to or for the account of Buyer pursuant to a law in effect on the date on which Buyer acquires any interest in the Transaction Documents, except to the extent that such amounts with respect to such Taxes were payable to such Buyer’s assignor immediately before such Buyer became a party hereto.  Each Seller shall indemnify and pay to Buyer, within ten (10) days after demand therefor, the full amount of any Taxes, other than Excluded Taxes, but including Taxes imposed or asserted on or attributable to Additional Amounts payable pursuant to this Section 29(b), payable or paid by Buyer or required to be withheld or deducted from a payment to Buyer and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the applicable Seller shall be conclusive absent manifest error.  As soon as practicable after any payment of Taxes by a Seller to a Governmental Authority pursuant to this Section 29(b), such Seller shall deliver to Buyer the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Buyer.

 

(c)                                  (i) Any Buyer that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Transaction Document shall deliver to the applicable Seller, at the time or times reasonably requested by such Seller, such properly

 

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completed and executed documentation reasonably requested by such Seller as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, Buyer, if reasonably requested by such Seller, shall deliver such other documentation prescribed by applicable law or reasonably requested by such Seller as will enable such Seller to determine whether or not Buyer is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 29(c)(ii) and 29(d) below) shall not be required if in Buyer’s reasonable judgment such completion, execution or submission would subject Buyer to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Buyer.

 

(ii) Without limiting the generality of the foregoing, on or before the date hereof, on or before the date such Person becomes a party to this Agreement or a participant, as applicable, and at the reasonable request of any Seller, Buyer and each assignee of Buyer will provide to such Seller two copies of, as applicable, a properly completed and duly executed United States Internal Revenue Service form W-9, W-8BEN, W-8BEN-E, W-8ECI, or W-8IMY (or successor form) (with applicable attachments, including, in the case of a Person claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, a certificate reasonably satisfactory to such Seller to the effect that such Person is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of such Seller within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (the “Portfolio Interest Certificate”)).  In addition, Buyer shall, to the extent it is legally entitled to do so, deliver to such Seller (in such number of copies as shall be requested by such Seller) on or prior to the date on which such Buyer becomes a Buyer under this Agreement (and from time to time thereafter upon the reasonable request of such Seller), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit such Seller to determine the withholding or deduction required to be made.  Buyer shall provide to such Seller a properly executed United States Internal Revenue Service Form W-9, dated on or before the Closing Date, evidencing a complete exemption from withholding or deduction of Tax from amounts payable by such Seller to Buyer under the Transaction Documents pursuant to applicable laws in effect on the Closing Date.  Each Seller shall provide to Buyer a properly executed United States Internal Revenue Service Form W-9 or other applicable forms as described by the United States Internal Revenue Service, dated on or before the Closing Date, evidencing a complete exemption from withholding or deduction of Tax from amounts payable by Buyer to any Seller under the Transaction Documents pursuant to applicable laws in effect on the Closing Date.  Each party hereto agrees to notify the other party of any circumstance known to it that causes a certificate or document provided by it pursuant to this Section 29(c) to fail to be true and to provide two copies of a properly completed and duly executed updated form and, if applicable, a Portfolio Interest Certificate, upon any previously delivered form becoming invalid, obsolete or inaccurate.

 

(d)                                 If a payment made to Buyer under any Transaction Document would be subject to U.S. federal withholding Tax imposed by FATCA if Buyer were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Buyer shall deliver to any Seller at the time or times

 

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prescribed by law and at such time or times reasonably requested by such Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by such Seller as may be necessary for such Seller to comply with its obligations under FATCA and to determine that Buyer has complied with Buyer’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this Section 29(d), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(e)                                  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 29 (including by the payment of additional amounts pursuant to this Section 29), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (e) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this paragraph (e), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (e) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(f)                                   Each party’s obligations under this Section 29 shall survive any assignment of rights by Buyer, the termination of this Agreement and the repurchase or release of any or all of the Purchased Loans.

 

30.                               MISCELLANEOUS

 

(a)                                 All rights, remedies and powers of Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers of Buyer whether under law, equity or agreement.  In addition to the rights and remedies granted to it in this Agreement, to the extent this Agreement is determined to create a security interest, Buyer shall have all rights and remedies of a secured party under the UCC.

 

(b)                                 This Agreement may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

 

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(c)                                  The headings in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.

 

(d)                                 Without limiting the rights and remedies of Buyer under this Agreement or the other Transaction Documents, Sellers shall pay Buyer’s actual out-of-pocket costs and expenses, including reasonable fees and expenses of accountants, attorneys and advisors, incurred in connection with the preparation, negotiation, execution and consummation of and any amendment, supplement or modification to, this Agreement and/or the other Transaction Documents and the Transactions thereunder.  Each Seller agrees to pay Buyer on demand all actual out-of-pocket costs and expenses (including reasonable expenses for legal services of every kind) of any subsequent enforcement of any of the provisions of this Agreement and/or the other Transaction Documents, or of the performance by Buyer of any obligations of the Seller Parties in respect of the Purchased Loans, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of the Collateral and for the custody, care or preservation of the Collateral (including insurance costs) and defending or asserting rights and claims of Buyer in respect thereof, by litigation or otherwise.  In addition, each Seller agrees to pay Buyer on demand all actual out-of-pocket costs and expenses (including reasonable expenses for legal services) incurred in connection with the maintenance of the Cash Management Account.  All such expenses shall be several but not joint recourse obligations of each Seller to Buyer under this Agreement.

 

(e)                                  Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or be invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

(f)                                   This Agreement together with the Transaction Documents contain a final and complete integration of all prior expressions by the parties with respect to the subject matter hereof and thereof and shall constitute the entire agreement among the parties with respect to such subject matter, superseding all prior oral or written understandings.

 

(g)                                  The parties understand that this Agreement is a legally binding agreement that may affect such party’s rights.  Each party represents to the other that it has received legal advice from counsel of its choice regarding the meaning and legal significance of this Agreement and that it is satisfied with its legal counsel and the advice received from it.

 

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

 

[NO FURTHER TEXT ON THIS PAGE]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first written above.

 

	
 
    	
SELLERS:
    	
 

	
 
    	
 
    	
 

	
 
    	
READYCAP COMMERCIAL, LLC, a Delaware limited liability company
    	
 

	
 
    	
 
    	
 

	
 
    	
 
    	
 

	
 
    	
By:
    	
/s/   Frederick C. Herbst
    	
 

	
 
    	
Name:   Frederick C. Herbst
    	
 

	
 
    	
Title:   Authorized Pereson
    	
 

	
 
    	
 
    	
 

	
 
    	
 
    	
 

	
 
    	
SUTHERLAND ASSET I, LLC, a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    	
By:   SUTHERLAND PARTNERS, L.P., not   in its individual capacity but solely as managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Frederick C. Herbst
    
	
 
    	
Name:   Frederick C. Herbst
    
	
 
    	
Title:   Authorized Person
    
				

 

[Signature pages continue on next page]

 

Master Repurchase Agreement

 

S-1

 

	
 
    	
U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely   as Depository
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Laura Debolt
    
	
 
    	
Name:   Laura Debolt
    
	
 
    	
Title:   Vice President
    

 

[Signature pages continue on next page]

 

Master Repurchase Agreement

 

S-2

 

	
 
    	
BUYER:
    
	
 
    	
 
    
	
 
    	
DEUTSCHE BANK AG, CAYMAN   ISLANDS BRANCH
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ryan M. Stark
    
	
 
    	
Name:   Ryan M. Stark
    
	
 
    	
Title:    Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Randal Johnson
    
	
 
    	
Name:   Randal Johnson
    
	
 
    	
Title:    Director
    

 

Master Repurchase Agreement

 

S-3

 

ANNEXES AND EXHIBITS

 

	
ANNEX I
    	
 
    	
Names and Addresses for Communications between   Parties
    
	
EXHIBIT I
    	
 
    	
Form of Confirmation — Purchased Loan
    
	
EXHIBIT II
    	
 
    	
Form of Additional Seller Joinder Agreement
    
	
EXHIBIT III
    	
 
    	
Authorized Representatives of Seller
    
	
EXHIBIT IV
    	
 
    	
Form of Custodial Delivery
    
	
EXHIBIT V
    	
 
    	
Form of Power of Attorney - Seller
    
	
EXHIBIT VI
    	
 
    	
Representations and Warranties Regarding Individual Purchased   Loans
    
	
EXHIBIT VII
    	
 
    	
Organizational Chart
    
	
EXHIBIT VIII
    	
 
    	
[Reserved]
    
	
EXHIBIT IX
    	
 
    	
Form of Servicer Notice and Agreement
    
	
EXHIBIT X
    	
 
    	
Prohibited Transferees
    
	
EXHIBIT XI
    	
 
    	
Underwriting Criteria
    
	
EXHIBIT XII
    	
 
    	
Conventional Concentration Limit Table
    
	
EXHIBIT XIII
    	
 
    	
Eligibility Matrices
    
	
EXHIBIT XIV
    	
 
    	
TI/LC Tracking Schedule
    
	
EXHIBIT XV
    	
 
    	
Form of Funding Certification
    
	
EXHIBIT XVI
    	
 
    	
Form of Available Amount Certificate
    
	
EXHIBIT XVII
    	
 
    	
Form of Data Tape
    
	
EXHIBIT XVIII
    	
 
    	
Form of CREFC Reports
    

 

 

ANNEX I

 

Names and Addresses for Communications Between Parties

 

Buyer:

 

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street, 3rd Floor

New York, NY 10005

Attention: Timothy Geraghty

Facsimile No.: (917) 338-3018

 

with a copy by email to the following:

 

Timothy Geraghty (timothy.geraghty@db.com),

Andrew McDermott (andrew.mcdermott@db.com)

Randal Johnson (randal.johnson@db.com) and

Jean Augustin (jean.augustin@db.com)

 

Sellers:

 

ReadyCap Commercial, LLC

114 Pacifica, Suite 400

Irvine, CA 92618

Attention: Jim Going

Facsimile No.: (949) 333-0330

 

Sutherland Asset I, LLC

1140 Avenue of Americas, 7th Floor

New York, NY 10036

Attention: Rick Herbst

Facsimile No.: (212) 257-4699

 

with a copy by email to the following:

 

Glenn Guszkowski (gguszkowski@waterfallam.com)

 

Buyer Reporting Parties:

 

Randal Johnson

 

Andrew McDermott

 

Timothy Geraghty

 

Jean Augustin

 

 

EXHIBIT I

 

FORM OF CONFIRMATION - PURCHASED LOAN

 

DEUTSCHE BANK AG,

Cayman Islands Branch

 

Ladies and Gentlemen:

 

Deutsche Bank AG, Cayman Islands Branch, is pleased to deliver our written CONFIRMATION of our agreement to enter into the Transaction pursuant to which Deutsche Bank AG, Cayman Islands Branch shall purchase from you the Purchased Loans identified on Schedule 1 attached hereto, pursuant to the terms of that certain Master Repurchase Agreement, dated as of December [  ], 2014 (as amended, modified and/or restated, the “Agreement”), among ReadyCap Commercial, LLC, a Delaware limited liability company (“Originator”), Sutherland Asset I, LLC, a Delaware limited liability company (“Sutherland”; together with Originator, collectively, the “Sellers”), U.S. Bank National Association, a national banking association (“Depository”) and Deutsche Bank AG, Cayman Islands Branch, a branch of a foreign banking institution (together with its successors and assigns, “Buyer”). Capitalized terms used herein without definition have the meanings given in the Agreement.

 

	
Purchase Date:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Purchased Loan:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Principal   Balance of Purchased Loan:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Repurchase Date:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Purchase Date   Market Value:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Purchase Date   Market Value Percentage:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Actual Original   Purchase Percentage:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Maximum Original   Purchase Percentage:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Purchase Price:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Initial Pricing   Rate:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Applicable   Spread:
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Base Maximum   Original Purchase Price Percentage
    	
 
    	
[                     ]
    
	
 
    	
 
    	
 
    
	
Representations   and Warranties:
    	
 
    	
See Schedule   2 attached hereto
    
	
 
    	
 
    	
 
    
	
Exceptions to   Representations and
    	
 
    	
See Schedule   3 attached hereto
    

 

 

	
Warranties:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Wiring   Instructions:
    	
 
    	
For Whom:USBank
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Amount: [                     ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Bank: US Bank
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ABA (For wire   transfers): 091000022
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
BNF: US Bank   N.A.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
A/C Number: [                     ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
OBI: READYCAP   MRA
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
SEI: [                     ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Contact:   Nicholas C. Xeros
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Ph Number:   312-332-7464
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Email:   Nicholas.xeros@usbank.com
    
	
 
    	
 
    	
 
    
	
Name and address   for
    	
 
    	
Buyer:
    
	
communications:
    	
 
    	
 
    
	
 
    	
 
    	
Deutsche Bank   AG, Cayman Islands Branch
    
	
 
    	
 
    	
60 Wall Street,   3rd Floor
    
	
 
    	
 
    	
New York, NY   10005
    
	
 
    	
 
    	
Attention:   Timothy Geraghty
    
	
 
    	
 
    	
Facsimile No.:   (917) 338-3018
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with a copy by   email to the following:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Timothy Geraghty   (timothy.geraghty@db.com),
    
	
 
    	
 
    	
Andrew McDermott   (andrew.mcdermott@db.com)
    
	
 
    	
 
    	
Randal Johnson   (randal.johnson@db.com) and
    
	
 
    	
 
    	
Jean Augustin   (jean.augustin@db.com)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Sellers:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ReadyCap   Commercial, LLC
    
	
 
    	
 
    	
114 Pacifica,   Suite 400
    
	
 
    	
 
    	
Irvine, CA 92618
    
	
 
    	
 
    	
Attention: Jim   Going
    
	
 
    	
 
    	
Facsimile No.:   (949) 333-0330
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Sutherland Asset   I, LLC
    
	
 
    	
 
    	
1140 Avenue of   Americas, 7th Floor
    
	
 
    	
 
    	
New York, NY   10036
    
	
 
    	
 
    	
Attention: Rick   Herbst
    

 

 

	
 
    	
 
    	
Facsimile No.:   (212) 257-4699
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with a copy by   email to the following:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Glenn Guszkowski   (gguszkowski@waterfallam.com)
    

 

[SIGNATURE PAGES FOLLOW]

 

 

	
 
    	
BUYER:
    
	
 
    	
 
    
	
 
    	
DEUTSCHE   BANK AG, CAYMAN ISLANDS BRANCH
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

	
SELLER:
    	
 
    
	
 
    	
 
    
	
[READYCAP   COMMERCIAL, LLC, a Delaware limited liability company]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
[SUTHERLAND   ASSET I, LLC, a Delaware limited liability company]
    	
 
    
	
 
    	
 
    
	
[By: SUTHERLAND PARTNERS, L.P., not in its   individual capacity but solely as managing member]
    	
 
    
	
 
    	
 
    
	
[By: SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    

 

 

SCHEDULE 1 TO CONFIRMATION

(PURCHASED LOAN)

 

 

SCHEDULE 2 TO CONFIRMATION

(REPRESENTATIONS AND WARRANTIES)

 

[** Exhibit VI to Master Repurchase Agreement then in effect to be attached.**]

 

 

SCHEDULE 3 TO CONFIRMATION

(EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES)

 

 

SCHEDULE 4 TO CONFIRMATION

(LOAN TRACKING TABLE)

 

 

EXHIBIT II

 

FORM OF ADDITIONAL SELLER JOINDER AGREEMENT AND

OMNIBUS AMENDMENT

 

This JOINDER AGREEMENT AND OMNIBUS AMENDMENT (this ”Agreement”) is made and is effective as of this [  ]th day of [       ], 201   (the “Effective Date”), by and among READYCAP COMMERCIAL, LLC, a Delaware limited liability company (“ReadyCap”), Sutherland Asset I, LLC (together with ReadyCap, the “Initial Sellers”), Deutsche Bank AG, Cayman Islands Branch (“Buyer”), [                          ] (“Joining Seller”) and each of the other parties that executes and delivers to Buyer a signature page hereto.

 

RECITALS

 

WHEREAS, the Initial Sellers and Buyer entered into (i) that certain Master Repurchase Agreement, dated as of December [   ], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Repurchase Agreement”), (ii) each other Repurchase Document listed on Schedule 1 hereto (together with the Repurchase Agreement, the “Initial Seller Documents”)

 

WHEREAS, the parties hereto each desire to add Joining Seller as a Seller of a Mortgage Loan under the Initial Seller Documents, as set forth in this Agreement;

 

WHEREAS, the parties hereto agree that as of the Effective Date, Joining Seller shall be a Seller under the Initial Seller Documents, as more specifically provided herein; and

 

WHEREAS, the parties hereto agree to amend each Initial Seller Document as provided herein.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree as follows:

 

SECTION 1.                Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Repurchase Agreement.

 

SECTION 2.                Amendment to Documents. As of the Effective Date, each of the Initial Seller Documents is hereby amended to add Joining Seller as a Seller thereunder and thereafter, all references to “Seller” and “Sellers” in this Agreement, the Repurchase Agreement and any of the other Initial Seller Documents shall include the Initial Sellers and Joining Seller, as the context shall require. Notwithstanding the foregoing or anything contained herein to the contrary, as a condition precedent to the effectiveness of this Agreement, Buyer shall have received from Joining Seller a counterpart to this Agreement.

 

SECTION 3.                Agreements of Joining Seller as a Seller. The parties hereto hereby agree as follows: Joining Seller hereby agrees to be bound by, and comply with, the terms and conditions of the Initial Seller Documents, as a Seller of a Mortgage Loan under the Repurchase

 

 

Agreement, including, without limitation, any terms relating to (i) the repurchase of, and grant of a security interest in, the Mortgage Loan sold by it by Buyer, (ii) the compliance with any applicable conditions precedent prior to the sale of the Mortgage Loan to Buyer, (iii) the making of representations and warranties with respect to itself and the Mortgage Loan on each applicable Purchase Date and as otherwise set forth in the Repurchase Agreement, (iv) the compliance with all covenants as set forth in the Repurchase Agreement and (v) indemnities applicable to a Seller. Each Event of Default set forth in Section 13 of the Repurchase Agreement shall apply to Joining Seller.

 

SECTION 4.                Joining Seller. Joining Seller’s organizational identification number is [                        ] and its tax identification number is [                        ]. Joining Seller has the following subsidiaries: [                        ] Joining Seller is a wholly-owned Subsidiary of [                        ]. On the Effective Date, Joining Seller’s chief executive office is, and has been, located at [                        ]. On the Effective Date, Joining Seller’s jurisdiction of organization is [                        ]. The fiscal year of Joining Seller is the calendar year. Joining Seller has no indebtedness, contractual obligations or investments other than (a) ordinary trade payables and (b) in connection with Mortgage Loans acquired or originated for the Transaction. Joining Seller has no guarantee obligations.

 

SECTION 5.                Joint and Several Liability. Notwithstanding anything in the Initial Seller Documents to the contrary, Seller hereby acknowledges and agrees that the Sellers are jointly and severally liable to Buyer pursuant to Section 26 of the Repurchase Agreement.

 

SECTION 6.                Further Assurances. The parties hereto shall each take any and all further actions and execute and deliver any and all such further documents and undertakings as are necessary or reasonably requested by the other party to effectuate the purposes of this Agreement. The undertakings set forth in this Section 6 shall survive the execution and delivery of this Agreement.

 

SECTION 7.                Fees and Expenses. Sellers agrees to pay to Buyer all fees and out-of-pocket expenses incurred by Buyer in connection with this Agreement (including all fees and out-of-pocket costs and expenses of Buyer’s legal counsel incurred in connection with this Agreement), in accordance with Section 26 of the Repurchase Agreement.

 

SECTION 8.                Representations. Seller hereby represents to Buyer that as of the date hereof, after giving effect to this Agreement, Seller is in full compliance with all of the terms and conditions of the Repurchase Agreement and each other Repurchase Document to which it is a party, and no Default or Event of Default has occurred and is continuing thereunder.

 

SECTION 9.                Limited Effect. Except as expressly amended and modified by this Agreement, each of the Repurchase Documents shall continue in full force and effect in accordance with its terms. Reference to this Agreement need not be made in any Repurchase Document or any other instrument or document executed in connection therewith or herewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, any Repurchase Document, any reference in any of such items to any Repurchase Document being sufficient to refer to such Repurchase Document as amended hereby.

 

 

SECTION 10.         Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

SECTION 11.         GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL GOVERN).

 

SECTION 12.         Counterparts. This Agreement may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. The parties agree that this Agreement and any notices hereunder may be transmitted between them by email and/or facsimile. The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties.

 

SECTION 13.         Notices. The address of Joining Seller for receiving notices and for all other purposes of the Initial Seller Documents is as follows:

 

[Seller Name]

[Address]

[Attention]

 

[Signature page to follow]

 

 

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute this Agreement as of the date first above written.

 

	
 
    	
READYCAP   COMMERCIAL, LLC,
    
	
 
    	
as an Initial   Seller
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
SUTHERLAND ASSET   I, LLC, 
    
	
 
    	
as an Initial   Seller
    
	
 
    	
 
    
	
 
    	
By:   SUTHERLAND PARTNERS, L.P., not in   its individual capacity but solely as managing member
    
	
 
    	
 
    
	
 
    	
By:   SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
[SELLER NAME],
    
	
 
    	
as a Joining   Seller
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

[Additional Signature Pages Follow]

 

 

	
 
    	
DEUTSCHE BANK   AG, CAYMAN ISLANDS BRANCH
    
	
 
    	
as Buyer
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

	
Acknowledged and   agreed to with respect to the Custodial Agreement:
    	
 
    
	
 
    	
 
    
	
U.S. BANK   NATIONAL ASSOCIATION,
    	
 
    
	
as the Custodian
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

	
Acknowledged and   agreed to with respect to the Servicing Agreement:
    	
 
    
	
 
    	
 
    
	
KEYBANK N.A.,
    	
 
    
	
as the Servicer
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

	
Acknowledged and   agreed to with respect to the Controlled Account Agreement:
    	
 
    
	
 
    	
 
    
	
U.S. BANK N.A.,
    	
 
    
	
as the   Depositary
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

Schedule 1

 

 

EXHIBIT III

 

AUTHORIZED REPRESENTATIVES OF SELLER

 

	
Name
    	
 
    	
Specimen Signature
    
	
 
    	
 
    	
 
    
	
[READYCAP TO   PROVIDE]
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

 

EXHIBIT IV

 

FORM OF CUSTODIAL DELIVERY

(SELLER)

 

On this           of         , 20     , [ReadyCap Commercial, LLC, a Delaware limited liability company], [Sutherland Asset I, LLC, a Delaware limited liability company], as Seller under that certain Master Repurchase Agreement, dated as of December [      ], 2014 (as amended, modified and/or restated, the “Repurchase Agreement”), by and among Deutsche Bank AG, Cayman Islands Branch (“Buyer”), ReadyCap Commercial, LLC, and Sutherland Asset I, LLC (“Seller”), and U.S. Bank National Association, as Depository does hereby deliver to U.S. Bank National Association (“Custodian”), as custodian under that certain Custodial Agreement, dated as of December [    ], 2014 (as amended, modified and/or restated, the “Custodial Agreement”), among Buyer, Custodian and Seller, the Loan Files with respect to the Purchased Loans to be purchased by Buyer pursuant to the Repurchase Agreement, which Purchased Loans are listed on the Loan Schedule attached hereto and which Purchased Loans shall be subject to the terms of the Custodial Agreement on the date hereof.

 

With respect to the Loan Files delivered hereby, for the purposes of issuing the Trust Receipt, the Custodian shall review the Loan Files to ascertain delivery of the documents listed in 2.02(a) to the Custodial Agreement.

 

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Custodial Agreement.

 

IN WITNESS WHEREOF, Seller has caused its name to be signed hereto by its officer thereunto duly authorized as of the day and year first above written.

 

[Signature page follows]

 

 

	
 
    	
[READYCAP   COMMERCIAL, LLC, a Delaware limited liability company]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
[SUTHERLAND   ASSET I, LLC, a Delaware limited liability company]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[By: SUTHERLAND PARTNERS, L.P., not in its   individual capacity but solely as managing member]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[By: SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner]
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

EXHIBIT V

 

FORM OF POWER OF ATTORNEY

(SELLER)

 

”Know All Men by These Presents, that [ReadyCap Commercial, LLC, a Delaware limited liability company] [Sutherland Asset I, LLC a Delaware limited liability company] (“Seller”) does hereby appoint Deutsche Bank AG, Cayman Islands Branch (“Buyer”), its attorney-in-fact, to act in Seller’s name, place and stead in any way which Seller could do with respect to any or all of the following, from and after the occurrence of an Event of Default: (i) the completion of the endorsements of the Mortgage Notes, the Assignments of Mortgages and all other assignment and transfer documents, (ii) the recordation of the Assignments of Mortgages and (iii) the enforcement of Seller’s rights under the Purchased Loans purchased by Buyer pursuant to that certain Master Repurchase Agreement, dated as of December [    ], 2014 (as amended, modified and/or restated, the “Repurchase Agreement”), by and between Buyer and Seller, and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Loans, the related Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Repurchase Agreement.

 

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OR SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

 

IN WITNESS WHEREOF, Seller has caused this Power of Attorney to be executed as of December [     ], 2014.

 

	
 
    	
[READYCAP   COMMERCIAL, LLC, a Delaware limited liability company]
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

	
 
    	
[SUTHERLAND   ASSET I, LLC, a Delaware limited liability company]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[By: SUTHERLAND PARTNERS, L.P., not in its   individual capacity but solely as managing member]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[By: SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner]
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

EXHIBIT VI

 

REPRESENTATIONS AND WARRANTIES

REGARDING INDIVIDUAL PURCHASED LOANS

 

For purposes of the following representations and warranties, the phrase “the Seller’s knowledge” and other words and phrases of like import shall mean, except where otherwise expressly set forth below, the actual state of knowledge of the Seller, its officers and employees responsible for the underwriting, origination, servicing or sale of the Purchase Loans regarding the matters expressly set forth below in each case without having conducted any independent inquiry into such matters and without any obligation to have done so (except as expressly set forth herein). All information contained in documents which are part of or required to be part of an Loan File, as specified in the Indenture (to the extent such documents exist) shall be deemed within the Seller’s knowledge.

 

1.            Whole Loan; Ownership of Mortgage Loans. Each Mortgage Loan is a whole loan and not a participation interest in a whole loan. Immediately prior to the sale, transfer and assignment to the Buyer, the Seller had good title to, and was the sole owner of, each Mortgage Loan. The Seller has full right and authority to sell, assign and transfer each Mortgage Loan, and the assignment to the Buyer constitutes a legal, valid and binding assignment of such Mortgage Loan free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Mortgage Loan.

 

2.            Loan Document Status. Each Mortgage Loan Document executed by or on behalf of the related Mortgagor, guarantor or other obligor in connection with such Mortgage Loan is the legal, valid and binding obligation of the related Mortgagor, guarantor or other obligor (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except as such enforcement may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law and except that certain provisions in such Mortgage Loan Document may be further limited or rendered unenforceable by or under applicable law, but (subject to the limitations set forth above) such limitations or unenforceability will not render such Mortgage Loan Document invalid as a whole or materially interfere with the lender’s realization of the principal benefits and/or security provided thereby (clauses (i) and (ii) collectively, the “Insolvency Qualifications”).

 

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

 

 

3.            Mortgage Provisions. The Mortgage Loan Documents for each Mortgage Loan contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property.

 

4.            Mortgage Status; Waivers and Modifications. Since origination and except by written instruments set forth in the related Loan File (a) the material terms of the operative Mortgage Loan Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect which materially interferes with the security to be provided by the related Mortgage; (b) no related Mortgaged Property or any portion thereof has been released from the lien of the related Mortgage in any manner which materially interferes with the security intended to be provided by such Mortgage or the current use of such Mortgaged Property; and (c) the related Mortgagor has not been released from its material obligations under the Mortgage Loan.

 

5.            Lien; Valid Assignment. Subject to the Insolvency Qualifications, each assignment of Mortgage and assignment of Assignment of Leases from the Seller constitutes a legal, valid and binding assignment from the Seller. Each such Mortgage and Assignment of Leases is freely assignable without the consent of the related Mortgagor. Each related Mortgage is a legal, valid and enforceable first lien on the related Mortgagor’s fee (or if so identified on the Schedule of Mortgage Loans, leasehold) interest in the Mortgaged Property in the principal amount of such Mortgage Loan or allocated loan amount (subject only to Permitted Encumbrances (as defined below)), except as the enforcement thereof may be limited by the Insolvency Qualifications. Such Mortgaged Property (subject to and excepting Permitted Encumbrances) is free and clear of any recorded mechanic’s liens, recorded materialmen’s liens and other recorded encumbrances which are prior to or equal to the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy and subject to the rights of tenants (subject to and excepting Permitted Encumbrances), and no rights exist which under law could give rise to any such lien or encumbrance that would be prior to or equal with the lien of the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy (as described below). Notwithstanding anything herein to the contrary, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions, other than the representations made in paragraph (40), is required in order to effect such perfection.

 

6.            Permitted Liens; Title Insurance. Each Mortgaged Property securing an Mortgage Loan is covered by an American Land Title Association loan title insurance policy or a comparable form of loan title insurance policy approved for use in the applicable jurisdiction (or, if such policy is yet to be issued, by a pro forma policy, a preliminary title policy with escrow instructions or a “marked up” commitment, in each case binding on the title insurer) (the “Title Policy”) in the original principal amount of such loan (or with respect to a loan secured by multiple properties, an amount equal to at least the allocated loan amount with respect to the Title Policy for each such property) after all advances of principal (including any advances held in escrow or reserves), that insures for the benefit of the owner of the indebtedness secured by the Mortgage, the first priority lien of the Mortgage, which lien is subject only to (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public

 

 

record; (c) the exceptions (general and specific) and exclusions set forth in such Title Policy; (d) other matters to which like properties are commonly subject; (e) the rights of tenants (as tenants only) under leases (including subleases) pertaining to the related Mortgaged Property and condominium declarations and (f) if the related Mortgage Loan constitutes a cross-collateralized Mortgage Loan, the lien of the Mortgage for another Mortgage Loan contained in the same cross-collateralized group, provided that none of which items (a) through (f), individually or in the aggregate, materially and adversely interferes with the current use or net operating income of the Mortgaged Property or the security intended to be provided by such Mortgage or the related Mortgagor’s ability to pay its obligations when they become due (collectively, the “Permitted Encumbrances”). Except as contemplated by clause (f) of the preceding sentence none of the Permitted Encumbrances are mortgage liens that are senior to or coordinate and co-equal with the lien of the related Mortgage. Such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no claims have been made thereunder and no claims have been paid thereunder. Neither the Seller, nor to the Seller’s knowledge, any other holder (other than an “Affiliate” (as such term is defined in the Indenture) of the Seller) of the Mortgage Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.

 

7.            Junior Liens. The Seller has no knowledge of any subordinate or mezzanine debt related to the Mortgaged Property.

 

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

 

9.            Condition of Property. Solely with respect to each Inspected Mortgaged Property, the Seller inspected or caused to be inspected such Inspected Mortgaged Property within six (6) months of origination of the related Mortgage Loan and within twelve (12) months of the related Purchase Date. An engineering report or a property condition assessment was prepared in connection with the origination of each Mortgage Loan related to an Inspected Mortgaged Property no more than six (6) months prior to the origination date.

 

The Seller has no knowledge of any material damage to any Mortgaged Property that the Seller believes would have a material adverse effect on the net operating income of such Mortgaged Property (other than as disclosed in the engineering report or property condition assessment delivered to the Seller, if any, in accordance with this paragraph (9) and set forth on the Exception Schedule).

 

 

10.          Taxes and Assessments. All real property taxes, governmental assessments and other outstanding governmental charges (including, without limitation, water and sewage charges) due with respect to the Mortgaged Property directly or indirectly securing an Mortgage Loan that is or could become a lien on the related Mortgaged Property that would be of equal or superior priority to the lien of the Mortgage and that prior to the Related Purchase Date have become delinquent with respect to each related Mortgaged Property have been paid, or an escrow of funds has been established in an amount sufficient to cover such tax or charge and reasonably estimated interest and penalties, if any, thereon. For purposes of this representation and warranty, real property taxes, governmental assessments and other outstanding governmental charges shall not be considered delinquent until the date on which interest and/or penalties would be payable thereon.

 

11.          Condemnation. As of the date of origination and to the Seller’s knowledge as of the related Purchase Date, there is no proceeding pending or threatened for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the current use or net operating income of the Mortgaged Property.

 

12.          Actions Concerning Mortgage Loan. As of the date of origination and as of the related Purchase Date, to the Seller’s knowledge, there was no pending, filed or threatened action, suit or proceeding, arbitration or governmental investigation against or affecting any Mortgagor or guarantor, under an Mortgage Loan or any Mortgagor’s interest in the related Mortgaged Property, an adverse outcome of which would reasonably be expected to materially and adversely affect (a) the value of such Mortgaged Property, (b) such Mortgagor’s ability to perform under the related Mortgage Loan, (c) such guarantor’s ability to perform under the related guaranty or (d) the current principal use of the Mortgaged Property to generate net cash flow sufficient to pay principal, interest and other amounts due on the related Mortgage Loan.

 

13.          Escrow Deposits. All escrow deposits and payments required to be escrowed with lender pursuant to each Mortgage Loan (including capital improvements and environmental remediation reserves) are in the possession, or under the control, of the Seller, its servicer or a subservicer, and there are no deficiencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required to be escrowed with lender under the related Mortgage Loan Documents are being conveyed by the Seller to the Buyer or its servicer or subservicer and identified as such with appropriate detail.

 

14.          Insurance. Each related Mortgaged Property is, and is required pursuant to the related Mortgage Loan Documents to be, insured by a property insurance policy providing coverage for loss in accordance with coverage found under a “special cause of loss form” or “all risk form” that includes replacement cost valuation issued by an insurer meeting the requirements of the related Mortgage Loan Documents and having a claims-paying or financial strength rating of at least “A-:VIII” from A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-” from Standard & Poor’s Ratings Service (collectively, the “Insurance Rating Requirements”), in an amount (subject to customary deductible) not less than the lesser of (1) the original principal balance of the Mortgage Loan and (2) the full insurable value on a replacement cost basis of the improvements, furniture, furnishings, fixtures and equipment included in the Mortgaged Property (with no deduction for physical

 

 

depreciation), but, in any event, not less than the amount necessary or containing such endorsements as are necessary to avoid the operation of any coinsurance provisions with respect to the related Mortgaged Property.

 

Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Mortgage Loan Documents, by business interruption or rental loss insurance (subject to customary deductible) which covers a period of not less than six (6) months.

 

If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the related Mortgaged Property is covered by, and the related Mortgagor is required to maintain insurance in the maximum amount (subject to customary deductible) available under the National Flood Insurance Program, plus such additional amounts as would be sufficient to cover the improvements located in such flood zone.

 

If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, the Mortgaged Property is covered by, and the related Mortgagor is required to maintain an insurance policy or endorsement covering damage from windstorm and/or windstorm related perils and/or named storms, in an amount (subject to customary deductible) at least equal to 100% of the full insurable value on a replacement cost basis of the improvements and personalty and fixtures included in the related Mortgaged Property by an insurer meeting the Insurance Rating Requirements.

 

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

 

For each Mortgaged Property that is located in seismic zones 3 or 4, if such Mortgaged Property was constructed prior to 1980, an architectural or engineering consultant has performed an analysis of such Mortgaged Property in order to evaluate the structural and seismic condition of such Mortgaged Property for the sole purpose of assessing the probable maximum loss (“PML”) for such Mortgaged Property in the event of an earthquake. In such instance, the PML was based on a 475-year return period, an exposure period of 50 years and a 10% probability of exceedance. If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer meeting the Insurance Rating Requirements in an amount (subject to customary deductible) not less than 100% of the PML.

 

The Mortgage Loan Documents require any material insurance proceeds in respect of a property loss to be applied, at the sole discretion of the lender, either (a) to the repair or restoration of all or part of the related Mortgaged Property or (b) to the payment of the outstanding principal balance of such Mortgage Loan together with any accrued interest thereon.

 

 

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

 

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

 

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

 

17.          Compliance with Usury Laws. The interest rate (exclusive of any default interest, late charges, yield maintenance charge, exit fees or prepayment premiums) of such

 

 

Mortgage Loan complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

 

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

 

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

 

20.          Local Law Compliance. To the Seller’s knowledge, as of the date of origination of the Mortgage Loan, based on inquiry customary in the industry (including but not limited to appraisal review), the improvements located on or forming part of each Mortgaged Property securing an Mortgage Loan are in material compliance with applicable zoning ordinances, building codes and land laws (collectively, “Zoning Regulations”) other than those which (i) are insured by the Title Policy or law and ordinance insurance coverage has been obtained for the Mortgaged Property or (ii) does not have a material and adverse effect on the operation or net operating income of such Mortgaged Property.

 

21.          Licenses and Permits. Each Mortgagor covenants in the Mortgage Loan Documents that it shall keep all material licenses, permits and applicable governmental authorizations necessary for the operation of the Mortgaged Property in full force and effect, and to the Seller’s knowledge based upon any of a letter from any government authorities or other affirmative internal investigation of local law compliance consistent with the investigation conducted by the Seller for similar commercial and multifamily mortgage loans intended for securitization; all such material licenses, permits and applicable governmental authorizations are in effect. The Mortgage Loan Documents, to the extent required by applicable law, require the related Mortgagor to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located and for the Mortgagor and the Mortgaged Property to be in compliance in all material respects with all regulations, zoning and building laws.

 

22.          Recourse Obligations. The Mortgage Loan Documents for each Mortgage Loan (a) provide that such Mortgage Loan becomes full recourse to the Mortgagor and guarantor (which is a natural person or persons, or an entity or entities distinct from the Mortgagor (but may be affiliated with the Mortgagor) that collectively, as of the date of origination of the related Mortgage Loan, have assets other than equity in the related Mortgaged Property that are not de minimis) in any of the following events (or negotiated provisions of substantially similar effect): (i) if any petition for bankruptcy, insolvency, dissolution or liquidation pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by, consented to, or acquiesced in by, the Mortgagor; (ii) Mortgagor or guarantor shall have solicited or caused to be solicited petitioning creditors to cause an involuntary bankruptcy filing with respect to the Mortgagor or

 

 

(iii) transfers of either the Mortgaged Property or controlling equity interests in Mortgagor made in violation of the Mortgage Loan Documents; and (b) contains provisions for recourse against the Mortgagor and guarantor (which is a natural person or persons, or an entity or entities distinct from the Mortgagor (but may be affiliated with the Mortgagor) that collectively, as of the date of origination of the related Mortgage Loan, have assets other than equity in the related Mortgaged Property that are not de minimis), for losses and damages resulting from the following (or negotiated provisions of substantially similar effect): (i) Mortgagor’s misappropriation of rents after an event of default, security deposits, insurance proceeds, or condemnation awards; (ii) Mortgagor’s fraud or intentional misrepresentation; (iii) criminal acts by the Mortgagor or guarantor resulting in the seizure or forfeiture of all or part of the Mortgaged Property; (iv) breaches of the environmental covenants in the Mortgage Loan Documents; or (v) Mortgagor’s commission of material physical waste at the Mortgaged Property.

 

23.          Mortgage Releases. The terms of the related Mortgage or related Mortgage Loan Documents do not provide for release of any material portion of the Mortgaged Property from the lien of the Mortgage except (a) a partial release, accompanied by principal repayment of an amount equal to the lesser of (i) not less than a specified percentage at least equal to 110% of the related allocated loan amount of such portion of the Mortgaged Property and (ii) the outstanding principal balance of the Mortgage Loan, (b) upon payment in full of such Mortgage Loan, (c) releases of out-parcels that are unimproved or other portions of the Mortgaged Property which will not have a material adverse affect on the underwritten value of the Mortgaged Property and which were not afforded any material value in the appraisal obtained at the origination of the Mortgage Loan and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (d) as required pursuant to an order of condemnation. With respect to any partial release under the preceding clauses (a) or (c), either: (x) such release of collateral (i) would not constitute a “significant modification” of the subject Mortgage Loan within the meaning of Treasury Regulations Section 1.860G-2(b)(2) and (ii) would not cause the subject Mortgage Loan to fail to be a “qualified mortgage” within the meaning of Section 860G(a)(3)(A) of the Code, or (y) the mortgagee or servicer can, in accordance with the related Mortgage Loan Documents, condition such release of collateral on the related Mortgagor’s delivery of an opinion of tax counsel to the effect specified in the immediately preceding clause (x). For the purposes of the preceding clause (x), for any Mortgage Loan originated after December 6, 2010, if the fair market value of the real property constituting such Mortgaged Property after the release is not equal to at least 80% of the principal balance of the Mortgage Loan outstanding after the release, the Mortgagor is required to make a payment of principal in an amount not less than the amount required by the REMIC Provisions.

 

In the case of any Mortgage Loan originated after December 6, 2010, in the event of a taking of any portion of a Mortgaged Property by a state or any political subdivision or authority thereof, whether by legal proceeding or by agreement, the Mortgagor can be required to pay down the principal balance of the Mortgage Loan in an amount not less than the amount required by the REMIC Provisions and, to such extent, may not be required to be applied to the restoration of the Mortgaged Property or released to the Borrower, if, immediately after the release of such portion of the Mortgaged Property from the lien of the Mortgagee (but taking into account the planned restoration) the fair market value of the real property constituting the remaining Mortgaged Property is not equal to at least 80% of the remaining principal balance of the Mortgage Loan.

 

 

In the case of any Mortgage Loan originated after December 6, 2010, no such Mortgage Loan that is secured by more than one Mortgaged Property or that is crosscollateralized with another Mortgage Loan permits the release of cross-collateralization of the related Mortgaged Properties, other than in compliance with the REMIC Provisions.

 

24.          Financial Reporting and Rent Rolls. At a minimum, the Mortgage Loan Documents require the Mortgagor to provide the owner or holder of the Mortgage Loan with quarterly (other than for single-tenant properties) and annual operating statements, quarterly (other than for single-tenant properties) and annual rent rolls for properties that have leases contributing more than 5% of the in-place base rent and annual financial statements. To Seller’s knowledge, all of the financial statements, operating statements and rent rolls provided by any Mortgagor or guarantor as of the date of origination and as of the related Purchase Date are true, accurate and complete in all material respects.

 

25.          Due-on-Sale or Encumbrance. Subject to specific exceptions set forth below, each Mortgage Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Mortgage Loan if, without the consent of the holder of the Mortgage Loan (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Mortgage Loan Documents (which provide for transfers without the consent of the lender which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of comparable collateral (including, without limitation, transfers of worn-out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers by leases entered into in accordance with the Mortgage Loan Documents)), (a) the related Mortgaged Property, or any controlling equity interest in the related Mortgagor, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers or transfers upon death or legal incapacity, (ii) transfers to certain affiliates as defined in the related Mortgage Loan Documents, (iii) transfers of less than, or other than, a controlling interest in a Mortgagor, (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific person or entity designated in the related Mortgage Loan Documents or a person or entity satisfying specific criteria identified in the related Mortgage Loan Documents, (v) transfers of stock or similar equity units in publicly traded companies, (vi) a substitution or release of collateral within the parameters of paragraph 23 herein, or (vii) by reason of any subordinate or mezzanine debt that existed at the origination of the related Mortgage Loan, or future permitted subordinate or mezzanine debt or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any subordinate or mezzanine debt that existed at origination and is permitted under the related Mortgage Loan Documents, (ii) purchase money security interests (iii) any Mortgage Loan that is cross-collateralized and cross-defaulted with another Mortgage Loan or (iv) Permitted Encumbrances. The Mortgage Loan Documents provide that to the extent any rating agency fees are incurred in connection with the review of and consent to any transfer or encumbrance, the Mortgagor is responsible for such payment along with all other reasonable fees and expenses incurred by the lender relative to such transfer or encumbrance.

 

26.          Single-Purpose Entity. Each Mortgage Loan that is a non-recourse loan requires the related Mortgagor to be a Single-Purpose Entity for at least as long as the Mortgage Loan is outstanding. Both the Mortgage Loan Documents and the organizational documents of

 

 

the related Mortgagor with respect to each Mortgage Loan provide that the Mortgagor is a Single-Purpose Entity. For this purpose, a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more of the Mortgaged Properties securing the Mortgage Loans and prohibit it from engaging in any business unrelated to such Mortgaged Property or Properties, and whose organizational documents further provide, or which entity represented in the related loan documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Mortgaged Property or Properties, or any indebtedness other than as permitted by the related Mortgage(s) or the other related loan documents, that it has its own books and records and accounts separate and apart from those of any other person (other than a Mortgagor for an Mortgage Loan that is cross-collateralized and cross-defaulted with the related Mortgage Loan), and that it holds itself out as a legal entity, separate and apart from any other person or entity.

 

27.          Ground Leases. For purposes of this Agreement, a “Ground Lease” shall mean a lease creating a leasehold estate in real property where the fee owner as the ground lessor conveys for a term or terms of years its entire interest in the land and buildings and other improvements, if any, comprising the premises demised under such lease to the ground lessee (who may, in certain circumstances, own the building and improvements on the land), subject to the reversionary interest of the ground lessor as fee owner.

 

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

 

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

 

(B)             The lessor under such ground lease has agreed in a writing included in the related Loan File (or in such ground lease) that the ground lease may not be amended, modified, canceled or terminated by agreement of lessor and lessee without the prior written consent of the lender and that any such action without such consent is not binding on the lender, its successors or assigns;

 

(C)             The ground lease has an original term (or an original term plus one or more optional renewal terms, which, under all circumstances, may be exercised, and will

 

 

be enforceable, by either Mortgagor or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Mortgage Loan;

 

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

 

(E)             The ground lease is assignable to the holder of the Mortgage Loan and its successors and assigns without the consent of the lessor thereunder (or if such consent is necessary, it has been obtained);

 

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

 

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

 

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

 

(I)              The ground lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial mortgage lender;

 

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

 

(K)             In the case of a total or substantially total taking or loss, under the terms of the ground lease, an estoppel or other agreement and the related Mortgage (taken together), any related insurance proceeds, or portion of the condemnation award allocable

 

 

to ground lessee’s interest in respect of a total or substantially total loss or taking of the related Mortgaged Property to the extent not applied to restoration, will be applied first to the payment of the outstanding principal balance of the related Mortgage Loan, as applicable, together with any accrued interest; and

 

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

 

28.             Servicing. The servicing and collection by Seller (or its designee) with respect to each Mortgage Loan has been, in all material respects, legal and have met customary industry standards for servicing commercial mortgage loans.

 

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

 

30.             Bankruptcy. As of the date of origination and to the Seller’s knowledge as of the related Purchase Date, neither the Mortgaged Property, nor any portion thereof, is the subject of, and no Mortgagor, guarantor or tenant occupying a single-tenant property is a debtor in state or federal bankruptcy, insolvency or similar proceeding.

 

31.             Organization of Mortgagor. With respect to each Mortgage Loan and to the extent the related Mortgagor is a corporate or other entity, in reliance on certified copies of the organizational documents of the Mortgagor delivered by the Mortgagor in connection with the origination of such Mortgage Loan, the Mortgagor is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico.

 

32.             Environmental Conditions. With respect to each Environmental Review Loan, a Phase I environmental site assessment (or update of a previous Phase I and or Phase II site assessment) and, with respect to certain Environmental Review Loans, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements was conducted by a reputable environmental consultant in connection with such Environmental

 

 

Review Loan within 12 months prior to its origination date (or an update of a previous ESA was prepared), and such ESA (i) did not identify the existence of recognized environmental conditions (as such term is defined in ASTM E1527-05 or its successor, hereinafter “Environmental Condition”) at the related Mortgaged Property or the need for further investigation, or (ii) if the existence of an Environmental Condition was indicated in any such ESA, then at least one of the following statements is true: (A) 125% of the funds reasonably estimated by a reputable environmental consultant to be sufficient to cover the estimated cost to cure any material noncompliance with applicable Environmental Laws or the Environmental Condition has been escrowed by the related Mortgagor and is held or controlled by the related lender; (B) if the only Environmental Condition relates to the presence of asbestos-containing materials, radon in indoor air, lead based paint or lead in drinking water, and the only recommended action in the ESA is the institution of such a plan, an operations or maintenance plan has been required to be instituted by the related Mortgagor that can reasonably be expected to mitigate the identified risk; (C) the Environmental Condition identified in the related environmental report was remediated or abated in all material respects prior to the date hereof, and, if and as appropriate, a no further action or closure letter was obtained from the applicable governmental regulatory authority (or the environmental issue affecting the related Mortgaged Property was otherwise listed by such governmental authority as “closed”); (D) an environmental policy or a lender’s pollution legal liability insurance policy meeting the requirements set forth below that covers liability for the identified circumstance or condition was obtained from an insurer rated no less than “A-” (or the equivalent) by Moody’s, S&P and/or Fitch; (E) a party not related to the Mortgagor was identified as the responsible party for such condition or circumstance and the Seller has reasonably estimated that the responsible party has financial resources adequate to address the situation; or (F) a party related to the Mortgagor having financial resources reasonably estimated to be adequate to address the situation is required to take action. To Seller’s knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property. Each Mortgagor is required pursuant to the Mortgage Loan Documents to be in compliance with all Environmental Laws.

 

An “Environmental Review Loan” is any Mortgage Loan (i) with a Principal Balance greater than $5,000,000, (ii) with respect to which the related Small Business Administration Records Search with Risk Assessment or Environmental Questionnaire identifies a high risk for contamination, (iii) that is secured by a Mortgaged Property with a North American Industry Classification Code matched with an environmentally sensitive industry or (iv) that is secured by a Mortgaged Property located in an industrial area or adjacent to property associated with high environmental-risk use.

 

In the case of some of the Mortgage Loans set forth on Schedule 3 of the Confirmation, (i) a Phase II environmental site assessment was recommended and such Phase II was either conducted or other measures were taken, such as obtaining a lender’s environmental insurance policy, effective as of the date thereof (the “Environmental Insurance Policy”), (ii) as of origination and to the Seller’s knowledge as of the Cut-off Date the Environmental Insurance Policy is in full force and effect, and the trustee is a named insured under such policy. On the effective date of the Environmental Insurance Policy, Seller as originator had no knowledge of any material and adverse environmental condition or circumstance affecting the Mortgaged Property (other than the existence of LBP, ACM or RG (each as defined below)) that was not

 

 

disclosed to the policy issuer in one or more of the following: (a) the application for insurance, (b) a Mortgagor questionnaire that was provided to the Policy Issuer, or (c) an engineering or other report provided to the Policy Issuer, and (v) the premium of any Environmental Insurance Policy has been paid through the maturity of the policy’s term and the term of such policy extends at least one year beyond the maturity of the Mortgage Loan.

 

With respect to (a) asbestos-containing materials (“ACM”) and, if the related Mortgaged Property is a multifamily property, with respect to radon gas (“RG”) and lead-based paint (“LBP”), and (b) if such report disclosed the existence of a material and adverse LBP, ACM or RG environmental condition or circumstance affecting the related Mortgaged Property, the related Mortgagor (A) was required to remediate the identified condition prior to closing the Mortgage Loan or provide additional security or establish with the mortgagee a reserve in an amount deemed to be sufficient by the Seller, for the remediation of the problem, and/or (B) agreed in the Loan Documents to establish an operations and maintenance plan after the closing of the Mortgage Loan that should reasonably be expected to mitigate the environmental risk related to the identified LBP, ACM or RG condition.

 

33.             Appraisal. The Loan File contains an appraisal of the related Mortgaged Property with an appraisal date within 9 months of the related date of origination. The appraisal is signed by an appraiser who (i) is a state licensed certified general appraiser and (ii) to the best of the Seller’s knowledge, had no interest, direct or indirect, in the Mortgaged Property or the Mortgagor or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan. Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation.

 

34.             Schedule of Mortgage Loans. The information pertaining to each Mortgage Loan which is set forth in the Schedule of Mortgage Loans and/or Appendix I to the related Confirmation is true and correct in all material respects as of the related Purchase Date and contains all information required by the Indenture to be contained therein.

 

35.             Cross-Collateralization. Except as set forth on the Schedule of Mortgage Loans, no Mortgage Loan is cross-collateralized or cross-defaulted with any other Mortgage Loan.

 

36.             Advance of Funds by the Seller. After origination, no advance of funds has been made by Seller to the related Mortgagor other than in accordance with the Mortgage Loan Documents, and, to the Seller’s knowledge, no funds have been received from any person other than the related Mortgagor or an affiliate for, or on account of, payments due on the Mortgage Loan (other than as contemplated by the related Mortgage Loan Documents).

 

37.             Compliance with Anti-Money Laundering Laws. The Seller has complied with all applicable anti-money laundering laws and regulations, including without limitation the USA PATRIOT Act with respect to the origination of the Mortgage Loan.

 

 

38.             Origination. Each Mortgage Loan was originated in compliance in all material respects with (i) all applicable federal, state and local laws and regulations, except where failure to comply would not have a material adverse impact on the Mortgage Loan and (ii) if such Mortgage Loan is an Initial Mortgage Loan, the Underwriting Criteria as in effect on the Closing Date and otherwise, the Underwriting Criteria as in effect at the time of its origination.

 

39.             No Equity Participation. No document relating to any of the Mortgage Loans provides for any contingent or additional interest in the form of participation in the cash flow of the applicable Mortgaged Property or a sharing in the appreciation of the value of such Mortgaged Property. The indebtedness evidenced by the Notes is not convertible to an ownership interest in any Mortgaged Property or any Mortgagor and neither the Seller nor any of its “Affiliates” (as such term is defined in the Indenture) have financed or own directly or indirectly, any equity of any form in any Mortgaged Property or any Mortgagor.

 

40.             UCC Financing Statements. With respect to any Mortgage Loan, if (i) accounts, general intangibles or other personal property is a material component of the security for such Mortgage Loan or (ii) the Seller has determined that it would be prudent to file a UCC financing statement with respect to such Mortgage Loan, the Seller has filed a UCC financing statement naming the related Mortgagor as debtor in the appropriate jurisdiction, and such UCC financing statement is sufficient to perfect a first-priority security interest in such accounts, general intangibles or other personal property.

 

41.             No Holdbacks. Other than Future Advance Obligations, the principal amount of the Mortgage Loan stated on the Loan Schedule has been fully disbursed as of the Closing Date and there is no requirement for future advances thereunder (except in those cases where the full amount of the Mortgage Loan has been disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the related Mortgaged Property), and any requirements or conditions to disbursements of any loan proceeds held in escrow have been satisfied with respect to any disbursement of any such escrow fund.

 

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

 

43.             No Defeasance. No Mortgage Loan provides for defeasance.

 

 

ADDITIONAL NON-RATED REPRESENTATIONS AND WARRANTIES

 

1.            Condition of Property. Solely with respect to each Inspected Mortgaged Property, the Seller inspected or caused to be inspected such Inspected Mortgaged Property within four (4) months of origination of the related Mortgage Loan and within twelve (12) months of the related Purchase Date. An engineering report or a property condition assessment was prepared in connection with the origination of each Mortgage Loan related to an Inspected Mortgaged Property no more than four (4) months prior to the origination date.

 

The Seller has no knowledge of any material damage to any Mortgaged Property that the Seller believes would have a material adverse effect on the net operating income of such Mortgaged Property (other than as disclosed in the engineering report or property condition assessment delivered to the Seller, if any, in accordance with this paragraph (9) and set forth on the Exception Schedule).

 

2.            Actions Concerning Mortgage Loan. As of the date of origination and as of the related Purchase Date, there was no pending, filed or threatened action, suit or proceeding, arbitration or governmental investigation involving any Mortgagor or guarantor, or any Affiliate of any Mortgagor or guarantor, under an Mortgage Loan or any Mortgagor’s interest in the related Mortgaged Property, an adverse outcome (including any settlement agreement) of which would reasonably be expected to materially and adversely affect (a) title to the Mortgaged Property, (b) the validity or enforceability of the Mortgage, (c) such Mortgagor’s ability to perform under the related Mortgage Loan, (d) such guarantor’s ability to perform under the related guaranty or (e) the current principal use of the Mortgaged Property to generate net cash flow sufficient to pay principal, interest and other amounts due on the related Mortgage Loan.

 

3.            Insurance. Each related Mortgaged Property is, and is required pursuant to the related Mortgage Loan Documents to be, insured by a property insurance policy providing coverage for loss in accordance with coverage found under a “special cause of loss form” or “all risk form” that includes replacement cost valuation issued by an insurer meeting the requirements of the related Mortgage Loan Documents and having a claims-paying or financial strength rating of at least “A-:VIII” from A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-” from Standard & Poor’s Ratings Service (collectively, the “Insurance Rating Requirements”), in an amount (subject to customary deductible) not less than the lesser of (1) the original principal balance of the Mortgage Loan and (2) the full insurable value on a replacement cost basis of the improvements, furniture, furnishings, fixtures and equipment included in the Mortgaged Property (with no deduction for physical depreciation), but, in any event, not less than the amount necessary or containing such endorsements as are necessary to avoid the operation of any coinsurance provisions with respect to the related Mortgaged Property.

 

Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Mortgage Loan Documents, by business interruption or rental loss insurance (subject to customary deductible) which covers a period of not less than six (6) months.

 

If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency

 

 

Management Agency as having special flood hazards, the related Mortgaged Property is covered by, and the related Mortgagor is required to maintain insurance in the maximum amount (subject to customary deductible) available under the National Flood Insurance Program, plus such additional amounts as would be sufficient to cover the improvements located in such flood zone.

 

If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, the Mortgaged Property is covered by, and the related Mortgagor is required to maintain an insurance policy or endorsement covering damage from windstorm and/or windstorm related perils and/or named storms, in an amount (subject to customary deductible) at least equal to 100% of the full insurable value on a replacement cost basis of the improvements and personalty and fixtures included in the related Mortgaged Property by an insurer meeting the Insurance Rating Requirements.

 

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

 

For each Mortgaged Property related to an Mortgage Loan with a Principal Balance greater than $5,000,000 that is located in seismic zones 3 or 4, an architectural or engineering consultant has performed an analysis of such Mortgaged Property in order to evaluate the structural and seismic condition of such Mortgaged Property for the sole purpose of assessing the probable maximum loss (“PML”) for such Mortgaged Property in the event of an earthquake. In such instance, the PML was based on a 475-year return period, an exposure period of 50 years and a 20% probability of exceedance. If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer meeting the Insurance Rating Requirements in an amount (subject to customary deductible) not less than 100% of the PML.

 

The Mortgage Loan Documents require any material insurance proceeds in respect of a property loss to be applied, at the sole discretion of the lender, either (a) to the repair or restoration of all or part of the related Mortgaged Property or (b) to the payment of the outstanding principal balance of such Mortgage Loan together with any accrued interest thereon.

 

All premiums on all insurance policies referred to in this section required to be paid as of the date hereof have been paid, and such insurance policies name the lender under the Mortgage Loan and its successors and assigns as a loss payee under a mortgagee endorsement clause or, in the case of the general liability insurance policy, as named or additional insured. Such insurance policies will inure to the benefit of the Trustee. Each related Mortgage Loan obligates the related Mortgagor to maintain all such insurance and, at such Mortgagor’s failure to do so, authorizes the lender to maintain such insurance at the Mortgagor’s cost and expense and to charge such Mortgagor for related expenses, including reasonable attorneys’ fees. All such insurance policies (other than commercial liability policies) require at least 10 days’ prior notice to the lender of termination or cancellation arising because of nonpayment of a premium and at

 

2

 

least 30 days prior notice to the lender of termination or cancellation (or such lesser period, not less than 10 days, as may be required by applicable law) arising for any reason other than nonpayment of a premium and no such notice has been received by the Seller.

 

4.            Local Law Compliance. The improvements located on or forming part of each Mortgaged Property securing an Mortgage Loan are in material compliance with applicable zoning ordinances, building codes and land laws (collectively, “Zoning Regulations”) other than those which (i) are insured by the Title Policy or law and ordinance insurance coverage has been obtained for the Mortgaged Property or (ii) would not have a material and adverse effect on the operation or net operating income of such Mortgaged Property.

 

5.            Financial Reporting and Rent Rolls. At a minimum, the Mortgage Loan Documents require the Mortgagor to provide the owner or holder of the Mortgage Loan with quarterly (other than for single-tenant properties) and annual operating statements, quarterly (other than for single-tenant properties) and annual rent rolls for properties that have leases contributing more than 5% of the in-place base rent and annual financial statements. All of the financial statements, operating statements and rent rolls provided by any Mortgagor or guarantor as of the date of origination and as of the related Purchase Date are true, accurate and complete in all material respects.

 

6.            Appraisal. The Loan File contains an appraisal of the related Mortgaged Property with an appraisal date within 6 months of the related Purchase Date. The appraisal is signed by an appraiser who (i) is a state licensed certified general appraiser and (ii) to the best of the Seller’s knowledge, had no interest, direct or indirect, in the Mortgaged Property or the Mortgagor or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan. Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation.

 

7.            Cross-Collateralization. Except as set forth on the Schedule of Mortgage Loans, no Mortgage Loan is cross-collateralized or cross-defaulted with any other Mortgage Loan, and, with respect to each non-recourse Mortgage Loan, there is no other indebtedness payable by the related Mortgagor to the Seller or any of its “Affiliates” (as such term is defined in the Indenture).

 

3

 

EXHIBIT VII

 

ORGANIZATIONAL CHART

 

 

 

EXHIBIT VIII

 

[Reserved]

 

 

EXHIBIT IX

 

FORM OF SERVICER NOTICE AND AGREEMENT

 

                     , 20   

 

[Servicer]

 

RE: Master Repurchase Agreement, dated as of December [ ], 2014 (as amended, modified and/or restated, the “Agreement”), among ReadyCap Commercial, LLC, a Delaware limited liability company (“Originator”), Sutherland Asset I, LLC, a Delaware limited liability company (“Sutherland”; together with Originator, collectively, the “Sellers”), U.S. Bank National Association, a national banking association (“Depository”) and Deutsche Bank AG, Cayman Islands Branch, a branch of a foreign banking institution (together with its successors and assigns, “Buyer”)

 

Ladies and Gentlemen:

 

[                                        ] (“Servicer”) has entered into that certain Servicing Agreement, dated as of December    , 2014 (the “Servicing Agreement”), with the Seller pursuant to which Servicer will be servicing certain commercial mortgage loans which loans are subject to Transactions with Buyer under the Repurchase Agreement. Capitalized terms used but not defined herein shall have the meaning set forth in the Repurchase Agreement. Servicer is hereby notified of, and agrees to comply with, the following:

 

With respect to each Purchased Loan, if not expressly required pursuant to the Loan Documents or if the related Mortgagor has not already been instructed to make remittances to the Servicer, the applicable Seller or Servicer shall deliver an instruction letter to the borrower under such Purchased Loan, instructing the borrower to remit all sums required to be remitted to the holder of the Purchased Loan under the related Loan Documents to the Servicer for deposit in that certain account of Servicer more particularly described on Exhibit A hereof (the “Servicer Account”). Servicer hereby acknowledges and agrees that Servicer shall cause all Available Income received by the Servicer on account of the Purchased Loans to be remitted to that certain account held at [U.S. Bank National Association] entitled “ReadyCap Commercial, LLC, as Seller, for the benefit of Deutsche Bank AG, Cayman Islands Branch, as Buyer”, which account is more particularly described on Exhibit A hereof (the “Cash Management Account”), by no later the Remittance Date (as defined under the Servicing Agreement). Subject to Servicer’s right to receive any amounts due to Servicer under the Servicing Agreement, Servicer acknowledges that all Income collected on account of the Purchased Loans, whether or not deposited into the Servicer Account is held for the benefit of Buyer.

 

Servicer agrees to deliver directly to Buyer, at the notice address provided herein (or at the following email addresses: randal.johnson@db.com, timothy.geraghty@db.com, andrew.mcdermott@db.com and jean.augustin@db.com or such other email addresses as may

 

G-1

 

hereafter be provided to Servicer by Buyer), all servicing statements, reports and other information with respect to the Purchased Loans that Servicer is required to deliver to the Seller under the Servicing Agreement, on the same date such information is required to be delivered to the Seller.

 

Buyer is the owner of all servicing records, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Purchased Loans and Trust Loans (the “Servicing Records”) so long as the Purchased Loans are subject to the Repurchase Agreement. Pursuant to the Repurchase Agreement, the Seller has granted Buyer a security interest in all servicing rights relating to the Purchased Loans and all Servicing Records to secure the obligation of the Seller or its designee to service in conformity with the Repurchase Agreement and any other obligation of the Seller to Buyer. The Seller has covenanted to safeguard such Servicing Records and to deliver them promptly to Buyer or its designee at Buyer’s request.

 

Upon the occurrence and continuance of an Event of Default under the Repurchase Agreement, subject to Section 13 of the Repurchase Agreement and the terms of the Servicing Agreement, Buyer shall deliver notice of such Event of Default to Servicer, and may, in its sole discretion, (i) sell its right to the Purchased Loans on a servicing released basis or (ii) terminate Servicer as the servicer of the Purchased Loans, with or without cause, in each case without payment of any termination fee. Upon receipt of a notice of an Event of Default from Buyer, Servicer shall follow the instructions of Buyer, without any further consent from the Seller or any other Person, with respect to the Purchased Loans and shall deliver to Buyer any information with respect to the Purchased Loans requested by Buyer.

 

Notwithstanding any contrary information or direction which may be delivered to Servicer by the Seller, Servicer may conclusively rely on any information, direction or notice of an Event of Default delivered by Buyer without any independent investigation or inquiry, and the Seller shall indemnify and hold Servicer harmless for any and all claims asserted against Servicer for any actions taken in good faith by Servicer in connection with the delivery of such information or notice of an Event of Default.

 

No provision of this Servicer Notice and Agreement or the Servicing Agreement may be amended, countermanded or otherwise modified without the prior written consent of Buyer. Buyer is an intended third party beneficiary of this letter.

 

Please acknowledge receipt and your agreement to the terms of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt. Any notices should be delivered to the following address:

 

(a)                                if to Buyer:

 

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street, 3rd Floor

 

 

New York, NY 10005

Attention: Timothy Geraghty

Facsimile No.: (917) 338-3018,

 

with a copy by email to the following:

 

Timothy Geraghty (timothy.geraghty@db.com),

Andrew McDermott (andrew.mcdermott@db.com)

Randal Johnson (randal.johnson@db.com) and

Jean Augustin (jean.augustin@db.com)

 

(b)                                if to Servicer,

 

[                                             ]

[                                             ]

[                                             ]

[                                             ]

 

with a copy to:

 

[                                             ]

[                                             ]

[                                             ]

[                                             ]

 

In the event of a conflict between the terms and conditions of this Servicer Notice and Agreement and the Servicing Agreement, this Servicer Notice and Agreement shall prevail. Except as specifically set forth in this Servicer Notice and Agreement with respect to the Purchased Loans, all terms and conditions of the Servicing Agreement shall remain in full force and effect.

 

This Servicer Notice and Agreement may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Delivery by telecopier or other electronic transmission (including a .pdf e-mail transmission) of an executed counterpart of a signature page to this Servicer Notice and Agreement shall be effective as delivery of an original executed counterpart of this Servicer Notice and Agreement.

 

This Servicer Notice and Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

 

[Remainder of page intentionally blank]

 

 

	
 
    	
 
    	
Very truly   yours,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
READYCAP   COMMERCIAL, LLC, a Delaware limited liability company
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
SUTHERLAND   ASSET I, LLC, a Delaware limited liability company
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By: SUTHERLAND PARTNERS, L.P., not in its   individual capacity but solely as managing member
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By: SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
ACKNOWLEDGED AND   AGREED TO:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
[Servicer]
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    	
 
    

 

 

EXHIBIT A

 

Description of Accounts

 

Servicer Account

 

	
Bank:
    	
[                                ]
    
	
City/State:
    	
[                                ]
    
	
ABA:
    	
[                                ]
    
	
Account Name:
    	
[                                ]
    
	
Account #:
    	
[                                ]
    
	
Attention:
    	
[                                ]
    

 

Cash Management Account

 

Bank:

City/State:

ABA:

Account Name:

Account #:

 

 

EXHIBIT X

 

PROHIBITED TRANSFEREES

 

Lone Star Funds

Garrison Capital Inc.

Apollo Global Management

Cerberus Capital Management

A10 Capital

Fortress Investment Group

Newcastle Investment Group

Ranieri Partners

Velocity Commercial Capital

Rialto Capital Management

LNR Property

Starwood Property Trust

Colony Capital

NorthStar Realty Finance Corp.

Arbor Commercial Mortgage

Blackstone

CWCapital

TPG Capital

Capital Crossing

Bayview Asset Management

Roosevelt Management Company

Shellpoint Partners

PNC Mortgage

Guggenheim Partners

Oaktree Capital Management

Sabal Financial Group

CarVal Investors

Varde Partners

First City Mortgage

Carrington Mortgage Services

Ocwen Financial Corporation

LoanCore Capital

 

 

EXHIBIT XI

 

UNDERWRITING CRITERIA

 

[ATTACHED]

 

 

EXHIBIT XII

 

CONVENTIONAL CONCENTRATION LIMITS

 

 

EXHIBIT XIII

 

ELIGIBILITY MATRICES

 

Initial Product Eligibility Compliant Criteria

 

 

EXHIBIT XIV

 

FORM OF TI/LC TRACKING SCHEDULE

 

[ATTACHED]

 

 

EXHIBIT XV

 

FORM OF FUNDING CERTIFICATION

 

[DATE]

 

Deutsche Bank AG, Cayman Islands Branch

c/o Deutsche Bank Securities Inc.

60 Wall St., 3rd Floor

New York, New York 10005

Attention: Structured Credit Mortgage Team

 

[     ]

 

Re:      Master Repurchase Agreement, dated as of December [    ], 2014 (as amended, modified and/or restated, the “Agreement”), among ReadyCap Commercial, LLC, a Delaware limited liability company (“Originator”), Sutherland Asset I, LLC, a Delaware limited liability company (“Sutherland”; together with Originator, collectively, the “Sellers”), U.S. Bank National Association, a national banking association (“Depository”) and Deutsche Bank AG, Cayman Islands Branch, a branch of a foreign banking institution (together with its successors and assigns, “Buyer”)

 

The undersigned, as Seller, has requested to enter into a Transaction at a Purchase Price to be funded on the requested Purchase Date in an amount equal to $[           ]. In connection with such request, the undersigned, as Seller, hereby certifies with respect to each Transaction Condition Precedent as of the requested Purchase Date as follows:

 

	
(Y/N) 1.
    	
 
    	
Each Mortgage Loan to be acquired in such   Transaction shall be an Eligible Loan.
    
	
 
    	
 
    	
 
    
	
(Y/N) 2.
    	
 
    	
Immediately prior to such Transaction, and   immediately after giving effect to such Transaction, each Purchased Loan that   is an Eligible Loan immediately prior to such Transaction shall continue to   be an Eligible Loan.
    
	
 
    	
 
    	
 
    
	
(Y/N) 3.
    	
 
    	
Immediately prior to such Transaction, and after   giving effect to such Transaction, no portion of the Transaction shall relate   to Mortgage Loans in excess of the Concentration Limits.
    
	
 
    	
 
    	
 
    
	
(Y/N) 4.
    	
 
    	
With respect to any New Collateral, proposed funds   to be advanced shall be no less than $250,000.
    
	
 
    	
 
    	
 
    
	
(Y/N) 5.
    	
 
    	
Immediately after giving effect to such Transaction,   the excess of the Maximum Amount over the Aggregate Repurchase Price shall   not be less than the aggregate Future Advance Obligations for all Purchased   Loans.
    

 

 

	
(Y/N) 6.
    	
 
    	
Immediately prior to such Transaction, and after   giving effect to such Transaction, the Aggregate Repurchase Price shall be no   greater than the Maximum Amount.
    
	
 
    	
 
    	
 
    
	
(Y/N) 7.
    	
 
    	
Immediately prior to such Transaction, and   immediately after giving effect to such Transaction, no Default or Event of   Default shall exist and be continuing.
    
	
 
    	
 
    	
 
    
	
(Y/N) 8.
    	
 
    	
Immediately prior to such Transaction, and   immediately after giving effect to such Transaction, no Margin Deficit shall   exist and be continuing.
    
	
 
    	
 
    	
 
    
	
(Y/N) 9.
    	
 
    	
Immediately prior to such Transaction, and   immediately after giving effect to such Transaction, no Servicer Termination   Event shall exist and be continuing, and no notice of removal or resignation   of any Servicer shall have been given.
    
	
 
    	
 
    	
 
    
	
(Y/N) 10.
    	
 
    	
The applicable Seller shall have delivered an   Available Amount Certificate in accordance with the provisions of Section 3(a) of   the Agreement.
    
	
 
    	
 
    	
 
    
	
(Y/N) 11.
    	
 
    	
The Loan File for the related Mortgage Loan shall   have been delivered to the Custodian.
    
	
 
    	
 
    	
 
    
	
(Y/N) 12.
    	
 
    	
No Material Adverse Event shall have occurred.
    
	
 
    	
 
    	
 
    
	
(Y/N) 13.
    	
 
    	
With respect to each Additional Advance to be made   in connection with such Transaction, proposed funds to be advanced shall be   no less than $50,000.
    
	
 
    	
 
    	
 
    
	
(Y/N) 14.
    	
 
    	
The Funding Compliant Ratio has been satisfied.
    
	
 
    	
 
    	
 
    
	
(Y/N) 15.
    	
 
    	
No Act of Insolvency shall have occurred with   respect to any Seller Party.
    
	
 
    	
 
    	
 
    
	
(Y/N) 16.
    	
 
    	
If required by Buyer in its sole and absolute   discretion, the applicable Seller shall have entered into an Approved Hedging   Transaction with respect to the related Eligible Loan.
    

 

 

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.

 

	
 
    	
[READYCAP   COMMERCIAL, LLC, a Delaware limited liability company]
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[SUTHERLAND   ASSET I, LLC a Delaware limited liability company]
    
	
 
    	
 
    
	
 
    	
[By:   SUTHERLAND PARTNERS, L.P., not   in its individual capacity but solely as managing member]
    
	
 
    	
 
    
	
 
    	
[By:   SUTHERLAND ASSET MANAGEMENT CORPORATION,   not in its individual capacity but solely as general partner]
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

 

EXHIBIT XVI

 

FORM OF AVAILABLE AMOUNT CERTIFICATE

 

[ATTACHED]

 

 

EXHIBIT XVII

 

FORM OF DATA TAPE

 

[ATTACHED]

 

 

EXHIBIT XVIII

 

FORM OF CREFC REPORTS

 

[ATTACHED]

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