Document:

exv10w16

EXHIBIT 10.16

Master Repurchase Agreement
 
September 1996 Version

	 	 	 

	Dated as of:
	 	May 12, 2011

	 	 	 

	Between:
	 	RBS Securities Inc.

	 	 	 

	and:
	 	Provident Mortgage Capital Associates, Inc.

1. Applicability

From time to time the parties hereto may enter into transactions in which one party
(“Seller”) agrees to transfer to the other (“Buyer”) securities or other assets
(“Securities”) against the transfer of funds by Buyer, with a simultaneous agreement by
Buyer to transfer to Seller such Securities at a date certain or on demand, against the
transfer of funds by Seller. 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 Annex I hereto and in any other
annexes identified herein or therein as applicable hereunder.

2. Definitions

(a)
“Act of Insolvency”, with respect to any party, (i) the commencement by such party as
debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation,
moratorium, dissolution, delinquency or similar 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, or another seeking such an
appointment or election, or the filing against a party of an application for a protective decree
under the provisions of the Securities Investor Protection Act of 1970, 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, or (C) is not dismissed within 15 days, (iii) the making by such party
of a general assignment for the benefit of 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;

	 	(b)	 	“Additional Purchased Securities”, Securities provided by Seller to Buyer pursuant to
Paragraph 4(a) hereof;
	 
	 	(c)	 	“Buyer’s Margin Amount”, with respect to any Transaction as of any date, the amount
obtained by application of the Buyer’s Margin Percentage to the Repurchase Price for such
Transaction as of such date;

 

 

	 	(d)	 	“Buyer’s Margin Percentage”, with respect to any Transaction as of any date, a
percentage (which may be equal to the Seller’s Margin Percentage) agreed to by Buyer and
Seller or, in the absence of any such agreement, the percentage obtained by dividing the
Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the
Purchase Date for such Transaction;
	 
	 	(e)	 	“Confirmation”, the meaning specified in Paragraph 3(b) hereof;
	 
	 	(f)	 	“Income”, with respect to any Security at any time, any principal thereof and all
interest, dividends or other distributions thereon;
	 
	 	(g)	 	“Margin Deficit”, the meaning specified in Paragraph 4(a) hereof;
	 
	 	(h)	 	“Margin Excess”, the meaning specified in Paragraph 4(b) hereof;
	 
	 	(i)	 	“Margin Notice Deadline”, the time agreed to by the parties in the relevant
Confirmation, Annex I hereto or otherwise as the deadline for giving notice requiring
same-day satisfaction of margin maintenance obligations as provided in Paragraph 4
hereof (or, in the absence of any such agreement, the deadline for such purposes
established in accordance with market practice);
	 
	 	(j)	 	“Market Value”, with respect to any Securities as of any date, the price for such
Securities on such date obtained from a generally recognized source agreed to by the
parties or the most recent closing bid quotation from such a source, plus accrued Income
to the extent not included therein (other than any Income credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such date
(unless contrary to market practice for such Securities);
	 
	 	(k)	 	“Price Differential”, with respect to any Transaction as of any date, the
aggregate amount obtained by daily application of the Pricing Rate for such Transaction
to the Purchase Price for such Transaction 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 Seller to Buyer with respect to
such Transaction);
	 
	 	(l)	 	“Pricing Rate”, the per annum percentage rate for determination of the Price Differential;
	 
	 	(m)	 	“Prime Rate”, the prime rate of U.S. commercial banks as published in The Wall
Street Journal (or, if more than one such rate is published, the average of such rates);
	 
	 	(n)	 	“Purchase Date”, the date on which Purchased Securities are to be transferred by
Seller to Buyer;
	 
	 	(o)	 	“Purchase Price”, (i) on the Purchase Date, the price at which Purchased Securities
are transferred by Seller to Buyer, and (ii) thereafter, except where Buyer and Seller
agree otherwise, such price increased by the amount of any cash transferred by Buyer to
Seller
pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller’s
obligations under clause (ii) of Paragraph 5 hereof;
	 
	 	(p)	 	“Purchased Securities”, the Securities transferred by Seller to Buyer in a
Transaction hereunder, and any Securities substituted therefor in accordance with
Paragraph 9 hereof. The term “Purchased Securities” with respect to any Transaction at
any time also shall include

2 § September 1996 § Master Repurchase Agreement

 

 

	 	 	 	Additional Purchased Securities delivered pursuant to Paragraph 4(a) hereof and shall
exclude Securities returned pursuant to Paragraph 4(b) hereof;
	 
	 	(q)	 	“Repurchase Date”, the date on which Seller is to repurchase the Purchased Securities
from Buyer, including any date determined by application of the provisions of Paragraph
3(c) or 11 hereof;
	 
	 	(r)	 	“Repurchase Price”, the price at which Purchased Securities are to be transferred
from Buyer to Seller upon termination of a Transaction, which will be determined in each
case (including Transactions terminable upon demand) as the sum of the Purchase Price and
the Price Differential as of the date of such determination;
	 
	 	(s)	 	“Seller’s Margin Amount”, with respect to any Transaction as of any date, the amount
obtained by application of the Seller’s Margin Percentage to the Repurchase Price for
such Transaction as of such date;
	 
	 	(t)	 	“Seller’s Margin Percentage”, with respect to any Transaction as of any date, a
percentage (which may be equal to the Buyer’s Margin Percentage) agreed to by Buyer and
Seller or, in the absence of any such agreement, the percentage obtained by dividing the
Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on
the Purchase Date for such Transaction.

3. Initiation; Confirmation; Termination

	 	(a)	 	An agreement to enter into a Transaction may be made orally or in writing at the
initiation of either Buyer or Seller. On the Purchase Date for the Transaction, the
Purchased Securities shall be transferred to Buyer or its agent against the transfer of the
Purchase Price to an account of Seller.
	 
	 	(b)	 	Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as
shall be agreed, shall promptly deliver to the other party a written confirmation of each
Transaction (a “Confirmation”). The Confirmation shall describe the Purchased Securities
(including CUSIP number, if any), identify Buyer and Seller and set forth (i) the Purchase
Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be
terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the
Transaction, and (v) any additional terms or conditions of the Transaction not inconsistent
with this Agreement. The Confirmation, together with this Agreement, shall constitute
conclusive evidence of the terms agreed between Buyer and Seller with respect to the
Transaction to which the Confirmation relates, unless with respect to the Confirmation
specific objection is made promptly after receipt thereof. In the event of any conflict
between the terms of such Confirmation and this Agreement, this Agreement shall prevail.
	 
	 	(c)	 	In the case of Transactions terminable upon demand, such demand shall be made by Buyer
or Seller, no later than such time as is customary in accordance with market practice, by
telephone or otherwise on or prior to the business day on which such termination will be
effective. On the date specified in such demand, or on the date fixed for termination in
the case of Transactions having a fixed term, termination of the Transaction will be
effected
by transfer to Seller or its agent of the Purchased Securities and any Income in respect
thereof received by Buyer (and not previously credited or transferred to, or applied to the
obligations of, Seller pursuant to Paragraph 5 hereof) against the transfer of the
Repurchase Price to an account of Buyer.

September 1996 § Master Repurchase Agreement § 3

 

 

4. Margin Maintenance

	 	(a)	 	If at any time the aggregate Market Value of all Purchased Securities subject to all
Transactions in which a particular party hereto is acting as Buyer is less than the
aggregate Buyer’s Margin Amount for all such Transactions (a “Margin Deficit”), then Buyer
may by notice to Seller require Seller in such Transactions, at Seller’s option, to
transfer to Buyer cash or additional Securities reasonably acceptable to Buyer
(“Additional Purchased Securities”), so that the cash and aggregate Market Value of the
Purchased Securities, including any such Additional Purchased Securities, will thereupon
equal or exceed such aggregate Buyer’s Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which such Buyer is acting
as Seller).
	 
	 	(b)	 	If at any time the aggregate Market Value of all Purchased Securities subject to all
Transactions in which a particular party hereto is acting as Seller exceeds the
aggregate Seller’s Margin Amount for all such Transactions at such time (a “Margin
Excess”), then Seller may by notice to Buyer require Buyer in such Transactions, at
Buyer’s option, to transfer cash or Purchased Securities to Seller, so that the aggregate
Market Value of the Purchased Securities, after deduction of any such cash or any
Purchased Securities so transferred, will thereupon not exceed such aggregate Seller’s
Margin Amount (increased by the amount of any Margin Excess as of such date arising from
any Transactions in which such Seller is acting as Buyer).
	 
	 	(c)	 	If any notice is given by Buyer or Seller under subparagraph (a) or (b) of this
Paragraph at or before the Margin Notice Deadline on any business day, the party receiving
such notice shall transfer cash or Additional Purchased Securities as provided in such
subparagraph no later than the close of business in the relevant market on such day. If
any such notice is given after the Margin Notice Deadline, the party receiving such notice
shall transfer such cash or Securities no later than the close of business in the relevant
market on the next business day following such notice.
	 
	 	(d)	 	Any cash transferred pursuant to this Paragraph shall be attributed to such
Transactions as shall be agreed upon by Buyer and Seller.
	 
	 	(e)	 	Seller and Buyer may agree, with respect to any or all Transactions hereunder, that
the respective rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this
Paragraph may be exercised only where a Margin Deficit or a Margin Excess, as the case
may be, exceeds a specified dollar amount or a specified percentage of the Repurchase
Prices for such Transactions (which amount or percentage shall be agreed to by Buyer and
Seller prior to entering into any such Transactions).
	 
	 	(f)	 	Seller and Buyer may agree, with respect to any or all Transactions hereunder, that
the respective rights of Buyer and Seller under subparagraphs (a) and (b) of this
Paragraph to require the elimination of a Margin Deficit or a Margin Excess, as the case
may be, may be exercised whenever such a Margin Deficit or a Margin Excess exists with
respect to any single Transaction hereunder (calculated without regard to any other
Transaction outstanding under this Agreement).

4 § September 1996 § Master Repurchase Agreement

 

 

5. Income Payments

Seller shall be entitled to receive an amount equal to all Income paid or distributed on
or in respect of the securities that is not otherwise received by Seller, to the full extent it
would be so entitled if the Securities had not been sold to Buyer. Buyer shall, as the parties
may agree with respect to any Transaction (or, in the absence of any such agreement, as Buyer
shall reasonably determine in its discretion), on the date such Income is paid or distributed
either (i) transfer to or credit to the account of Seller such Income with respect to any
Purchased Securities subject to such Transaction or (ii) with respect to Income paid in cash,
apply the Income payment or payments to reduce the amount, if any, to be transferred to Buyer
by Seller upon termination of such Transaction. Buyer shall not be obligated to take any action
pursuant to the preceding sentence (A) to the extent that such action would result in the
creation of a Margin Deficit, unless prior thereto or simultaneously therewith Seller transfers
to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit,
or (B) if an Event of Default with respect to Seller has occurred and is then continuing at the
time such Income is paid or distributed.

6. Security Interest

Although the parties intend that all Transactions hereunder be sales and purchases and
not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed
to have pledged to Buyer as security for the performance by Seller of its obligations under
each such Transaction, and shall be deemed to have granted to Buyer a security interest in,
all of the Purchased Securities with respect to all Transactions hereunder and all Income
thereon and other proceeds thereof.

7. Payment and Transfer

Unless otherwise mutually agreed, all transfers of funds hereunder shall be in
immediately available funds. All Securities transferred by one party hereto to the other party
(i) shall be in suitable form for transfer or shall be accompanied by duly executed
instruments of transfer or assignment in blank and such other documentation as the party
receiving possession may reasonably request, (ii) shall be transferred on the book-entry
system of a Federal Reserve Bank, or (iii) shall be transferred by any other method mutually
acceptable to Seller and Buyer.

8. Segregation of Purchased Securities

To the extent required by applicable law, all Purchased Securities in the possession of
Seller shall be segregated from other securities in its possession and shall be identified as
subject to this Agreement Segregation may be accomplished by appropriate identification on the
books and records of the holder, including a financial or securities intermediary or a clearing
corporation. All of Seller’s interest in the Purchased Securities shall pass to Buyer on the
Purchase Date and, unless otherwise agreed by Buyer and Seller, nothing in this Agreement shall
preclude Buyer from engaging in repurchase transactions with the Purchased Securities or
otherwise selling, transferring, pledging or hypothecating the Purchased Securities, but no
such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to
Seller pursuant to Paragraph 3, 4 or 11 hereof, or of Buyer’s obligation to credit or pay
Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5 hereof.

September 1996 § Master Repurchase Agreement § 5

 

 

Required Disclosure for Transactions in Which the

Seller Retains Custody of the Purchased Securities

Seller is not permitted to substitute other securities for those subject to this
Agreement and therefore must keep Buyer’s securities segregated at all times, unless in
this Agreement Buyer grants Seller the right to substitute other securities. If Buyer
grants the right to substitute, this means that Buyer’s securities will likely be
commingled with Seller’s own securities during the trading day. Buyer is advised that,
during any trading day that Buyer’s securities are commingled with Seller’s securities,
they [will]* [may]** be subject to liens granted by Seller to [its clearing bank]* [third
parties]** and may be used by Seller for deliveries on other securities transactions.
Whenever the securities are commingled, Seller’s ability to resegregate substitute
securities for Buyer will be subject to Seller’s ability to satisfy [the clearing]*
[any]** lien or to obtain substitute
securities.

 

* Language to be used under 17 C.F.R §403.4(e) if Seller is a government securities broker
or dealer other than a financial institution.

** Language to be used under 17 C.F.R §403.5(d) if Seller is a financial institution.

9. Substitution

	 	(a)	 	Seller may, subject to agreement with and acceptance by Buyer, substitute other
Securities for any Purchased Securities. Such substitution shall be made by transfer to
Buyer of such other Securities and transfer to Seller of such Purchased Securities. After
substitution, the substituted Securities shall be deemed to be Purchased Securities.
	 
	 	(b)	 	In Transactions in which Seller retains custody of Purchased Securities, the parties
expressly agree that Buyer shall be deemed, for purposes of subparagraph (a) of this
Paragraph, to have agreed to and accepted in this Agreement substitution by Seller of
other Securities for Purchased Securities; provided, however, that such other Securities
shall have a Market Value at least equal to the Market Value of the Purchased Securities
for which they are substituted.

10. Representations

Each of Buyer and Seller represents and warrants to the other that (i) it is duly
authorized to execute and deliver this Agreement, to enter into Transactions contemplated
hereunder and to perform its obligations hereunder and has taken all necessary action to
authorize such execution, delivery and performance, (ii) it will engage in such Transactions as
principal (or, if agreed in writing, in the form of an annex hereto or otherwise, in advance of
any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person
signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of
any such disclosed principal), (iv) it has obtained all authorizations of any governmental body
required in connection with this Agreement and the Transactions hereunder and such
authorizations are in full force and effect and (v) the execution, delivery and performance of
this Agreement and the Transactions hereunder will not violate any law, ordinance, charter,
by-law or rule applicable to it or any agreement by which it is bound or by which any of its
assets are affected. On the Purchase Date for any Transaction Buyer and Seller shall each be
deemed to
repeat all the foregoing representations made by it.

6 § September 1996 § Master Repurchase Agreement

 

 

11. Events of Default

In the event that (i) Seller fails to transfer or Buyer fails to purchase Purchased
Securities upon the applicable Purchase Date, (ii) Seller fails to repurchase or Buyer fails to
transfer Purchased Securities upon the applicable Repurchase Date, (iii) Seller or Buyer fails
to comply with Paragraph 4 hereof, (iv) Buyer fails, after one business day’s notice, to comply
with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi)
any representation made by Seller or Buyer shall have been incorrect or untrue in any material
respect when made or repeated or deemed to have been made or repeated, or (vii) Seller or Buyer
shall admit to the other its inability to, or its intention not to, perform any of its
obligations hereunder (each an “Event of Default”):

	 	(a)	 	The nondefaulting party may, at its option (which option shall be deemed to have been
exercised immediately upon the occurrence of an Act of Insolvency), declare an Event of
Default to have occurred hereunder and, upon the exercise or deemed exercise of such
option, the Repurchase Date for each Transaction hereunder shall, if it has not already
occurred, be deemed immediately to occur (except that, in the event that the Purchase Date
for any Transaction has not yet occurred as of the date of such exercise or deemed
exercise, such Transaction shall be deemed immediately canceled). The nondefaulting party
shall (except upon the occurrence of an Act of Insolvency) give notice to the defaulting
party of the exercise of such option as promptly as practicable.
	 
	 	(b)	 	In all Transactions in which the defaulting party is acting as Seller, if the
nondefaulting party exercises or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the defaulting party’s obligations in such
Transactions to repurchase all Purchased Securities, at the Repurchase Price therefor on
the Repurchase Date determined in accordance with subparagraph (a) of this Paragraph, shall
thereupon become immediately due and payable, (ii) all Income paid after such exercise or
deemed exercise shall be retained by the nondefaulting party and applied to the aggregate
unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder, and
(iii) the defaulting party shall immediately deliver to the nondefaulting party any
Purchased Securities subject to such Transactions then in the defaulting party’s possession
or control.
	 
	 	(c)	 	In all Transactions in which the defaulting party is acting as Buyer, upon tender by
the nondefaulting party of payment of the aggregate Repurchase Prices for all such Transactions, all right, title and interest in and entitlement to all Purchased Securities
subject to such Transactions shall be deemed transferred to the nondefaulting party, and
the defaulting party shall deliver all such Purchased Securities to the nondefaulting
party.
	 
	 	(d)	 	if the nondefaulting party exercises or is deemed to have exercised the option referred
to in subparagraph (a) of this Paragraph, the nondefaulting party, without prior notice to
the defaulting party, may:

	 	(i)	 	as to Transactions in which the defaulting party is acting as Seller, (A)
immediately sell, in a recognized market (or otherwise in a commercially reasonable
manner) at such price or prices as the nondefaulting party may reasonably deem
satisfactory, any or all Purchased Securities subject to such Transactions and apply
the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts
owing by the defaulting party hereunder or (B) in its sole discretion elect, in lieu
of selling all or a portion of such Purchased Securities, to give the defaulting party
credit for such Purchased Securities in an amount equal to the price therefor on such
date, obtained from a generally recognized source or the most recent closing bid
quotation from

September 1996 § Master Repurchase Agreement § 7

 

 

	 	 	 	such a source, against the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder; and
	 
	 	(ii)	 	as to Transactions in which the defaulting party is acting as Buyer, (A)
immediately purchase, in a recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the nondefaulting party may reasonably
deem satisfactory, securities (“Replacement Securities”) of the same class and amount
as any Purchased Securities that are not delivered by the defaulting party to the
nondefaulting party as required hereunder or (B) in its sole discretion elect, in
lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement
Securities at the price therefor on such date, obtained from a generally recognized
source or the most recent closing offer quotation from such a source.

	 	 	 	Unless otherwise provided in Annex I, the parties acknowledge and agree that (1) the
Securities subject to any Transaction hereunder are instruments traded in a recognized
market, (2) in the absence of a generally recognized source for prices or bid or offer
quotations for any Security, the nondefaulting party may establish the source therefor in
its sole discretion and (3) all prices, bids and offers shall be determined together with
accrued Income (except to the extent contrary to market practice with respect to the
relevant Securities).
	 
	 	(e)	 	As to Transactions in which the defaulting party is acting as Buyer, the defaulting
party shall be liable to the nondefaulting party for any excess of the price paid (or
deemed paid) by the nondefaulting party for Replacement Securities over the Repurchase
Price for the Purchased Securities replaced thereby and for any amounts payable by the
defaulting party under Paragraph 5 hereof or otherwise hereunder.
	 
	 	(f)	 	For purposes of this Paragraph 11, the Repurchase Price for each Transaction
hereunder in respect of which the defaulting party is acting as Buyer shall not increase
above the amount of such Repurchase Price for such Transaction determined as of the date
of the exercise or deemed exercise by the nondefaulting party of the option referred to in
subparagraph (a) of this Paragraph.
	 
	 	(g)	 	The defaulting party shall be liable to the nondefaulting party for (i) the amount of
all reasonable legal or other expenses incurred by the nondefaulting party in connection
with or as a result of an Event of Default, (ii) damages in an amount equal to the cost
(including all fees, expenses and commissions) of entering into replacement transactions
and entering into or terminating hedge transactions in connection with or as a result of
an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or
resulting from the occurrence of an Event of Default in respect of a Transaction.
	 
	 	(h)	 	To the extent permitted by applicable law, the defaulting party shall be liable to
the non-defaulting party for interest on any amounts owing by the defaulting party
hereunder, from the date the defaulting party becomes liable for such amounts hereunder
until such amounts are (i) paid in full by the defaulting party or (ii) satisfied in full
by the exercise of the nondefaulting party’s rights, hereunder. Interest on any sum
payable by the defaulting party to the nondefaulting party under this Paragraph 11(h)
shall be at a rate equal to the greater of the Pricing Rate for the relevant Transaction
or the Prime Rate.
	 
	 	(i)	 	The nondefaulting party shall have, in addition to its rights hereunder, any rights
otherwise
available to it under any other agreement or applicable law.

8 § September 1996 § Master Repurchase Agreement

 

 

12. Single Agreement

Buyer and Seller acknowledge that, and have entered hereinto and will enter into each
Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions
hereunder constitute a single business and contractual relationship and have been made in
consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of
its obligations in respect of each Transaction hereunder, and that a default in the performance
of any such obligations shall constitute a default by it in respect of all Transactions
hereunder, (ii) that each of them shall be entitled to set off claims and apply property held
by them in respect of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other transfers made by either
of them in respect of any Transaction shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Transactions hereunder, and
the obligations to make any such payments, deliveries and other transfers may be applied
against each other and netted.

13. Notices and Other Communications

Any and all notices, statements, demands or other communications hereunder may be given
by a party to the other by mail, facsimile, telegraph, messenger or otherwise to the address
specified in Annex II hereto, or so sent to such party at any other place specified in a notice
of change of address hereafter received by the other. All notices, demands and requests
hereunder may be made orally, to be confirmed promptly in writing, or by other communication
as specified in the preceding sentence.

14. 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.

15. Non-assignability; Termination

	 	(a)	 	The rights and obligations of the parties under this Agreement and under any
Transaction shall not be assigned by either party without the prior written consent of the
other party, and any such assignment without the prior written consent of the other party
shall be null and void. Subject to the foregoing, this Agreement and any Transactions
shall be binding upon and shall inure to the benefit of the parties and their respective
successors and assigns. This Agreement may be terminated by either party upon giving
written notice to the other, except that this Agreement shall, notwithstanding such
notice, remain applicable to any Transactions then outstanding.
	 
	 	(b)	 	Subparagraph (a) of this Paragraph 15 shall not preclude a party from assigning,
charging or otherwise dealing with all or any part of its interest in any sum payable to
it under Paragraph 11 hereof.

16. 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.

September 1996 § Master Repurchase Agreement § 9

 

 

17. No Waivers, Etc.

No express or implied waiver of any Event of Default by either party shall constitute a
waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall
constitute a waiver of its right to exercise any other 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 on any of the foregoing, the failure to give a notice
pursuant to Paragraph 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at
a later date.

18. Use of Employee Plan Assets

	 	(a)	 	If assets of an employee benefit plan subject to any provision of the Employee
Retirement Income Security Act of 1974 (“ERISA”) are intended to be used by either party
hereto (the “Plan Party”) in a 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 or is
otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall
not be required so to proceed.
	 
	 	(b)	 	Subject to the last sentence of subparagraph (a) of this Paragraph, any such
Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most
recent available audited statement of its financial condition and its most recent
subsequent unaudited statement of its financial condition.
	 
	 	(c)	 	By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i)
to represent to Buyer that since the date of Seller’s latest such financial statements,
there has been no material adverse change in Seller’s financial condition which Seller has
not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and
unaudited statements of its financial condition as they are issued, so long as it is a
Seller in any outstanding Transaction involving a Plan Party.

19. Intent

	 	(a)	 	The parties recognize that each Transaction is a “repurchase agreement” as that term
is defined in Section 101 of Title 11 of the United States Code, as amended (except
insofar as the type of Securities subject to such Transaction or the term of such
Transaction would render such definition inapplicable), and a “securities contract” as
that term is defined in Section 741 of Title 11 of the United States Code, as amended
(except insofar as the type of assets subject to such Transaction would render such
definition inapplicable).
	 
	 	(b)	 	It is understood that either party’s right to liquidate Securities delivered to it in
connection with Transactions hereunder or to exercise any other remedies pursuant to
Paragraph 11 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.
	 
	 	(c)	 	The parties 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”), men 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).

10 § September 1996 § Master Repurchase Agreement

 

 

	 	(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).

20. 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.

	 	 	 	 	 	 	 	 	 	 	 

	Provident Mortgage Capital Associates, Inc.	 	 	 	RBS Securities Inc.	 	 
	 	 	 

	By:

	 	/s/ Mark E. Lefanowicz
 

	 	 	 	By:
	 	/s/
 

	 	 
	Title:

	 	Chief Financial Officer
	 	 	 	Title:
	 	Managing Director	 	 
	Date:

	 	May 12, 2011
	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 

	 	 

September 1996 § Master Repurchase Agreement § 11

 

 

Annex I

Supplemental Terms and Conditions

This Annex I forms a part of the Master Repurchase Agreement dated as of May 12, 2011 (the
“Agreement”) between RBS Securities Inc. and Provident Mortgage Capital Associates, Inc.
Capitalized terms used but not defined in this Annex I shall have the meanings ascribed to them in
the Agreement.

	1.	 	Other Applicable Annexes. In addition to this Annex I
and Annex II, the following
Annexes and any Schedules thereto shall form a part of the Agreement and shall be applicable
thereunder:

[Annex III (International Transactions)]

[Annex IV (Party Acting as Agent)]

[Annex V (Margin for Forward Transactions)]

[Annex VI (Buy/Sell Back Transactions)]

[Annex VII (Transactions Involving Registered Investment Companies)]

	2.	 	The following proviso shall be added to the end of the definition of “Market Value” in
Paragraph 2(j):

“provided, however, that with respect to Purchased Securities for which there exists no
generally recognized pricing source, the Market Value shall be determined by Buyer in
the exercise of its good-faith reasonable discretion.”

	3.	 	The following paragraph shall be inserted in Paragraph 12 at the end thereof:

12. Setoff; Cross Default; and Cross Collateral.

“Each
party further agrees that (i) a party’s (‘X’) failure to pay or deliver
any amounts as required under any other transaction or agreement with the other
party (‘Y’) (and after giving effect to any defenses or notice and cure periods
contained in such transaction or agreement, there occurs a liquidation, an
acceleration, or an early termination of all obligations under the master agreement
under which multiple transactions may be entered into by the relevant parties (or in
the case of any transaction with respect to which no master agreement is in place,
such transaction or agreement)) (“Other Obligations”) shall constitute an Event of
Default hereunder with X as the defaulting party, (ii) upon the occurrence of the
event referred to in (i), after applicable notice and cure periods related thereto,
Y, without prior notice to X, shall have the right to setoff any amounts or
obligations owed by X hereunder against any amounts or obligations owed by Y arising
under Other Obligations (irrespective of the currency), and (iii) upon the
occurrence of the event referred to
in (i), as security for the performance by a party of its Other Obligations, it
grants to the other party a security interest in all securities and other property
(and all proceeds thereof) transferred pursuant to this Agreement, which security
interest may be enforced in accordance with the provisions of applicable law or
Paragraph 11(d) hereof (applying such Paragraph as if such defaulted Other
Obligations were owed hereunder in respect of a Transaction in which X is the
Seller).”

12 § September 1996 § Master Repurchase Agreement

 

 

4. Events of Termination.

(a) An Event of Termination shall occur if:

(i) Tangible Net Worth. As of the last day of any calendar month, Party B’s Tangible Net Worth
falls below $225,000,000 plus 75% of any additional equity raises;

“Tangible Net Worth” shall mean, with respect to any Person, as of any date of determination, the
consolidated Net Worth of such Person and its Subsidiaries, less the consolidated net book value
of all assets of such Person and its Subsidiaries (to the extent reflected as an asset in the
balance sheet of such Person or any Subsidiary at such date) which will be treated as intangibles
under GAAP, including, without limitation, such items as deferred financing expenses, deferred
taxes, net leasehold improvements, good will, trademarks, trade names, service marks, copyrights,
patents, licenses and unamortized debt discount and expense; provided, that residual securities
issued by such Person or its Subsidiaries shall not be treated as intangibles for purposes of this
definition.

As used herein, “Net Worth” shall mean, with respect to any Person, the excess of total assets of
such Person, over total liabilities of such Person, determined in accordance with GAAP.

(ii) Maintenance of Liquidity. As of the last day of any calendar month, Party B’s cash and Cash
Equivalents falls below $15,000,000;

As used
herein, “Cash Equivalents” shall mean (a) securities with maturities of ninety (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 ninety (90) days or less from the date of acquisition and overnight bank deposits of
any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase
obligations of any commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than seven (7) days with respect to securities issued or fully guaranteed
or insured by the United States Government, (d) commercial paper of a domestic issuer rated at
least A-1 or the equivalent thereof by Standard and Poor’s
Ratings Group (“S&P”) or P-1 or the
equivalent thereof by Moody’s Investors Service, Inc.
(“Moody’s”) and in either case maturing
within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90)
days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign government (as the case
may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of ninety (90)
days or less from the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition or, (g) shares of
money market mutual or similar funds which invest exclusively in assets satisfying the requirements
of clauses (a) through (f) of this definition,

(iii) Leverage Ratios;. As any day Party B’s (i) ratio of Adjusted Indebtedness to Tangible Net
Worth is greater than 12 to 1.

September 1996 § Master Repurchase Agreement § 13

 

 

As used herein, “Indebtedness” shall mean, for 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 ninety (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 account of such person; (e) Capital Lease Obligations
of such Person; (f) obligations of such Person under repurchase 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; (i) indebtedness of
general partnerships of which such Person is a general partner; and (j) any other indebtedness of
such Person evidenced by a note, bond, debenture or similar instrument.

As used herein, “Adjusted Indebtedness” shall mean with respect to any Person, for any
period, the aggregate Indebtedness of such Person and its Subsidiaries, which Indebtedness shall be
adjusted to include any Indebtedness of such Person and its Subsidiaries that is reflected on their
consolidated financial statements as off-balance sheet.

(iv) Loss of REIT Status. The failure of Party B to maintain its status as a “real estate
investment trust” under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended,
or;

or;

(v) Key Person. Craig Pica shall no longer be employed by the Investment Manager or shall, for any
reason, no longer devote all or substantially all of his business time and attention to the
Investment Manager and its business operations (each a “Key Person Event”). Upon the occurrence of
a Key Person Event, if Party A reasonably determines that such action has had, or with will have,
a material adverse effect the creditworthiness of Party B, or the ability of Party B to perform
its obligations under this Agreement, and after giving three (3) business days notice, an Event of
Termination shall have occurred. Notwithstanding the forgoing, the following shall apply, (x) if
any one of the Key Persons is the subject of a Key Person Event, Party B may appoint a successor
Key Person within thirty (30) days of the occurrence of such Key Person Event and if such person
is reasonably satisfactory to Party A, at all times thereafter such successor Key Person shall be
deemed to be a Key Person for purposes of this Part 4(a)(v). Furthermore, if Party A elects to
exercise its right to designate an Early Termination Date pursuant to this Part 4(a)(v) following
the occurrence of a Key Person Event then notwithstanding anything in this Agreement to the
contrary, Party A shall not exercise its option under subparagraph (a) of Paragraph 11 of the
Agreement in respect of such Event of Termination sooner than ten (10) business days following the
date of notice to Party B of such designation.

	 	(b)	 	In the event either of the foregoing Events of Termination shall occur, Party B shall
be the “affected party” and Party A shall be the “nonaffected party”.

14 § September 1996 § Master Repurchase Agreement

 

 

	 	(c)	 	If at any time there shall occur an Event of Termination in respect of Seller or Buyer,
then the nonaffected party shall have the right to exercise its option under subparagraph (a) of
Paragraph 11 of the Agreement and will be entitled to the remedies set forth in Paragraph 11 of
the Agreement. All references in Paragraph 11 to the defaulting party shall be deemed
references to the affected party, all references to the nondefaulting party shall be deemed
references to the nonaffected party and all references to Event of Default shall be deemed
references to Event of Termination for the purposes of this provision.
	 
	 	(d)	 	Documents to Deliver. Party B shall delivery to Party A monthly, within 20 days after
the end of the applicable month, an unaudited estimated written report of its Shareholder’s
Equity as of the last day of each month (“Performance Summary”). The obligations of Party B
under this subparagraph shall be satisfied if such party shall have provided the other party
with access to an internet or intranet website from which such form, document or certificate
can be readily obtained using a commonly used web browser. Notwithstanding anything
to the contrary in this Agreement, Party B may deliver its Performance Summary solely to the
following email address: hedgefund@rbs.com (Attention: Credit Department).

September 1996 § Master Repurchase Agreement § 15

 

 

Annex II

Names and Addresses for Communications Between Parties

RBS Securities Inc.

600 Washington Blvd

Stamford, Connecticut 06901

Phone: (203)897-2281 Fax:

(203)873-4481

Attn:
Legal Department - Documentation

Provident Mortgage Capital Associates, Inc.

Attn: Mark E Lefanowicz, Chief Financial Officer

1633 Bayshore Hwy., Ste 331

Burlingame, CA 94010

Ph: 855/653-4300

Fax: 855/653-4301

16 § September 1996 § Master Repurchase Agreement

 

 

Annex III

International Transactions

This Annex
III (including any Schedules hereto) forms a part of the Master Repurchase
Agreement dated as of May 12, 2011 (the “Agreement”) between RBS Securities Inc. and Provident
Mortgage Capital Associates, Inc. Capitalized terms used but not
defined in this Annex III shall
have the meanings ascribed to them in the Agreement.

	1.	 	Definitions. For purposes of the Agreement and this Annex
III:

	 	(a)	 	The following terms shall have the following
meanings:
	 
	 	 	 	“Base Currency”, United States dollars or such other currency as Buyer and Seller may
agree in the Confirmation with respect to any International Transaction or otherwise in
writing;
	 
	 	 	 	“Business Day” or “business day”:

	 	(i)	 	in relation to any International Transaction which (A) involves an
International Security and (B) is to be settled through CEDEL or Euroclear, a day on
which CEDEL or, as the case may be, Euroclear is open to settle business in the
currency in which the Purchase Price and the Repurchase Price are denominated;
	 
	 	(ii)	 	in relation to any International Transaction which (A) involves an
International Security and (B) is to be settled through a settlement system other
than CEDEL or Euroclear, a day on which that settlement system is open to settle such
International Transaction;
	 
	 	(iii)	 	in relation to any International Transaction which involves a delivery of
Securities not falling within (i) or (ii) above, a day on which banks are open for
business in the place where delivery of the relevant Securities is to be effected;
and
	 
	 	(iv)	 	in relation to any International Transaction which involves an obligation to
make a payment not falling within (i) or (ii) above, a day other than a Saturday or
Sunday on which banks are open for business in the principal financial center of the
country of which the currency in which the payment is denominated is the official
currency and, if different, in the place where any account designated by the parties
for the making or receipt of the payment is situated (or, in the case of ECU, a day on
which ECU clearing operates);
	 
	 	 	 	“CEDEL”, CEDEL Bank, societe anonyme;
	 
	 	 	 	“Contractual Currency”, the currency in which the International Securities subject
to any International Transaction are denominated or such other currency as may be
specified in the Confirmation with respect to any International Transaction;
	 
	 	 	 	“Euroclear”, Morgan Guaranty Trust Company of New York, Brussels Branch, as operator
of the Euroclear System;
	 
	 	 	 	“International Security”, any Security that (i) is denominated in a currency other
than United States dollars or (ii) is capable of being cleared through a clearing
facility outside the United States or (iii) is issued by an issuer organized under
the laws of a jurisdiction other than the United States (or any political subdivision
thereof);

September 1996 § Master Repurchase Agreement § 17

 

 

	 	 	 	“International Transaction”, any Transaction involving (i) an International
Security or (ii) a party organized under the laws of a jurisdiction other than the
United States (or any political subdivision thereof) or having its principal place
of business outside the United States or (iii) a branch or office outside the
United States designated in Annex I by a party organized under the laws of the
United States (or any political subdivision thereof) as an office through which
that party may act;
	 
	 	 	 	“LIBOR”, in relation to any sum in any currency, the offered rate for deposits for
such sum in such currency for a period of three months which appears on the Reuters
Screen LIBO page as of 11:00 A.M., London time, on the date on which it is to be
determined (or, if more than one such rate appears, the arithmetic mean of such
rates);
	 
	 	 	 	“Spot Rate”, where an amount in one currency is to be converted into a second
currency on any date, the spot rate of exchange of a comparable amount quoted by a
major money-center bank in the New York interbank market, as agreed by Buyer and
Seller, for the sale by such bank of such second currency against a purchase by it
of such first currency.

	 	(b)	 	Notwithstanding Paragraph 2 of the Agreement, the term “Prime Rate” shall mean,
with respect to any International Transaction, LIBOR plus a spread, as may be specified
in the Confirmation with respect to any International Transaction or otherwise in
writing.

	2.	 	Manner of Transfer. All transfers of International Securities (i) shall be in suitable form
for transfer and accompanied by duly executed instruments of transfer or assignment in blank
(where required for transfer) and such other documentation as the transferee may reasonably
request, or (ii) shall be transferred through the book-entry system of Euroclear or CEDEL, or
(iii) shall be transferred through any other agreed securities clearing system or (iv) shall
be transferred by any other method mutually acceptable to Seller and Buyer.
	 
	3.	 	Contractual Currency.

	 	(a)	 	Unless otherwise mutually agreed, all funds transferred in respect of the Purchase
Price or the Repurchase Price in any International Transaction shall be in the Contractual
Currency.
	 
	 	(b)	 	Notwithstanding subparagraph (a) of this Paragraph 3, the payee of any payment may,
at its option, accept tender thereof in any other currency; provided, however, that, to
the extent permitted by applicable law, the obligation of the payor to make such payment
will be discharged only to the extent of the amount of the Contractual Currency that such
payee may, consistent with normal banking procedures, purchase with such other currency
(after deduction of any premium and costs of exchange) for delivery within the customary
delivery period for spot transactions in respect of the relevant currency.
	 
	 	(c)	 	If for any reason the amount in the Contractual Currency so received, including
amounts received after conversion of any recovery under any judgment or order expressed in
a currency other than the Contractual Currency, falls short of the amount in the
Contractual Currency due in respect of the Agreement, the party required to make the
payment shall (unless an Event of Default has occurred and such party is the nondefaulting
party) as a separate and independent obligation (which shall not merge with any judgment
or any payment or any partial payment or enforcement of payment) and to the extent
permitted by applicable law, immediately pay such additional amount in the Contractual
Currency as may be necessary to compensate for the shortfall.

18 § September 1996 § Master Repurchase Agreement

 

 

	 	(d)	 	If for any reason the amount of the Contractual Currency received by one party
hereto exceeds the amount in the Contractual Currency due such party in respect of the
Agreement, then (unless an Event of Default has occurred and such party is the
non-defaulting party) the party receiving the payment shall refund promptly the amount of
such excess.

	4.	 	Notices. Any and all notices, statements, demands or other communications with respect to
International Transactions shall be given in accordance with Paragraph 13 of the Agreement and
shall be in the English language.
	 
	5.	 	Taxes.

	 	(a)	 	Transfer taxes, stamp taxes and all similar costs with respect to the transfer of
Securities shall be paid by Seller.
	 
	 	(b)	 	(i)	Unless otherwise agreed, all money payable by one party (the “Payor”) to the other
(the “Payee”) in respect of any International Transaction shall be paid free and clear
of, and without withholding or deduction for, any taxes or duties of whatsoever nature
imposed, levied, collected, withheld or assessed by any authority having power to tax
(a “Tax”), unless the withholding or deduction of such Tax is required by law. In that
event, unless otherwise agreed, Payor shall pay such additional amounts as will result
in the net amounts receivable by Payee (after taking account of such withholding or
deduction) being equal to such amounts as would have been received by Payee had no
such Tax been required to be withheld or deducted; provided that for purposes of
Paragraphs 5 and 6 the term Tax” shall not include any Tax that would not have been
imposed but for the existence of any present or former connection between Payee and
the jurisdiction imposing such Tax other than the mere receipt of payment from Payor
or the performance of Payee’s obligations under an International Transaction. The
parties acknowledge and agree, for the avoidance of doubt, that the amount of Income
required to be transferred, credited or applied by Buyer for the benefit of Seller
under Paragraph 5 of the Agreement shall be determined without taking into account any
Tax required to be withheld or deducted from such Income, unless otherwise agreed.

	 	(ii)	 	In the case of any Tax required to be withheld or deducted from any money
payable to a party hereto acting as Payee by the other party hereto acting as Payor,
Payee agrees to deliver to Payor (or, if applicable, to the authority imposing the
Tax) any certificate or document reasonably requested by Payor that would entitle
Payee to an exemption from, or reduction in the rate of, withholding or deduction of
Tax from money payable by Payor to Payee.
	 
	 	(iii)	 	Each party hereto agrees to notify the other party of any circumstance known
or reasonably known to it (other than a Change of Tax Law, as defined in Paragraph 6
hereof) that causes a certificate or document provided by it pursuant to subparagraph
(b)(ii) of this Paragraph to fail to be true.
	 
	 	(iv)	 	Notwithstanding subparagraph (b)(i) of this Paragraph, no additional amounts
shall be payable by Payor to Payee in respect of an International Transaction to the
extent that such additional amounts are payable as a result of a failure by Payee to
comply with its obligations under subparagraph (b)(ii) or (b)(iii) of this Paragraph
with respect to such International Transaction.

September 1996 § Master Repurchase Agreement § 19

 

 

	6.	 	Tax Event.

	 	(a)	 	This Paragraph 6 shall apply if either party notifies the other, with respect to a
Tax required to be collected by withholding or deduction, that:

	 	(i)	 	any action taken by a taking authority or brought in a court of competent
jurisdiction after the date an International Transaction is entered into, regardless
of whether such action is taken or brought with respect to a party to the Agreement;
or
	 
	 	(ii)	 	a change in the fiscal or regulatory regime after the date an International
Transaction is entered into,

	 	 	 	(each, a “Change of Tax Law”) has or will, in the notifying party’s reasonable opinion,
have a material adverse effect on such party in the context of an International
Transaction.
	 
	 	(b)	 	If so requested by the other party, the notifying party will furnish the other party
with an opinion of a suitably qualified adviser that an event referred to in subparagraph
(a)(i) or (a)(ii) of this Paragraph 6 has occurred and affects the notifying party.
	 
	 	(c)	 	Where this Paragraph 6 applies, the party giving the notice referred to in
subparagraph (a) above may, subject to subparagraph (d) below, terminate the International
Transaction effective from a date specified in the notice, not being earlier (unless so
agreed by the other party) than 30 days after the date of such notice, by nominating such
date as the Repurchase Date.
	 
	 	(d)	 	If the party receiving the notice referred to in subparagraph (a) of this Paragraph 6
so elects, it may override such notice by giving a counter-notice to the other party. If a
counter-notice is given, the party which gives such counter-notice will be deemed to have
agreed to indemnify the other party against the adverse effect referred to in subparagraph
(a) of this Paragraph 6 so far as it relates to the relevant International Transaction and
the original Repurchase Date will continue to apply.
	 
	 	(e)	 	Where an International Transaction is terminated as described in this Paragraph 6,
the party which has given the notice to terminate shall indemnify the other party against
any reasonable legal and other professional expenses incurred by the other party by reason
of the termination, but the other party may not claim any sum constituting consequential
loss or damage in respect of a termination in accordance with this Paragraph 6.
	 
	 	(f)	 	This Paragraph 6 is without prejudice to Paragraph 5 of this Annex III; but an
obligation to pay additional amounts pursuant to Paragraph 5 of this Annex III may, where
appropriate, be a circumstance which causes this Paragraph 6 to apply.

	7.	 	Margin. In the calculation of “Margin Deficit” and “Margin Excess” pursuant to Paragraph 4 of
the Agreement, all sums not denominated in the Base Currency shall be deemed to be converted
into the Base Currency at the Spot Rate on the date of such calculation.
	 
	8.	 	Events of Default.

	 	(a)	 	In addition to the Events of Default set forth in Paragraph 11 of the Agreement, it
shall be an additional “Event of Default” if either party fails, after one business day’s
notice, to perform any covenant or obligation required to be performed by it under this
Annex III, including, without limitation, the payment of taxes or additional amounts as
required by Paragraph 5 of this Annex III.

20 § September 1996 § Master Repurchase Agreement

 

 

	 	(b)	 	In addition to the other rights of a nondefaulting party under Paragraph 11 of the
Agreement, following an Event of Default, the nondefaulting party may, at any time at its
option, effect the conversion of any currency into a different currency of its choice at the
Spot Rate on the date of the exercise of such option and offset obligations of the defaulting
party denominated in different currencies against each other.

September 1996 § Master Repurchase Agreement § 21

 

 

Schedule III.A

International Transactions Relating to [Relevant Country]

This Schedule III.A forms a part of Annex III to the Master Repurchase Agreement dated as of
May 12, 2011 (the “Agreement”) between RBS Securities Inc. and Provident Mortgage Capital
Associates, Inc. Capitalized terms used but not defined in this Schedule III.A shall have the
meanings ascribed to them in Annex III.

[Insert provisions applicable to relevant country.]

22 § September 1996 § Master Repurchase Agreement

 

 

Annex IV

Party Acting as Agent

This Annex IV forms a part of the Master Repurchase Agreement dated as of May 12, 2011 (the
“Agreement”) between RBS Securities Inc. and Provident Mortgage Capital Associates, Inc. This Annex
IV sets forth the terms and conditions governing all transactions in which a party selling
securities or buying securities, as the case may be (“Agent”), in a Transaction is acting as agent
for one or more third parties (each, a “Principal”). Capitalized terms used but not defined in this
Annex IV shall have the meanings ascribed to them in the Agreement.

	1.	 	Additional Representations. In addition to the representations set forth in Paragraph 10 of
the Agreement, Agent hereby makes the following representations, which shall continue during
the term of any Transaction: Principal has duly authorized Agent to execute and deliver the
Agreement on its behalf, has the power to so authorize Agent and to enter into the
Transactions contemplated by the Agreement and to perform the obligations of Seller or Buyer,
as the case may be, under such Transactions, and has taken all necessary action to authorize
such execution and delivery by Agent and such performance by it.
	 
	2.	 	Identification of Principals. Agent agrees (a) to provide the other party, prior to the date
on which the parties agree to enter into any Transaction under the Agreement, with a written
list of Principals for which it intends to act as Agent (which list may be amended in writing
from time to time with the consent of the other party), and (b) to provide the other party,
before the close of business on the next business day after orally agreeing to enter into a
Transaction, with notice of the specific Principal or Principals for whom it is acting in
connection with such Transaction. If (i) Agent fails to identify such Principal or Principals
prior to the close of business on such next business day or (ii) the other party shall
determine in its sole discretion that any Principal or Principals identified by Agent are not
accept able to it, the other party may reject and rescind any Transaction with such Principal
or Principals, return to Agent any Purchased Securities or portion of the Purchase Price, as
the case may be, previously transferred to the other party and refuse any further performance
under such Transaction, and Agent shall immediately return to the
other party any portion of
the Purchase Price or Purchased Securities, as the case may be, previously transferred to
Agent in connection with such Transaction; provided, however, that (A) the other party shall
promptly (and in any event within one business day) notify Agent of its determination to
reject and rescind such Transaction and (B) to the extent that any performance was rendered by
any party under any Transaction rejected by the other party, such party shall remain entitled
to any Price Differential or other amounts that would have been payable to it with respect to
such performance if such Transaction had not been rejected. The other party acknowledges that
Agent shall not have any obligation to provide it with confidential information regarding the
financial status of its Principals; Agent agrees, however, that it will assist the other party
in obtaining from Agent’s Principals such information regarding the financial status of such
Principals as the other party may reasonably request.
	 
	3.	 	Limitation of Agent’s Liability. The parties expressly acknowledge that if the
representations of Agent under the Agreement, including this Annex IV, are true and correct in
all material respects during the term of any Transaction and Agent otherwise complies with the
provisions of this Annex IV, then (a) Agent’s obligations under the Agreement shall not
include a guarantee of performance by its Principal or Principals and (b) the other party’s
remedies shall not include a right of setoff in respect of rights or obligations, if any, of
Agent arising in other transactions in which Agent is acting as principal.

September 1996 § Master Repurchase Agreement § 23

 

 

	4.	 	Multiple Principals.

	 	(a)	 	In the event that Agent proposes to act for more than one Principal hereunder, Agent
and the other party shall elect whether (i) to treat Transactions under the Agreement as
transactions entered into on behalf of separate Principals or (ii) to aggregate such
Transactions as if they were transactions by a single Principal. Failure to make such an
election in writing shall be deemed an election to treat Transactions under the Agreement
as transactions on behalf of separate Principals.
	 
	 	(b)	 	In the event that Agent and the other party elect (or are deemed to elect) to treat
Transactions under the Agreement as transactions on behalf of separate Principals, the
parties agree that (i) Agent will provide the other party, together with the notice
described in Paragraph 2(b) of this Annex IV, notice specifying the portion of each
Transaction allocable to the account of each of the Principals for which it is acting (to
the extent that any such Transaction is allocable to the account of more than one
Principal); (ii) the portion of any individual Transaction allocable to each Principal
shall be deemed a separate Transaction under the Agreement; (iii) the margin maintenance
obligations of Buyer and Seller under Paragraph 4 of the Agreement shall be determined on
a Transaction-by-Transaction basis (unless the parties agree to determine such obligations
on a Principal-by-Principal basis); and (iv) Buyer’s and Seller’s remedies under the
Agreement upon the occurrence of an Event of Default shall be determined as if Agent had
entered into a separate Agreement with the other party on behalf of each of its
Principals.
	 
	 	(c)	 	In the event that Agent and the other party elect to treat Transactions under the
Agreement as if they were transactions by a single Principal, the parties agree that (i)
Agent’s notice under Paragraph 2(b) of this Annex IV need only identify the names of its
Principals but not the portion of each Transaction allocable to each Principal’s account,
(ii) the margin maintenance obligations of Buyer and Seller under Paragraph 4 of the
Agreement shall, subject to any greater requirement imposed by applicable law, be
determined on an aggregate basis for all Transactions entered into by Agent on behalf of
any Principal; and (iii) Buyer’s and Seller’s remedies upon the occurrence of an Event of
Default shall be determined as if all Principals were a single Seller or Buyer, as the
case may be.
	 
	 	(d)	 	Notwithstanding any other provision of the Agreement (including, without limitation,
this Annex IV), the parties agree that any Transactions by Agent on behalf of an employee
benefit plan under ERISA shall be treated as Transactions on behalf of separate Principals
in accordance with Paragraph 4(b) of this Annex IV (and all margin maintenance obligations
of the parties shall be determined on a Transaction-by-Transaction basis).

	5.	 	Interpretation of Terms. All references to “Seller” or “Buyer”, as the case may be, in the
Agreement shall, subject to the provisions of this Annex IV (including, among other provisions, the limitations on Agent’s liability in Paragraph 3 of this Annex IV), be construed to
reflect that (i) each Principal shall have, in connection with any Transaction or Transactions
entered into by Agent on its behalf, the rights, responsibilities, privileges and obligations
of a “Seller” or “Buyer”, as the case may be,
directly entering into such Transaction or Transactions with the other party under the Agreement, and (ii) Agent’s Principal or Principals have
designated Agent as their sole agent for performance of Seller’s obligations to Buyer or
Buyer’s obligations to Seller, as the case may be, and for receipt of performance by Buyer of
its obligations to Seller or Seller of its obligations to Buyer, as the case may be, in
connection with any Transaction or Transactions under the Agreement (including, among other
things, as Agent for each Principal in connection with transfers of Securities, cash or other
property and

24 § September 1996 § Master Repurchase Agreement

 

 

	 	 	as agent for giving and receiving all notices under the Agreement). Both Agent and its
Principal or Principals shall be deemed “parties” to the Agreement and all references to a “party”
or “either party” in the Agreement shall be deemed revised accordingly (and any Act of Insolvency
with respect to Agent or any other Event of Default by Agent under Paragraph 11 of the Agreement
shall be deemed an Event of Default by Seller or Buyer, as the case may be).

September 1996 § Master Repurchase Agreement § 25

 

 

Annex V

Margin for Forward Transactions

This Annex V forms a part of the Master Repurchase Agreement dated as of May 12, 2011 (the
“Agreement”) between RBS Securities Inc. and Provident Mortgage Capital Associates, Inc.
Capitalized terms used but not defined in this Annex V shall have the meanings ascribed to them in
the Agreement.

	1.	 	Definitions. For purposes of the Agreement and this Annex V, the following terms shall have
the following meanings:
	 
	 	 	“Forward Exposure”, the amount of loss a party would incur upon canceling a Forward
Transaction and entering into a replacement transaction, determined in accordance with market
practice or as otherwise agreed by the parties;
	 
	 	 	“Forward Transaction”, any Transaction agreed to by the parties as to which the Purchase Date
has not yet occurred;
	 
	 	 	“Net Forward Exposure”, the aggregate amount of a party’s Forward Exposure to the other party
under all Forward Transactions hereunder reduced by the aggregate amount of any Forward
Exposure of the other party to such party under all Forward Transactions hereunder;
	 
	 	 	“Net Unsecured Forward Exposure”, a party’s Net Forward Exposure reduced by the Market Value
of any Forward Collateral transferred to such party (and not returned) pursuant to Paragraph 2
of this Annex V.
	 
	2.	 	Margin Maintenance.

	 	(a)	 	If at any time a party (the “In-the-Money Party”) shall have a Net Unsecured Forward
Exposure to the other party (the “Out-of-the-Money Party”) under one or more Forward
Transactions, the In-the-Money Party may by notice to the Out-of-the-Money Party require
the Out-of-the-Money Party to transfer to the In-the-Money Party Securities or cash
reasonably acceptable to the In-the-Money Party (together with any Income thereon and
proceeds thereof, “Forward Collateral”) having a Market Value sufficient to eliminate such
Net Unsecured Forward Exposure. The Out-of-the-Money Party may by notice to the
In-the-Money Party require the In-the-Money Party to transfer to the Out-of-the-Money
Party Forward Collateral having a Market Value that exceeds the In-the-Money Party’s Net
Forward Exposure (“Excess Forward Collateral Amount”). The rights of the parties under
this subparagraph shall be in addition to their rights under subparagraphs (a) and (b) of
Paragraph 4 and any other provisions of the Agreement.
	 
	 	(b)	 	The parties may agree, with respect to any or all Forward Transactions hereunder,
that the respective rights of the parties under subparagraph (a) of this Paragraph may be
exercised only where a Net Unsecured Forward Exposure or Excess Forward Collateral Amount,
as the case may be, exceeds a specified dollar amount or other specified threshold for
such Forward Transactions (which amount or threshold shall be agreed to by the parties
prior to entering into any such Forward Transactions).
	 
	 	(c)	 	The parties may agree, with respect to any or all Forward Transactions hereunder,
that the respective rights of the parties under subparagraph (a) of this Paragraph to
require the elimination of a Net Unsecured Forward Exposure or Excess Forward Collateral
Amount,

26 § September 1996 § Master Repurchase Agreement

 

 

	 	 	 	as the case may be, may be exercised whenever such a Net Unsecured Forward Exposure or
Excess Forward Collateral Amount exists with respect to any single Forward Transaction
hereunder (calculated without regard to any other Forward Transaction outstanding
hereunder).
	 
	 	(d)	 	The parties may agree, with respect to any or all Forward Transactions hereunder,
that (i) one party shall transfer to the other party Forward Collateral having a Market
Value equal to a specified dollar amount or other specified threshold no later than the
Margin Notice Deadline on the day such Forward Transaction is entered into by the parties
or (ii) one party shall not be required to make any transfer otherwise required to be made
under this Paragraph if, after giving effect to such transfer, the Market Value of the
Forward Collateral held by such party would be less than a specified dollar amount or
other specified threshold (which amount or threshold shall be agreed to by the parties
prior to entering into any such Forward Transactions).
	 
	 	(e)	 	If any notice is given by a party to the other under subparagraph (a) of this
Paragraph at or before the Margin Notice Deadline on any business day, the party receiving
such notice shall transfer Forward Collateral as provided in such subparagraph no later
than the close of business in the relevant market on such business day. If any such notice
is given after the Margin Notice Deadline, the party receiving such notice shall transfer
such Forward Collateral no later than the close of business in the
relevant market on the
next business day.
	 
	 	(f)	 	Upon the occurrence of the Purchase Date for any Forward Transaction and the
performance by the parties of their respective obligations to transfer cash and Securities
on such date, any Forward Collateral in respect of such Forward Transaction, together with
any Income thereon and proceeds thereof, shall be transferred by the party holding such
Forward Collateral to the other party; provided, however, that neither party shall be
required to transfer such Forward Collateral to the other if such transfer would result in
the creation of a Net Unsecured Forward Exposure of the transferor.
	 
	 	(g)	 	The Pledgor (as defined below) of Forward Collateral may, subject to agreement with
and acceptance by the Pledgee (as defined below) thereof, substitute other Securities
reasonably acceptable to the Pledgee for any Securities Forward Collateral. Such
substitution shall be made by transfer to the Pledgee of such other Securities and
transfer to the Pledgor of such Securities Forward Collateral. After substitution, the
substituted Securities shall constitute Forward Collateral.

	3.	 	Security Interest.

	 	(a)	 	In addition to the rights granted to the parties under Paragraph 6 of the Agreement,
each party (“Pledgor”) hereby pledges to the other party (“Pledgee”) as security for the
performance of its obligations hereunder, and grants Pledgee a security interest in and
right of setoff against, any Forward Collateral and any other cash, Securities or
property, and all proceeds of any of the foregoing, transferred by or on behalf of Pledgor
to Pledgee or due from Pledgee to Pledgor in connection with the Agreement and the Forward
Transactions hereunder.
	 
	 	(b)	 	Unless otherwise agreed by the parties, a party to whom Forward Collateral has been
transferred shall have the right to engage in repurchase transactions with Forward
Collateral or otherwise sell, transfer, pledge or hypothecate Forward Collateral,
including in respect of loans or other extensions of credit to such party that may be in
amounts

September 1996 § Master Repurchase Agreement § 27

 

 

	 	 	 	greater than the Forward Collateral such party is entitled to as security for
obligations hereunder, and that may extend for periods of time longer than the periods
during which such party is entitled to Forward Collateral as security for obligations
hereunder; provided, however, that no such transaction shall relieve such party of its
obligations to transfer Forward Collateral pursuant to Paragraph 2 or 4 of this Annex V or
Paragraph 11 of the Agreement.

	4.	 	Events of Default.

	 	(a)	 	In addition to the Events of Default set forth in Paragraph 11 of the Agreement, it
shall be an additional “Event of Default” if either party fails, after one business day’s
notice, to perform any covenant or obligation required to be performed by it under
Paragraph 2 or any other provision of this Annex.
	 
	 	(b)	 	In addition to the other rights of a nondefaulting party under Paragraphs 11 and 12
of the Agreement, if the nondefaulting party exercised or is deemed to have exercised the
option referred to in Paragraph 11(a) of the Agreement:

	 	(i)	 	The nondefaulting party, without prior notice to the defaulting party, may
(A) immediately sell, in a recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the nondefaulting party may reasonably
deem satisfactory, any or all Forward Collateral subject to any or all Forward
Transactions hereunder and apply the proceeds thereof to any amounts owing by the
defaulting party hereunder or (B) in its sole discretion elect, in lieu of selling all
or a portion of such Forward Collateral, to give the defaulting party credit for such
Forward Collateral in an amount equal to the price therefor on such date, obtained
from a generally recognized source or the most recent closing bid quotation from such
a source, against any amounts owing by the defaulting party hereunder.
	 
	 	(ii)	 	Any Forward Collateral held by the defaulting party, together with any
Income thereon and proceeds thereof, shall be immediately transferred by the
defaulting party to the nondefaulting party. The nondefaulting party may, at its
option (which option shall be deemed to have been exercised immediately upon the
occurrence of an Act of Insolvency), and without prior notice to the defaulting
party, (i) immediately purchase, in a recognized market (or otherwise in a
commercially reasonable manner) at such price or prices as the nondefaulting party
may reasonably deem satisfactory, securities (“Replacement Securities”) of the same
class and amount as any Securities Forward Collateral that is not delivered by the
defaulting party to the nondefaulting party as required hereunder or (ii) in its sole
discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have
purchased Replacement Securities at the price therefor on such date, obtained from a
generally recognized source or the most recent closing offer quotation from such a
source, whereupon the defaulting party shall be liable for the price of such
Replacement Securities together with the amount of any cash Forward Collateral not
delivered by the defaulting party to the nondefaulting party as required hereunder.

	 	 	 	Unless otherwise provided in Annex I, the parties acknowledge and agree that (1) the
Forward Collateral subject to any Forward Transaction hereunder are instruments traded in
a recognized market, (2) in the absence of a generally recognized source for prices or bid
quotations for any Forward Collateral, the nondefaulting party may establish the source
therefor in its sole discretion and (3) all prices and bids shall be determined

28 § September 1996 § Master Repurchase Agreement

 

 

	 	 	 	together with accrued Income (except to the extent contrary to market practice with
respect to the relevant Forward Collateral).

	5.	 	No Waivers. Etc. Without limitation of the provisions of Paragraph 17 of the Agreement, the
failure to give a notice pursuant to subparagraph (a), (b), (c) or (d) of Paragraph 2 of this
Annex V will not constitute a waiver of any right to do so at a later date.

September 1996 § Master Repurchase Agreement § 29

 

 

Annex VI

Buy/Sell Back Transactions

This Annex VI forms a part of the Master Repurchase Agreement dated as of May 12, 2011 (the
“Agreement”) between RBS Securities Inc. and Provident Mortgage Capital Associates, Inc.
Capitalized terms used but not defined in this Annex VI shall have the meanings ascribed to them
in the Agreement.

	1.	 	In the event of any conflict between the terms of this Annex VI and any other term of the
Agreement, the terms of this Annex VI shall prevail.
	 
	2.	 	Each Transaction shall be identified at the time it is entered into and in the relevant
Confirmation as either a Repurchase Transaction or a Buy/Sell Back Transaction.
	 
	3.	 	In the case of a Buy/Sell Back Transaction, the Confirmation delivered in accordance with
Paragraph 3 of the Agreement may consist of a single document in respect of both of the
transfers of funds against Securities which together form the Buy/Sell Back Transaction or
separate Confirmations may be delivered in respect of each such transfer.
	 
	4.	 	Definitions. The following definitions shall apply to Buy/Sell Back Transactions:

	 	(a)	 	“Accrued Interest”, with respect to any Purchased Securities subject to a Buy/Sell
Back Transaction, unpaid Income that has accrued during the period from (and including)
the issue date or the last Income payment date (whichever is later) in respect of such
Purchased Securities to (but excluding) the date of calculation. For these purposes unpaid
Income shall be deemed to accrue on a daily basis from (and including) the issue date or
the last Income payment date (as the case may be) to (but excluding) the next Income
payment date or the maturity date (whichever is earlier);
	 
	 	(b)	 	“Sell Back Differential”, with respect to any Buy/Sell Back Transaction as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for such
Buy/Sell Back Transaction to the Purchase Price for such Buy/Sell Back Transaction on a
360 day per year basis (unless otherwise agreed by the parties for the Transaction) for
the actual number of days during the period commencing on (and including) the Purchase
Date for such Buy/Sell Back Transaction and ending on (but excluding) the date of
determination;
	 
	 	(c)	 	“Sell Back Price”, with respect to any Buy/Sell Back Transaction:

	 	(i)	 	in relation to the date originally specified by the parties as the
Repurchase Date pursuant to Paragraph 2(q) of the Agreement, the price agreed by the
Parties in relation to such Buy/Sell Back Transaction, and
	 
	 	(ii)	 	in any other case (including for the purposes of the application of
Paragraph 4 or Paragraph 11 of the Agreement), the product of the formula (P + D) -
(IR + C), where:

	 	P    = 	 	the Purchase Price
	 
	 	D    = 	 	 the Sell Back Differential
	 
	 	IR   = 	 	 the amount of any Income in respect of the Purchased Securities
paid by the issuer on any date falling between the Purchase Date and the
Repurchase Date

30 § September 1996 § Master Repurchase Agreement

 

 

	 	C     =     	 	 the aggregate amount obtained by daily application of the Pricing
Rate for such Buy/Sell Back Transaction to any such Income from (and
including) the date of payment by the issuer to (but excluding) the date of
calculation.

	5.	 	When entering into a Buy/Sell Back Transaction the parties shall also agree on the Sell Back
Price and the Pricing Rate to apply in relation to such Buy/Sell Back Transaction on the
scheduled Repurchase Date. The parties shall record the Pricing Rate in at least one
Confirmation applicable to such Buy/Sell Back Transaction.
	 
	6.	 	Termination of a Buy/Sell Back Transaction shall be effected on the Repurchase Date by
transfer to Seller or its agent of Purchased Securities against the payment by Seller of (i)
in a case where the Repurchase Date is the date originally agreed to by the parties pursuant
to Paragraph 2(q) of the Agreement, the Sell Back Price referred to in Paragraph 4(c)(i) of
this Annex; and (ii) in any other case, the Sell Back Price referred to in Paragraph 4(c)(ii)
of this Annex.
	 
	7.	 	For the avoidance of doubt, the parties acknowledge and agree that the Purchase Price and the
Sell Back Price in Buy/Sell Back Transactions shall include Accrued Interest (except to the
extent contrary to market practice with respect to the Securities subject to such Buy/Sell
Back Transaction, in which event (i) an amount equal to the Purchase Price plus Accrued
Interest to the Purchase Date shall be paid to Seller on the Purchase Date and shall be used,
in lieu of the Purchase Price, for calculating the Sell Back Differential, (ii) an amount
equal to the Sell Back Price plus the amount of Accrued Interest to the Repurchase Date shall
be paid to Buyer on the Repurchase Date, and (iii) the formula in Paragraph 4(c)(ii) of this
Annex VI shall be replaced by the formula “(P + AI +
D) — (IR + C)”, where “AI” equals Accrued
Interest to the Purchase Date).
	 
	8.	 	Unless the parties agree in Annex I to the Agreement that a Buy/Sell Back Transaction is not
to be repriced, they shall at the time of repricing agree on the Purchase Price, the Sell Back
Price and the Pricing Rate applicable to such Transaction.
	 
	9.	 	Paragraph 5 of the Agreement shall not apply to Buy/Sell Back Transactions. Seller agrees, on
the date such Income is received, to pay to Buyer any Income received by Seller in respect of
Purchased Securities that is paid by the issuer on any date falling between the Purchase Date
and the Repurchase Date.
	 
	10.	 	References to “Repurchase Price” throughout the Agreement shall be construed as references to
“Repurchase Price or the Sell Back Price, as the case may be.”
	 
	11.	 	In Paragraph 11 of the Agreement, references to the “Repurchase Prices” shall be construed as
references to “Repurchase Prices and Sell Back Prices.”

September 1996 § Master Repurchase Agreement § 31

 

 

Annex VII

Transactions Involving Registered Investment Companies

This Annex VII (including any Schedules hereto) forms a part of the Master Repurchase
Agreement dated as of May 12, 2011 (the “Agreement”) between RBS Securities Inc. and Provident
Mortgage Capital Associates, Inc. (“Counterparty”) and each investment company identified on
Schedule VII.A hereto (as such schedule may be amended from time to time) acting on behalf of its
respective series or portfolios identified on such Schedule VII.A, or in the case of those
investment companies for which no separate series or portfolios are identified on such Schedule
VII.A, acting for and on behalf of itself (each such series, portfolio or investment company, as
the case may be, hereinafter referred to as a “Fund”). In the event of any conflict between the
terms of this Annex VII and any other term of the Agreement, the terms of this Annex VII shall
prevail. Capitalized terms used but not defined in this Annex VII shall have the meanings ascribed
to them in the Agreement.

	1.	 	Multiple Funds. For any Transaction in which a Fund is acting as Buyer (or Seller, as the
case may be), each reference in the Agreement and this Annex VII to Buyer (or Seller, as the case
may be) shall be deemed a reference solely to the particular Fund to which such Transaction
relates, as identified to Seller (or Buyer, as the case may be) by the Fund and as may be
specified in the Confirmation therefor. In no circumstances shall the rights, obligations or
remedies of either party with respect to a particular Fund constitute a right, obligation or
remedy applicable to any other Fund. Specifically, and without otherwise limiting the scope of
this Paragraph: (a) the margin maintenance obligations of Buyer and Seller specified in
Paragraph 4 or any other provisions of the Agreement and the single agreement provisions of
Paragraph 12 of the Agreement shall be applied based solely upon Transactions entered into by
a particular Fund, (b) Buyer’s and Seller’s remedies under the Agreement upon the occurrence
of an Event of Default shall be determined as if each Fund had entered into a separate
Agreement with Counterparty, and (c) Seller and Buyer shall have no right to set off claims
related to Transactions entered into by a particular Fund against claims related to
Transactions entered into by any other Fund.
	 
	2.	 	Margin Percentage. For any Transaction in which a Fund is acting as Buyer, the Buyer’s
Margin Percentage shall always be equal to at least                 %, or such other percentage as the
parties hereto may from time to time mutually determine; provided, that in no event shall such
percentage be less than 100%. For any Transaction in which a Fund is acting as Seller, the
Buyer’s Margin Percentage shall be such percentage as the parties hereto may from time to time
mutually determine; provided, that in no event shall such percentage be less than 100%.
	 
	3.	 	Confirmations. Unless otherwise agreed, Counterparty shall promptly issue a Confirmation to
the Fund pursuant to Paragraph 3 of the Agreement. Upon the transfer of substituted or
Additional Purchased Securities by either party, Counterparty shall promptly provide notice to
the Fund confirming such transfer.
	 
	4.	 	Financial Condition. Each party represents that it has delivered the following financial
information to the other party to the Agreement: in the case of a party that is a registered
broker-dealer, its most recent statements required to be furnished to customers by Rule 17a-
5(c) under the 1934 Act; in the case of a party that is a Fund, its most recent audited or
unaudited financial statements required to be any other party, its most recent audited or

32 § September 1996 § Master Repurchase Agreement

 

 

	 	 	unaudited statements of financial condition or other comparable information concerning
its financial condition.
	 
	 	 	Each party represents that the financial statements or information so delivered fairly reflect
its financial condition and, if applicable, its net capital ratio, on the date as of which
such financial statements or information were prepared. Each party agrees that it will make
available and deliver to the other party, promptly upon request, all such financial statements
that subsequently are required to be delivered to its customers or shareholders pursuant to
Rule 17a-5(c) or Rule 30d-1, as the case may be, or, in the case of a party that is neither a
registered broker-dealer nor a Fund, all such financial information that subsequently becomes
available to the public.
	 
	 	 	Each Fund acknowledges and agrees that it has made an independent evaluation of the
creditworthiness of the other party that is required pursuant to the Investment Company Act of
1940 or the regulations thereunder. Each Fund agrees that its agreement to enter into each
Transaction hereunder shall constitute an acknowledgment and agreement that it has made such an
evaluation.
	 
	5.	 	Segregation of Purchased Securities. Unless otherwise agreed by the parties, any transfer of
Purchased Securities to a Fund shall be effected by delivery or other transfer (in the manner
agreed upon pursuant to Paragraph 7 of the Agreement) to the custodian or subcustodian
designated for such Fund in Schedule VII.A hereto (“Custodian”) for credit to the Fund’s
custodial account with such Custodian. If the party effecting such transfer is the Fund’s
Custodian, such party shall, unless otherwise directed by the Fund, (a) transfer and maintain
such Purchased Securities to and in the Fund’s custodial account with such party and (b) so
indicate in a notice to the Fund.

September 1996 § Master Repurchase Agreement § 33

 

 

Schedule VII.A

Supplemental
Terms and Conditions of Transactions
Involving Registered Investment Companies

This Schedule VII.A forms a part of Annex VII to the Master Repurchase Agreement dated as of
May 12, 2011 (the “Agreement”) between RBS Securities Inc. and Provident Mortgage Capital
Associates, Inc. Capitalized terms used but not defined in this
Schedule VII.A shall have the
meanings ascribed to them in Annex VII.

	1.	 	This Agreement is entered into by or on behalf of the following Funds, and unless
otherwise indicated by the appropriate Fund in connection with a Transaction, the following
Custodians are designated to receive transfers of Purchased Securities on behalf of such
Funds for credit to the appropriate Fund’s custodial account:

	 	 	 
	Name of Fund	 	Custodian
	 

	 	 

	[ ]. 	 	 Limitation of Liability. If the Fund is organized as a business trust (or a
series thereof), the parties agree as follows: [insert appropriate language limiting
liability of trustees, officers and others].

	 	 	 

	

	 	40 Broad Street

New York, NY 10004-2373

Telephone 212.440.9400

Fax 212.440.5260

www.bondmarkets.com

34 § September 1996 § Master Repurchase Agreementexv10w7

Exhibit 10.7

PRE-NEGOTIATION AGREEMENT

          This Pre-negotiation Agreement (this “Agreement”), dated as of November 8, 2010, is among KFC
Corporation, a Delaware corporation (“Franchisor”), and Morgan’s Restaurants of Pennsylvania, Inc.,
Morgan’s Restaurants of Ohio, Inc., and Morgan Foods, Inc. (collectively, the “Franchisee”).

          WHEREAS, Franchisor and Franchisee executed certain Franchise Agreements identified on
Exhibit A hereto (the “Franchise Agreements”);

          WHEREAS, the Franchise Agreements require the Franchisee to remodel the restaurant facilities
identified on Exhibit A (“Facilities”) by specified dates;

          WHEREAS, the Franchisee has not been able to remodel certain of the Facilities by the
specified dates as required by the Franchise Agreements;

          WHEREAS, the Franchisor issued formal written notices (“Notices”) to the Franchisee confirming
the Franchisee’s failure to timely remodel the Facilities identified on Exhibit B; and

          WHEREAS, Franchisee has requested, and Franchisor has agreed, to the presentation and
consideration of a restructuring proposal on the terms and conditions set forth in this Agreement;

          NOW, THEREFORE, in consideration of the promises and the representations, warranties,
covenants and agreements contained hereinafter set forth, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

               1.1 Definitions.

               (a) Capitalized terms used but not defined herein shall have the respective meanings ascribed
to them in the Franchise Agreements.

               (b) “Affiliate” of any person means another person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with, such first
person.

 

 

ARTICLE II

STATUS OF FRANCHISE AGREEMENTS

          2.1 Effect on the Franchise Agreements. Except as expressly provided in this
Agreement, all of the terms, conditions, restrictions and other provisions contained in the
Franchise Agreements shall remain in full force and effect.

          2.2 Franchise Agreements Enforceable. Franchisee acknowledges and agrees that each
of its obligations, liabilities and duties under the Franchise Agreements is and shall remain
valid and enforceable against it to the extent and as provided in the Franchise Agreements.

          2.3 Notices of Failure To Timely Remodel. Franchisee acknowledges the fact that it
has not performed the remodels required by the Franchise Agreements and that Franchisor delivered
formal written notices memorializing the Franchisee’s non-compliance. Those notices entitle
Franchisor to exercise all Franchisor’s rights and remedies under the Franchise Agreements or
applicable law in connection with the Franchisee’s non-compliance. No agreement exists
documenting a cure of the Franchisee’s non-compliance or otherwise modifying or amending its
remodeling obligations under the Franchise Agreements.

ARTICLE III

NEGOTIATIONS

          3.1 Restructuring Proposal. Franchisee shall submit to Franchisor a written
restructuring plan (“Proposal”) within thirty (30) days of the date of this Agreement (the
“Proposal Deadline”). The Proposal shall consist of a detailed written plan for how Franchisee
will obtain the necessary capital (including identifying all sources of capital funding) and
otherwise restructure its business to enable it to comply with the remodeling requirements set
forth in the Notices and meet Franchisee’s upgrading obligations for all Facilities under the
Franchise Agreements. The Proposal shall include, without limitation, the following:

               (a) Listing of all Facilities with: (i) cross reference between Franchisee and Franchisor
numbering conventions; and (ii) indication of fee and leased properties;

               (b) Store level P&L statements through November 7, 2010 or Franchisee’s equivalent period end
date;

               (c) Updated (as of November 7, 2010) balance sheet for Franchisee’s businesses;

               (d) Updated (as of November 7, 2010) accounts payable aging summary;

               (e) Aggregated income statements (including above store/G&A expenses) for Franchisee’s:

                    (i) KFC business;

2

 

                    (ii) Single branded Taco Bell business; and

                    (iii) Total Franchisee business

               (f) Detail supporting G&A structure of KFC, single branded Taco Bell and overall Franchisee
businesses.

               (g) Detailed debt disclosure, including:

                    (i) Amount of debt by lender for all Franchisee businesses;

                    (ii) Amount of debt by line of business (e.g. KFC, Taco Bell, and any wholly owned
subsidiaries);

                    (iii) Amount of debt by store (for all brands — KFC, Taco Bell, etc.);

                    (iv) How each loan is collateralized (e.g., by land only, land and real property,
cross collateralization, etc.);

                    (v) Interest rate and indication of floating or fixed for each loan;

                    (vi) Maturity of each loan;

                    (vii) Monthly payment of each loan in aggregate;

                    (viii) Monthly payment of each loan by store; and

                    (ix) Loan covenant schedule, including: (A) calculation formula; (B) frequency of
calculation; and (C) an indication of whether required covenant levels are part of any
Loan Modification Agreement referenced in Franchisee’s 10-Q disclosure.

               (h) Cash flow model for last 2 years and for the next 5 years with the following:

                    (i) Same store sales assumption by brand;

                    (ii) Inflation factor by food, labor, other;

                    (iii) Capex schedule with cost assumptions;

                    (iv) Debt service coverage ratio;

                    (v) Fixed charge coverage ratio; and

3

 

                    (vi) Assumptions of any cost controlling outcomes (e.g., rent decreases negotiated by
Prime Locations).

               (i) Sources of potential capital and anticipated terms;

               (j) Up-to-date sale / leaseback candidate worksheet;

               (k) Details of potential debt refinancing — assumptions on amortization, rate, pro-forma
monthly repayment amounts, securitization, etc.

               (l) Copies of all agreements with brokers, marketing companies and other consultants that
Franchisee has engaged or intends to engage to assist in the disposition of any Franchisee
properties, buildings and other assets, such as sale leaseback transactions; and

               (m) Bi-weekly updates on capital funding efforts, including, but not limited to, marketing
reports, status of negotiations with potential purchasers and market research.

          3.2 Franchisee acknowledges that, as of the date of this Agreement, Franchisee is current in
all financial obligations required by the Franchise Agreements, and that Franchisee must remain
current on all financial obligations required under the Franchise Agreements during the term of
this Agreement. Franchisee’s failure to remain current in such financial obligations shall be
deemed a breach of this Agreement, entitling the Franchisor to unilaterally and immediately
terminate this Agreement.

          3.3 Franchisee shall execute a written release of liability, in the form of Exhibit C
attached hereto, granted in favor of Franchisor as of the date of the Proposal.

          3.4 Franchisee shall provide Franchisor with additional information as reasonably requested
by Franchisor.

          3.5 No Prejudice from Discussions. Without liability for failing to do so,
Franchisor and Franchisee each plan to discuss various courses of action which might be in their
mutual interest, including, but not limited to, the Proposal. All such discussions, meetings,
negotiations and communications in connection therewith relating to the Franchise Agreements and
occurring either before or after the date of this Agreement shall be privileged and without
prejudice to any party to this Agreement, and without exception, shall constitute settlement
negotiations which shall not be introduced or admissible as evidence in any administrative,
judicial or other proceeding without the express written consent of all of the parties to this
Agreement. No action or proceeding of any kind (whether legal or equitable, whether based in
tort, contract, or otherwise) may be brought by any of the parties to this Agreement against
anyone based upon or relating to the negotiations contemplated by this Agreement.

          3.6 No Obligations to Negotiate. Franchisee acknowledges and agrees that Franchisor
does not have any obligation to accept any Proposal or to modify, amend or enter into negotiations
with respect to the Franchise Agreements. No party is obligated to enter into or continue
negotiations relating to the Franchise Agreements, and any party, in its sole and absolute
discretion, may terminate negotiations at any time and for any reason if it so elects,

4

 

without notice or liability to any other party. Franchisee acknowledges that Franchisor
would not enter into any negotiations or otherwise consider the Proposal without the parties
entering into this Agreement.

          3.7 Only Written Agreements and Amendments. The negotiations and discussions by the
parties may be lengthy and complex. While an agreement may be reached on one or more issues which
are part of the overall obligations of the Franchisee under the Franchise Agreements that the
parties are trying to resolve, the parties agree that, except for the preliminary agreements
contained in this Agreement, none of the parties shall be bound by or rely upon any agreement on
any issues until (a) agreement is reached on all issues, and (b) the agreement on all issues has
been reduced to a written agreement, signed and delivered by an authorized representative of each
of the parties to this Agreement. Furthermore, in order to avoid any confusion or
misunderstanding, each of the parties agrees that this Agreement may only be amended in a writing,
signed by Franchisee and Franchisor. Nothing in this Agreement shall be construed to impose any
duty or obligation whatsoever upon any party to negotiate or enter into a settlement or agreement.

          3.8 No Waivers or Estoppel. No negotiations or other action undertaken pursuant to
this Agreement shall constitute a waiver of any party’s rights under the Franchise Agreements,
except to the extent specifically stated in a written agreement complying with the provisions of
paragraph 3.7 of this Agreement. Subject to Article VI of this Agreement, in addition,
participation in negotiations concerning the Franchise Agreement shall not restrict, inhibit or
estop any party from exercising any right, remedy or power available to such party at any time
(whether or not settlement negotiations are continuing) including, but not limited to, all rights,
remedies and powers granted under the Franchise Agreements or otherwise available at law or in
equity, or require any delay in the exercise of any such, right, remedy or power. Franchisee also
agrees that no failure to exercise and no delay in exercising any rights, remedies and powers
under the Franchise Agreements or otherwise available at law or in equity shall operate as a
waiver of any such rights, remedies or powers.

ARTICLE IV

FRANCHISEE COOPERATION

          4.1 Access to Information. Franchisee and Franchisor including their respective
agents and representatives, will cooperate in good faith to conduct physical assessments,
appraisals or other evaluations of the properties and assets, real or personal, utilized in
connection with Franchisee’s performance under the Franchise Agreements. In connection therewith,
Franchisee shall permit Franchisor, its agents and its representatives reasonable access to
inspect and review all such properties and assets and all books, records and information relating
thereto at all reasonable times and shall permit them to make copies of all such books, records
and information. Franchisee also agrees that it will furnish Franchisor current, complete and
accurate financial statements in a form satisfactory to Franchisor.

5

 

ARTICLE V

FRANCHISEE REPRESENTATIONS AND WARRANTIES

          5.1 Authority; Non-Contravention. Franchisee has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation by Franchisee of the
transactions contemplated hereby have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of Franchisee and no stockholder votes are
necessary to authorize this Agreement or to consummate the transactions contemplated hereby.

          5.2 Business Not Viable Absent Franchise Agreements. Franchisee acknowledges that
its business is not viable absent the Franchise Agreements remaining in effect.

          5.3 Use of Counsel. Franchisee acknowledges and represents that it (i) has fully and
carefully read this Agreement prior to signing it, (ii) has been, or has had the opportunity to
be, advised by independent legal counsel of its own choice at its own expense as to the legal
effect and meaning of each of the terms and conditions of this Agreement, and (iii) is signing and
entering into this Agreement as a free and voluntary act without duress or undue pressure or
influence of any kind or nature whatsoever and has not relied on any promises, representations or
warranties regarding the subject matter hereof other than those set forth in this Agreement.

ARTICLE VI

FORBEARANCE

          6.1 Forbearance. Subject to the terms of this Agreement, Franchisor agrees to
forbear from terminating the Franchise Agreements or commencing any judicial proceedings to
enforce the termination of the Franchise Agreements (to the extent applicable) until the earlier
to occur of (a) January 31, 2011, and (b) the date upon which any of the Forbearance Conditions
(as defined below) is not satisfied by the date required.

          6.2 Forbearance Conditions. For purposes of this Agreement, “Forbearance Conditions”
shall mean the requirement that each of the conditions set forth below shall be performed or
satisfied, as and when required, TIME BEING OF THE ESSENCE, in all respects:

               (a) Franchisee shall timely and fully pay any and all amounts owing under the Franchise
Agreements, arising on and after the date of this Agreement.

               (b) Franchisee shall not be in default of any of its obligations under this Agreement or
under the Franchise Agreements (except for the remodel obligations relating to the Facilities
listed in Exhibit B).

               (c) Franchisee shall submit the Proposal within thirty (30) days of the date of this
Agreement.

6

 

               (d) By December 31, 2010, Franchisee shall establish a remodel fund account (“Account”) in a
manner and form agreed to by Franchisor, but including the following:

                    (i) The Account shall be established at a mutually agreed to financial institution, separate
from other financial accounts of Franchisee.

                    (ii) The Account shall be funded through a combination of (1) net proceeds, after repayment
of senior debt only, from the disbursements resulting from the disposition of any property,
building, equipment, and the like owned by Franchisee through sale leaseback transactions, store
closures, and sale of property, (2) free cash flows after debt payments (the definition of “free
cash flow” must be mutually agreed to by the parties within thirty (30) days of the date of this
Agreement);

                    (iii) Franchisee shall submit to Franchisor, in a format and manner agreed to by Franchisor,
weekly Account balance reconciliations, including up-to-date reporting of any asset disbursements
and free cash flow calculation;

                    (iv) Franchisee may only withdraw funds from the Account in accordance with specific terms,
conditions and restrictions (“Account Agreement”) mutually agreed to by the parties within thirty
(30) days of the date of this Agreement.

                    (v) Franchisee shall use Account funds for the sole purpose of remodeling and upgrading the
Facilities in accordance with the Franchise Agreements; unless the Account Agreement otherwise
allows Franchisee, with Franchisor’s prior written approval, to apply Account funds to other
payments owed to Franchisor or to pay other business expenses necessary to continue to operate
Franchisee’s KFC business in the event of adverse financial conditions; and

                    (vi) The amount of the initial deposit into the Account must be mutually agreed to by the
partied within thirty (30) days of the date of this Agreement and be funded from Franchisee’s
existing cash balances and proceeds from its proposed restructuring deals.

          (e) By December 31, 2010, Franchisee shall submit to KFCC for its approval: (i) a schedule
for remodeling, relocating or rebuilding (based on the required scope of work determined by
Franchisor) (collectively “Remodel” or “Remodeling”) all of the Facilities listed in Exhibit A,
and (ii) a list of specific Facilities that Franchisee commits to Remodel in 2011 (based on the
required scope of work determined by Franchisor), including the start and completion dates for
each Facility, and any anticipated Facility closures in 2011.

          (f) No later than January 31, 2011, the parties must finalize and execute a comprehensive
agreement (“Remodel Agreement”) acceptable to Franchisor that addresses Remodeling commitments for
all of the Facilities listed in Exhibit A, including the number and scope of each Remodel action
to be undertaken by Franchisee, including any anticipated Facility closures, during each year of
the Remodel Agreement.

7

 

          (g) Franchisee shall not commence any judicial proceedings against or involving Franchisor,
including arbitration or mediation proceedings, or formal or informal proceedings for the
dissolution or rehabilitation of Franchisee.

          (h) Franchisee shall be in compliance with the Franchise Agreements on and after the date of
this Agreement, except with respect to the matters listed on Exhibit D.

          6.3 Upon completion of the Forbearance Conditions above, Franchisor will rescind the Notices
of non-compliance issued to Franchisee.

ARTICLE VII

CONFIDENTIALITY

Franchisee and its present and prospective affiliates, and its and their respective directors,
officers, employees, agents or advisors (including, without limitation, attorneys, accountants,
consultants, financial advisors and equity holders) (collectively, “Representatives”), agree to
treat, with the utmost strictest confidence, and not to disclose in any manner whatsoever, in whole
or in part, the terms of this Agreement, the fact that this Agreement exists, the negotiations and
discussions leading up to this Agreement, and any other information relating to this Agreement
(collectively, the “Confidential Information”). The Confidential Information shall not, without
the prior written consent of Franchisor, be disclosed to any person or entity other than
Franchisee’s Representatives who need to know such information for the purpose of providing legal
or financial advice to the Franchisee (and in those instances only to the extent justifiable by
that need), who are informed by Franchisee of the confidential nature of the Confidential
Information and who are provided with a copy of this Article VII and agree to be bound by the terms
hereof. Notwithstanding the foregoing, Franchisee and its representatives shall not, under any
circumstances, disclose the Confidential Information to any other franchisee of Franchisor or
franchisees of any affiliates of Franchisor. In any event, Franchisee shall be responsible for any
breach of this Agreement by any of Franchisee’s Representatives for prohibited or unauthorized
disclosure or use of the Confidential Information, and Franchisee agrees, at its sole expense, to
take all reasonable measures to restrain its Representatives from prohibited or unauthorized
disclosure or use of the Confidential Information. In the event that Franchisee or its
Representatives are requested pursuant to, or required by, applicable law or regulation or by legal
process to disclose any Confidential Information, Franchisee agrees that it will provide Franchisor
with prompt written notice (and copies, if applicable) of such request or requirement in order to
enable Franchisor to seek an appropriate protective order or other remedy, to consult with
Franchisee with respect to Franchisor taking steps to resist or narrow the scope of such request or
legal process, or to waive compliance, in whole or in part, with the terms of this Article VII of
the Agreement. In any such event, Franchisee and its Representatives agree to (i) furnish only
that portion of the Confidential Information for which Franchisor has waived compliance or for
which Franchisee is advised by counsel is legally required to be furnished and (ii) use their
reasonable best efforts to ensure that all Confidential Information and other information that is
so disclosed will be accorded confidential treatment. Immediately upon termination of this
Agreement, or at any time upon the request of Franchisor, Franchisee and its Representatives shall
promptly deliver to Franchisor all written material containing or reflecting any Confidential
Information (including all copies, extracts or other reproductions in whole or in

8

 

part) and agree to destroy all documents, memoranda, notes and other writings whatsoever (including
all copies, extracts or other reproductions in whole or in part) prepared by Franchisee or its
Representatives based on the Confidential Information. Upon the written request of Franchisor,
Franchisee shall certify in writing to Franchisor Franchisee’s destruction of such documents,
memoranda, notes and other writings. Notwithstanding the return or destruction of the Confidential
Information, Franchisee and its Representatives will continue to be bound by the obligations
imposed by this Article VII. It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by Franchisee or its Representatives, and that
Franchisor would be entitled to specific performance and injunctive or other equitable relief as a
remedy for any such breach. Such remedy shall not be deemed to be the exclusive remedy for
Franchisee’s or its Representatives’ breach of this Agreement, but shall be in addition to all
other remedies available at law or equity to Franchisor. Franchisee shall be responsible to pay or
reimburse Franchisor for any costs and expenses (including reasonable attorney’s fees and costs)
incurred by Franchisor in connection with the enforcement of this Article VII if it is determined
that Franchisee or its Representatives has breached this Article VII; provided, however the parties
agree that nothing in this Article VII shall be interpreted to restrain Franchisee from making
disclosures required of it by law or regulation as an SEC reporting company.

ARTICLE VIII

RELEASE

          8.1 Release. Franchisee, on behalf of itself and each of its Affiliates, hereby
releases and forever discharges Franchisor and each of its past, present and future
Representatives, Affiliates, members, controlling persons, subsidiaries, successors and assigns
(individually, a “Releasee” and collectively, “Releasees”) from any and all claims, demands,
proceedings, causes of action, suits, liens, losses, costs, expenses, orders, obligations,
contracts, debts and liabilities of any kind, character or nature whatsoever, whether known or
unknown, suspected or unsuspected, asserted or unasserted, fixed or contingent, both at law and in
equity, that Franchisee or any of its Affiliates now has, has ever had, or may hereafter have
arising contemporaneously with or prior to the date of this Agreement or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to the date of this
Agreement; provided, however, that nothing contained herein shall operate to release any
obligations of the Franchisor arising under the Franchise Agreements after the date of this
Agreement. Franchisee hereby irrevocably covenants to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing to be commenced, any
proceeding of any kind against any Releasee, based upon any matter purported to be released hereby.

          8.2 Indemnification. Without in any way limiting any of the rights and remedies
otherwise available to any Releasee, Franchisee shall indemnify and hold harmless each Releasee
from and against all loss, liability, claim, damage (including incidental and consequential
damages) or expense (including costs of investigation and defense and reasonable attorney’s fees)
whether or not involving third party claims, arising directly or indirectly from or

9

 

in connection with (i) the assertion by or on behalf of Franchisee or any of its Affiliates of
any claim or other matter purported to be released pursuant to this Article VIII and (ii) the
assertion by any third party of any claim or demand against any Releasee which claim or demand
arises directly or indirectly from, or in connection with, any assertion by or on behalf of
Franchisee or any of its Affiliates against such third party of any claims or other matters
purported to be released pursuant to this Article VIII, or arises directly or indirectly from or in
connection with any Default, any default under this Agreement, or any other obligation of
Franchisee or its Affiliates.

          8.3 Waiver of Unknown Claims. Franchisee hereby expressly waives all rights afforded
by Section 1542 of the Civil Code of California or any statute or common law principle of similar
effect in any jurisdiction with respect to the Releasees (collectively, “Section 1542”). Section
1542 of the Civil Code of California states as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN
BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and
complete release, Franchisee expressly waives and relinquishes any rights and benefits that it may
have under Section 1542. Franchisee understands and agrees that the release contained in this
Article V is intended to include all claims, if any, which Franchisee may have and which Franchisee
does not now know or suspect to exist in its favor against the Releasees and that this release
extinguishes those claims. Franchisee represents and warrants to the Releasees that it has been
advised by its attorney of the effect and import of the provisions of Section 1542, and that
Franchisee has not assigned or otherwise transferred or subrogated any interest in any claims,
demands or causes of action that are the subject of this release. Franchisee agrees to indemnify,
defend and hold the Releasees harmless for any liability, loss, claims, demands, damages, costs,
expenses or attorneys’ fees incurred as a result of any person or entity asserting such assignment,
transfer or subrogation. Franchisee further agrees that in the event of litigation relating to the
subject matter of this release contained in Article VIII, each Releasee shall be entitled to
reasonable attorneys’ fees and costs if it is the prevailing party in such litigation.

ARTICLE IX

GENERAL PROVISIONS

          9.1 Binding Effect, Etc. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective successors, assigns
(including any direct or indirect successor by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of either party), spouses, heirs, executors and
personal and legal representatives.

          9.2 Severability. The provisions of this Agreement shall be severable in the event
that any of the provisions hereof (including any provision within a single section,

10

 

paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable in any respect, and the validity and enforceability of any such provision
in every other respect and of the remaining provisions hereof shall not be in any way impaired and
shall remain enforceable to the fullest extent permitted by law.

          9.3 Survival. The provisions of Articles VII and VIII shall remain in full force and
effect and shall survive any termination of this Agreement.

          9.4 Notices. All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier (with written confirmation of
receipt) or (c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):

Franchisor:

KFC Corporation

1441 Gardiner Lane

Louisville, KY 40213

Attention: General Counsel, KFCC

Facsimile: (502) 874-2198

Franchisee:

Morgan Foods, Inc.

4829 Galaxy Parkway

Cleveland, OH 44128-5955

Attention: Jim Liguori

Facsimile: (216) 359-2105

          9.5 Section Headings. The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.

          9.6 Certain Interpretive Matters. No provision of this Agreement shall be
interpreted in favor of, or against, either of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or thereof.

          9.7 Governing Law. This Agreement shall be governed by the laws of the Commonwealth
of Kentucky without regard to conflicts of laws principles.

          9.8 Consent to Personal Jurisdiction in Kentucky. As further consideration for
Franchisor’s agreement to enter into this Agreement, Franchisee consents to the non-exclusive
jurisdiction of the courts in the Commonwealth of Kentucky and consents to personal jurisdiction
in Kentucky for all purposes.

11

 

          9.9 Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. Delivery of a signed
counterpart by facsimile transmission will constitute a party’s due execution and delivery of this
Agreement.

12

 

          IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
date first written above.

	 	 	 	 	 
	 	KFC CORPORATION

 	 
	 	By:  	/s/ Cathy Tang
 	 
	 	 	Name:  	Cathy Tang 	 
	 	 	Title:  	V.P. and Chief Legal Officer 	 
	 
	 	Morgan Foods, Inc.

 	 
	 	By:  	/s/ James J. Liguori
 	 
	 	 	Name:  	James J. Liguori 	 
	 	 	Title:  	President & COO 	 
	 
	 	Morgan’s Restaurants of Pennsylvania, Inc.

 	 
	 	By:  	/s/ James J. Liguori
 	 
	 	 	Name:  	James J. Liguori 	 
	 	 	Title:  	President & COO 	 
	 
	 	Morgan’s Restaurants of Ohio, Inc.

 	 
	 	By:  	/s/ James J. Liguori
 	 
	 	 	Name:  	James J. Liguori 	 
	 	 	Title:  	President & COO 	 
	 

13

 

Exhibit A

FRANCHISE AGREEMENTS

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Date of
	 	 	 	 	 	 	Franchise
	STORE #	 	STREET ADDRESS	 	CITY, STATE	 	Agreement
	L125-001

	 	745 FOURTH ST.
	 	NEW KENSINGTON, PA
	 	6/13/1997
	L125-002

	 	2705 SOUTH AVE.
	 	YOUNGSTOWN, OH
	 	6/13/1997
	L125-005

	 	825 EAST STATE STREET
	 	ALLIANCE, OH
	 	6/13/1997
	L125-006

	 	3445 ELM ROAD
	 	WARREN, OH
	 	6/13/1997
	L125-008

	 	4673 WILLIAM FLYNN HIGHWAY
	 	ALLISON PARK, PA
	 	6/13/1997
	L125-010

	 	855 W. MARKET ST.
	 	WARREN, OH
	 	6/13/1997
	L125-011

	 	102 MADISON AVE.
	 	ROCHESTER, PA
	 	6/13/1997
	L125-012

	 	1713-15 FREEPORT RD.
	 	NATRONA HTS, PA
	 	6/13/1997
	L125-018

	 	100 S. HERMITAGE RD.
	 	HERMITAGE, PA
	 	6/13/1997
	L125-023

	 	2658 BRODHEAD ROAD
	 	ALIQUIPPA, PA
	 	6/13/1997
	L125-024

	 	156 NORTH LINCOLN AVE.
	 	SALEM, OH
	 	6/13/1997
	L125-038

	 	4015 MAIN ST.
	 	WEIRTON, WV
	 	6/13/1997
	L125-048

	 	325 N. CENTER AVE., P.O. BOX 550
	 	NEW STANTON, PA
	 	6/13/1997
	L125-051

	 	5684 WARREN-YOUNGSTOWN RD.
	 	NILES, OH
	 	6/13/1997
	L125-055

	 	3299 CANFIELD RD.
	 	YOUNGSTOWN, OH
	 	6/13/1997
	L125-056

	 	4187 SUNSET BLVD.
	 	STEUBENVILLE, OH
	 	6/13/1997
	L125-058

	 	2506 ELLWOOD RD.
	 	NEW CASTLE, PA
	 	6/13/1997
	L125-064

	 	4642 MAHONING AVE.
	 	YOUNGSTOWN, OH
	 	6/13/1997
	L125-082

	 	4400 WILLIAM PENN HIGHWAY
	 	MURRYSVILLE, PA
	 	6/13/1997
	L125-086

	 	212 NEW CASTLE ROAD
	 	BUTLER, PA
	 	6/13/1997
	L125-101

	 	9390 ROUTE 30
	 	IRWIN, PA
	 	6/13/1997
	L125-114

	 	3517 SOUTH GRAND
	 	ST. LOUIS, MO
	 	6/11/1997
	L125-117

	 	1510 JOHNSON ROAD
	 	GRANITE CITY, IL
	 	6/11/1997
	L125-124

	 	5020 DELMAR
	 	ST. LOUIS, MO
	 	6/11/1997
	L125-125

	 	10557 PAGE
	 	ST. LOUIS, MO
	 	6/11/1997
	L125-129

	 	590 LATROBE THIRTY PLAZA
	 	LATROBE, PA
	 	6/13/1997
	L125-130

	 	865 ROSTRAVER RD.
	 	BELLE VERNON, PA
	 	6/13/1997
	L125-134

	 	975 E. PITTSBURGH ST.
	 	GREENSBURG, PA
	 	7/11/1997
	L125-135

	 	50 MILLER LANE
	 	WAYNESBURG, PA
	 	6/13/1997
	L125-136

	 	109 CAVASINA DR.
	 	CANONSBURG, PA
	 	6/13/1997
	L125-137

	 	2656 W. 12TH STREET
	 	ERIE, PA
	 	7/28/1997
	L125-138

	 	4410 BUFFALO RD.
	 	ERIE, PA
	 	7/28/1997
	L125-139

	 	3100 N.RIDGE RD., EAST
	 	ASHTABULA, OH
	 	7/28/1997
	L125-140

	 	360 WATER STREET
	 	CONNEAUT LAKE, PA
	 	7/28/1997
	L125-141

	 	6636 SOUTH AVE.
	 	YOUNGSTOWN, OH
	 	9/9/1998
	L125-144

	 	219 N. FLORISSANT
	 	FERGUSON, MO
	 	6/16/1997
	L125-145

	 	1200 PENNSYLVANIA AVE. EAST
	 	WARREN, PA
	 	7/9/1997

14

 

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Date of
	 	 	 	 	 	 	Franchise
	STORE #	 	STREET ADDRESS	 	CITY, STATE	 	Agreement
	L125-146

	 	522 E. SECOND ST.
	 	JAMESTOWN, NY
	 	7/9/1997
	L125-147

	 	15644 ST. RT 170
	 	CALCUTTA, OH
	 	5/4/1999
	L125-148

	 	5933 PEACH STREET
	 	ERIE, PA
	 	11/6/1997
	L125-149

	 	1116 PARADE ST.
	 	ERIE, PA
	 	9/23/1997
	L125-150

	 	701 COOKE LANE
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-151

	 	5501 PENN AVENUE
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-152

	 	1098-A WASHINGTON AVENUE
	 	BRIDGEVILLE, PA
	 	7/13/1999
	L125-153

	 	120 MURTLAND AVENUE
	 	WASHINGTON, PA
	 	7/13/1999
	L125-156

	 	222 WEST 8TH AVENUE
	 	HOMESTEAD, PA
	 	7/13/1999
	L125-157

	 	804 W. VIEW PARK DRIVE
	 	WEST VIEW, PA
	 	7/13/1999
	L125-158

	 	640 LONGRUN ROAD
	 	MCKEESPORT, PA
	 	7/13/1999
	L125-159

	 	278 YOST BLVD.
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-160

	 	6190 STEUBENVILLE PIKE
	 	MCKEESROCK, PA
	 	7/13/1999
	L125-161

	 	509 PENN AVENUE
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-162

	 	9797 MCKNIGHT RD.
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-163

	 	5130 CLAIRTON BLVD.
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-164

	 	6901 UNIVERSITY BLVD.
	 	MOON TOWNSHIP, PA
	 	7/13/1999
	L125-165

	 	4915 BAUM BLVD.
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-167

	 	1 LANDINGS DRIVE
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-168

	 	740 LYSLE BLVD.
	 	MCKEESPORT, PA
	 	7/13/1999
	L125-169

	 	1100 BROWNSVILLE RD.
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-170

	 	3770 PENN HIGHWAY
	 	MONROEVILLE, PA
	 	7/13/1999
	L125-171

	 	4306 OHIO RIVER BLVD.
	 	PITTSBURGH, PA
	 	7/13/1999
	L125-172

	 	2500 WASHINGTON BLVD.
	 	BELPRE, OH
	 	7/13/1999
	L125-173

	 	401 GREENE STREET
	 	MARIETTA, OH
	 	7/13/1999
	L125-175

	 	207 MARSHALL STREET
	 	BENWOOD, WV
	 	7/13/1999
	L125-176

	 	122 N. LAFAYETTE AVENUE
	 	MOUNDSVILLE, WV
	 	7/13/1999
	L125-177

	 	120 ZANE STREET
	 	WHEELING, WV
	 	7/13/1999
	L125-178

	 	930 SEVENTH STREET
	 	PARKERSBURG, WV
	 	7/13/1999
	L125-179

	 	2604 OHIO AVENUE
	 	PARKERSBURG, WV
	 	7/13/1999
	L125-180

	 	HIGHWAY 32, ROUTE 67
	 	FARMINGTON, MO
	 	7/13/1999
	L125-181

	 	#3 CHAT ROAD
	 	LEADINGTON, MO
	 	7/13/1999
	L125-183

	 	1200 CASS AVE.
	 	ST. LOUIS, MO
	 	7/13/1999
	L125-186

	 	9955 WATSON ROAD
	 	ST. LOUIS, MO
	 	7/13/1999
	L125-187

	 	15493 MANCHESTER ROAD
	 	BALLWIN, MO
	 	7/13/1999
	L125-188

	 	210 RODI ROAD
	 	PITTSBURGH, PA
	 	8/10/1999
	L125-189

	 	101 S. WEIDMAN ROAD
	 	MANCHESTER, MO
	 	9/7/1999
	L125-190

	 	1031 PAXTON DRIVE
	 	BETHEL PARK, PA
	 	10/21/1999
	L125-192

	 	45 FOSTER AVENUE
	 	CRAFTON, PA
	 	12/7/1999
	L125-193

	 	270 E. FAIRMOUNT AVE.
	 	LAKEWOOD, NY
	 	9/24/1999

15

 

Exhibit B

FACILITIES SUBJECT TO NOTICES

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Date of
	 	 	 	 	 	 	Franchise
	STORE #	 	STREET ADDRESS	 	CITY, STATE	 	Agreement
	L125-001

	 	745 FOURTH ST.
	 	NEW KENSINGTON, PA
	 	6/13/1997
	L125-002

	 	2705 SOUTH AVE.
	 	YOUNGSTOWN, OH
	 	6/13/1997
	L125-010

	 	855 W. MARKET ST.
	 	WARREN, OH
	 	6/13/1997
	L125-011

	 	102 MADISON AVE.
	 	ROCHESTER, PA
	 	6/13/1997
	L125-012

	 	1713-15 FREEPORT RD.
	 	NATRONA HTS, PA
	 	6/13/1997
	L125-023

	 	2658 BRODHEAD ROAD
	 	ALIQUIPPA, PA
	 	6/13/1997
	L125-048

	 	325 N. CENTER AVE., P.O. BOX 550
	 	NEW STANTON, PA
	 	6/13/1997
	L125-135

	 	50 MILLER LANE
	 	WAYNESBURG, PA
	 	6/13/1997
	L125-139

	 	3100 N.RIDGE RD., EAST
	 	ASHTABULA, OH
	 	7/28/1997
	L125-140

	 	360 WATER STREET
	 	CONNEAUT LAKE, PA
	 	7/28/1997

16

 

Exhibit C

GENERAL RELEASE

     ____________________, a ______________ corporation, on behalf of itself and each of its
present and prospective affiliates, members, subsidiaries, successors and assigns and its and their
respective directors, officers, employees, agents or advisors (including, without limitation,
attorneys, accountants, consultants, financial advisors and equity holders) (collectively
“Franchisee”) hereby releases and forever discharges KFC Corporation and each of its past, present
and future directors, officers, employees, agents or advisors, affiliates, members, controlling
persons, subsidiaries, successors and assigns (individually, a “Releasee” and collectively,
“Releasees”) from any and all claims, demands, proceedings, causes of action, suits, liens, losses,
costs, expenses, orders, obligations, contracts, debts and liabilities of any kind, character or
nature whatsoever, whether known or unknown, suspected or unsuspected, asserted or unasserted,
fixed or contingent, both at law and in equity, that Franchisee now has, has ever had, or may
hereafter have arising contemporaneously with or prior to the date of this General Release or on
account of or arising out of any matter, cause or event occurring contemporaneously with or prior
to the date of this General Release. Franchisee hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be
commenced, any proceeding of any kind against any Releasee, based upon any matter purported to be
released hereby.

Signed this ______ day of ____________, 201_.

	 	 	 	 	 
	 	Morgan Foods, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Morgan’s Restaurants of Pennsylvania, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Morgan’s Restaurants of Ohio, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

17

 

	 	 	 	 	 

Exhibit D

INTENTIONALLY LEFT BLANK

18

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