Document:

Exhibit 10.2

 

EXECUTION VERSION

 

LOAN OBLIGATION PURCHASE AGREEMENT

 

This LOAN OBLIGATION PURCHASE AGREEMENT (this “Agreement”) is made as of February 27, 2015 by and between Arbor Realty SR, Inc., a Maryland corporation (the “Seller”), and Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd., an exempted company incorporated in the Cayman Islands with limited liability (the “Issuer” and, in some instances, the “Purchaser”).

 

W I T N E S S E T H:

 

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

 

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

 

WHEREAS, the Issuer and Arbor Realty Commercial Real Estate Notes 2015-FL1 LLC, a Delaware limited liability company (the “Co-Issuer”), intend to issue (a) the U.S.$165,750,000 Class A Senior Secured Floating Rate Notes Due 2025 (the “Class A Notes”), (b) the U.S.$24,750,000 Class B Secured Floating Rate Notes Due 2025 (the “Class B Notes”) and (c) the U.S.$28,500,000 Class C Secured Floating Rate Notes Due 2025 (the “Class C Notes”  and, collectively with the Class A Notes and Class B Notes, the “Notes”), pursuant to an indenture, dated as of February 27, 2015 (the “Indenture”), by and among the Issuer, the Co-Issuer, U.S. Bank National Association, as trustee, paying agent, calculation agent, transfer agent, custodial securities intermediary, backup advancing agent and notes registrar (together with any successor trustee permitted under the Indenture, the “Trustee”) and Arbor Realty SR, Inc., as advancing agent;

 

WHEREAS, pursuant to its Governing Documents, certain resolutions of its Board of Directors and a preferred shares paying agency agreement, the Issuer also intends to issue the U.S.$81,000,000 aggregate notional amount preferred shares (the “Preferred Shares” and, together with the Notes, the “Securities”);

 

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

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                      Defined Terms.

 

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

 

 

“5 Times Square Junior Participation”: The participation represented by Certificate A-1-1 of Sub-Participation A-1, as defined in that certain Sub-Participation and Servicing Agreement, dated as of October 6, 2011, by and among Arbor Realty Participation, LLC, Arbor Realty Mortgage Securities Series 2005-1, Ltd. and Arbor Realty Mortgage Securities Series 2006-1, Ltd., of the 5 Times Square Whole Loan.

 

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

 

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

 

“Borrower”:  The Borrower under a Mortgage Loan.

 

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

 

“Companion Loan”: Any Non-Acquired Participation.

 

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

 

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

 

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

 

“Junior Participation”: (i) One or more junior participation interests (or B Notes) in a Whole Loan or (ii) the 5 Times Square Junior Participation, as the context may require.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Participation”: Any Senior Participation or Junior Participation.

 

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

 

“Reference Date”:  With respect to each Loan Obligation and Mortgage Loan, the later of December 1, 2014, or the related origination date.

 

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

 

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

 

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

 

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

 

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

 

“Whole Loan”:  A mortgage loan secured by a first mortgage lien on a multi-family property.

 

2.                                      Purchase and Sale of the Loan Obligations.

 

(a)                                 Set forth in Exhibit A hereto is a list of Loan Obligations and certain other information with respect to each of the Loan Obligations.  The Seller agrees to sell to the Issuer, and the Issuer agrees to purchase from the Seller, all of the Loan Obligations at an aggregate purchase price of U.S$249,657,925.46 (the “Purchase Price”).  Immediately prior to such sale, the Seller hereby conveys and assigns all right, title and interest it may have in such Loan Obligation to the Issuer.

 

(b)                                 Delivery or transfer of the Loan Obligations shall be made on or about February 27, 2015 (the “Closing Date”) at the time and in the manner agreed upon by the parties. Upon receipt of evidence of the delivery or transfer of the Loan Obligations to the Issuer or its

 

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designee, the Issuer shall pay or cause to be paid to the Seller the Purchase Price in the manner agreed upon by the Seller and the Issuer.

 

3.                                      Conditions.

 

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

 

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

 

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

 

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

 

4.                                      Covenants, Representations and Warranties.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(vii)                           no proceedings are pending or, to its knowledge, threatened against it before any federal, state or other governmental agency, authority, administrative or regulatory body, arbitrator, court or other tribunal, foreign or domestic, which, singularly or in the aggregate, could  materially and adversely affect the ability of the Seller to perform any of its obligations under this Agreement; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 For purposes of the representations and warranties set forth in Schedule 1(a), the phrases “to the knowledge of the Seller” or “to the Seller’s knowledge” shall mean, except where otherwise expressly set forth in a particular representation and warranty, the actual state of knowledge of the Seller or any servicer acting on its behalf regarding the matters referred to, in each case:  (i) at the time of the Seller’s origination or acquisition of the particular Loan Obligation, after the Seller having conducted such inquiry and due diligence into such matters as would be customarily performed by a prudent institutional commercial or multifamily, as applicable, mortgage lender; and (ii) subsequent to such origination, the Seller having utilized monitoring practices that would be utilized by a prudent institutional commercial or multifamily, as applicable, mortgage lender and having made prudent inquiry as to the knowledge of the servicer servicing such Loan Obligation on its behalf.  Also, for purposes of such representations and warranties, the phrases “to the actual knowledge of the Seller” or “to the Seller’s actual knowledge” shall mean, except where otherwise expressly set forth below, the actual state of knowledge of the Seller or any servicer acting on its behalf without any express or implied obligation to make inquiry.  All information contained in documents which are part of or required to be part of a Collateral File shall be deemed to be within the knowledge and the actual knowledge of the Seller.  Wherever there is a reference to receipt by, or possession of, the Seller of any information or documents, or to any action taken by the Seller or not taken by the Seller, such reference shall include the receipt or possession of such information or documents by, or the taking of such action or the failure to take such action by, the Seller or any servicer acting on its behalf.

 

(e)                                  If the Seller receives written notice of a breach of a representation or a warranty pursuant to this Agreement relating to any Loan Obligation, then the Seller shall (1) not later than 90 days from receipt of such notice or discovery by the Seller, cure such breach (to the extent such breach is capable of being cured), (2) subject to the consent of a majority of the holders of each Class of Notes (excluding any Note held by the Seller or any of its affiliates), make a Cash payment to the Issuer in an amount that the Loan Obligation Manager, on behalf of the Issuer, determines is sufficient to compensate the Issuer for such breach of representation or warranty (such payment, a “Loss Value Payment”), which Loss Value Payment will be deemed to cure such breach of representation or warranty, or (3) if such breach cannot be cured within

 

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such 90-day period, repurchase the affected Loan Obligation not later than the end of such 90-day period at the Repurchase Price (as defined in Section 16.3(c) of the Indenture)

 

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

 

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

 

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

 

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

 

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

 

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

 

5.                                      Sale.

 

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

 

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Seller shall be deemed to have granted, and the Seller hereby grants, to the Issuer a security interest in the Loan Obligations for the benefit of the Secured Parties and its assignees as security for the Seller’s obligations hereunder and the Seller consents to the pledge of the Loan Obligations to the Trustee.

 

6.                                      Non-Petition.

 

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

 

7.                                      Amendments.

 

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

 

8.                                      Communications.

 

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

 

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

 

To the Issuer:                                                                      Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd.

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

 

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

 

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

 

9.                                      Governing Law and Consent to Jurisdiction.

 

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

 

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

 

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

 

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

 

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

 

10.                               Counterparts.

 

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

 

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11.                               Limited Recourse Agreement.

 

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

 

12.                               Assignment and Assumption

 

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

 

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

 

 

	
 
    	
ARBOR   REALTY SR, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Valerie Rubin
    
	
 
    	
 
    	
Name:
    	
Valerie   Rubin
    
	
 
    	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY COMMERCIAL REAL ESTATE NOTES   2015-FL1, LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jarladth Travers
    
	
 
    	
 
    	
Name:
    	
Jarladth   Travers
    
	
 
    	
 
    	
Title:
    	
Director
    

 

 

Exhibit A

 

LIST OF LOAN OBLIGATIONS

 

Standard Maryland - Seneca Bay

Emerald Place

420 5th Avenue

Standard Maryland - Cedar Creek

Water Ridge

511-521 Ninth Ave (Residential)

5 Times Square

Crystal Lake

Charter Landing

Cardinal Multifamily Portfolio

Sylvan & Mirlen

Creekwood

Forest Edge

Shoals

Pueblo South

Grand Oaks Apartments

Hollow Creek Communities

 

 

SCHEDULE 1(a)

 

REPRESENTATIONS AND WARRANTIES RE:
 LOAN OBLIGATIONS

 

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

 

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

 

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

 

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

 

(4)                                 Mortgage Status; Waivers and Modifications.  Since origination and except prior to the Cut-off Date by written instruments set forth in the related Mortgage File (a) the material terms of such Mortgage, Note, Mortgage Loan guaranty, participation agreement, if applicable, and related Loan Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect

 

 

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

 

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

 

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

 

(7)                                 Junior Liens.  It being understood that B notes and junior participation interests secured by the same Mortgage as a Mortgage Loan are not subordinate mortgages or junior liens, except for any Crossed Mortgage Loan, there are, as of origination, and to the Seller’s knowledge, as of the Cut-off Date, no subordinate mortgages or junior liens securing the payment of money encumbering the related Mortgaged Property (other than Permitted Encumbrances and the Title Exceptions, taxes and assessments, mechanics and materialmens liens (which are the subject of the representation in paragraph (5) above), and equipment

 

 

and other personal property financing).  Except as set forth in Schedule 1(b), the Seller has no knowledge of any mezzanine debt secured directly by interests in the related Borrower.

 

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

 

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

 

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

 

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

 

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

 

(12)                          Condemnation.  As of the date of origination and to the Seller’s knowledge as of the Cut-off Date, there is no proceeding pending, and, to the Seller’s knowledge as of the date of origination and as of the Cut-off

 

 

Date, there is no proceeding threatened, for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the value, use or operation of the Mortgaged Property.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

removal of which would not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements obtained with respect to the Title Policy.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

(iv)             The participation agreement is legal, valid and enforceable as between its parties;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

SCHEDULE 1(a)

 

EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES

 

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

 

	
Loan Obligation
    	
 
    	
Representation
    	
 
    	
Exception
    
	
511-521 Ninth Ave (Residential)
    	
 
    	
(16)   Insurance
    	
 
    	
The   mortgaged property is insured by an insurance carrier providing general   liability coverage with respect to products and completed operations, with a   rating of A-:VIII by A.M. Best Company, Inc.
    
	
Emerald Place
    	
 
    	
(16)   Insurance
    	
 
    	
The   mortgaged property is insured by (i) an insurance carrier providing   general liability coverage with a rating of A-:IX by A.M. Best   Company, Inc., and (ii) an insurance carrier providing a flood coverage   policy that is insured by a division of the United States government, but   which carrier does not have an insurance rating.
    
	
Charter Landing
    	
 
    	
(16)   Insurance
    	
 
    	
The   mortgaged property is insured by an insurance carrier with a rating of   A-:VIII by A.M. Best Company, Inc.
    
	
Creekwood
    	
 
    	
(16)   Insurance
    	
 
    	
The   mortgaged property is insured by a flood insurance carrier with a rating of   A-: IV by A.M. Best Company, Inc.
    
	
Sylvan & Mirlen
    	
 
    	
(16)   Insurance
    	
 
    	
The   mortgaged property is insured by an insurance carrier with a rating of   A-:VIII by A.M. Best Company, Inc.
    
	
420   5th Avenue
    	
 
    	
(19)   No Contingent Interest or Equity Participation
    	
 
    	
Arbor   Realty SR, Inc. (“ARSR”), an affiliate of the lender, has an indirect   equity interest in the amount of $400,000 in the borrower by way of an   ownership interest in 420 Fifth Associates LLC (which holds a 10% interest in   the borrower as a tenant-in-common), which entitles ARSR to an 80% profits   interest 
    

 

 

	
Loan Obligation
    	
 
    	
Representation
    	
 
    	
Exception
    
	
 
    	
 
    	
 
    	
 
    	
in   amounts distributed to 420 Fifth Associates LLC.
    
	
Grand   Oaks Apartments
    	
 
    	
(36)   Organization of Borrower
    	
 
    	
The   borrower, VCP Grand Oaks, LLC, is controlled by Trace McCreary, who also   controls VCP Shoals, LLC, the borrower on the Shoals loan.
    
	
Shoals
    	
 
    	
(36)   Organization of Borrower
    	
 
    	
The   borrower, VCP Shoals, LLC, is controlled by Trace McCreary, who also controls   VCP Grand Oaks, LLC, the borrower on the Grand Oaks loan.
    
	
Standard   Maryland—Seneca Bay
    	
 
    	
(36)   Organization of Borrower
    	
 
    	
The   Borrower, STND Seneca Bay—Baltimore LLC, is owned and controlled by David Liu   and Lisa Zhou, who also control STND Cedar Creek—Baltimore LLC, the borrower   on the Standard Maryland—Cedar Creek mortgage loan.
    
	
Standard   Maryland—Cedar Creek
    	
 
    	
(36)   Organization of Borrower
    	
 
    	
The   Borrower, STND Cedar Creek—Baltimore LLC, is owned and controlled by David   Liu and Lisa Zhou, who also control STND Seneca Bay—Baltimore LLC, the   borrower on the Standard Maryland - Seneca Bay mortgage loan.
    

 

 

SCHEDULE 1(b)

 

Existing Mezzanine Debt

 

	
Loan Obligation
    	
 
    	
Amount of Existing
   Mezzanine Debt
    	
 
    
	
5 Times Square
    	
 
    	
$
    	
140,219,693
    	
 
    
					

 

 

SCHEDULE 1(c)

 

Future Mezzanine Debt

 

None.

 

 

SCHEDULE 1(d)

 

Crossed Loan Obligations

 

None.EXHIBIT 10.3

 

EXECUTION VERSION

 

ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2015-FL1, LTD.
   CLASS A NOTES, CLASS B NOTES AND CLASS C NOTES

 

 

Placement Agreement

 

Dated as of February 20, 2015

 

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

 

Sandler O’Neill & Partners, L.P.
 1251 Avenue of the Americas, 6th Floor
 New York, New York 10020

 

Ladies and Gentlemen:

 

ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2015-FL1, LTD. (the “Issuer”) and ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2015-FL1 LLC (the “Co-Issuer” and, together with the Issuer, the “Co-Issuers”), propose to issue their $165,750,000 Class A Senior Secured Floating Rate Term Notes Due 2025 (the “Class A Notes”), their $24,750,000 Class B Secured Floating Rate Notes Due 2025 (the “Class B Notes”), and their $28,500,000 Class C Secured Floating Rate Notes Due 2025 (the “Class C Notes” and, together with the Class A Notes and Class B Notes, the “Notes”).  The Issuer intends to issue 81,000 preferred shares, with a par value of U.S.$0.0001 per share and a notional amount of U.S.$1.00 per share (the “Preferred Shares” and, together with the Notes, the “Securities”).  The Co-Issuers have engaged J.P. Morgan Securities LLC (“JPMorgan Securities”) and Sandler O’Neill & Partners, L.P. (“Sandler O’Neill” and, together with JPMorgan Securities, each, a “Placement Agent” and, collectively, the “Placement Agents”) to act as placement agents in conjunction with the offer and sale of the Notes pursuant to this Placement Agreement (this “Agreement”).

 

The Notes shall be issued pursuant to an Indenture, to be dated as of February 27, 2015 (the “Indenture”), among the Co-Issuers, and U.S. Bank National Association, as Trustee (in such capacity, the “Trustee”), and the Preferred Shares shall be issued pursuant to the Governing Documents (as defined in the Indenture) of the Issuer, certain resolutions of the board of directors of the Issuer passed prior to the issuance of the Preferred Shares and the Preferred Shares Paying Agency Agreement, dated as of February 27, 2015 (the “Preferred Shares Paying Agency Agreement”), among the Issuer, U.S. Bank National Association, as preferred shares paying agent (the “Preferred Shares Paying Agent”), and MaplesFS Limited, as share registrar.

 

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Capitalized terms used but not defined herein shall have the meanings given to them in the Offering Memorandum (as hereinafter defined).

 

On the Closing Date, the Issuer will purchase the Loan Obligations described and listed in Annex A to the Offering Memorandum (collectively, the “Loan Obligations” and, with all other assets pledged to the Trustee on behalf of the Secured Parties pursuant to the Indenture, the “Collateral”) from Arbor Realty SR, Inc. (including any successor by merger, the “Seller” or “Parent”).

 

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

 

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

 

(a)                                 The Co-Issuers and the Parent hereby appoint the Placement Agents to act as placement agents in connection with the offer and sale of the Notes in accordance with the terms hereof, and the Placement Agents hereby accept such appointment in accordance with the terms hereof.  Subject to the terms and conditions hereof and in reliance on the representations and warranties herein set forth, the Co-Issuers and the Parent agree to sell or cause to be sold the Notes and the Placement Agents agree, on a best efforts basis, to (i) solicit offers to purchase the Notes on behalf of the Co-Issuers from time to time in negotiated transactions at various prices to be determined at the time of the sale and (ii) provide customary facilitation of the offering and sale of the Notes.  In connection with acting as placement agents hereunder, the Placement Agents shall have the right (but not the obligation) to purchase the Notes and resell the Notes pursuant to the terms of this Agreement.  Each of the Co-Issuers, the Parent and the Placement Agents agree that, as to any and all of the Notes with respect to which any Placement Agent arranges the sale pursuant to this Agreement, such Notes shall be offered and sold in reliance on, among other things, the agreements, representations, warranties and covenants of the Co-Issuers and the Parent contained herein and on the terms and conditions and in the manner provided for herein; provided, however, that neither Placement Agent shall have any liability to the Co-Issuers in the event that any purchase or sale is not consummated for any reason.  The Co-Issuers and the Parent shall have the sole right to accept or reject any or all offers presented by a Placement Agent in the sole and absolute discretion of the Co-Issuers and the Parent.  The Co-Issuers shall direct the Placement Agents to remit the aggregate purchase price for the Notes (net of the advisory, structuring and placement agent fee (the “Advisory, Structuring and Placement Agent Fee”) set forth on Schedule I, which shall be retained by the applicable Placement Agent) placed pursuant hereto to an account specified by the Issuer.

 

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

 

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

 

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

 

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

 

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

 

(v)                                 other than the Time of Sale Information, the Indenture, the Offering Memorandum and the other Basic Documents, neither it nor any of its affiliates

 

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(including its agents and representatives) has furnished or made available, or will furnish or make available, to potential investors in the Notes, without the prior consent of the Co-Issuers and the Parent, any written communication that constitutes an offer to sell or solicitation of an offer to buy the Notes.

 

(c)                                  In connection with the issuance of the Notes, the Co-Issuers and the Parent have prepared an Offering Memorandum, dated February 20, 2015 (including any exhibits and annexes thereto and any accompanying electronic media, the “Offering Memorandum”), in form and substance acceptable to the Placement Agents.  Copies of the Offering Memorandum will be delivered by the Co-Issuers and the Parent to the Placement Agents pursuant to the terms of this Agreement.  At or prior to the time when sales of the Notes were first made, which was approximately 12:45 p.m. (prevailing Eastern time) on February 20, 2015 (the “Time of Sale”), the Co-Issuers and the Parent have prepared the following documents: (i) a Preliminary Offering Memorandum, dated February 10, 2015 (including any exhibits and annexes thereto and any accompanying electronic media, the “Preliminary Offering Memorandum”and, together with any Additional Disclosure Materials (as defined below), the “Time of Sale Information”).  If, subsequent to the date of this Agreement, (x) the Co-Issuers, the Parent and the Placement Agents determine that, as to any investors in the Notes, the Time of Sale Information as of the Time of Sale included an untrue statement of material fact or omitted to state a material fact necessary in order to make the statement therein, in the light of the circumstances under which they were made, not misleading and any Placement Agent terminates its old purchase contracts and enters into new purchase contracts with investors in the Notes, then “Time of Sale Information” shall also include such additional information conveyed to investors as of the time of entry into the new purchase contracts, including any information that corrects such material misstatements or omissions and “Time of Sale” shall refer to the time and date on which such new purchase contracts were entered into. Any Time of Sale Information furnished to the Placement Agents subsequent to the date of this Agreement shall be in form and substance satisfactory to the Placement Agents and shall be listed on Annex B hereto.

 

(d)                                 Except as otherwise set forth in paragraph (e) below, the Notes to be placed by the Placement Agents shall be represented by one or more definitive global notes in book-entry form, which shall be deposited by or on behalf of the Co-Issuers with the Depository Trust Company (the “DTC”) or its designated custodian. The Co-Issuers shall deliver the applicable Notes to the Placement Agents, acting on behalf of the purchasers of the applicable Notes, by causing DTC to credit such Notes to the account of the applicable Placement Agent (or its designee) at DTC. The Notes shall be registered in such names and such authorized denominations as the Placement Agents may request in writing not less than forty-eight (48) hours prior to the Closing Date.  The Co-Issuers shall cause the Notes to be made available to the Placement Agents for inspection at least twenty-four (24) hours prior to the Closing Date at the offices of Cadwalader, Wickersham & Taft LLP at One World Financial Center, New York, New York 10281 (the “Closing Location”).  The time and date of delivery of the Notes shall be 10:00 a.m., New York City time, on February 27, 2015, or such other time and date as the Placement Agents and the Co-Issuers may agree upon in writing.  The time and date of such payment and delivery is referred to herein as the “Closing Date”.  On the Closing Date, the Co-Issuers and the Parent (jointly and severally) agree to pay to the Placement Agents the Advisory, Structuring and Placement Agent Fee set forth on Schedule I.

 

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

 

(f)                                   The documents to be delivered at the Closing Date by or on behalf of the parties hereto pursuant to Section 4 hereof and the Notes shall be delivered at the Closing Location on the Closing Date.  A meeting shall be held at the Closing Location at 5:00 p.m., New York City time, on the New York Business Day next preceding the Closing Date, or such other time agreed to by the parties hereto, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence shall be available for review by the parties hereto.  For the purposes of this Section 1(f), “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.

 

(g)                                  The Placement Agents acknowledge and agree that the Co-Issuers and, for purposes of the opinions to be delivered to the Placement Agents pursuant to Sections 4(g) and 4(h) hereof, counsel for the Co-Issuers and counsel for the Placement Agents, respectively, may rely upon the accuracy of the representations and warranties of the Placement Agents, and compliance by the Placement Agents with their agreements contained in Section 1(b) (including Annex A hereto), and the Placement Agents hereby consent to such reliance.

 

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

 

(i)             Each Placement Agent may provide to prospective investors Additional Disclosure Materials (as defined below), subject to the following conditions:  (i) each Placement Agent shall provide

 

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

 

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

 

(a)                                 Time of Sale Information and Offering Memorandum. The Time of Sale Information, as of the Time of Sale, did not, and as of the Closing Date, will not, and the Offering Memorandum, as of the date thereof, did not, and as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Co-Issuers do not make any representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to either Placement Agents furnished to the Co-Issuers in writing by the applicable Placement Agent expressly for use in the Time of Sale Information and the Offering Memorandum and any amendment or supplement thereto (such information as identified in Section 11, the “Placement Agent Information”).

 

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

 

(c)                                  No Material Adverse Change.  Other than as set forth in the Time of Sale Information, since the Time of Sale and other than as set forth in the Offering Memorandum, since the date thereof, there has not been any material adverse change or any development involving a prospective material adverse change, in or affecting the business, properties, management, financial position, stockholders’ equity or results of operations of the Co-Issuers or the Parent.

 

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

 

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

 

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

 

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

 

(h)                                 No Violation or Default.  None of the Co-Issuers or Parent is (A) in violation of its charter, by-laws or similar organizational documents; (B) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets are subject; or (C) in violation of any law or statute or any judgment, order or regulation of any court or governmental agency or body having jurisdiction over it or any of its properties (“Governmental Authority).

 

(i)                                     No Conflicts with Existing Instruments.  The execution, delivery and performance by the Issuer, Co-Issuer and Parent of the Basic Documents to which it is a party, the issuance and sale of the Notes and compliance by it with the terms thereof and the consummation of the transactions contemplated by such Basic Documents will not (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or, except as contemplated by the Basic Documents, result in the creation or imposition of any lien, charge or encumbrance upon any of its property or assets pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or

 

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by which it is bound or to which any of its property or assets are subject; (B) result in any violation of the provisions of the charter, by-laws or similar organizational documents of the Issuer, Co-Issuer or Parent; or (C) result in the violation of any law or statute or any judgment, order or regulation of any Governmental Authority.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(t)                                    17g-5 Compliance.  The Arbor Realty Trust, Inc. (“ART”) has executed and delivered a written representation to Moody’s Ratings Services Inc. (“Moody’s”) and DBRS, Inc. (“DBRS” and, together with Moody’s, the “Rating Agencies”) that it will take the actions

 

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specified in paragraphs (a)(3)(iii)(A) through (D) of Rule 17g-5 of the Exchange Act (“Rule 17g-5”), and ART has complied with each such representation in all material respects.

 

3.                                      Further Agreements of the Co-Issuers and the Parent.  Each of the Co-Issuers and the Parent jointly and severally covenants and agrees with the Placement Agents that:

 

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

 

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

 

(c)                                  Notice to the Placement Agents.  The Co-Issuers and the Parent will advise the Placement Agents promptly, and confirm such advice in writing: (i) of the issuance by any governmental or regulatory authority of any order preventing or suspending the use of either any Time of Sale Information or the Offering Memorandum or the initiation or threatening of any proceeding for that purpose; (ii) of the occurrence of any event at any time prior to the completion of the initial offering of the Notes as a result of which any Time of Sale Information or the Offering Memorandum as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Time of Sale Information and the Offering Memorandum are delivered to a purchaser, not misleading; and (iii) of the receipt by the Co-Issuers or the Parent or any of their Affiliates of any notice with respect to any suspension of the qualification of the Notes for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and the Co-Issuers and the Parent will use their commercially reasonable efforts to prevent the issuance of any such order preventing or suspending the use of any Time of Sale Information or the Offering Memorandum or suspending any such qualification of the Notes and, if any such order is issued, will obtain as soon as possible the withdrawal thereof.

 

(d)                                 Ongoing Compliance.  If, at any time prior to the Time of Sale, (i) any event shall occur or condition shall exist as a result of which any of the Time of Sale Information would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) it is necessary to amend or supplement any of the Time of Sale Information so that any of the Time of Sale Information will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, the Co-Issuers and the Parent will promptly notify the Placement Agents thereof and forthwith prepare (in a form reasonably acceptable to the Placement Agents) and, subject to paragraph (b) above in this Section 3, furnish to the Placement Agents such amendments or supplements to any of the Time of Sale Information as may be necessary so that the statements in any of the Time of Sale

 

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Information as so amended or supplemented will not, in light of the circumstances under which they were made, be misleading.  If at any time prior to the Closing Date, (x) any event shall occur or condition shall exist as a result of which the Offering Memorandum as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing (A) when the Offering Memorandum is delivered to a purchaser and (B) at the Closing Date, not misleading or (y) it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, the Co-Issuer and the Parent will promptly notify the Placement Agents thereof and forthwith prepare (in a form reasonably acceptable to the Placement Agents) and, subject to paragraph (b) above in this Section 3, furnish to the Placement Agents such amendments or supplements to the Offering Memorandum as may be necessary so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances existing when the Offering Memorandum as so amended or supplemented is delivered to a purchaser and at the Closing Date, be misleading or so that the Offering Memorandum will comply with applicable law.

 

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

 

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

 

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

 

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

 

(i)                                     No Integration.  None of the Co-Issuers and the Parent or any of their respective affiliates (as defined in Rule 501(b) of Regulation D) will, directly or through any agent, sell, offer for sale, solicit offers to buy or otherwise negotiate in respect of, any security

 

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(as defined in the Securities Act), that is or will be integrated with the sale of the Notes in a manner that would require registration of any of the Securities under the Securities Act.

 

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

 

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

 

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

 

(m)                             Sale Treatment.  Parent agrees that its transfer of the Loan Obligations shall be reflected on its balance sheet and other financial statements as a sale and/or contribution of the Loan Obligations to the Issuer and not as a financing. Issuer agrees that the transfer to the Issuer of the Loan Obligations shall be reflected on Issuer’s balance sheet and other financial statements as the purchase and/or acquisition of such Loan Obligations by Issuer from the Parent and not as a loan to Issuer from Parent.  Parent is not selling the Loan Obligations and the Co-Issuers are not selling the Notes with any intent to hinder, delay or defraud any of the creditors of the Parent or the Co-Issuers, as applicable.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)                                 Opinion of Counsel for the Co-Issuers and the Parent.  Cadwalader, Wickersham & Taft LLP, special counsel to the Co-Issuers and the Parent, Richards, Layton & Finger, P.A. counsel to the Co-Issuer, Maples and Calder, Cayman Islands counsel to the Issuer, and other applicable counsel to the Parent shall have furnished to the Placement Agents their respective written opinions with respect to such matters as the Placement Agents may reasonably

 

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request, each dated the Closing Date and addressed to the Placement Agents in form and substance reasonably satisfactory to the Placement Agents.  Except with respect to any negative assurance letter relating to the Time of Sale Information or the Offering Memorandum, each such opinion (a) may express counsel’s reliance as to factual matters on certificates of government and agency officials and the representations and warranties made by, and on certificates or other documents furnished by officers of, the parties to the Basic Documents and (b) may be qualified as an opinion only on the law of the State of New York, the Delaware Limited Liability Company Act and the federal law of the United States of America.

 

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

 

(j)                                    Opinion of Counsel for the Trustee, the Preferred Shares Paying Agent, the Loan Obligation Manager, the Servicer, Arbor Realty SR, Inc. and ARMS Equity.  Prior to the placement of the Notes hereunder, the Placement Agents shall have received the opinions, dated as of the Closing Date, of the respective counsel to the Trustee, the Preferred Shares Paying Agent, the Loan Obligation Manager, the Servicer, Arbor Realty SR, Inc. and ARMS Equity, each in form and substance reasonably satisfactory to the Placement Agents.

 

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

 

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

 

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

 

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

 

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

 

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

 

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5.                                      Indemnification and Contribution.

 

(a)                                 Indemnification of the Placement Agents by Co-Issuers and ART Each of the Co-Issuers and ART (jointly and severally) agree to indemnify and hold harmless the Placement Agents, their affiliates, directors and officers and each person, if any, who controls any Placement Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each a “Placement Agent Indemnitee”), from and against any and all losses, claims, damages and liabilities (including, without limitation, out-of-pocket legal fees and other out-of-pocket expenses incurred in connection with any suit, action, investigations or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Time of Sale Information or the Offering Memorandum (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information with respect to which the Placement Agents have agreed to indemnify each of the Issuer, Co-Issuer and ART pursuant to Section 5(b) hereof; provided that with respect to any such untrue statement in or omission from the Time of Sale Information, the indemnity agreement contained in this paragraph (a) with respect to the Time of Sale Information shall not inure to the benefit of a Placement Agent Indemnitee, to the extent that the sale to the person asserting any such loss, claim, damage or liability was an initial sale by the applicable Placement Agent and any such loss, claim, damage or liability of or with respect to the applicable Placement Agent results from the fact that (i) prior to the occurrence of the events described in clause (ii) below, and prior to the Time of Sale, the Co-Issuers or ART shall have notified the applicable Placement Agent that the Time of Sale Information contains an untrue statement of material fact or omits to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) such untrue statement or omission of a material fact was corrected in an amended or supplemented Time of Sale Information and such corrected Time of Sale Information was provided to the Placement Agents far enough in advance of the Time of Sale (but not less than one (1) Business Day) so that such corrected Time of Sale Information could have been provided (electronically or otherwise) to such person asserting any such loss, claim, damage or liability prior to the Time of Sale and (iii) the applicable Placement Agent did not send or give such corrected Time of Sale Information to such person at or prior to the Time of Sale.

 

(b)                                 Indemnification of the Co-Issuers and ART by Placement Agents.  The Placement Agents agree to severally but not jointly indemnify and hold harmless the Co-Issuers and ART and their respective affiliates, directors and officers and each person, if any, who controls any of the Co-Issuers or ART within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the indemnity set forth in subsection (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with the Placement Agent Information.

 

(c)                                  Indemnification Among Placement Agents. Each Placement Agent (the “Indemnifying Placement Agent”) agrees to indemnify and hold harmless the other Placement

 

15

 

Agent, its officers and directors and each person who controls such Placement Agent within the meaning of either the Securities Act or the Exchange Act (collectively, the “Indemnified Placement Agent”), against any and all losses, claims, damages, liabilities, costs and expenses, joint or several, to which any Indemnified Placement Agent may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, common law or otherwise, insofar as such losses, claims, damages, liabilities, costs or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of material fact in any Additional Disclosure Materials prepared by or on behalf of the Indemnifying Placement Agent or omission or alleged omission to state in such Additional Disclosure Materials a material fact necessary in order to make the statements therein (when read in conjunction with the Time of Sale Information), in light of the circumstances under which they were made, not misleading; except that the Indemnifying Placement Agent shall not be obligated so to indemnify and hold harmless an Indemnified Placement Agent for any losses, claims, damages, costs, expenses or liabilities (1) to the extent that the Indemnified Placement Agent is entitled to indemnification, or contribution therefor from the Co-Issuers or ART pursuant to this Section 5, or from any of the Trustee, the Servicer or the Special Servicer pursuant to any indemnification agreement between, among others, such party, the Issuer, the Indemnitor and/or the Placement Agents, or (2) arising out of or based upon any untrue statements, alleged untrue statements, omissions or alleged omissions that are also made in or consistent with the Preliminary Offering Memorandum.  Neither Placement Agent shall be liable to the other Placement Agent under this Section 5(c) for any losses, liabilities, claims or damages arising out of an untrue statement or alleged untrue statement or omission or alleged omission in any such document prepared by such other Placement Agent.  This indemnity agreement will be in addition to any liability that any Placement Agent may otherwise have.

 

(d)                                 Notice and Procedures.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to paragraph (a), (b) or (c) above, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 5 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure (in which case the Indemnifying Person shall be relieved of its indemnification obligation only to the extent of any loss caused by the Indemnified Person’s failure to provide notice); and provided further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 5.  If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; or (iii) the use of counsel chosen by the Indemnifying Person to

 

16

 

represent the Indemnified Person would present such counsel with a conflict of interest.  It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred.  Any such separate firm for the Placement Agents, their respective Affiliates, directors, officers and any control persons of a Placement Agent shall be designated in writing by the Placement Agents and any such separate firm for the Co-Issuers and ART, their respective directors and officers and any person who controls the Co-Issuers or ART, as applicable, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall be designated in writing by the Co-Issuers and ART.  Upon receipt of notice from the Indemnifying Person to such Indemnified Person of its election to assume the defense of such action and approval by the Indemnified Person of counsel, the Indemnifying Person will not be liable to such Indemnified Person under this Section 5 for any legal or other expenses subsequently incurred by such Indemnified Person in connection with the defense thereof unless the Indemnified Person shall have employed separate counsel in accordance with the third immediately preceding sentence (it being understood, however, that the Indemnifying Person shall not be liable for the expenses of more than one separate counsel (in addition to local counsel).  The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there is a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than forty-five (45) days after receipt by the Indemnifying Person of such request, (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement and (iii) such settlement does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of the Indemnifying Person.  No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

 

(e)                                  Contribution.  If the indemnification provided for in subsections (a), (b) and (c) above is unavailable to an Indemnified Person or is insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Co-Issuers and ART on the one hand and the Placement Agents on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i)

 

17

 

but also the relative fault of the Co-Issuers or ART on the one hand and the Placement Agents on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the Co-Issuers and ART on the one hand and the Placement Agents on the other shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Co-Issuers and/or ART from the sale of the Notes and the total fees, discounts and commissions received by the Placement Agents in connection therewith bear to the aggregate offering price of the Notes.  The relative fault of the Co-Issuers and ART on the one hand and the Placement Agents on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Co-Issuers or ART or by a Placement Agent and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances.

 

(f)                                   Limitation on Liability.  Each of the Co-Issuers, ART and the Placement Agents agrees that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (e) above.  The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (e) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 5, in no event shall the Placement Agents be required to contribute any amount in excess of the amount by which the total fees, discounts and commissions received by it with respect to the offering of the Notes exceeds the amount of any damages that the applicable Placement Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  Further, ART and the Co-Issuers each acknowledge and agree that no Placement Agent has any responsibility and shall not assume any liability for (i) any information that is posted to the internet website established and maintained by ART, the Parent, the Co-Issuers or any other party pursuant to Rule 17g-5 of the Exchange Act (such internet website, the “17g-5 Website”), or (ii) the failure of any information to be posted to the 17g-5 Website by any party.

 

(g)                                  Non-Exclusive Remedies.  The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

 

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

 

7.                                      Termination.  This Agreement may be terminated in the absolute discretion of the Placement Agents solely with respect to their role in this transaction, by notice to the Co-Issuers and the Parent if, after the execution and delivery of this Agreement and prior to the Closing Date (a) trading generally shall have been suspended or materially limited on or

 

18

 

by any of the New York Stock Exchange or the over-the-counter market; (b) a general moratorium on commercial banking activities shall have been declared by federal or New York State authorities or there is a material disruption in commercial banking or securities settlement or clearance services in the United States generally; or (c) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, either within or outside the United States, that in the judgment of the Placement Agents is material and adverse and makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Notes on the terms and in the manner contemplated by this Agreement, the Time of Sale Information or the Offering Memorandum.

 

8.                                      Payment of Expenses.

 

(a)                                 Regardless of whether the transactions contemplated by this Agreement are consummated or whether this Agreement is terminated, the Co-Issuers and the Parent shall pay or cause to be paid all costs and expenses incident to the performance of their obligations hereunder, including without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and delivery of the Notes and any taxes payable in connection therewith; (ii) the costs and expenses incident to the preparation and printing of the Time of Sale Information and the Offering Memorandum (including all exhibits, attachments, amendments and supplements thereto) and the distribution thereof in connection with the offering, purchase, sale, resale and delivery of the Notes; (iii) the costs of reproducing and distributing each of the Basic Documents; (iv) the reasonable costs and expenses of the Placement Agents, including the fees and expenses of its counsel, transfer taxes on resale of any of the Notes by a Placement Agent, any advertising expenses and other expenses incurred by a Placement Agent in connection with offering or reoffering the Notes and/or entering into purchase contracts with investors in the Notes; (v) the fees and expenses of the counsel to the Co-Issuers, the Parent and independent accountants; (vi) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Notes under the laws of such jurisdictions as a Placement Agent may designate and the preparation, printing and distribution of any “blue sky” memorandum (including the related reasonable fees and expenses of counsel for the Placement Agents); (vii) any fees charged by the Rating Agencies for rating and surveillance of the Notes; (viii) the fees and expenses of the Trustee and the Servicer (including related reasonable fees and expenses of any counsel to such parties), except to the extent otherwise set forth in the Basic Documents; (ix) all expenses and application fees incurred in connection with the application for the approval of all the Notes for book-entry transfer by DTC; (x) all reasonable expenses incurred in connection with any “road show” presentation to potential investors; (xi) the costs and expenses of the Co-Issuers in connection with the purchase of the Loan Obligations; and (xii) all other costs and expenses incident to the performance of the obligations of the Co-Issuers and the Parent hereunder that are not otherwise specifically provided for in this Section 8(a).

 

(b)                                 If (i) this Agreement is terminated pursuant to Section 7 hereof, (ii) the Co-Issuers for any reason fail to tender the Notes for delivery to the Placement Agents, (iii) the Issuer, Co-Issuer, or Parent fail or refuse to comply with this Agreement, or (iv) the Placement Agents fail to place the Notes, each of the Issuer, the Co-Issuer, and the Parent (jointly and severally) agrees to reimburse the Placement Agents for all out-of-pocket costs and expenses (including the fees and expenses of their counsel) reasonably incurred by a Placement Agent in connection with this Agreement and the offer and sale of the Notes contemplated hereby.

 

19

 

9.                                      Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors.  Nothing in this Agreement is intended or shall be construed to give any other person, other than the affiliates, officers, directors and controlling persons referred to in Section 5 hereof and their respective heirs and legal representatives any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. No purchaser of Notes from a Placement Agent shall be deemed to be a successor merely by reason of such purchase.

 

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

 

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

 

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

 

13.                               Miscellaneous.

 

(a)                                 Notices.  All notices and other communications hereunder shall be in writing and effective only upon receipt, and shall be deemed to have been duly given if mailed or transmitted and confirmed by any standard form of telecommunication.  Notices to the Placement Agents shall be given to it at J.P. Morgan Securities LLC, 383 Madison Avenue, 8th Floor, New York, New York 10179, Attention: ABS Syndicate, fax: 212-834-6754, email: andy.chema@jpmorgan.com, with copies to J.P. Morgan Securities LLC, 383 Madison Avenue, 32nd Floor, New York, New York 10179, Attention: Bianca A. Russo, fax: (917) 464-6116, email: russo_bianca@jpmorgan.com, and Clifford Chance US LLP, 31 West 52nd Street, New York, New York 10019, Attention: Steven T. Kolyer, fax: (212) 878-8375, email: steven.kolyer@cliffordchance.com and to Sandler O’Neill & Partners, L.P., 1251 Avenue of the Americas, 6th Floor New York, New York 10020, Attention:  General Counsel, telephone:  (212) 466 7800, fax:  (212) 466 7996, with copies to Clifford Chance US LLP, 31 West 52nd Street, New York, New York 10019, Attention: Steven T. Kolyer, fax: (212) 878-8375, email: steven.kolyer@cliffordchance.com.  Notices to the Issuer shall be given to it at Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd., c/o MaplesFS Limited, Queensgate House, P.O. Box 1093, Queensgate House, KY1 1102, Grand Cayman, Cayman Islands, Attention: The Directors, telephone:  (345) 945 7099, fax:  (345) 945 7100 with a copy to the Parent at the address below.  Notices to ART or the Parent shall be given to them at Arbor Realty Collateral Management, LLC, 333 Earle Ovington Boulevard, 9th Floor, Uniondale, New York 11553, Attention:  Executive Vice President, Structured Securitization, fax:  (212) 389 6573, telephone:  (212) 389 6546.  Notices to the Co-Issuer shall be given to it at Arbor Realty Commercial Real

 

20

 

Estate Notes 2015-FL1 LLC, c/o Puglisi & Associates, 830 Library Avenue, Suite 204, Newark, Delaware 19711, Attention: Donald J. Puglisi, telephone: (302) 738 6680, fax: (302) 738 7210 with a copy to the Parent at the address above.

 

(b)                                 Governing Law. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AGREEMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF.  THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AGREEMENT.

 

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

 

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

 

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

 

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

 

(g)                                  No Bankruptcy Petition/Limited Recourse.  The Placement Agents covenant and agree that, prior to the date which is one year and one day (or, if longer, the applicable preference period then in effect plus one day) after the payment in full of all of the Notes issued by the Co-Issuers, they will not institute against, or join any other Person in instituting against, any of the Co-Issuers any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any bankruptcy, insolvency, reorganization or similar law in any jurisdiction.  Notwithstanding any other provision of this Agreement, the obligations of the Issuer hereunder are limited-recourse obligations and the obligations of the Co-Issuer hereunder are non-recourse obligations, in each case, payable solely from the Collateral in accordance with the terms of the Indenture and following realization thereof and reduction thereof to zero, all obligations of and all claims against the Co-Issuers hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse may be had under this Agreement against any employee, agent, officer, partner, member, shareholder or director of any party hereto (collectively, the “Associated Persons”), in

 

21

 

respect of the transactions contemplated by this Agreement, it being expressly agreed and understood that this Agreement is solely an obligation of each of the parties hereto and that no personal liability whatever shall attach to or be incurred by any Associated Person under or by reason of the obligations, representations and agreements of the parties contained in this Agreement, or implied therefrom.  This Section 13(g) shall survive the termination or expiration of this Agreement.

 

(h)                                 Waiver of Jury Trial.  EACH OF THE CO-ISSUERS, THE PARENT AND EACH PLACEMENT AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST THE OTHER PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

 

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

 

[SIGNATURE PAGES FOLLOW]

 

22

 

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

 

	
 
    	
Very truly yours,
    
	
 
    
	
 
    	
ISSUER:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY COMMERCIAL REAL ESTATE NOTES 2015-FL1, LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jarladth Travers
    
	
 
    	
 
    	
Name:
    	
Jarladth Travers
    
	
 
    	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CO-ISSUER:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY COMMERCIAL REAL ESTATE NOTES   2015-FL1 LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Donald J. Puglisi
    
	
 
    	
 
    	
Name:
    	
Donald J. Puglisi
    
	
 
    	
 
    	
Title:
    	
Independent Manager
    
					

 

[Signatures continue on following page]

 

23

 

	
 
    	
PARENT:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY SR, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Valerie Rubin
    
	
 
    	
 
    	
Name:
    	
Valerie   Rubin
    
	
 
    	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    
	
 
    	
ART:
    
	
 
    	
 
    
	
 
    	
ARBOR REALTY TRUST, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ William Connolly
    
	
 
    	
 
    	
Name:
    	
William Connolly
    
	
 
    	
 
    	
Title:
    	
Authorized   Signatory
    

 

[Signatures continue on following page]

 

24

 

	
Accepted:  February 20,   2015
    	
 
    
	
 
    	
 
    
	
PLACEMENT   AGENTS:
    	
 
    
	
 
    	
 
    
	
J.P. MORGAN SECURITIES LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Bradley J. Horn
    	
 
    
	
 
    	
Name:
    	
Bradley J. Horn
    	
 
    
	
 
    	
Title:
    	
Vice President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SANDLER O’NEILL & PARTNERS, L.P.
    	
 
    
	
 
    	
 
    
	
By:
    	
Sandler O’Neill & Partners Corp.,
    	
 
    
	
 
    	
its sole general partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Robert A. Kleinert
    	
 
    
	
 
    	
Name:
    	
Robert A. Kleinert
    	
 
    
	
 
    	
Title:
    	
An Officer of the Corporation
    	
 
    
	
 
    	
 
    

 

25

 

SCHEDULE I

 

NOTES

 

	
 
    	
 
    	
Initial Note
   Principal
   Balance
    	
 
    	
Interest Rate
    	
 
    	
Ratings
   (Moody’s/ DBRS/)
    	
 
    
	
Class A Notes
    	
 
    	
$
    	
165,750,000
    	
 
    	
One-month LIBOR 1.75%
    	
 
    	
Aaa(sf)/AAA(sf)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Class B Notes
    	
 
    	
$
    	
24,750,000
    	
 
    	
One-month LIBOR + 3.25%
    	
 
    	
Baa2(sf)/BBB(sf)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Class C Notes
    	
 
    	
$
    	
28,500,000
    	
 
    	
One-month LIBOR + 4.25%
    	
 
    	
NR/BBB(low)(sf)
    	
 
    

 

The aggregate combined Advisory, Structuring and Placement Agent Fee paid to the Placement Agents is $2,190,000.00.

 

26

 

ANNEX A

 

Restrictions on Offers and Sales Outside the United States

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(F) It has not made and will not make any invitation to any member of the public in the Cayman Islands, within the meaning of Section 175 of the Cayman Islands Companies Law (2013 Revision), to subscribe for the Notes.

 

27

 

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

 

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

 

(A) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (B) it has not offered or sold and shall not offer or sell the Notes in United Kingdom other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or who it is reasonable to expect shall acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the “FSMA”);

 

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

 

(C) it, in relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), has represented and agreed that, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), has not made and will not make an offer of the Notes which are the subject of the offering contemplated by the Offering Memorandum as completed by the accompanying prospectus to the public in that Relevant Member State other than:  (A) to any legal entity which is a “qualified investor” as defined in the Prospectus Directive; (B) to fewer than 100 or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Placement Agent or Placement Agents nominated by the issuing entity for any such offer; or (C) in any other circumstances falling within Article 3(2) of the Prospectus Directive;  provided that, no such offer of the Notes referred to in (A) to (C) above shall require the Co-Issuers or the Placement Agents to publish a prospectus pursuant to Article 3 of the Prospectus Directive.  For the purposes of this Section 1(b)(viii), (1) the expression an “offer of the Notes which are subject of the offering contemplated by the Offering Memorandum to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient

 

28

 

information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe to the Notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, (2) the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including by the 2010 PD Amending Directive to the extent implemented in each Relevant Member State) and includes any relevant implementing measure in the Relevant Member State, and (3) the expression “2010 PD Amending Directive” means Directive 2010/73/EU.  “European Economic Area” means Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden and United Kingdom; and

 

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

 

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

 

29

 

ANNEX B

 

Subsequent Time of Sale Information

 

30

 

EXHIBIT A

 

ARBOR REALTY COLLATERAL MANAGEMENT, LLC

 

Officer’s Certificate

 

The undersigned, Paul Elenio, pursuant to Section 4(e) of that certain Placement Agreement dated as of February 20, 2015 by and among Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd., Arbor Realty Commercial Real Estate Notes 2015-FL1 LLC, Arbor Realty SR, Inc., Arbor Realty Trust, Inc., J.P. Morgan Securities LLC and Sandler O’Neill &  Partners, L.P. (the “Placement Agreement”) does HEREBY CERTIFY that:

 

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

 

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

 

(c)                                  Neither the execution and delivery of the Loan Obligation Management Agreement nor the performance by the Loan Obligation Manager of its duties thereunder or under the Indenture conflicts with or will violate or result in a breach or violation of any of the  terms or provisions of, or constitutes a default under: (i) the limited liability company agreement of the Loan Obligation Manager, (ii) the terms of any indenture, contract, lease, mortgage, deed 

 

31

 

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

 

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

 

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

 

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

 

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

 

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

 

32

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th day of February, 2015.

 

 

	
 
    	
ARBOR REALTY COLLATERAL MANAGEMENT, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Paul Elenio
    
	
 
    	
 
    	
Name:
    	
Paul Elenio
    
	
 
    	
 
    	
Title:
    	
Chief Financial Officer
    

 

33

 

EXHIBIT B

 

[·]

 

Officer’s Certificate

 

The undersigned,                                         , pursuant to Section 4(f) of that certain Placement Agreement dated as of February 20, 2015, by and among Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd., Arbor Realty Commercial Real Estate Notes 2015-FL1 LLC, Arbor Realty SR, Inc., Arbor Realty Trust, Inc., J.P. Morgan Securities LLC and Sandler O’Neill & Partners, L.P. (the “Placement Agreement”) does HEREBY CERTIFY that:

 

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

 

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

 

(c)                                  Neither the execution and delivery of the Loan Obligation Purchase Agreement nor the performance by Seller of its duties thereunder or under the Indenture conflicts with or will violate or result in a breach or violation of any of the terms or provisions of, or constitutes a default under: (i) the articles of incorporation or by-laws of Seller, (ii) the terms of

 

B-1

 

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

 

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

 

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

 

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

 

B-2

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th day of February, 2015.

 

 

	
 
    	
ARBOR REALTY SR, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Valerie Rubin
    
	
 
    	
Name:
    	
Valerie   Rubin
    
	
 
    	
Title:
    	
Authorized   Signatory
    
				

 

3

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