Document:

Exhibit
10.2

 

AMENDMENT TO LOAN DOCUMENTS

 

THIS AMENDMENT TO LOAN DOCUMENTS (this  “Amendment”)
is entered into as of June 30, 2010, by and between SILICON VALLEY BANK (“Bank”
or “Silicon”) and NETLIST, INC., a Delaware corporation (“Borrower”).  Borrower’s chief executive office is located
at 51 Discovery, Suite 150, Irvine, CA 92618.

 

RECITALS

 

A.            Bank and
Borrower are parties to that certain Loan and Security Agreement with an
Effective Date of October 31, 2009 
(as amended, modified, supplemented or restated, the “ Loan Agreement”)
in effect between Bank and Borrower.

 

B.            Bank has
extended credit to Borrower for the purposes permitted in the Loan Agreement.

 

C.            Borrower has
requested that Bank amend the Loan Agreement to modify the Profitability
Financial Covenant as more fully set forth herein.

 

D.            Bank has agreed
to so amend the Loan Agreement, but only to the extent, in accordance with the
terms, subject to the conditions and in reliance upon the representations and
warranties set forth below.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:

 

1.             Definitions.  Capitalized terms used but not defined in
this Amendment shall have the meanings given to them in the Loan Agreement.

 

2.             Amendments
to Loan Documents.

 

2.1          Modified
Profitability Financial Covenant.  Section 6.9(b) of
the Loan Agreement is hereby amended in its entirety to read as follows:

 

(b)           Profitability.  Measured as of the end of each of the
following fiscal quarters, minimum Gross Profit of not less than the following
[note — amounts within pointed brackets ( < $ > ) are negative amounts]:

 

	
  Fiscal
  Quarter ending ...

  	
   

  	
  Minimum Gross Profit

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  <415,000.00

  	
  > 

  
	
  December 31, 2009

  	
   

  	
  $

  	
  43,000.00

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  1,429,000.00

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  1,500,000.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  

 

1

 

3.             Limitation
of Amendments.

 

3.1          The amendments
set forth in Section 2, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (a) be a consent to any amendment,
waiver or modification of any other term or condition of any Loan Document, or
(b) otherwise prejudice any right or remedy which Bank may now have or may
have in the future under or in connection with any Loan Document.

 

3.2          This Amendment
shall be construed in connection with and as part of the Loan Documents and all
terms, conditions, representations, warranties, covenants and agreements set
forth in the Loan Documents (as amended by this Amendment, as applicable) are
hereby ratified and confirmed and shall remain in full force and effect.

 

4.             Representations
and Warranties.  To induce
Bank to enter into this Amendment, Borrower hereby represents and warrants to
Bank as follows:

 

4.1          Immediately
after giving effect to this Amendment, (a) the representations and
warranties contained in the Loan Documents are true, accurate and complete in
all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they
are true and correct as of such date, or except as otherwise previously
disclosed in writing by Borrower to Bank), and (b) no Event of Default has
occurred and is continuing;

 

4.2          Borrower has
the power and authority to execute and deliver this Amendment and to perform
its obligations under the Loan Documents, as amended by this Amendment;

 

4.3          The
organizational documents of Borrower delivered to Bank on the Effective Date
remain true, accurate and complete and have not been otherwise amended,
supplemented or restated and are and continue to be in full force and effect;

 

4.4          The execution
and delivery by Borrower of this Amendment and the performance by Borrower of
its obligations under the Loan Documents, as amended by this Amendment, have
been duly authorized;

 

4.5          The execution
and delivery by Borrower of this Amendment and the performance by Borrower of
its obligations under the Loan Documents, as amended by this Amendment, do not
and will not contravene (a) any law or regulation binding on or affecting
Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other
governmental or public body or authority, or subdivision thereof, binding on
Borrower, or (d) the organizational documents of Borrower;

 

2

 

4.6          The execution
and delivery by Borrower of this Amendment and the performance by Borrower of
its obligations under the Loan Documents, as amended by this Amendment, do not
require any order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by any governmental or
public body or authority, or subdivision thereof, binding on either Borrower,
except as already has been obtained or made; and

 

4.7          This Amendment
has been duly executed and delivered by Borrower and is the binding obligation
of Borrower, enforceable against Borrower in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors’
rights.

 

5.             Release
by Borrower and Guarantor.  Each
of Borrower and Guarantor (individually and collectively, “Obligor”) hereby
agree as follows:

 

5.1          FOR
GOOD AND VALUABLE CONSIDERATION, Obligor hereby forever
relieves, releases, and discharges Bank and its present or former employees,
officers, directors, agents, representatives, attorneys, and each of them, from
any and all claims, debts, liabilities, demands, obligations, promises, acts,
agreements, costs and expenses, actions and causes of action, of every type,
kind, nature, description or character whatsoever, whether known or unknown,
suspected or unsuspected, absolute or contingent, arising out of or in any
manner whatsoever connected with or related to facts, circumstances, issues,
controversies or claims existing or arising from the beginning of time through
and including the date of execution of this Amendment (collectively “Released Claims”). 
Without limiting the foregoing, the Released Claims shall include any
and all liabilities or claims arising out of or in any manner whatsoever
connected with or related to the Loan Documents, the Recitals hereto, any
instruments, agreements or documents executed in connection with any of the
foregoing or the origination, negotiation, administration, servicing and/or
enforcement of any of the foregoing.

 

5.2          In furtherance
of this release, Obligor expressly acknowledges and waives any and all rights
under Section 1542 of the California Civil Code, which provides as
follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR EXPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.” (Emphasis added.)

 

3

 

5.3          By entering
into this release, Obligor recognizes that no facts or representations are ever
absolutely certain and it may hereafter discover facts in addition to or
different from those which it presently knows or believes to be true, but that
it is the intention of Obligor hereby to fully, finally and forever settle and
release all matters, disputes and differences, known or unknown, suspected or
unsuspected; accordingly, if Obligor should subsequently discover that any fact
that it relied upon in entering into this release was untrue, or that any
understanding of the facts was incorrect, Obligor shall not be entitled to set
aside this release by reason thereof, regardless of any claim of mistake of
fact or law or any other circumstances whatsoever.  Obligor acknowledges that it is not relying
upon and has not relied upon any representation or statement made by Bank with
respect to the facts underlying this release or with regard to any of such
party’s rights or asserted rights.

 

5.4          This release
may be pleaded as a full and complete defense and/or as a cross-complaint or
counterclaim against any action, suit, or other proceeding that may be
instituted, prosecuted or attempted in breach of this release.  Obligor acknowledges that the release
contained herein constitutes a material inducement to Bank to enter into this
Amendment, and that Bank would not have done so but for Bank’s expectation that
such release is valid and enforceable in all events.

 

5.5          Obligor hereby
represents and warrants to Bank, and Bank is relying thereon, as follows:

 

(a)           Except as
expressly stated in this Amendment, neither Bank nor any agent, employee or
representative of Bank has made any statement or representation to Obligor
regarding any fact relied upon by Obligor in entering into this Amendment.

 

(b)           Obligor has
made such investigation of the facts pertaining to this Amendment and all of the
matters appertaining thereto, as it deems necessary.

 

(c)           The terms of
this Amendment are contractual and not a mere recital.

 

(d)           This Amendment
has been carefully read by Obligor, the contents hereof are known and
understood by Obligor, and this Amendment is signed freely, and without duress,
by Obligor.

 

(e)           Obligor
represents and warrants that it is the sole and lawful owner of all right,
title and interest in and to every claim and every other matter which it
releases herein, and that it has not heretofore assigned or transferred, or
purported to assign or transfer, to any person, firm or entity any claims or
other matters herein released.  Obligor
shall indemnify Bank, defend and hold it harmless from and against all claims
based upon or arising in connection with prior assignments or purported
assignments or transfers of any claims or matters released herein.

 

4

 

6.             Fee.  In consideration for Bank
entering into this Amendment, Borrower shall pay Bank a fee in the mutually
agreed amount of $2,500.00, which fee shall be
earned in full and payable concurrently with the execution and delivery of this
Amendment.  Such fee shall be
non-refundable and in addition to all interest and other fees payable to Bank under
the Loan Documents.  Bank is authorized
to charge such fee to Borrower’s loan account.

 

7.             Bank
Expenses.  Borrower shall
pay to Bank, when due, all Bank Expenses (including reasonable attorneys’ fees
and expenses), when due, incurred in connection with or pursuant to this
Amendment.

 

8.             Counterparts.  This Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

 

9.             Effectiveness.  This Amendment shall be deemed effective upon
the due execution and delivery to Bank of this Amendment by each party hereto.

 

[Remainder of page intentionally left blank; signature page immediately
follows.]

 

5

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.

 

	
  BANK

  	
   

  	
  BORROWER

  
	
   

  	
   

  	
   

  
	
  Silicon
  Valley Bank

  	
   

  	
  NETLIST, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Kurt Miklinski

  	
   

  	
  By:

  	
  /s/
  Gail Sasaki

  
	
  Name:
  Kurt Miklinski

  	
   

  	
  Name:
  Gail Sasaki

  
	
  Title:
  Vice President

  	
   

  	
  Title:
  Chief Financial Officer

  
					

 

CONSENT

 

The
undersigned hereby expressly agrees to Section 5 of the foregoing
Amendment and acknowledges that its consent to the rest of the foregoing
Amendment is not required, but the undersigned nevertheless does hereby agree
and consent to the entire foregoing Amendment and to the documents and
agreements referred to therein and to all future modifications and amendments
thereto, and any termination thereof, and to any and all other present and
future documents and agreements between or among the foregoing parties.  Nothing herein shall in any way limit any of
the terms or provisions of the Guaranty, the Guarantor Security Agreement, or
any other Loan Documents, executed by the undersigned, all of which are hereby
ratified and affirmed.

 

 

	
  GUARANTOR:

  	
   

  
	
   

  	
   

  
	
  NETLIST TECHNOLOGY TEXAS
  LP, a Texas limited partnership

  	
   

  
	
   

  	
   

  
	
  By:          NETLIST, INC., its
  general partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gail Sasaki

  	
   

  
	
  Name: Gail Sasaki

  	
   

  
	
  Title: Chief Financial
  Officer

  	
   

  
			

 

Signature PageExhibit
10.1

 

Execution
Copy

 

THIS MASTER REPURCHASE AND SECURITIES CONTRACT, dated as of August 6,
2010 (this “Agreement”), is made by and between STARWOOD
PROPERTY MORTGAGE SUB-2, L.L.C., a Delaware limited liability
company (as more specifically defined below, “Seller”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association (as more specifically defined below, “Buyer”).  Seller and Buyer (each a “Party”)
hereby agree as follows:

 

ARTICLE 1

 

APPLICABILITY

 

Section 1.01           Applicability.  Subject to the terms and conditions of the
Repurchase Documents, at the request of Seller, the Parties may from time to
time enter into transactions in which Seller agrees to sell, transfer and
assign to Buyer certain Assets and all related rights in and interests related
to such Assets on a servicing released basis, against the transfer of funds by
Buyer representing the Purchase Price for such Assets, with a simultaneous
agreement by Buyer to transfer to Seller and Seller to repurchase such Assets
in a repurchase transaction at a date not later than the Maturity Date, against
the transfer of funds by Seller representing the Repurchase Price for such
Assets.

 

ARTICLE 2

 

DEFINITIONS AND INTERPRETATION

 

“Accelerated
Repurchase Date”:  Defined in Section 10.02.

 

“Account
Control Agreement”:  A bank account
control agreement in favor of Buyer with respect to any bank account related to
a Purchased Asset, substantially in the form attached as Exhibit G-1
hereto.

 

“Actual
Knowledge”:  With respect to any
Person, the actual knowledge of such Person without further inquiry or
investigation; provided, that for the avoidance of doubt, with respect
to Seller, Guarantor, Manager, the Intermediate Starwood Entities and
Sub-Servicer, such actual knowledge shall include the knowledge of all such
Persons collectively and each of their respective employees, officers,
directors and agents (and with respect to agents, solely to those agents who
worked on the acquisition of the Assets or this Transaction) of any of them.

 

“Affiliate”:  With respect to any Person, any other Person
directly or indirectly Controlling, Controlled by, or under common Control
with, such Person.

 

“Affiliated
Hedge Counterparty”:  Buyer, or an
Affiliate of Buyer, in its capacity as a party to any Interest Rate Protection
Agreement with Seller or any Affiliate of Seller.

 

“Alternative
Rate”:  A per annum rate based on an
index approximating the behavior of LIBOR, as determined by Buyer.

 

 

“Anti—Terrorism
Laws”:  Any Requirements of Law
relating to money laundering or terrorism, including Executive Order 13224
signed into law on September 23, 2001, the regulations promulgated by the
Office of Foreign Assets Control of the Treasury Department, and the Patriot
Act.

 

“Applicable
Percentage”:  For each Purchased
Asset as of any date, the applicable percentage determined by Buyer for such
Purchased Asset on the related Purchase Date and set forth in the Confirmation
for such Purchased Asset, up to the Maximum Applicable Percentage.

 

“Appraisal”:  A FIRREA-compliant appraisal addressed to and
reasonably satisfactory to Buyer of the related Underlying Mortgaged Property
from an Independent Appraiser.

 

“Asset”:  Any Whole Loan, Senior Interest, Junior
Interest, Mezzanine Loan or Mezzanine Participation Interest, the Underlying
Mortgaged Property for which is included in the categories for Types of
Mortgaged Property.

 

“Bankruptcy
Code”:  Title 11 of the United States
Code.

 

“Blank
Assignment Documents”:  Defined in Section 6.02(k).

 

“Book
Value”:  For any Purchased Asset as
of any date, an amount, as certified by Seller in the related Transaction
Request and Confirmation, equal to the lesser of (a) the outstanding
principal amount or par value thereof as of such date, and (b) the price
that Seller initially paid or advanced in respect thereof plus any additional
amounts advanced by Seller, minus principal payments received by Seller, and as
further reduced by losses realized and write-downs taken by Seller.

 

“Business
Day”:  Any day other than a Saturday
or a Sunday (a) on which banks in the States of New York, California or
North Carolina are not authorized or obligated by law or executive order to be
closed, or (b) if the term “Business Day” is used in connection with the
determination of LIBOR, on which dealings in Dollar deposits are carried on in
the London interbank market.

 

“Buyer”:  Wells Fargo Bank, National Association.

 

“Buyer’s
Margin Percentage”:  For any
Purchased Asset as of any date, the percentage equivalent of the quotient
obtained by dividing one (1) by the Applicable Percentage for such
Purchased Asset as of such date.

 

“Capital
Lease Obligations”:  With respect to
any Person, the amount of all obligations of such Person to pay rent or other
amounts under a lease of property to the extent and in the amount that such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person.

 

“Capital
Stock”:  Any and all shares,
interests, participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent equity ownership interests in a
Person which is not a corporation, including, without limitation, any and all 

 

2

 

member
or other equivalent interests in any limited liability company, and any and all
partnership or other equivalent interests in any partnership or limited
partnership, and any and all warrants or options to purchase any of the
foregoing.

 

“Cash
Liquidity”:  With respect to
Guarantor on any date, the amount of cash and cash equivalents held by
Guarantor.

 

“Change
of Control”:  The occurrence of any
of the following events: (a) prior to an internalization of management by
Guarantor, if Manager is no longer the manager of Guarantor; (b) after
such time as Guarantor is internally managed, any “person” or “group” (within
the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) shall become, or obtain
rights (whether by means of warrants, options or otherwise) to become, the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a percentage of the total voting power of all
classes of Capital Stock of Guarantor entitled to vote generally in the
election of directors, of 20% or more; (c) change in Control of Manager
and/or Starwood Capital Group Global, L.P. from the Person or Persons who are
directly or indirectly Controlling such entities on the date hereof; or
(d) each of either Guarantor or the Intermediate Starwood Entities shall
cease to own and control, of record and beneficially, directly or indirectly
100% of the outstanding Capital Stock of Seller.  Notwithstanding the foregoing, Buyer shall
not be deemed to approve or to have approved any internalization of management
by Guarantor as a result of this definition or any other provision herein,
other than to the extent actually approved pursuant to Section 8.14
or Section 10.01(g).

 

“Class”:  With respect to an Asset, such Asset’s
classification as one of the following: Whole Loan, Senior Interest, Junior
Interest, Mezzanine Loan or Mezzanine Participation Interest.

 

“Closing
Certificate”:  A true and correct
certificate in the form of Exhibit D, executed by a Responsible
Officer of Seller.

 

“Closing
Date”:  August 6, 2010.

 

“CMBS”:  Shall mean mortgage pass-through certificates
or other securities issued pursuant to a securitization of commercial real
estate loans.

 

“Code”:  The Internal Revenue Code of 1986, as
amended.

 

“Collection
Account”: Any collection, escrow, reserve, collateral or lock—box accounts
pledged to Seller with respect to any Purchased Asset.

 

“Commitment
Fee”:  An amount equal to fifty basis
points (0.50%) multiplied by the Maximum Amount, minus a credit of $700,000,
which credit is in full satisfaction of the credit required under the Master
Repurchase and Securities Contract dated as of March 31, 2010 by and
between Buyer and Starwood Property Mortgage Sub-1, L.L.C.

 

“Compliance
Certificate”:  A true and correct
certificate in the form of Exhibit E, executed by a Responsible
Officer of Seller.

 

3

 

“Confirmation”:  A purchase confirmation in the form of Exhibit B,
duly completed, executed and delivered by Seller and Buyer in accordance with Section 3.01.

 

“Contingent
Liabilities”:  With respect to any
Person as of any date, all of the following as of such date:
(a) liabilities and obligations (including any Guarantee Obligations) of
such Person in respect of “off—balance sheet arrangements” (as defined in the
Off—Balance Sheet Rules defined below), (b) obligations, including
Guarantee Obligations, whether or not required to be disclosed in the footnotes
to such Person’s financial statements, guaranteeing in whole or in part any Non—Recourse
Indebtedness, lease, dividend or other obligation, excluding, however,
(i) contractual indemnities (including any indemnity or price—adjustment
provision relating to the purchase or sale of securities or other assets), and
(ii) guarantees of non—monetary obligations which have not yet been called
on or quantified, of such Person or any other Person, and (c) forward
commitments or obligations to fund or provide proceeds with respect to any loan
or other financing which is obligatory and non—discretionary on the part of the
lender.  The amount of any Contingent
Liabilities described in the preceding clause (b) shall be deemed to
be (i) with respect to a guarantee of interest or interest and principal,
or operating income guarantee, the sum of all payments required to be made
thereunder (which, in the case of an operating income guarantee, shall be
deemed to be equal to the debt service for the note secured thereby), through
(x) in the case of an interest or interest and principal guarantee, the
stated date of maturity of the obligation (and commencing on the date interest
could first be payable thereunder), or (y) in the case of an operating
income guarantee, the date through which such guarantee will remain in effect,
and (ii) with respect to all guarantees not covered by the preceding
clause (i), an amount equal to the stated or determinable amount of the
primary obligation in respect of which such guarantee is made or, if not stated
or determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as recorded on the
balance sheet and in the footnotes to the most recent financial statements of
such Person.  “Off-Balance Sheet Rules”
means the Disclosure in Management’s Discussion and Analysis About Off-Balance
Sheet Arrangements and Aggregate Contractual Obligations, Securities Act
Release Nos. 33—8182; 34—47264; FR—67 International Series Release No. 1266
File No. S7—42—02, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified at 17
CFR Parts 228, 229 and 249).

 

“Contractual
Obligation”:  With respect to any
Person, any provision of any securities issued by such Person or any indenture,
mortgage, deed of trust, deed to secure debt, contract, undertaking, agreement,
instrument or other document to which such Person is a party or by which it or
any of its property or assets are bound or are subject.

 

“Control”:  With respect to any Person, the direct or
indirect possession of the power to direct or cause the direction of the
management or policies of such Person, whether through the ability to exercise
voting power, by contract or otherwise.  “Controlling,”
“Controlled” and “under common Control” have correlative meanings.

 

“Controlled
Account Agreement”:  A control
agreement with respect to the Waterfall Account and the Servicing Agreement
Account, each, dated as of the date of this Agreement, each among Seller, Buyer
and Waterfall Account Bank, each of which agreements shall be substantially in
the form of Exhibit G-2 attached hereto.

 

4

 

“Core
Pricing Margin”:  Defined in Schedule 2,
which definition is incorporated herein by reference.

 

“Core
Purchased Assets”:  All Purchased
Assets that as of the Purchase Date therefor, consist either of eligible Whole
Loans or eligible Senior Interests.

 

“Credit
Event”:  Defined
in the Fee and Pricing Letter, which definition is incorporated herein by
reference.

 

“Current
Mark-to-Market Value”:  For any
Purchased Asset as of any date, the market value for such Purchased Asset as of
such date as determined by Buyer (a) with reference to the market value of
the Underlying Mortgaged Property, and (b) taking into account such other
criteria (other than current interest rates and spreads) as and to the extent
that Buyer deems appropriate, including, as appropriate, market conditions,
credit quality, liquidity of position, subordination and delinquency status and
aging which market value, in each case, may be determined to be zero.  The Current Mark-to-Market Value of each
Purchased Asset as of the related Purchase Date will be set forth in on the
Confirmation executed in connection with the related Transaction, and such
Current Mark-to-Market Value will not be adjusted by Buyer for any Purchased
Asset after the related Purchase Date unless a Credit Event shall occur with
respect to the related Purchased Asset, provided that there shall be no
restrictions on Buyer’s ability to recalculate, solely for internal purposes,
the Current Mark-to-Market Value of any Purchased Asset at any time.

 

“Custodial
Agreement”:  The Custodial Agreement,
dated as of the date hereof, among Buyer, Seller and Custodian, substantially
in the form of Exhibit J.

 

“Custodian”:  Wells Fargo Bank, National Association,
solely in its capacity as Custodian pursuant to the Custodial Agreement, or any
permitted successor thereto.

 

“Debt
Yield”:  With respect to any
Purchased Asset(s) and for any relevant calendar quarter, the percentage
equivalent of the quotient obtained by dividing (i) the product of
(A) the underwritten net cash flow for such period from the related
Mortgaged Property or Mortgaged Properties securing the Purchased Asset(s), as
determined by Buyer in its sole and absolute discretion, multiplied by
(B) a fraction, (1) the numerator of which shall be 360, and (2) the
denominator of which shall be the number of days in the relevant Test Period,
by (ii) the then-current Purchase Price of such Purchased Asset(s) on
the last day of such calendar quarter.

 

“Debt
Yield Test”:  Defined in Schedule 2,
which definition is incorporated herein by reference.

 

“Default”:  Any event which, with the giving of notice or
the lapse of time, or both, would become an Event of Default.

 

“Default
Rate”:  As of any date, the Pricing
Rate in effect on such date plus 400 basis points (4.00%), determined after any
Repurchase Date on the basis of periods corresponding to Pricing Periods.

 

5

 

“Defaulted
Asset”:  Any Asset or Purchased
Asset, as applicable, (a) that is thirty (30) or more days (or, in the
case of payments due at maturity, one (1) day) delinquent in the payment
of principal, interest, fees, distributions or any other amounts payable under
the related Purchased Asset Documents, (b) for which there is a non—monetary
default under the related Purchased Asset Documents, beyond any applicable
notice or cure period, (c) as to whose Underlying Obligor an Insolvency
Event has occurred, or (d) for which Seller, Servicer or Sub-Servicer has
received notice of the foreclosure or proposed foreclosure of any Lien on the
related Underlying Mortgaged Property; provided that with respect to any
Junior Interest, Senior Interest or Mezzanine Participation Interest, in
addition to the foregoing such Junior Interest, Senior Interest or Mezzanine
Participation Interest will also be considered a Defaulted Asset to the extent
that the Underlying Whole Loan would be considered a Defaulted Asset as
described in this definition.

 

“Derivatives
Contract”:  Any rate swap
transaction, basis swap, credit derivative transaction, forward rate
transaction, commodity swap, commodity option, forward commodity contract,
equity or equity index swap or option, bond or bond price or bond index swap or
option or forward bond or forward bond price or forward bond index transaction,
interest rate option, forward foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction, cross—currency
rate swap transaction, currency option, spot contract, or any other similar
transaction or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, including any obligations or
liabilities thereunder.

 

“Derivatives
Termination Value”:  With respect to
any one or more Derivatives Contracts, after taking into account the effect of
any legally enforceable netting agreement relating to such Derivatives
Contracts, (a) for any date on or after the date such Derivatives
Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date
prior to the date referenced in the preceding clause (a), the amount(s) determined
as the mark—to—market value(s) for such Derivatives Contracts, as
determined based on one or more mid—market or other readily available
quotations provided by any recognized dealer in such Derivatives Contracts
(which may include Buyer).

 

“Dollars”
and “$”:  Lawful money of the
United States of America.

 

“Early
Repurchase Date”:  Defined in Section 3.04.

 

“EBITDA”:  With respect to any Person and any Test
Period, an amount equal to the sum of (a) Net Income (or loss) of such
Person (prior to any impact from minority interests or joint venture net income
and before deduction of any dividends on preferred stock of such Person), plus
the following (but only to the extent actually included in determination of
such Net Income (or loss)): 
(i) depreciation and amortization expense, (ii) Interest
Expense, (iii) income tax expense, and (iv) extraordinary or
non-recurring gains and losses, plus (b) such Person’s proportionate share
of Net Income of the joint venture investments and unconsolidated Affiliates of
such Person, all with respect to such Test Period, plus (c) amounts
deducted in accordance with GAAP in respect of other non-cash expenses in
determining such Net Income for such Person.

 

6

 

“Eligible
Asset”:  An Asset:

 

(a)           that
satisfies the LTV/LTC Test;

 

(b)           with
respect to which no Representation Breach exists;

 

(c)           that
is not a Defaulted Asset;

 

(d)           with
respect to which there are no future funding obligations on the part of Seller,
Buyer or any other Person;

 

(e)           whose
Underlying Mortgaged Property is located in the United States, whose Underlying
Obligors are domiciled in the United States, and all obligations thereunder and
under the Underlying Mortgage Documents are denominated and payable in Dollars;

 

(f)            whose
Underlying Obligors are not Sanctioned Entities;

 

(g)           that
is directly or indirectly secured by one or more Mortgaged Properties that
satisfy the applicable Debt Yield Test for the related Asset; and

 

(h)           that
is secured by a perfected, first priority security interest on a commercial or
multi-family property (or, in the case of a Mezzanine Loan or a Mezzanine
Participation Interest, secured by first priority pledges of all of the Equity
Interests of Persons that directly or indirectly own a commercial or
multi-family property); provided, that notwithstanding the failure of an
Asset or Purchased Asset to conform to the requirements of this definition,
Buyer may, subject to such terms, conditions and requirements and Applicable
Percentage adjustments as Buyer may require, designate in writing any such non—conforming
Asset or Purchased Asset as an Eligible Asset, which designation (1) may
include a temporary or permanent waiver of one or more Eligible Asset
requirements, and (2) shall not be deemed a waiver of the requirement that
all other Assets and Purchased Assets must be Eligible Assets (including any
Assets that are similar or identical to the Asset or Purchased Asset subject to
the waiver).

 

“Eligible
Assignee”:  Any of the following
Persons designated by Buyer for purposes of Section 18.08(c):  (a) a bank, financial institution,
pension fund, insurance company or similar Person, an Affiliate of any of the
foregoing, and an Affiliate of Buyer, and (b) any other Person to which
Seller has consented; provided, that such consent of Seller shall not be
unreasonably withheld, delayed or conditioned, and shall not be required at any
time when a Event of Default exists. 
Such Person shall provide to Seller such duly executed IRS forms as
Seller reasonably requests.

 

“Environmental
Laws”:  Any federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, guideline, written
policy and rule of common law now or hereafter in effect, and any judicial
or administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, employee health
and safety or hazardous materials, including CERCLA, RCRA, the Federal Water
Pollution 

 

7

 

Control
Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking
Water Act, the Oil Pollution Act of 1990, the Emergency Planning and the
Community Right-to-Know Act of 1986, the Hazardous Material Transportation Act,
the Occupational Safety and Health Act, and any state and local or foreign
counterparts or equivalents.

 

“Equity
Interests”:  With respect to any
Person, (a) any share, interest, participation and other equivalent
(however denominated) of capital stock of (or other ownership, equity or profit
interests in) such Person, (b) any warrant, option or other right for the
purchase or other acquisition from such Person of any of the foregoing,
(c) any security convertible into or exchangeable for any of the
foregoing, and (d) any other ownership or profit interest in such Person
(including partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such share, warrant, option, right or other
interest is authorized or otherwise existing on any date.

 

“ERISA”:  The Employee Retirement Income Security Act
of 1974.

 

“Event
of Default”:  Defined in Section 10.01.

 

“Extension
Fee”:  0.25% of the Maximum Aggregate
Repurchase Price, payable by Seller on the date of the exercise by Seller of
each Extension Option.

 

“Fee
and Pricing Letter”:  The letter
agreement, dated as of the date of this Agreement, by and between Buyer and
Seller.

 

“Fixed
Charge Coverage Ratio”:  With respect
to any Person and for any Test Period at any time, the EBITDA for such period,
divided by the Fixed Charges for the same period.

 

“Fixed
Charges”:  With respect to any Person
and for any Test Period at any time, the sum of (a) debt service,
(b) all preferred dividends, (c) Capital Lease Obligations paid or
accrued during such period, (d) capital expenditures (if any), and
(e) any amounts payable under any Ground Lease.

 

“Flex
Pricing Margin”:  Defined in Schedule 2,
which definition is incorporated herein by reference.

 

“Flex
Purchased Assets”:  All Purchased
Assets that as of the Purchase Date therefor, consist of eligible Junior
Interests, eligible Mezzanine Loans, and eligible Mezzanine Participation
Interests, and solely with respect to Senior Interests and Whole Loans, all
Senior Interests and Whole Loans that otherwise meet all of the criteria to
qualify as eligible Whole Loans or eligible Senior Interests, except that they
are directly or indirectly secured by Liens on Underlying Mortgaged Properties
which as of the Purchase Date therefor, generate a Debt Yield that is equal to
or greater than nine percent (9%), but less than eleven
percent (11%).

 

“GAAP”:  Generally accepted accounting principles as
in effect from time to time in the United States, consistently applied.

 

8

 

“Governing
Documents”:  With respect to any
Person, its articles or certificate of incorporation or formation, by-laws,
partnership, limited liability company, operating or trust agreement and/or
other organizational, charter or governing documents.

 

“Governmental
Authority”:  Any (a) nation or
government, (b) state or local or other political subdivision thereof,
(c) central bank or similar monetary or regulatory authority,
(d) Person, agency, authority, instrumentality, court, regulatory body,
central bank or other body or entity exercising executive, legislative,
judicial, taxing, quasi—judicial, quasi—legislative, regulatory or
administrative functions or powers of or pertaining to government,
(e) court or arbitrator having jurisdiction over such Person, its
Affiliates or its assets or properties, (f) stock exchange on which shares
of stock of such Person are listed or admitted for trading, (g) accounting
board or authority that is responsible for the establishment or interpretation
of national or international accounting principles, and (h) supra-national
body such as the European Union or the European Central Bank.

 

“Ground
Lease”:  A ground lease containing
the following terms and conditions: (a) a remaining term (exclusive of any
unexercised extension options) of thirty (30) years or more from the Purchase
Date of the related Asset, (b) the right of the lessee to mortgage and
encumber its interest in the leased property without the consent of the lessor
or with such consent given, (c) the obligation of the lessor to give the holder
of any mortgage lien on such leased property written notice of any defaults on
the part of the lessee and agreement of such lessor that such lease will not be
terminated until such holder has had a reasonable opportunity to cure or
complete foreclosures, and fails to do so, (d) reasonable transferability
of the lessee’s interest under such lease, including ability to sublease, and
(e) such other rights customarily required by mortgagees making a loan
secured by the interest of the holder of the leasehold estate demised pursuant
to a ground lease.

 

“Guarantee
Agreement”: A Guarantee Agreement, substantially in the form of Exhibit H,
made by Guarantor in favor of Buyer.

 

“Guarantee
Default”:  Defined in Section 8.13.

 

“Guarantee
Obligation”:  With respect to any Person
(the “guaranteeing person”), any obligation of (a) the guaranteeing
person or (b) another Person (including any bank under any letter of
credit) to induce the creation of the obligations for which the guaranteeing
person has issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, Contractual Obligation, Derivatives Contract or other obligations or
indebtedness (the “primary obligations”) of any other third Person (the “primary
obligor”) in any manner, whether directly or indirectly, including any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for
the purchase or payment of any such primary obligation, or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or
hold harmless the owner of any such primary obligation against loss in respect
thereof; 

 

9

 

provided, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business.  The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the maximum stated amount of the
primary obligation relating to such Guarantee Obligation (or, if less, the
maximum stated liability set forth in the instrument embodying such Guarantee
Obligation); provided, that in the absence of any such stated amount or
stated liability, the amount of such Guarantee Obligation shall be such
guaranteeing person’s maximum anticipated liability in respect thereof as
reasonably determined by such Person in good faith.

 

“Guarantor”:  Starwood Property Trust, Inc., a
Maryland corporation, together with its successors and permitted assigns.

 

“Hedge
Counterparty”:  Either (a) an
Affiliated Hedge Counterparty, or (b) any other counterparty approved by
Buyer to any Interest Rate Protection Agreement with Seller that satisfies the
requirements of Section 8.11 and is, in form and substance
reasonably acceptable to Buyer.

 

“Hedge
Required Asset”:  A Purchased Asset that
has a fixed rate of interest or return, unless otherwise waived in writing by
Buyer in its sole discretion.

 

“Hotel
Assets”:  All Purchased Assets that
are directly or indirectly secured by hotels.

 

“Income”:  With respect to any Purchased Asset, all of
the following (in each case with respect to the entire par amount of the Asset
represented by such Purchased Asset and not just with respect to the portion of
the par amount represented by the Purchase Price advanced against such Asset):  (a) all Principal Payments, (b) all
Interest Payments, and (c) all other income, distributions, receipts,
payments, collections, prepayments, recoveries, proceeds (including insurance
and condemnation proceeds) and other payments or amounts of any kind paid, received,
collected, recovered or distributed on, in connection with or in respect of
such Purchased Asset, including principal payments, interest payments,
principal and interest payments, prepayment fees, extension fees, exit fees,
defeasance fees, transfer fees, make whole fees, late charges, late fees and
all other fees or charges of any kind or nature, premiums, yield maintenance
charges, penalties, default interest, dividends, gains, receipts, allocations,
rents, interests, profits, payments in kind, returns or repayment of
contributions, net sale, foreclosure, liquidation, securitization or other
disposition proceeds, insurance payments, settlements and proceeds, and
(d) all payments received from Hedge Counterparties pursuant to Interest
Rate Protection Agreements related to such Purchased Asset; provided,
that any amounts which under the applicable Purchased Asset Documents are
required to be deposited into and held in escrow or reserve to be used for a
specific purpose, such as taxes and insurance, shall not be included in the
term “Income” unless and until (i) an event of default exists under
such Purchased Asset Documents, (ii) the holder of the related Purchased
Asset has exercised or is entitled to exercise rights and remedies with respect
to such amounts, (iii) such amounts are no longer required to be held for
such purpose under such Purchased Asset Documents, or (iv) such amounts
may be applied to all or a portion of the outstanding indebtedness under such
Purchased Asset Documents, and provided, further, that “Income”
from Junior Interests, Senior Interests and Mezzanine Participation Interests
shall include, without limitation, Seller’s share of all amounts

 

10

 

payable
in respect of each such Junior Interest, Senior Interest and Mezzanine
Participation Interest and the Underlying Whole Loan or the underlying
Mezzanine Loan pursuant to the Junior Interest Documents, Senior Interest
Documents and Mezzanine Participation Documents.

 

“Indebtedness”:  With respect to any Person and any date, all
of the following with respect to such Person as of such date:  (a) obligations in respect of money
borrowed (including principal, interest, assumption fees, prepayment fees, yield
maintenance charges, penalties, exit fees, contingent interest and other
monetary obligations whether choate or inchoate and whether by loan, the
issuance and sale of debt securities or the sale of property or assets to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets, or otherwise),
(b) obligations, whether or not for money borrowed (i) represented by
notes payable, letters of credit or drafts accepted, in each case representing
extensions of credit, (ii) evidenced by bonds, debentures, notes or
similar instruments, (iii) constituting purchase money indebtedness,
conditional sales contracts, title retention debt instruments or other similar
instruments, upon which interest charges are customarily paid or that are
issued or assumed as full or partial payment for property or services rendered,
or (iv) in connection with the issuance of Preferred Equity or trust
preferred securities, (c) Capital Lease Obligations, (d) reimbursement
obligations under any letters of credit or acceptances (whether or not the same
have been presented for payment), (e) Off—Balance Sheet Obligations,
(f) obligations to purchase, redeem, retire, defease or otherwise make any
payment in respect of any mandatory redeemable stock issued by such Person or
any other Person (inclusive of forward equity contracts), valued at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (g) as applicable, all obligations of such Person (but not the
obligation of others) in respect of any keep well arrangements, credit
enhancements, contingent or future funding obligations under any Purchased
Asset or any obligation senior to any Purchased Asset, unfunded interest
reserve amount under any Purchased Asset or any obligation that is senior to
any Purchased Asset, purchase obligation, repurchase obligation, sale/buy—back
agreement, takeout commitment or forward equity commitment, in each case
evidenced by a binding agreement (excluding any such obligation to the extent
the obligation can be satisfied by the issuance of Equity Interests (other than
mandatory redeemable stock)), (h) net obligations under any Derivatives
Contract not entered into as a hedge against existing indebtedness, in an
amount equal to the Derivatives Termination Value thereof, (i) all Non—Recourse
Indebtedness, recourse indebtedness and all indebtedness of other Persons which
such Person has guaranteed or is otherwise recourse to such Person,
(j) all indebtedness of another Person secured by (or for which the holder
of such indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien (other than certain Permitted Liens) on property or assets
owned by such Person, even though such Person has not assumed or become liable
for the payment of such indebtedness or other payment obligation; provided,
that if such Person has not assumed or become liable for the payment of such
indebtedness, then for the purposes of this definition the amount of such indebtedness
shall not exceed the market value of the property subject to such Lien,
(k) all Contingent Liabilities, (l) all obligations of such Person
incurred in connection with the acquisition or carrying of fixed assets by such
Person or obligations of such Person to pay the deferred purchase or
acquisition price of property or assets, including contracts for the deferred
purchase price of property or assets that include the procurement of services,
(m) indebtedness of general partnerships of which such Person is liable as
a general partner (whether secondarily or contingently liable or otherwise),
and (n) obligations 

 

11

 

to
fund capital commitments under any Governing Document, subscription agreement or
otherwise.

 

“Indemnified
Amount”:  Defined in Section 13.01.

 

“Indemnified
Person”:  Defined in Section 13.01.

 

“Independent
Appraiser”:  An independent
professional real estate appraiser who is a member in good standing of the
American Appraisal Institute, and, if the state in which the subject Underlying
Mortgaged Property is located certifies or licenses appraisers, is certified or
licensed in such state, and in each such case, who has a minimum of five years
experience in the subject property type.

 

“Independent
Director” or “Independent Manager”: 
An individual who has prior experience as an independent director,
independent manager or independent member with at least three (3) years of
employment experience and who is provided by CT Corporation, Corporation
Service Company, National Registered Agents, Inc., Wilmington Trust
Company, Stewart Management Company, Lord Securities Corporation or, if none of
those companies is then providing professional Independent Directors or
Independent Managers, another nationally recognized company reasonably approved
by Buyer, in each case that is not an Affiliate of Seller and that provides
professional Independent Directors and Independent Managers and other corporate
services in the ordinary course of its business, and which individual is duly
appointed as a member of the board of directors or board of managers of such
corporation or limited liability company and is not, has never been, and will
not while serving as Independent Director or Independent Manager be, any of the
following:

 

(a)           a
member, partner, equity holder, manager, director, officer or employee of
Seller, any Principal, any of their respective equity holders or Affiliates
(other than (a) as an Independent Director or Independent Manager of
Seller or Principal and (b) as an Independent Director or Independent
Manager of an Affiliate of Seller or Principal or any of their respective
single-purpose entity equity holder that is not in the direct chain of
ownership of Seller or Principal and that is required by a creditor to be a
single purpose bankruptcy remote entity, provided that such Independent
Director or Independent Manager is employed by a company that routinely
provides professional Independent Directors or Independent Managers);

 

(b)           a
creditor, supplier or service provider (including provider of professional
services) to Seller, any single-purpose entity equity holder, or any of their
respective equity holders or Affiliates (other than a nationally-recognized
company that routinely provides professional Independent Directors or
Independent Managers and other corporate services to Seller, any single-purpose
entity equity holder, or any of their respective equity holders or Affiliates
in the ordinary course of business);

 

(c)           a
family member of any such member, partner, equity holder, manager, director,
officer, employee, creditor, supplier or service provider; or

 

(d)           a
Person that controls (whether directly, indirectly or otherwise) any of the
individuals described in the preceding clauses (a), (b) or (c).

 

12

 

An
individual who otherwise satisfies the preceding definition other than
clause (a) by reason of being the Independent Director or Independent
Manager of a “special purpose entity” affiliated with Seller or Principal shall
not be disqualified from serving as an Independent Director or Independent
Manager of Seller if the fees that such individual earns from serving as
Independent Directors or Independent Managers of affiliates of Seller or Principal
in any given year constitute in the aggregate less than 5% of such individual’s
annual income for that year.

 

“Initial
Maturity Date” shall mean August 5, 2013.

 

“Insolvency
Action”:  With respect to any Person,
the taking by such Person of any action resulting in an Insolvency Event, other
than solely under clause (g) of the definition thereof.

 

“Insolvency
Event”:  With respect to any Person,
(a) the filing of a decree or order for relief by a court having
jurisdiction in the premises with respect to such Person or any substantial
part of its assets or property in an involuntary case under any applicable
Insolvency Law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its assets or property, or ordering the
winding—up or liquidation of such Person’s affairs, and such decree or order
shall remain unstayed and in effect for a period of thirty (30) days,
(b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, (c) the consent by
such Person to the entry of an order for relief in an involuntary case under
any Insolvency Law, (d) the consent by such Person to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its assets or property, (e) the making by such Person of any general
assignment for the benefit of creditors, (f) the admission in a legal
proceeding of the inability of such Person to pay its debts generally as they
become due, (g) the failure by such Person generally to pay its debts as
they become due, or (h) the taking of action by such Person in furtherance
of any of the foregoing.

 

“Insolvency
Proceeding”:  Any case, action or
proceeding before any court or other Governmental Authority relating to any
Insolvency Event.

 

“Insolvency
Laws”:  The Bankruptcy Code and all
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments
and similar debtor relief laws from time to time in effect affecting the rights
of creditors generally.

 

“Interest
Expense”:  With respect to any Person
and any period, the amount of total interest expense incurred by such Person,
including capitalized or accruing interest (but excluding interest funded under
a construction loan), all with respect to such period.

 

“Interest
Payments”:  With respect to any
Purchased Asset and any period, all payments of interest, income, receipts,
dividends, and any other collections and distributions received from time to
time in connection with such Purchased Asset.

 

“Interest
Rate Protection Agreement”:  With
respect to any or all Purchased Assets, any futures contract, options related
contract, short sale of United States Treasury 

 

13

 

securities
or any interest rate swap, cap, floor or collar agreement, total return swap or
any other similar arrangement providing for protection against fluctuations in
interest rates or the exchange of nominal interest obligations, either
generally or under specific contingencies in form and substance reasonably acceptable
to Buyer, in each case with a Hedge Counterparty and that is acceptable to
Buyer.  For the avoidance of doubt, any
Interest Rate Protection Agreement with respect to a Purchased Asset shall be
included in the definitions of “Purchased Asset” and “Repurchase
Document”.

 

“Intermediate
Starwood Entities”:  Individually or
collectively, Principal and SPT Real Estate Sub I, LLC, a Delaware limited
liability company.

 

“Internal
Control Event”:  Material weakness
in, or fraud that involves management or other employees who have a significant
role in, the internal controls of Seller, Manager, any Intermediate Starwood
Entity or Guarantor over financial reporting, in each case as described in the
Securities Laws.

 

“Investment”:
With respect to any Person, any acquisition or investment (whether or not of a
controlling interest) by such Person, whether by means of (a) the purchase
or other acquisition of any Equity Interest in another Person, (b) a loan,
advance or extension of credit to, capital contribution to, guaranty or credit
enhancement of Indebtedness of, or purchase or other acquisition of any
Indebtedness of, another Person, including any partnership or joint venture
interest in such other Person, or (c) the purchase or other acquisition
(in one transaction or a series of transactions) of assets of another Person
that constitute the business or a division or operating unit of another
Person.  Any binding commitment or option
to make an Investment in any other Person shall constitute an Investment.  Except as expressly provided otherwise, for
purposes of determining compliance with any covenant contained in this
Agreement, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.

 

“Investment
Company Act”:  The Investment Company
Act of 1940, as amended, restated or modified from time to time.

 

“Irrevocable
Redirection Notice”:  A notice in
form reasonably acceptable to Buyer, sent by Seller or by Servicer or Sub-Servicer
on Seller’s behalf directing the remittance of Income with respect to a
Purchased Asset to the Servicing Agreement Account or the Waterfall Account, as
applicable, and executed by the applicable Underlying Obligor, Servicer,
Sub-Servicer or other Person with respect to such Purchased Asset.

 

“Junior
Interest”:  (a) A junior
participation interest in a performing commercial real estate loan, or
(b) a “B-note” in an “A/B structure” (or a more subordinate note in an “A/B/C”,
“A/B/C/D” or similar structure) in a performing commercial real estate loan.

 

“Junior
Interest Documents”:  Shall mean, for
any Junior Interest, the Junior Interest Note together with any co-lender
agreements, participation agreements and/or other intercreditor agreements or
other documents governing or otherwise relating to such Junior Interest.

 

14

 

“Junior
Interest Note”:  If the Junior
Interest is (a) a promissory note, the related original Mortgage Note and (b) a
junior participation interest, the related original participation certificate
(if any).

 

“Knowledge”:  With respect to any Person, means
collectively (i) the actual knowledge of such Person, (ii) notice of
any fact, event, condition or circumstance that would cause a reasonably
prudent Person to conduct an inquiry that would give such Person actual
knowledge, whether or not such Person actually undertook such an inquiry, and
(iii) all knowledge that is imputed to a Person under any statute, rule,
regulation, ordinance, or official decree or order.

 

“Leverage
Covenant”:  The financial covenant
set forth in Section 15(b) of the Guarantee Agreement.

 

“LIBOR”:  For any Pricing Period, the rate (expressed
as a percentage per annum and rounded upward, if necessary, to the next nearest
1/100 of 1%) for deposits in Dollars, for a one-month period, that appears on
Reuters Screen LIBOR01 (or the successor thereto) as the London interbank
offered rate for deposits in Dollars as of 11:00 a.m., London time, on the
Pricing Rate Reset Date for such Pricing Period.  If such rate does not appear on Reuters
Screen LIBOR01 as of 11:00 a.m., London time, on such Pricing Rate Reset
Date, Buyer shall request the principal London office of the Reference Banks
selected by Buyer to provide such banks’ offered quotation (expressed as a
percentage per annum) to leading banks in the international Eurocurrency market
for deposits in Dollars for a one-month period as of 11:00 a.m., London
time, on such Pricing Rate Reset Date for amounts of not less than the
aggregate Repurchase Price of all Purchased Assets.  If at least two such offered quotations are
so provided, LIBOR shall be the arithmetic mean of such quotations.  If fewer than two such quotations are so
provided, Buyer shall request any three major banks in New York City selected
by Buyer to provide such banks’ rate (expressed as a percentage per annum) for
loans in Dollars to leading banks in the international Eurocurrency market for
a one-month period as of approximately 11:00 a.m., New York City time on
the applicable Pricing Rate Reset Date for amounts of not less than the
aggregate Repurchase Price of all Purchased Assets.  If at least two such rates are so provided,
LIBOR shall be the arithmetic mean of such rates.

 

“LIBO
Rate”:  For any Pricing Period, the
rate (expressed as a percentage per annum and rounded upward, if necessary, to
the next nearest 1/100 of 1%) determined for such Pricing Period in accordance
with the following formula:

 

	
   

  	
  LIBOR for such Pricing

  	
   

  
	
   

  	
  Period

  	
   

  
	
   

  	
  1 – Reserve Requirement

  	
   

  

 

“Lien”:  Any mortgage, statutory or other lien,
pledge, charge, right, claim, adverse claim, attachment, levy, hypothecation,
assignment, security interest, UCC financing statement or encumbrance of any
kind on or otherwise relating to any Person’s assets or properties in favor of
any other Person or any preference, priority or other security agreement or
preferential arrangement of any kind.

 

15

 

“LTV/LTC
Test”:  Defined in the Fee and
Pricing Letter, which definition is incorporated herein by reference.

 

“Manager”:  SPT Management, LLC, a Delaware limited
liability company.

 

“Margin
Call”:  Defined in Section 4.01.

 

“Margin
Deficit”:  Defined in Section 4.01.

 

“Market
Value”:  Defined in the Fee and
Pricing Letter, which definition is incorporated herein by reference.

 

“Material
Adverse Effect”:  A material adverse
effect on or material adverse change in or to (a) the property, assets,
business, operations, financial condition, credit quality or prospects of
Seller, any Intermediate Starwood Entity or Guarantor, (b) the ability of
Seller to pay and perform the Repurchase Obligations, (c) the validity,
legality, binding effect or enforceability of any Repurchase Document,
Purchased Asset Document, Purchased Asset or security interest granted
hereunder or thereunder, (d) the rights and remedies of Buyer or any
Indemnified Person under any Repurchase Document, Purchased Asset Document or
Purchased Asset, or (e) the perfection or priority of any Lien granted
under any Repurchase Document or Purchased Asset Document.

 

“Material
Default”:  The occurrence of any of
the events described in clauses (a), (f), (g), (j), (l), (q) and (s) of
Section 10.01 which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default.

 

“Material
Modification”:  Any material
extension, amendment, waiver, termination, rescission, cancellation, release or
other modification to the terms of, or any collateral, guaranty or indemnity
for, or the exercise of any material right or remedy of a holder (including all
lending, corporate and voting rights, remedies, consents, approvals and
waivers) of, any Purchased Asset or Purchased Asset Document.

 

“Materials
of Environmental Concern”:  Any
hazardous, toxic or harmful substances, materials, wastes, pollutants or
contaminants defined as such in or regulated under any Environmental Law.

 

“Maturity
Date”:  The earliest of (a) the
Initial Maturity Date, as such date may be extended pursuant to Section 3.07,
(b) any Accelerated Repurchase Date, and (c) any date on which the
Maturity Date shall otherwise occur in accordance with the Repurchase Documents
or Requirements of Law.

 

“Maximum
Amount”:  $350,000,000.

 

“Maximum
Applicable Percentage”:  For each
Purchased Asset as of any date, the maximum applicable percentage
determined by Buyer for such Purchased Asset on the related Purchase Date and
set forth in the Confirmation for such Purchased Asset, not to exceed
(a) seventy-five percent (75%) for all Eligible Assets other than
Hotel Assets and (b) seventy percent (70%) for all Eligible Assets
consisting of Hotel Assets.

 

16

 

“Metropolitan
Purchased Assets”:  Core Purchased
Assets (other than Hotel Assets) that are secured by premium class A
Mortgaged Properties located in major metropolitan areas.

 

“Mezzanine
Borrower” The obligor on a Mezzanine Note, including any Person who has
assumed or guaranteed the obligations of the obligor thereunder.

 

“Mezzanine
Loan”:  A performing senior or junior
mezzanine loan secured by pledges of one-hundred percent (100%) of the direct
or indirect Equity Interests in a Person that owns a Mortgaged Property.

 

“Mezzanine
Loan Documents”:  For any Mezzanine
Loan, the Mezzanine Note and all other documents executed in connection with,
evidencing or governing such Mezzanine Loan.

 

“Mezzanine
Note”:  The original executed
promissory note or other tangible evidence of the Mezzanine Loan indebtedness.

 

“Mezzanine
Participation Certificate”:  The original
executed participation certificate (if any) that evidences a Mezzanine
Participation Interest.

 

“Mezzanine
Participation Documents”:  Shall
mean, for any Mezzanine Participation Interest, the Mezzanine Participation
Certificate, if any, together with any participation agreements and/or other
intercreditor agreements or other documents governing or otherwise relating to
such Mezzanine Participation Interest.

 

“Mezzanine
Participation Interest”:  A senior or
junior participation interest in a performing Mezzanine Loan.

 

“Moody’s”:  Moody’s Investors Service, Inc., or, if
Moody’s Investors Service, Inc. is no longer issuing ratings, another
nationally recognized rating agency reasonably acceptable to Buyer.

 

“Mortgage”:  Any mortgage, deed of trust, assignment of
rents, security agreement and fixture filing, or other instruments creating and
evidencing a lien on real property and other property and rights incidental
thereto.

 

“Mortgage
Note”:  The original executed
promissory note or other evidence of the indebtedness of a Mortgagor with
respect to a commercial mortgage loan.

 

“Mortgaged
Property”:  The real property
(including all improvements, buildings, fixtures, building equipment and
personal property thereon and all additions, alterations and replacements made
at any time with respect to the foregoing) and all other collateral securing
repayment of the debt evidenced by a Mortgage Note, Senior Interest Note,
Mezzanine Note, Mezzanine Participation Certificate or Junior Interest Note.

 

“Mortgagee”:  The record holder of a Mortgage Note secured
by a Mortgage.

 

17

 

“Mortgagor”:  The obligor on a Mortgage Note, including any
Person who has assumed or guaranteed the obligations of the obligor thereunder.

 

“Multiemployer
Plan”:  A Plan that is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Near
Cash Liquidity”: Shall mean, with respect to Guarantor on any date, the
market value of Near Cash Securities held by Guarantor or its direct or
indirect subsidiaries as of such date. 
Market value of Near Cash Securities shall be determined on a monthly
basis by at least one independent third party financial institution reasonably
acceptable to Buyer.

 

“Near
Cash Securities”:  Shall mean
(i) CMBS having, at all times, a maturity or weighted average life of
twelve (12) months or less, as determined by the applicable servicer,
(ii) RMBS having a duration of twelve (12) months or less as
determined by Tilden Park Capital Management (and, at Buyer’s request, the
assumptions used in such determination shall be provided to Buyer for Buyer’s
review), in each case, having a rating of Baa3 or BBB (or the equivalent) or
higher by at least one Rating Agency (it being acknowledged that such
securities may also have a lower rating from one or more Rating Agencies) or
(iii) other public or privately placed securities approved by Buyer.

 

“Net
Cash Flow”:  With respect to any
Purchased Asset and for any period, the net cash flow of such Purchased Asset
for such period as underwritten by Buyer.

 

“Net
Income”:  With respect to any Person
for any period, the net income of such Person for such period as determined in
accordance with GAAP.

 

“Non—Recourse
Indebtedness”:  With respect to any
Person and any date, indebtedness of such Person as of such date for borrowed
money in respect of which recourse for payment (except for customary exceptions
for fraud, misapplication of funds, environmental indemnities, Insolvency
Events, non-approved transfers or other events) is contractually limited to
specific assets of such Person encumbered by a Lien securing such Indebtedness.

 

“Non-Utilization
Fee”:  An amount equal to
(A) two-hundred basis points (2.00%), multiplied by (B) an
amount equal to the positive amount, if any of (i) the applicable
Utilization Threshold Amount minus, (ii) the average daily unpaid
Repurchase Price of all Purchased Assets (excluding unpaid Price Differential)
during the preceding twelve (12) month period.

 

“Off—Balance
Sheet Obligations”:  With respect to
any Person and any date, to the extent not included as a liability on the
balance sheet of such Person, all of the following with respect to such Person
as of such date: (a) monetary obligations under any financing lease or so—called
“synthetic,” tax retention or off—balance sheet lease transaction which, upon
the application of any Insolvency Laws, would be characterized as indebtedness,
(b) monetary obligations under any sale and leaseback transaction which
does not create a liability on the balance sheet of such Person, or
(c) any other monetary obligation arising with respect to any other
transaction which (i) is characterized as indebtedness for tax purposes
but not for accounting purposes, or (ii) is the functional equivalent of
or takes the place of borrowing but which does not constitute a liability on
the balance sheet of such Person (for purposes of this 

 

18

 

clause (c),
any transaction structured to provide tax deductibility as interest expense of
any dividend, coupon or other periodic payment will be deemed to be the
functional equivalent of a borrowing).

 

“Participant”:  Defined in Section 18.08(b).

 

“Patriot
Act”:  The Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001.

 

“Permitted
Liens”:  Any of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding has
been commenced:  (a) Liens for
state, municipal, local or other local taxes not yet due and payable,
(b) Liens imposed by Requirements of Law, such as materialmen’s, mechanics’,
carriers’, workmen’s, repairmen’s and similar Liens, arising in the ordinary
course of business securing obligations that are not overdue for more than
thirty (30) days, and (c) Liens granted pursuant to or by the Repurchase
Documents.

 

“Person”:  An individual, corporation, limited liability
company, business trust, partnership, trust, unincorporated organization, joint
stock company, sole proprietorship, joint venture, Governmental Authority or
any other form of entity.

 

“Plan”:  An “employee benefit plan” as defined in Section 3(3) of
ERISA, subject to Title I of ERISA in respect of which, Seller, Guarantor or
any Intermediate Starwood Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA, be deemed to be an “employer” as
defined in Section 3(5) of ERISA.

 

“Pledge
Agreement”:  The Pledge and Security
Agreement, dated as of the date hereof, between Buyer and Principal, as
amended, modified, waived, supplemented, extended, restated or replaced from
time to time.

 

“Pledged
Collateral”:  Defined in the Pledge
Agreement.

 

“Price
Differential”:  (a) For any
Pricing Period or portion thereof and any Transaction outstanding, the sum of
the products, for each day during such Pricing Period or portion thereof, of
(i) 1/360th of the Pricing Rate in effect for such Pricing Period during
which such day occurs, times (ii) the Purchase Price for such Purchased
Asset as of such day, and (b) for any Pricing Period or portion thereof
and all Transactions outstanding, the sum of the amounts calculated in
accordance with the preceding clause (a) for all Transactions.

 

“Pricing
Margin”:  For each Flex Purchased
Asset, the applicable Flex Pricing Margin, and for each Core Purchased Asset,
the applicable Core Pricing Margin.

 

“Pricing
Period”:  For any Purchased Asset,
(a) in the case of the first Remittance Date, the period from the Purchase
Date for such Purchased Asset to but excluding such Remittance Date, and
(b) in the case of any subsequent Remittance Date, the one-month period
commencing on and including the prior Remittance Date and ending on but
excluding such Remittance Date; provided, that no Pricing Period for a
Purchased Asset shall end after the Repurchase Date for such Purchased Asset.

 

19

 

“Pricing
Rate”:  For any Pricing Period, the
LIBO Rate for such Pricing Period plus the Pricing Margin, which shall be
subject to adjustment and/or conversion as provided in Sections 12.01
and 12.02; provided, that while an Event of Default exists, the
Pricing Rate shall be the Default Rate.

 

“Pricing
Rate Reset Date”:  (a) In the
case of the first Pricing Period for any Purchased Asset, the Purchase Date for
such Purchased Asset, and (b) in the case of any subsequent Pricing
Period, two (2) Business Days prior to the Remittance Date on which such
Pricing Period begins.

 

“Principal”:  Starwood Property Mortgage, L.L.C., a
Delaware limited liability company, the entity that is the sole member of
Seller.

 

“Principal
Payments”:  For any Purchased Asset,
all payments and prepayments of principal received and applied (or which was
required to be applied in accordance with the related Purchased Asset
Documents) as principal toward the Purchase Price for such Purchased Asset,
including insurance and condemnation proceeds and recoveries from liquidation
or foreclosure.

 

“Purchase
Agreement”:  Any purchase agreement
between Seller and any Transferor pursuant to which Seller purchased or
acquired an Asset which is subsequently sold to Buyer hereunder.

 

“Purchase
Date”:  For any Purchased Asset, the
date on which such Purchased Asset is transferred by Seller to Buyer.

 

“Purchase
Price”:  For any Purchased Asset,
(a) as of the Purchase Date for such Purchased Asset, an amount equal to
the product of the Market Value of such Purchased Asset, times the Applicable
Percentage for such Purchased Asset, and (b) as of any other date, the
amount described in the preceding clause (a), (i) reduced by any
amount of Margin Deficit transferred by Seller to Buyer pursuant to Section 4.01
and applied to the Purchase Price of such Purchased Asset, (ii) reduced by
any Principal Payments remitted to the Waterfall Account and which were applied
to the Purchase Price of such Purchased Asset by Buyer and (iii) reduced
by any payments made by Seller in reduction of the outstanding Purchase Price,
in each case as of such determination date with respect to such Purchased
Asset.

 

“Purchased
Asset Documents”:  For any Purchased
Asset, the Whole Loan Documents, Senior Interest Documents, Junior Interest
Documents, Mezzanine Loan Documents or Mezzanine Participation Documents
evidencing and governing such Purchased Asset.

 

“Purchased
Assets”:  (a) For any Transaction,
each Asset sold by Seller to Buyer in such Transaction, and (b) for the
Transactions in general, all Assets sold by Seller to Buyer, in each case
including, to the extent relating to such Asset or Assets, all of Seller’s
right, title and interest in and to (i) Purchased Asset Documents,
(ii) Servicing Rights, (iii) Servicing Files, (iv) mortgage
guaranties and insurance (issued by Governmental Authorities or otherwise) and
claims, payments and proceeds thereunder, (v) insurance policies,
certificates of insurance and claims, payments and proceeds thereunder,
(vi) the principal balance of such Assets, not just the amount advanced,
(vii) amounts and property from time to time on deposit in the Waterfall

 

20

 

Account
and the Waterfall Account itself, (viii) all Collection Accounts and all
amounts and property from time to time on deposit therein, to the extent of
Seller’s or the holder’s interest therein, (ix) Income, (x) security
interests of Seller in Derivatives Contracts entered into by Underlying
Obligors, (xi) rights of Seller under any letter of credit, guarantee,
warranty, indemnity or other credit support or enhancement, (xii) Interest
Rate Protection Agreements relating to such Assets, (xiii) all of the “Pledged
Collateral”, as such term is defined in the Pledge Agreement, and
(xiv) supporting obligations of any kind; provided, that
(A) Purchased Assets shall not include any obligations of Seller, and
(B) for purposes of the grant of security interest by Seller to Buyer and
the other provisions of Article 11, Purchased Assets shall include
all of the following: general intangibles, accounts, chattel paper, deposit
accounts, securities accounts, instruments, securities, financial assets,
uncertificated securities, security entitlements and investment property (as
such terms are defined in the UCC) and replacements, substitutions,
conversions, distributions or proceeds relating to or constituting any of the
items described in the preceding clauses (i) through (xiv).

 

“Ramp-up
Period Expiration Date”:  shall be
the ninetieth (90th) day following
the Closing Date.

 

“Rating
Agencies”:  Each of Fitch, Inc.,
Moody’s and S&P.

 

“Reference
Banks”:  Banks each of which shall
(a) be a leading bank in the international Eurocurrency market, and
(b) have an established place of business in London.  Initially, the Reference Banks shall be
JPMorgan Chase Bank, Barclays Bank, PLC and Deutsche Bank AG.  If any such Reference Bank should be
unwilling or unable to act as such or if Buyer shall terminate the appointment
of any such Reference Bank or if any of the Reference Banks should be removed
from the Reuters Monitor Money Rates Service or in any other way fail to meet
the qualifications of a Reference Bank, Buyer may designate alternative banks
meeting the criteria specified in the preceding clauses (a) and (b).

 

“REIT”:  A Person satisfying the conditions and
limitations set forth in Section 756(b) and 856(c) of the Code
which are necessary to qualify such Person as a “real estate investment trust,”
as defined in Section 756(a) of the Code.

 

“Release”:  Any generation, treatment, use, storage,
transportation, manufacture, refinement, handling, production, removal,
remediation, disposal, presence or migration of Materials of Environmental
Concern on, about, under or within all or any portion of any property or
Mortgaged Property.

 

“Remedial
Work”:  Any investigation,
inspection, site monitoring, containment, clean-up, removal, response,
corrective action, mitigation, restoration or other remedial work of any kind
or nature because of, or in connection with, the current or future presence,
suspected presence, Release or threatened Release in or about the air, soil,
ground water, surface water or soil vapor at, on, about, under or within all or
any portion of any property or Mortgaged Property of any Materials of
Environmental Concern, including any action to comply with any applicable
Environmental Laws or directives of any Governmental Authority with regard to
any Environmental Laws.

 

21

 

“Remittance
Date”:  The tenth (10th) day of each month (or if
such day is not a Business Day, the next following Business Day), or such other
day as is mutually agreed to by Seller and Buyer.

 

“Reportable
Event”:  Any event set forth in
Section 4043(c) of ERISA, other than an event as to which the notice
period is waived under Pension Benefit Guaranty Commission Reg. §4043.

 

“Representation
Breach”:  Any representation,
warranty, certification, statement or affirmation made by Seller, Principal or
Guarantor in any Repurchase Document (including in Schedule 1(a), 1(b),
1(c) or 1(d)) or in any certificate, notice, report or other
document prepared and delivered by or on behalf of Seller, Manager, any
Intermediate Starwood Entity or Guarantor pursuant to any Repurchase Document
proves to be incorrect, false or misleading in any material respect when made,
and in the case of the representations and warranties contained in Schedule 1(a),
1(b), 1(c) or 1(d) only, without regard to any
Knowledge or lack of Knowledge thereof by such Person or (unless otherwise
waived in writing), by Buyer, and without regard to any qualification,
representation or warranty relating to such Knowledge or lack of Knowledge.

 

“Repurchase
Date”:  For any Purchased Asset, the
earliest of (a) the Maturity Date, (b) any Early Repurchase Date
therefor, and (c) the Business Day on which Seller is to repurchase such
Purchased Asset as specified by Seller and agreed to by Buyer in the related
Confirmation.

 

“Repurchase
Documents”:  Collectively, this
Agreement, the Custodial Agreement, the Controlled Account Agreements, the
Pledge Agreement, all Interest Rate Protection Agreements, the Guarantee
Agreement, all Confirmations, all UCC financing statements, amendments and
continuation statements filed pursuant to any other Repurchase Document, and
all additional documents, certificates, agreements or instruments, the
execution of which is required, necessary or incidental to or desirable for
performing or carrying out any other Repurchase Document.

 

“Repurchase
Obligations”:  All obligations of
Seller to pay the Repurchase Price on the Repurchase Date and all other
obligations and liabilities of Seller to Buyer arising under or in connection
with the Repurchase Documents, including all obligations and liabilities of
Seller or Guarantor to any Affiliated Hedge Counterparties arising under or in
connection with the Interest Rate Protection Agreements, whether now existing
or hereafter arising, and all interest and fees that accrue after the
commencement by or against Seller, any Intermediate Starwood Entity or
Guarantor of any Insolvency Proceeding naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding (in each case, whether due or accrued).

 

“Repurchase
Price”:  For any Purchased Asset as
of any date, an amount equal to the sum of (a) the outstanding Purchase
Price as of such date, (b) the accrued and unpaid Price Differential for
such Purchased Asset as of such date, (c) all amounts that would be
payable by Seller to Buyer and any other Affiliated Hedge Counterparty in
connection with the termination of any Interest Rate Protection Agreement with
Buyer and any other Affiliated Hedge Counterparty relating to such Purchased
Asset if such Interest Rate Protection Agreement were 

 

22

 

terminated
as of such date, (d) any accrued and unpaid fees and expenses and
indemnity amounts and any other amounts owed by Seller or Guarantor to Buyer or
any of its Affiliates under this Agreement, any Repurchase Document or
otherwise, and (e) all other amounts due and payable as of such date by
Seller to Buyer under this Agreement or any Repurchase Document.

 

“Requirements
of Law”:  With respect to any Person
or property or assets of such Person and as of any date, all of the following
applicable thereto as of such date: all Governing Documents and existing and
future laws, statutes, rules, regulations, treaties, codes, ordinances,
permits, certificates, orders and licenses of and interpretations by any
Governmental Authority (including Environmental Laws, ERISA, regulations of the
Board of Governors of the Federal Reserve System, and laws, rules and
regulations relating to usury, licensing, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy), judgments, decrees, injunctions, writs, awards or
orders of any court, arbitrator or other Governmental Authority.

 

“Reserve
Requirement”:  For any Pricing
Period, the aggregate of the rates (expressed as a decimal fraction) of reserve
requirements enacted or imposed after the date hereof and in effect during such
Pricing Period (including basic, supplemental, marginal and emergency reserves
under any regulations of the Board of Governors of the Federal Reserve System
or other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for Eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of
such Board of Governors) maintained by Buyer.

 

“Responsible
Officer”:  With respect to any
Person, the chief executive officer, the chief financial officer, the chief
accounting officer, the treasurer or the chief operating officer of such
Person.

 

“Retained
Interest”:  (a) With respect to
any Purchased Asset, (i) all duties, obligations and liabilities of Seller
thereunder, including payment and indemnity obligations, (ii) all
obligations of agents, trustees, servicers, administrators or other Persons
under the documentation evidencing such Purchased Asset, and (iii) if any
portion of the Indebtedness related to such Purchased Asset is owned by another
lender or is being retained by Seller, the interests, rights and obligations
under such documentation to the extent they relate to such portion, and
(b) with respect to any Purchased Asset with an unfunded commitment on the
part of Seller, all obligations to provide additional funding, contributions,
payments or credits.

 

“RMBS”:  Shall mean mortgage pass-through certificates
or other securities issued pursuant to a securitization of residential mortgage
loans.

 

“S&P”:  Standard and Poor’s Ratings Services, a
division of The McGraw Hill Companies, Inc. or, if Standard &
Poor’s Ratings Services is no longer issuing ratings, another nationally
recognized rating agency reasonably acceptable to Buyer.

 

“Sanctioned
Entity”:  (a) A country or a
government of a country, (b) an agency of the government of a country,
(c) an organization directly or indirectly controlled by a country or its
government, (d) a Person resident in or determined to be resident in a
country, that in each case is subject to a country sanctions program
administered and enforced by the Office of 

 

23

 

Foreign
Assets Control, or (e) a Person named on the list of Specially Designated
Nationals maintained by the Office of Foreign Assets Control.

 

“Securities
Laws”:  The Securities Act of 1933,
the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the
applicable accounting and auditing principles, rules, standards and practices
promulgated, approved or incorporated by the Securities and Exchange Commission
or the Public Company Accounting Oversight Board.

 

“Seller”:  The Seller named in the preamble of this
Agreement.

 

“Senior
Interest”:  (a) A senior or pari
passu participation interest in a performing commercial real estate loan, or (b) an
“A note” in an “A/B structure” in a performing commercial real estate
loan.

 

“Senior
Interest Documents”:  For any Senior
Interest, the Senior Interest Note together with any co-lender agreements,
participation agreements and/or other intercreditor agreements or other
documents governing or otherwise relating to such Senior Interest.

 

“Senior
Interest Note”:  If the Senior
Interest is (a) a promissory note, the related original Mortgage Note and
(b) a senior participation interest, the related original participation
certificate (if any).

 

“Servicer”:  Wells Fargo Bank, National Association, as
servicer of all of the Purchased Assets.

 

“Servicing
Agreement Account”:  The “Servicing
Account” under the Servicing and Sub-Servicing Agreement, which shall be a
segregated interest bearing account established at the Waterfall Account Bank,
in the name of Seller, pledged to Buyer and subject to a Controlled Account
Agreement.

 

“Servicing
and Sub-Servicing Agreement”:  The
Servicing and Sub-Servicing Agreement between and among Buyer, Seller, Servicer
and Sub-Servicer, substantially in the form attached as Exhibit I
hereto.

 

“Servicing
File”:  With respect to any Purchased
Asset, the file retained and maintained by Seller, Servicer and/or Sub-Servicer
including the originals or copies of all Purchased Asset Documents and other
documents and agreements relating to such Purchased Asset, including to the
extent applicable all servicing agreements, files, documents, records, data
bases, computer tapes, insurance policies and certificates, appraisals, other
closing documentation, payment history and other records relating to or
evidencing the servicing of such Purchased Asset, which file shall be held by
Seller and/or the Servicer for and on behalf of Buyer.

 

“Servicing
Rights”:  All right, title and
interest of Seller or any Affiliate of Seller in and to any and all of the
following:  (a) rights to service
and collect the Purchased Assets, (b) amounts received by Seller or any
other Person for servicing the Purchased Assets, (c) late fees, penalties
or similar payments with respect to the Purchased Assets, (d) agreements
and documents creating or evidencing any such rights to service, documents,
files and records 

 

24

 

relating
to the servicing of the Purchased Assets, and rights of Seller or any other
Person thereunder, (e) escrow, reserve and similar amounts with respect to
the Purchased Assets, (f) rights to appoint, designate and retain any
other servicers, sub-servicers, special servicers, agents, custodians, trustees
and liquidators with respect to the Purchased Assets, and (g) accounts and
other rights to payment related to the Purchased Assets.

 

“Single
Employer Plan”:  Any Plan that is not
a Multiemployer Plan.

 

“Solvent”:  With respect to any Person at any time,
having a state of affairs such that all of the following conditions are met at
such time:  (a) the fair value of
the assets and property of such Person is greater than the amount of such
Person’s liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(32) of the Bankruptcy Code, (b) the present
fair salable value of the assets and property of such Person in an orderly
liquidation of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person is able to realize upon its assets and
property and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person’s ability to pay as such
debts and liabilities mature, and (e) such Person is not engaged in a
business or a transaction, and is not about to engage in a business or a
transaction, for which such Person’s assets and property would constitute
unreasonably small capital.

 

“Special
Purpose Entity”:  A corporation,
limited partnership or limited liability company that, since the date of its
formation (unless otherwise indicated in this Agreement) and at all times on
and after the date hereof, has complied with and shall at all times comply with
the provisions of Article 9.

 

“Sub-Limit”:
Defined in the Fee and Pricing Letter, which definition is incorporated herein
by reference.

 

“Sub-Servicer”:  Defined in the Fee and Pricing Letter, which
definition is incorporated herein by reference.

 

“Sub-Servicer
Event of Default”:  With respect to a
Sub-Servicer, any default or event of default (however defined), beyond all
applicable notice and cure periods, under the Servicing and Sub-Servicing
Agreement between Servicer and such Sub-Servicer.

 

“Subsidiary”:
With respect to any Person, any corporation, partnership, limited liability
company or other entity (heretofore, now or hereafter established) of which at
least a majority of the securities or other ownership interests having by the
terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership, limited liability company or other entity (without regard to the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person, and shall include all
Persons the accounts of which are with those of such Person pursuant to GAAP.

 

25

 

“Tangible
Net Worth”:  With respect to any
Person and any date, all amounts which would be included under capital or
shareholder’s equity (or any like caption) on a balance sheet of such Person,
minus (a) amounts owing to such Person from any Affiliate thereof, or from
officers, employees, partners, members, directors, shareholders or other
Persons similarly affiliated with such Person or any Affiliate thereof,
(b) intangible assets (other than Interest Rate Protection Agreements to
the extent related to any Purchased Asset), and (c) prepaid taxes and/or
expenses, all on or as of such date.

 

“Term
Sheet”:  The letter and/or summary of
terms and conditions dated July 16, 2010 between and among Buyer, Seller
and Guarantor.

 

“Test
Period”:  The time period from the
first day of each calendar quarter, through and including the last day of such
calendar quarter.

 

“Total
Assets”:  With respect to any Person
and any date, an amount equal to the aggregate book value of all assets owned
by such Person on a consolidated basis and the proportionate share of assets
owned by non-consolidated Subsidiaries of such Person, less (a) amounts
owing to such Person from any Affiliate thereof, or from officers, employees,
partners, members, directors, shareholders or other Persons similarly
affiliated with such Person or any Affiliate thereof, (b) intangible
assets (other than Interest Rate Protection Agreements specifically related to the
Purchased Assets), and (c) prepaid taxes and expenses, all on or as of
such date.

 

“Total
Indebtedness”:  With respect to any
Person and any date, all amounts of Indebtedness (other than Contingent
Liabilities not reflected on such Person’s consolidated balance sheet), plus
the proportionate share of all Indebtedness (other than Contingent Liabilities
not reflected on such Person’s consolidated balance sheet) of all
non-consolidated Affiliates of such Person, on or as of such date.

 

“Transaction”:  With respect to any Asset, the sale and
transfer of such Asset from Seller to Buyer pursuant to the Repurchase
Documents against the transfer of funds from Buyer to Seller representing the
Purchase Price or any additional Purchase Price for such Asset.

 

“Transaction
Request”:  Defined in Section 3.01(a).

 

“Transferor”:  The seller of an Asset under a Purchase
Agreement.

 

“Type”:  With respect to a Mortgaged Property, such
Mortgaged Property’s classification as one of the following: retail, office,
multi-family, industrial, hospitality, student housing, medical office product,
self-storage, health club, or any other property type approved by Buyer.

 

“UCC”:  The Uniform Commercial Code as in effect in
the State of New York; provided, that, if, by reason of Requirements of
Law, the perfection, effect on perfection or non-perfection or priority of the
security interest in any Purchased Asset is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, UCC shall mean the
Uniform Commercial Code as in effect in such other jurisdiction.

 

26

 

“Underlying
Whole Loan”:  With respect to any
Senior Interest, Junior Interest or Mezzanine Loan, a mortgage loan made in
respect of the related Underlying Mortgaged Property.

 

“Underlying
Mortgaged Property”:  In the case of
any:

 

(a)           Whole
Loan, the Mortgaged Property securing such Whole Loan;

 

(b)           Junior
Interest, the Mortgaged Property securing such Junior Interest (if the Junior
Interest is of the type described in clause (a) of the definition
thereof), or the Mortgaged Property securing the Whole Loan in which such
Junior Interest represents a junior participation (if the Junior Interest is of
the type described in clause (b) of the definition thereof);

 

(c)           Senior
Interest, the Mortgaged Property securing such Senior Interest (if the Senior
Interest is of the type described in clause (a) of the definition
thereof), or the Mortgaged Property securing the Whole Loan in which such
Senior Interest represents a senior participation (if the Senior Interest is of
the type described in clause (b) of the definition thereof);

 

(d)           Mezzanine
Loan, the Mortgaged Property that is owned by a Person whose Equity Interest is
pledged as collateral security for such Mezzanine Loan; and

 

(e)           Mezzanine
Participation Interest, the Mortgaged Property that is owned by the Person the
Capital Stock of which is pledged as collateral security for the Mezzanine Loan
in which such Mezzanine Participation Interest represents an interest.

 

“Underlying
Obligor”:  Individually and
collectively, as the context may require, the Mortgagor or Mezzanine Borrower
and other obligor or obligors under an Asset, including (i) any Person
that has not signed the related Mortgage Note but owns an interest in the
related Underlying Mortgaged Property, which interest has been encumbered to
secure such Asset, and (ii) any other Person who has assumed or guaranteed
the obligations of such Mortgagor under the Purchased Asset Documents relating
to an Asset.

 

“Underwriting
Package”:  With respect an Asset, the
internal document or credit committee memorandum of Seller (redacted to protect
confidential information) setting forth all material information relating to
such Asset which is known by Seller, prepared by Seller for its evaluation of
such Asset, to include at a minimum all the information required to be set
forth in the relevant Confirmation.  In
addition, the Underwriting Package shall include all of the following, to the
extent applicable and available:

 

(a)           all
Purchased Asset Documents, and

 

(b)           all
documents, instruments and agreement received in respect of the closing of an
acquisition or origination of an Asset, including, to the extent received
(i) an Appraisal, (ii) the current occupancy report, tenant stack and
rent roll, (iii) at least two (2) years of property-level financial
statements, (iv) the current financial statement of the Underlying
Obligor, (v) the mortgage asset file described in the Custodial Agreement,

 

27

 

(vi) third-party reports and agreed-upon procedures, letters and
reports (whether drafts or final forms), site inspection reports, market
studies and other due diligence materials prepared by or on behalf of or
delivered to Seller, (vii) aging of accounts receivable and accounts
payable, (viii) such further documents or information as Buyer may
request, provided same are either in Seller’s possession or are reasonably
obtainable by Seller, (ix) any and all agreements, documents, reports, or
other information concerning the Asset (including, without limitation, all of
the related Purchased Asset Documents) received or obtained in connection with
the origination of the Asset, and (x) any other material documents or
reports concerning the Asset prepared or executed by Seller or Guarantor, but
only to the extent such documents are not email correspondence, do not
represent internal analysis or would otherwise not be subject to
attorney-client privilege.

 

“Utilization
Threshold Amount” shall mean (x) on the first anniversary of the
Ramp-up Period Expiration Date, $157,500,000, (y) on the second
anniversary of the Closing Date, $175,000,000 and (z) on the third, fourth
and fifth anniversary dates of the Closing Date, $192,500,000.

 

“Waterfall
Account”:  A segregated
non-interest-bearing account established at Waterfall Account Bank, in the name
of Seller, pledged to Buyer and subject to a Controlled Account Agreement.

 

“Waterfall
Account Bank”:  Wells Fargo Bank,
National Association, or any other bank requested by Seller and approved by
Buyer.

 

“Whole
Loan”:  A performing first priority
commercial real estate whole loan for which the Underlying Mortgage Property
has stabilized, as determined by Buyer.

 

“Whole
Loan Documents”:  For any Whole Loan,
the Mortgage Note and all other documents executed in connection with,
evidencing or governing such Whole Loan and the related Underlying Mortgaged
Property.

 

Section 2.01          Rules of Interpretation.  Headings are for convenience only and do not
affect interpretation.  The following rules of
this Section 2.01 apply unless the context requires otherwise. The
singular includes the plural and conversely. A gender includes all
genders.  Where a word or phrase is
defined, its other grammatical forms have a corresponding meaning.  A reference to an Article, Section,
Subsection, Paragraph, Subparagraph, Clause, Annex, Schedule, Appendix,
Attachment, Rider or Exhibit is, unless otherwise specified, a reference
to an Article, Section, Subsection, Paragraph, Subparagraph or Clause of, or
Annex, Schedule, Appendix, Attachment, Rider or Exhibit to, this
Agreement, all of which are hereby incorporated herein by this reference and
made a part hereof.  A reference to a
party to this Agreement or another agreement or document includes the party’s
permitted successors, substitutes or assigns. 
A reference to an agreement or document is to the agreement or document
as amended, modified, novated, supplemented or replaced, except to the extent
prohibited by any Repurchase Document.  A
reference to legislation or to a provision of legislation includes a
modification, codification, replacement, amendment or re-enactment of it, a
legislative provision substituted for it and a rule, regulation or statutory
instrument issued under it.  A reference
to writing includes a facsimile or electronic transmission and any means of
reproducing words in a 

 

28

 

tangible and permanently visible form.  A reference to conduct includes an omission,
statement or undertaking, whether or not in writing.  An Event of Default exists until it has been
cured or waived in writing by Buyer.  The
words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement
as a whole and not to any particular provision of this Agreement, unless the
context clearly requires or the language provides otherwise.  The word “including” is not limiting and
means “including without limitation.” 
The word “any” is not limiting and means “any and all” unless the
context clearly requires or the language provides otherwise.  In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from and
including,” the words “to” and “until” each mean “to but excluding,” and the
word “through” means “to and including.” 
The words “will” and “shall” have the same meaning and effect.  A reference to day or days without further
qualification means calendar days.  A
reference to any time means New York time. 
This Agreement may use several different limitations, tests or
measurements to regulate the same or similar matters. All such limitations,
tests and measurements are cumulative and shall each be performed in accordance
with their respective terms.  Unless the
context otherwise clearly requires, all accounting terms not expressly defined
herein shall be construed in accordance with GAAP, and all accounting
determinations, financial computations and financial statements required
hereunder shall be made in accordance with GAAP, without duplication of
amounts, and on a consolidated basis with all Subsidiaries.  All terms used in Articles 8 and 9 of the
UCC, and used but not specifically defined herein, are used herein as defined
in such Articles 8 and 9.  A reference to
“fiscal year” and “fiscal quarter” means such fiscal periods of Seller.  A reference to an agreement includes a
security interest, guarantee, agreement or legally enforceable arrangement
whether or not in writing.  A reference
to a document includes an agreement (as so defined) in writing or a
certificate, notice, instrument or document, or any information recorded in
computer disk form.  Whenever Seller is
required to provide any document to Buyer under the Repurchase Documents, the
relevant document shall be provided in writing or printed form unless Buyer
requests otherwise.  At the request of
Buyer, the document shall be provided in computer disk form or both printed and
computer disk form.  The Repurchase
Documents are the result of negotiations between the Parties, have been reviewed
by counsel to Buyer and counsel to Seller, and are the product of both
Parties.  No rule of construction
shall apply to disadvantage one Party on the ground that such Party proposed or
was involved in the preparation of any particular provision of the Repurchase
Documents or the Repurchase Documents themselves.  Except where otherwise expressly stated,
Buyer may give or withhold, or give conditionally, approvals and consents, and
may form opinions and make determinations, in its sole and absolute discretion,
subject in all cases to the implied covenant of good faith and fair
dealing.  Reference in any Repurchase
Document to Buyer’s discretion shall mean, unless otherwise expressly stated
herein or therein, Buyer’s sole and absolute discretion, and the exercise of
such discretion shall be final and conclusive. 
In addition, unless otherwise expressly provided in the applicable
Repurchase Document, whenever Buyer has a decision or right of determination,
opinion or request, exercises any right given to it to agree (or any similar
language or terms), disagree, accept, consent, grant waivers, take action or no
action or to approve or disapprove, or any arrangement or term is to be
satisfactory or acceptable to or approved by Buyer (or any similar language or
terms), the decision of Buyer with respect thereto shall be in the sole and
absolute discretion of Buyer, and such decision shall be final and
conclusive.  Any requirement of good
faith, discretion or judgment by Buyer shall not be construed to require Buyer
to request or await 

 

29

 

receipt of information or documentation not
immediately available from or with respect to Seller or the Purchased Assets.

 

ARTICLE 3

 

THE TRANSACTIONS

 

Section 3.01          Procedures.

 

(a)           From time to time prior to the Maturity Date, but not more
frequently than twice per calendar week, with not less than three (3) Business
Days prior written notice to Buyer, Seller may request Buyer to enter into a
proposed Transaction by sending Buyer a notice substantially in the form of Exhibit A
(“Transaction Request”) (i) describing the Transaction and each
proposed Asset and any related Underlying Mortgaged Property and other security
therefor in reasonable detail, (ii) transmitting a complete Underwriting
Package (or whatever portion thereof is then-currently available to Seller) for
each proposed Asset, and (iii) specifying which (if any) of the
representations and warranties of Seller set forth in this Agreement (including
in Schedule 1(a), 1(b), 1(c) or 1(d) applicable
to the Class of such Asset) Seller will be unable to make with respect to
such Asset.  Within five (5) Business
Days after the receipt by Buyer of a Transaction Request, Buyer shall indicate
to Seller its preliminary approval or disapproval of the proposed Asset.  Seller shall promptly deliver to Buyer any
supplemental materials requested at any time by Buyer, provided the same are
either in Seller’s possession or are reasonably obtainable by Seller.  Buyer shall conduct such review of the
Underwriting Package and each such Asset as Buyer determines appropriate.  Buyer shall determine whether or not it is
willing to purchase any or all of the proposed Assets, and if so, on what terms
and conditions.  It is expressly agreed
and acknowledged that Buyer is entering into the Transactions on the basis of
all such representations and warranties and on the completeness and accuracy of
the information contained in the applicable Underwriting Package, and any
incompleteness or inaccuracies in the related Underwriting Package will only be
acceptable to Buyer if disclosed in writing to Buyer by Seller in advance of
the related Purchase Date, and then only if Buyer opts to purchase the related
Purchased Asset from Seller notwithstanding such incompleteness and
inaccuracies.  In the event of a
Representation Breach, Seller shall immediately repurchase the related Asset or
Assets in accordance with Section 3.04.

 

(b)           If Buyer communicates to Seller a non-binding
determination that it is willing to purchase any or all of such Assets, which
non-binding determination shall include the principal terms for the proposed
Transaction, Seller shall deliver to Buyer an executed preliminary Confirmation
for such Transaction, describing each such Asset and its proposed Purchase
Date, Market Value, Applicable Percentage, Purchase Price and such other terms
and conditions as Buyer may require.  If
Buyer requires changes to the preliminary Confirmation, Seller shall make such
changes and re-execute the preliminary Confirmation.  If Buyer determines to enter into the
Transaction on the terms described in the preliminary Confirmation, Buyer shall
promptly execute and return the same to Seller, which shall thereupon become
effective as the Confirmation of the Transaction.  Buyer’s approval of the purchase of an Asset
on such terms and conditions as Buyer may require shall be evidenced only by
its execution and delivery of the related Confirmation.  For the avoidance of doubt, Buyer shall not
(i) be bound by any preliminary or final non-binding determination
referred to above, (ii) be deemed to have

 

30

 

 

approved the purchase of an Asset by virtue of the
approval or entering into by Buyer of a rate lock agreement, Interest Rate
Protection Agreement, total return swap or any other agreement with respect to
such Asset, or (iii) be obligated to purchase an Asset notwithstanding a
Confirmation executed by the Parties unless and until all applicable conditions
precedent in Article 6 have been satisfied or waived by Buyer.

 

(c)           Buyer shall communicate to Seller a final determination of
whether or not it is willing to purchase each proposed Purchased Asset, and if
so, on what terms and conditions, within ten (10) Business Days from
the date of the delivery of the related Transaction Request to Buyer.  If Buyer has not communicated such final
determination to Seller by such date, Buyer shall automatically and without
further action be deemed to have determined not to purchase the related
proposed Purchased Asset.

 

(d)           Each Confirmation, together with this Agreement, shall be
conclusive evidence of the terms of the Transaction covered thereby, and shall
be construed to be cumulative to the extent possible.  If terms in a Confirmation are inconsistent
with terms in this Agreement with respect to a particular Transaction, the Confirmation
shall prevail.  Whenever the Applicable
Percentage or any other term of a Transaction (other than the Pricing Rate,
Market Value and outstanding Purchase Price) with respect to an Asset is
revised or adjusted in accordance with this Agreement, an amended and restated
Confirmation reflecting such revision or adjustment and that is otherwise
acceptable to the Parties shall be prepared by Seller and executed by the
Parties.

 

(e)           The fact that Buyer has conducted or has failed to conduct
any partial or complete examination or any other due diligence review of any
Asset or Purchased Asset shall in no way affect any rights Buyer may have under
the Repurchase Documents or otherwise with respect to any representations or
warranties or other rights or remedies thereunder or otherwise, including the
right to determine at any time that such Asset or Purchased Asset is not an
Eligible Asset, if such Asset or Purchased Asset does not meet the requirements
therefor, as set forth in the definition of “Eligible Asset”.

 

(f)            No Transaction shall be entered into if (i) any
Margin Deficit, Default or Event of Default exists or would exist as a result
of such Transaction, (ii) the Repurchase Date for the Purchased Asset
subject to such Transaction would be later than the Maturity Date, (iii) after
giving effect to such Transaction, the aggregate Repurchase Price of all
Purchased Assets subject to Transactions then outstanding would exceed the
Maximum Amount, (iv) a material adverse change with respect to the related
proposed Purchased Asset, Seller and/or Guarantor has occurred, (v) any
proposed Purchased Asset does not qualify as an Eligible Asset, or
(vi) Seller has not provided Buyer with all of the necessary or requested
due diligence materials to allow Buyer to determine whether or not a proposed
Purchased Asset qualifies as an Eligible Asset.

 

Section 3.02           Transfer of Purchased Assets;
Servicing Rights.  Seller hereby
sells, transfers, conveys and assigns to Buyer on a servicing-released basis
all of Seller’s right, title and interest (but no Retained Interest) in and to
each Purchased Asset, together with all related Servicing Rights.  Subject to this Agreement, prior to the
Maturity Date, Seller may sell to Buyer, repurchase from Buyer and re-sell
Eligible Assets to Buyer, but may not substitute 

 

31

 

other Eligible Assets for Purchased Assets.  On each Purchase Date ownership of and title
to each Purchased Asset shall be transferred to and vest in Buyer or its
designee against the simultaneous transfer of the Purchase Price to the account
of Seller specified in Annex 1 (or if not specified therein, in the
related Confirmation or as directed by Seller). 
Buyer has the right to designate the servicer and sub-servicer of the
Purchased Assets, and the Servicing Rights and other servicing provisions under
this Agreement are not severable from or to be separated from the Purchased
Assets under this Agreement, and such Servicing Rights and other servicing
provisions of this Agreement constitute (a) “related terms” under this
Agreement within the meaning of Section 101(47)(A)(i) of the
Bankruptcy Code and/or (b) a security agreement or other arrangement or
other credit enhancement related to the Repurchase Documents.

 

Section 3.03           Maximum Amount.  The aggregate outstanding Purchase Price for
all Purchased Assets as of any date shall not exceed the Maximum Amount.  If such aggregate outstanding Purchase Price
exceeds the Maximum Amount, Seller shall immediately pay to Buyer an amount
necessary to reduce such aggregate outstanding Purchase Price to an amount
equal to or less than the Maximum Amount.

 

Section 3.04           Early Repurchases; Mandatory
Repurchases.

 

(a)           The terms and provisions governing early repurchases and
mandatory repurchases under Section 3.04(a) are set forth in
the Fee and Pricing Letter, and are hereby incorporated by reference.

 

(b)           In addition to other rights and remedies of Buyer under
any Repurchase Document, Seller shall repurchase any Purchased Asset that no
longer qualifies as an Eligible Asset, as determined by Buyer, within
three (3) Business Days of the receipt by Seller of a related
repurchase notice from Buyer.

 

(c)           Notwithstanding the foregoing and any other provision to
the contrary contained elsewhere in any Repurchase Document, at any time during
the existence of an uncured Default or Event of Default, Seller cannot
repurchase a Purchased Asset in connection with a full payoff of the underlying
Whole Loan by the Underlying Obligor, unless one-hundred percent (100%) of the
net proceeds due in connection with the relevant payoff in question shall be
paid directly to Buyer.  The portion of
all such net proceeds in excess of the then-current Repurchase Price of the
related Purchased Asset will be applied by Buyer to reduce any other amounts
due and payable to Buyer under this Agreement, and then to reduce the
Repurchase Prices of the other Purchased Assets in such order and in such
amounts as Buyer shall determine.

 

Section 3.05           Repurchase.  On the Repurchase Date for each Purchased
Asset, Seller shall transfer to Buyer the Repurchase Price for such Purchased
Asset as of the Repurchase Date, and pay all amounts due to any Affiliated
Hedge Counterparty under the related Interest Rate Protection Agreement and
Buyer shall transfer to Seller such Purchased Asset, whereupon the Transaction
with respect to such Purchased Asset shall terminate. Buyer shall be deemed to
have simultaneously released its security interest in such Purchased Asset,
shall authorize Custodian to release to Seller the Purchased Asset Documents
for such Purchased Asset and, to the extent any UCC financing statement filed
against Seller specifically identifies such Purchase Asset, Buyer shall deliver
an amendment thereto or termination thereof 

 

32

 

evidencing the release of such Purchased Asset from
Buyer’s security interest therein.  Any
such transfer or release shall be without recourse to Buyer and without
representation or warranty by Buyer, except that Buyer shall represent to Seller,
to the extent that good title was transferred and assigned by Seller to Buyer
hereunder on the related Purchase Date, that Buyer is the sole owner of the
related Purchased Asset, free and clear of any other interests or Liens created
by Buyer.  Any Income with respect to
such Purchased Asset received by Buyer or Waterfall Account Bank after payment
of the Repurchase Price therefor shall be remitted to Seller.  Notwithstanding the foregoing, on or before
the Maturity Date, Seller shall repurchase all Purchased Assets by paying to
Buyer the outstanding Repurchase Price therefor and all other outstanding
Repurchase Obligations.

 

Section 3.06           Payment of Price Differential and
Fees.

 

(a)           Notwithstanding that Buyer and Seller intend that the
Transactions hereunder be sales to Buyer of the Purchased Assets, Seller shall
pay to Buyer the accrued value of the Price Differential for each Purchased
Asset on each Remittance Date.  Buyer
shall give Seller notice of the Price Differential and any fees and other
amounts due under the Repurchase Documents on or prior to the second (2nd)
Business Day preceding each Remittance Date; provided, that Buyer’s
failure to deliver such notice shall not affect Seller’s obligation to pay such
amounts.  If the Price Differential includes
any estimated Price Differential, Buyer shall recalculate such Price
Differential after the Remittance Date and, if necessary, make adjustments to
the Price Differential amount due on the following Remittance Date.

 

(b)           Seller and Guarantor shall pay to Buyer all fees and other
amounts as and when due as set forth in this Agreement including, without
limitation:

 

(i)            the Non-Utilization Fee, shall be due and payable on the
first anniversary of the Ramp up Period Expiration Date and on each succeeding
anniversary of the Closing Date; notwithstanding the foregoing, if the
Repurchase Agreement terminates at any time prior to the first anniversary of
the Ramp-up Period Expiration Date (for the avoidance of doubt, even if all
Purchased Assets are repurchased by Seller at any time prior to the first
anniversary of the Ramp-up Period Expiration Date), the Non-Utilization Fee
will remain due and payable by Seller and Guarantor on the first anniversary of
the Ramp-up Period Expiration Date based on all accruals for the time period
beginning on the Ramp-up Period Expiration Date and ending on the first
anniversary of the Ramp-up Period Expiration Date.  In addition thereto, (A) on the second
anniversary of the Closing Date, Seller and Guarantor shall pay to Buyer an
additional amount equal to (1) twenty-five basis points (0.25%) multiplied
by (2) the positive amount, if any of (i) $245,000,000 minus
(ii) the greater of either the average daily unpaid Repurchase Price of
all Purchased Assets (excluding unpaid Price Differential) during the preceding
nine (9) month period or $175,000,000; and (B) on the third,
fourth and fifth anniversaries of the Closing Date, Seller and Guarantor shall
pay to Buyer an additional amount equal to (1) twenty-five basis points
(0.25%) multiplied by (2) the positive amount, if any of
(i) $245,000,000 minus (ii) the greater of either the average daily
unpaid Repurchase Price of all Purchased Assets (excluding unpaid Price
Differential) during the preceding twelve (12) month period or $192,500,000;

 

33

 

(ii)           the Commitment Fee shall be due and payable on the Closing
Date; and

 

(iii)          the Extension Fee shall be payable on the date of the
exercise by Seller of each Extension Option.

 

Section 3.07           Extension of the Maturity Date.  Seller shall have two (2) options to
extend the Maturity Date (each, an “Extension Option”), each for an
additional one (1) year period (each, an “Extension Term”) ending
on the one year anniversary of the Initial Maturity Date or the first extended
Maturity Date, as the case may be (each, an “Extended Maturity Date”),
exercisable in each case by delivery to Buyer of a written notice exercising
any such Extension Option no earlier than sixty (60) days or later than
thirty (30) days prior to the Initial Maturity Date or first Extended
Maturity Date, as the case may, but subject to the following conditions:  (i) no Event of Default exists on the
date of delivery of notice by Seller exercising such Extension Option or the
then current Maturity Date, (ii) no Margin Deficit shall be outstanding,
(iii) Seller shall be in compliance with the Debt Yield Test,
(iv) all Purchased Assets must qualify as Eligible Assets (or Seller
repurchases any Purchased Asset that no longer qualifies as an Eligible Asset
within three (3) business days of notice thereof from Buyer, provided
that the failure of Buyer to deliver such written notice shall not be construed
as a waiver of Buyer’s right to require Seller to satisfy all of the conditions
for an extension of the Term), and (v) the payment by Seller to Buyer of
the Extension Fee on or before the current Maturity Date.

 

Notwithstanding
the preceding paragraph, if a Default has occurred and is continuing on or
prior to the then current Maturity Date, then the Initial Maturity Date or the
first Extended Maturity Date, as applicable, shall be extended on an interim
basis to the earlier of the date such Default is cured by or at the direction
of Seller (whereupon the exercise of the applicable Extension Option shall
immediately be effective and the then current Maturity Date shall be extended
for the applicable Extension Term) or, if such Default remains uncured, the
date that the applicable cure period in respect of such Default expires.

 

Section 3.08           Payment, Transfer and Custody.

 

(a)           Unless otherwise expressly provided herein, all amounts
required to be paid or deposited by Seller hereunder shall be paid or deposited
in accordance with the terms hereof no later than 3:00 p.m. on the day
when due, in immediately available Dollars and without deduction, setoff or
counterclaim, and if not received before such time shall be deemed to be
received on the next Business Day. 
Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next following Business
Day, and such extension of time shall in such case be included in the
computation of such payment.  If Seller
fails to pay all or part of any Repurchase Price amount by 5:00 p.m., New
York City time on any date when due, Buyer may require Seller to pay (in
addition to, and together with, such past-due Repurchase Price) a late fee
equal to one percent (1%) of the total amount of the late payment, plus
interest on such past due Repurchase Price as provided in Section 18.16,
until any such past due Repurchase Price is received in full by Buyer.  Amounts payable to Buyer and not otherwise
required to be deposited into the Waterfall Account shall be deposited into an
account of Buyer.  Seller shall have no
rights in, rights of withdrawal from, or rights to give notices or instructions
regarding Buyer’s account or the Waterfall Account or the 

 

34

 

Servicing Agreement Account.  Amounts in the Servicing Agreement Account
may be invested at the direction and in the discretion of Buyer in cash
equivalents before they are distributed in accordance with Article 5.

 

(b)           Any Purchased Asset Documents not delivered to Buyer or
Custodian are and shall be held in trust by Seller or its agent for the benefit
of Buyer as the owner thereof.  Seller or
its agent shall maintain a copy of the Purchased Asset Documents and the
originals of the Purchased Asset Documents not delivered to Buyer or
Custodian.  The possession of Purchased
Asset Documents by Seller or its agent is in a custodial capacity only at the
will of Buyer for the sole purpose of assisting Servicer and Sub-Servicer with
their duties under the Servicing and Sub-Servicing Agreement.  Each Purchased Asset Document retained or
held by Seller or its agent shall be segregated on Seller’s books and records
from the other assets of Seller or its agent, and the books and records of
Seller or its agent shall be marked to reflect clearly the sale of the related
Purchased Asset to Buyer on a servicing-released basis.  Seller or its agent shall release its custody
of the related Purchased Asset Document only in accordance with written
instructions from Buyer, unless such release is required as incidental to the
sub-servicing of the Purchased Assets by Sub-Servicer or is in connection with
a repurchase of any Purchased Asset by Seller, in each case in accordance with
the Custodial Agreement.

 

Section 3.09           Repurchase Obligations Absolute.  All amounts payable by Seller under the
Repurchase Documents shall be paid without notice (except as expressly required
in the Repurchase Documents), demand, counterclaim, setoff, deduction or
defense (as to any Person and for any reason whatsoever) and without abatement,
suspension, deferment, diminution or reduction (as to any Person and for any
reason whatsoever), and the Repurchase Obligations shall not be released,
discharged or otherwise affected, except as expressly provided herein, by
reason of:  (a) any damage to,
destruction of, taking of, restriction or prevention of the use of,
interference with the use of, title defect in, encumbrance on or eviction from,
any Purchased Asset or related Underlying Mortgaged Property, (b) any
Insolvency Proceeding relating to Seller or any Underlying Obligor, or any
action taken with respect to any Purchased Asset Document by any trustee or
receiver of Seller or any Underlying Obligor or by any court in any such
proceeding, (c) any claim that Seller has or might have against Buyer
under any Repurchase Document or otherwise, (d) any default or failure on
the part of Buyer to perform or comply with any Repurchase Document or other
agreement with Seller, (e) the invalidity or unenforceability of any
Purchased Asset, Repurchase Document or Purchased Asset Document, or
(f) any other occurrence whatsoever, whether or not similar to any of the
foregoing, and whether or not Seller has notice or Knowledge of any of the
foregoing.  The Repurchase Obligations
shall be full recourse to Seller.  This Section 3.09
shall survive the termination of the Repurchase Documents and the payment in
full of the Repurchase Obligations.

 

ARTICLE 4

 

MARGIN MAINTENANCE

 

Section 4.01           Margin Deficit.

 

(a)           If on any date (i) the Market Value of a Purchased
Asset is less than (ii) the product of (A) Buyer’s Margin Percentage
times (B) the outstanding Repurchase Price for 

 

35

 

such Purchased Asset as of such date (the excess, if
any, of (ii) over (i), a “Margin Deficit”), then Seller shall,
within three (3) Business Days after notice from Buyer (a “Margin Call”),
transfer cash to Buyer in an amount at least equal to such Margin Deficit.  Buyer shall apply the funds received in
satisfaction of a Margin Deficit to the Repurchase Obligations in such manner
as Buyer determines, to amounts due and owing under the Repurchase Documents on
such date.  Additional terms and
provisions governing Margin Deficits and Margin Calls under this Section 4.01(a) are
set forth in the Fee and Pricing Letter, and are hereby incorporated by
reference.

 

(b)           Buyer’s election not to deliver a Margin Call notice at
any time there is a Margin Deficit shall not waive the Margin Deficit or in any
way limit or impair Buyer’s right to deliver a Margin Call notice at any time
when the same or any other Margin Deficit exists (and the conditions to the
delivery of such Margin Call notice under Section 4.01(a) above
are satisfied).  Buyer’s rights under
this Section 4.01 are in addition to and not in lieu of any other
rights of Buyer under the Repurchase Documents or Requirements of Law.

 

(c)           All cash transferred to Buyer pursuant to this Section 4.01
with respect to a Purchased Asset shall be deposited into the Waterfall
Account, except as directed by Buyer, and notwithstanding any provision in Section 5.02
to the contrary, shall be applied to reduce the Purchase Price of such
Purchased Asset.

 

(d)           Additional terms and provisions concerning the Debt Yield
Test are set forth in the Fee and Pricing Letter, and are hereby incorporated
by reference.

 

ARTICLE 5

 

APPLICATION OF INCOME

 

Section 5.01           Waterfall Account; Servicing
Agreement Account.  The Waterfall
Account and the Servicing Agreement Account shall be established at Waterfall
Account Bank.  The customary related fees
and expenses of Waterfall Account Bank in connection with maintaining the
Waterfall Account and the Servicing Agreement Account will be the sole
responsibility of Seller.  Buyer shall
have sole dominion and control (including, without limitation, “control” within
the meaning of Section 9-104(a) of the UCC) over the Waterfall
Account and the Servicing Agreement Account. 
Neither Seller nor any Person claiming through or under Seller shall
have any claim to or interest in the Waterfall Account or the Servicing Agreement
Account.  All Income received by Seller,
Buyer or Waterfall Account Bank in respect of the Purchased Assets, as well as
any interest received from the reinvestment of such Income, (other than amounts
of reinvestment income permitted to be retained by Servicer as additional
servicing compensation in accordance with Section 3.03(c) of
the Servicing and Sub-Servicing Agreement) shall be deposited directly into the
Waterfall Account except, in the case of amounts deposited by Servicer, such
deposits to the Waterfall Account shall occur from the Servicing Agreement
Account in accordance with Section 3.04(a)(iv) of the
Servicing and Sub-Servicing Agreement, and shall be applied to and remitted by
Waterfall Account Bank in accordance with this Article 5.  If any Underlying Obligor for which Seller
has not delivered to Buyer a countersigned Irrevocable Redirection Notice shall
make any payment due in connection with any Purchased Asset to an account other
than the Waterfall Account, Seller shall cause such payment to be deposited or
transferred to the Waterfall Account within two (2) Business Days.  

 

36

 

Notwithstanding the foregoing, so long as the
Servicing and Sub-Servicing Agreement is in full force and effect and Manager
is acting as Sub-Servicer thereunder, all amounts to be paid or are otherwise
received from, or on behalf of, a related Underlying Obligor shall be paid
directly to the Servicing Agreement Account and, thereafter, remitted to the
Waterfall Account in accordance with the terms of the Servicing and
Sub-Servicing Agreement.  With respect to
any Purchased Asset that was originated by Seller, Seller shall establish and
maintain at all times the Collection Account(s) relating to such Purchased
Asset at Waterfall Account Bank.

 

Section 5.02           No Material Default or Event of
Default Exists.  If no Material
Default or Event of Default exists, all Income described in Section 5.01
and deposited into the Waterfall Account during each Pricing Period shall be applied
by Waterfall Account Bank by no later than the next following Remittance Date
in the following order of priority:

 

first, to pay all then-currently due and payable
servicing fees to Buyer (or its designated Servicer), and to reimburse Buyer
(or its designated Servicer) for any and all costs, expenses, advances and
similar amounts incurred by Buyer (or its designated Servicer) in connection
with the servicing of the Purchased Assets;

 

second, to the extent such payments are actually remitted
by the Underlying Obligor to the Waterfall Account, to remit the tax (and
insurance, if applicable) escrow portion and any tenant improvement, capital
expenditure or other reserve portion of any payments received from each
Underlying Obligor to the respective escrow agents pursuant to the escrow
agreements for the related Whole Loan or Underlying Whole Loans, and whether or
not any event of default exists with respect to the related Whole Loan or
Underlying Whole Loan;

 

third, to pay to Buyer an amount equal to the Price
Differential accrued with respect to all Purchased Assets as of such Remittance
Date;

 

fourth, to pay to Buyer an amount equal to all default
interest, late fees, fees, expenses and Indemnified Amounts then due and
payable from Seller and other applicable Persons to Buyer under the Repurchase
Documents;

 

fifth, to pay to Buyer an amount sufficient to eliminate
any outstanding Margin Deficit (without limiting Seller’s obligation to satisfy
a Margin Deficit in a timely manner as required by Section 4.01);

 

sixth, to pay any custodial fees and expenses due and
payable under the Custodial Agreement;

 

seventh, for each Core Purchased Asset, to pay the
Applicable Percentage of any Principal Payment to Buyer, but only to the extent
that such remittance would not result in the creation of a Margin Deficit, to
be applied by Buyer within one (1) Business Day of receipt to reduce the
outstanding Purchase Price of the applicable Purchased Asset, with the balance
of such Principal Payment to be paid to Seller within three (3) Business
Days of receipt;

 

eighth, for each Flex Purchased Asset, to pay one-hundred
percent (100%) of any Principal Payment to Buyer, to be applied by Buyer within
one (1) Business Day of receipt to reduce the outstanding Purchase Price
of the applicable Purchased Asset and, after payment in 

 

37

 

full
of such Purchase Price, any remaining portion of any such Principal Payment
shall be paid to Seller within three (3) Business Days;

 

ninth, to pay to Buyer any other amounts due and payable
from Seller and other applicable Persons to Buyer under the Repurchase
Documents; and

 

tenth, to pay to Seller any remainder for its own
account, subject, however, to the covenants and other requirements of the Repurchase
Documents.

 

Section 5.03           A Material Default or Event of
Default Exists.  If a Material
Default or an Event of Default exists, all Income deposited into the Waterfall
Account in respect of the Purchased Assets shall be applied by Waterfall
Account Bank, on the Business Day next following the Business Day on which each
amount of Income is so deposited, in the following order of priority:

 

first, to pay all then-currently due and payable
servicing fees to Buyer (or its designated Servicer), and to reimburse Buyer
(or its designated Servicer) for any and all costs, expenses, advances and
similar amounts incurred by Buyer (or its designated Servicer) in connection
with the servicing of the Purchased Assets;

 

second, to the extent such payments are actually remitted
by the Underlying Obligor to the Waterfall Account, to remit the tax (and
insurance, if applicable) escrow portion of any payments received from each
Underlying Obligor to the respective escrow agents pursuant to the escrow
agreements for the related Whole Loan or Underlying Whole Loans, and whether or
not any event of default exists with respect to the related Whole Loan or
Underlying Whole Loan;

 

third, to pay to Buyer an amount equal to the Price
Differential accrued with respect to all Purchased Assets as of such Remittance
Date;

 

fourth, to pay to Buyer an amount equal to all default
interest, late fees, fees, expenses and Indemnified Amounts then due and
payable from Seller and other applicable Persons to Buyer under the Repurchase
Documents;

 

fifth, to pay any custodial fees and expenses due and
payable under the Custodial Agreement;

 

sixth, to pay to Buyer an amount equal to the aggregate
Repurchase Price of all Purchased Assets (to be applied in such order and in
such amounts as determined by Buyer, until such Purchase Price has been reduced
to zero) plus all other amounts due to Buyer under the Repurchase Documents;

 

seventh, to pay to Buyer all other Repurchase Obligations
due to Buyer; and

 

eighth, to pay to Seller any remainder for its own
account.

 

Section 5.04           Seller to Remain Liable.  If the amounts remitted to Buyer as provided
in Sections 5.02 and 5.03 are insufficient to pay all
amounts due and payable from 

 

38

 

Seller to Buyer under this Agreement or any
Repurchase Document on a Remittance Date, a Repurchase Date, upon the
occurrence of an Event of Default or otherwise, Seller shall nevertheless
remain liable for and shall pay to Buyer when due all such amounts.

 

ARTICLE 6

 

CONDITIONS PRECEDENT

 

Section 6.01           Conditions Precedent to Initial
Transaction.  Buyer shall not be
obligated to enter into any Transaction or purchase any Asset until the
following conditions have been satisfied in the discretion of Buyer, or waived
by Buyer, on and as of the Closing Date:

 

(a)           Buyer has received the following documents, each dated the
Closing Date or as of the Closing Date unless otherwise specified:  (i) each Repurchase Document duly
executed and delivered by the parties thereto, (ii) an official good
standing certificate dated a recent date with respect to Seller (including in
each jurisdiction where any Underlying Mortgaged Property is located to the
extent necessary for Buyer to enforce its rights and remedies thereunder),
(iii) certificates of the secretary or an assistant secretary of Seller
with respect to attached copies of the Governing Documents and applicable
resolutions of Seller, and the incumbencies and signatures of officers of
Seller executing the Repurchase Documents to which it is a party, evidencing
the authority of Seller with respect to the execution, delivery and performance
thereof, (iv) a Closing Certificate, (v) an executed power of
attorney of Seller in the form of Exhibit C, (vi) such
opinions from counsel to Seller as Buyer may require, including with respect to
corporate matters, enforceability, non-contravention, no consents or approvals
required other than those that have been obtained, first priority perfected
security interests in the Purchased Assets, the Pledged Collateral and any
other collateral pledged pursuant to the Repurchase Documents, Investment
Company Act matters, and the applicability of Bankruptcy Code safe harbors, and
(vii) all other documents, certificates, information, financial
statements, reports, approvals and opinions of counsel as it may require;

 

(b)           (i) UCC financing statements have been filed against
Seller and Principal in all filing offices required by Buyer, (ii) Buyer
has received such searches of UCC filings, tax liens, judgments, pending litigation
and other matters relating to Seller and the Purchased Assets as Buyer may
require, (iii) the results of such searches are satisfactory to Buyer and (iv) all
original certificates evidencing all ownership interests in Seller, which
interests shall be in certificated form pursuant to Section 8-103 of the
UCC, together with executed original copies of all necessary blank transfer
documents, have been delivered to Custodian;

 

(c)           Buyer has received payment from Seller of all fees and
expenses then payable under this Agreement and the other Repurchase Documents,
as contemplated by Section 13.02; and

 

(d)           Buyer has completed to its satisfaction such due diligence
and modeling as it may require.

 

Section 6.02           Conditions Precedent to All
Transactions.  Buyer shall not be
obligated to enter into any Transaction, purchase any Asset, or be obligated to
take, fulfill or 

 

39

 

perform any other action hereunder, until the
following additional conditions have been satisfied in the discretion of Buyer,
or waived by Buyer, with respect to each Asset on and as of the Purchase Date
therefor:

 

(a)           Buyer has received the following documents:  (i) a Transaction Request, (ii) an
Underwriting Package, (iii) a Confirmation, (iv) fully-executed
Irrevocable Redirection Notices, except to the extent set forth in Section 8.16,
(v) a trust receipt and other items required to be delivered under the
Custodial Agreement, and (vi) all other documents, certificates,
information, financial statements, reports, approvals and opinions of counsel
as Buyer may require;

 

(b)           immediately before such Transaction and after giving
effect thereto and to the intended use thereof, no Representation Breach
(including with respect to any Purchased Asset), Default, Event of Default,
Margin Deficit or Material Adverse Effect exists;

 

(c)           Buyer has completed its due diligence review of the
Underwriting Package, Purchased Asset Documents and such other documents,
records and information as Buyer deems appropriate, and the results of such
reviews are satisfactory to Buyer;

 

(d)           Buyer has (i) determined that such Asset is an
Eligible Asset, (ii) approved the purchase of such Asset,
(iii) obtained all necessary internal credit and other approvals for such
Transaction, and (iv) executed the Confirmation;

 

(e)           the aggregate outstanding Purchase Price of all
Transactions does not exceed the Maximum Amount after giving effect to such
Transaction;

 

(f)            the Repurchase Date is not later than the Maturity Date;

 

(g)           Seller has satisfied all requirements and conditions and
have performed all covenants, duties, obligations and agreements contained in
the Repurchase Documents to be performed by Seller on or before the Purchase
Date;

 

(h)           to the extent the related Purchased Asset Documents
contain notice, cure and other provisions in favor of a pledgee under a
repurchase or warehouse facility, and without prejudice to the sale treatment
of such Asset to Buyer, Buyer has received evidence that Seller has given
notice to the applicable Persons of Buyer’s interest in such Asset and
otherwise satisfied any other applicable requirements under such pledgee
provisions so that Buyer is entitled to the rights and benefits of a pledgee
under such pledgee provisions;

 

(i)            (i) Buyer has received a copy of the related
Interest Rate Protection Agreement (if any) and all related documents,
(ii) Seller or Guarantor, as applicable, has assigned to Buyer all of
assignor’s rights (but none of its obligations) under such Interest Rate
Protection Agreement and related documents, and (iii) no termination
event, default or event of default (however defined) exists thereunder;

 

(j)            Buyer shall have received blank assignments of all
related Purchased Asset Documents, each in appropriate form for recording (to
the extent recordable) in the

 

40

 

 

jurisdiction in which the underlying real estate is
located (the “Blank Assignment Documents”); and

 

(k)           For all Assets acquired from or originated by (whether
directly or indirectly) an Affiliate of Seller (other than any Asset acquired
directly or indirectly from and/or originated by Guarantor or any Intermediate
Starwood Entity), if requested by Buyer, a true sale opinion from counsel to
Seller in form and substance reasonably satisfactory to Buyer.

 

Each
Confirmation delivered by Seller shall constitute a certification by Seller
that all of the conditions precedent in this Article 6 have been
satisfied, unless any such condition precedent was expressly waived in the
related Confirmation.

 

The
failure of Seller to satisfy any of the conditions precedent in this Article 6
with respect to any Transaction or Purchased Asset shall, unless such failure
was waived in writing by Buyer on or before the related Purchase Date, give
rise to the right of Buyer at any time to rescind the related Transaction,
whereupon Seller shall immediately pay to Buyer the Repurchase Price of such
Purchased Asset.

 

ARTICLE 7

 

REPRESENTATIONS AND WARRANTIES OF
SELLER

 

Seller
represents and warrants, on and as of the date of this Agreement, each Purchase
Date, and at all times when any Repurchase Document or Transaction is in full
force and effect, as follows:

 

Section 7.01           Seller.  Seller has been duly organized and validly
exists in good standing as a limited liability company under the laws of the
State of Delaware.  Seller (a) has all
requisite power, authority, legal right, licenses and franchises, (b) is duly
qualified to do business in all jurisdictions necessary, and (c) has been
duly authorized by all necessary action, to (w) own, lease and operate its
properties and assets, (x) conduct its business as presently conducted,
(y) execute, deliver and perform its obligations under the Repurchase
Documents to which it is a party, and (z) acquire, own, sell, assign,
pledge and repurchase the Purchased Assets. 
Seller’s exact legal name is set forth in the preamble and signature pages of
this Agreement.  Seller’s location
(within the meaning of Article 9 of the UCC), and the office where Seller
keeps all records (within the meaning of Article 9 of the UCC) relating to
the Purchased Assets is at the address of Seller referred to in Annex 1.  Seller has not changed its name or location
within the past twelve (12) months. 
Seller’s organizational identification number is 4792057 and its tax
identification number is 27-2143719. 
Seller is a wholly-owned Subsidiary of Guarantor.  The fiscal year of Seller is the calendar
year.  Seller has no Indebtedness,
Contractual Obligations or investments other than (a) ordinary trade
payables, (b) in connection with Assets acquired or originated for the Transactions,
and (c) the Repurchase Documents. 
Seller has no Guarantee Obligations.

 

Section 7.02           Repurchase Documents.  Each Repurchase Document to which Seller is a
party has been duly executed and delivered by Seller and constitutes the legal,
valid and binding obligation of Seller enforceable against Seller in accordance
with its terms, except as 

 

41

 

such enforceability may be limited by Insolvency
Laws and general principles of equity. The execution, delivery and performance
by Seller of each Repurchase Document to which it is a party do not and will
not (a) conflict with, result in a breach of, or constitute (with or
without notice or lapse of time or both) a default under, any (i) Governing
Document, Indebtedness, Guarantee Obligation or Contractual Obligation
applicable to Seller or any of its properties or assets, (ii) Requirements
of Law, or (iii) approval, consent, judgment, decree, order or demand of
any Governmental Authority, or (b) result in the creation of any Lien
(other than Permitted Liens) on any of the properties or assets of Seller.  All approvals, authorizations, consents,
orders, filings, notices or other actions of any Person or Governmental
Authority required for the execution, delivery and performance by Seller of the
Repurchase Documents to which it is a party and the sale of and grant of a
security interest in each Purchased Asset to Buyer, have been obtained,
effected, waived or given and are in full force and effect.  The execution, delivery and performance of
the Repurchase Documents do not require compliance by Seller with any “bulk
sales” or similar law.  There is no
material litigation, proceeding or investigation pending or, to Seller’s
Knowledge,  threatened, against Seller,
Manager, any Intermediate Starwood Entity or Guarantor before any Governmental
Authority (a) asserting the invalidity of any Repurchase Document,
(b) seeking to prevent the consummation of any Transaction, or
(c) seeking any determination or ruling that could reasonably be expected
to have a Material Adverse Effect.

 

Section 7.03           Solvency.  None of Seller, Manager, any Intermediate
Starwood Entity or Guarantor is or has ever been the subject of an Insolvency
Proceeding.  Seller, Manager, each
Intermediate Starwood Entity and Guarantor are Solvent and the Transactions do
not and will not render Seller, Manager, any Intermediate Starwood Entity or
Guarantor not Solvent.  Seller is not
entering into the Repurchase Documents or any Transaction with the intent to
hinder, delay or defraud any creditor of Seller, Manager, any Intermediate
Starwood Entity or Guarantor.  Seller has
received or will receive reasonably equivalent value for the Repurchase
Documents and each Transaction.  Seller
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.  Seller is generally able to
pay, and as of the date hereof is paying, its debts as they come due.

 

Section 7.04           Taxes.  Seller, Manager, each Intermediate Starwood
Entity and Guarantor have filed all required federal income tax returns and all
other material tax returns, domestic and foreign, required to be filed by them
and have paid all material taxes (including mortgage recording taxes),
assessments, fees, and other governmental charges payable by them, or with
respect to any of their properties or assets, which have become due, and income
or franchise taxes have been paid or are being contested in good faith by appropriate
proceedings diligently conducted and for which appropriate reserves have been
established in accordance with GAAP. 
Seller, Manager, each Intermediate Starwood Entity and Guarantor have
paid, or have provided adequate reserves for the payment of, all such taxes for
all prior fiscal years and for the current fiscal year to date.  There is no material action, suit,
proceeding, investigation, audit or claim relating to any such taxes now
pending or, to Seller’s Knowledge, threatened by any Governmental Authority
which is not being contested in good faith as provided above.  None of Seller, Manager, any Intermediate
Starwood Entity or Guarantor has entered into any agreement or waiver or been
requested to enter into any agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes, or is aware of any
circumstances that would cause the taxable years or other taxable periods of
Seller, Manager, any 

 

42

 

Intermediate Starwood Entity or Guarantor not to be
subject to the normally applicable statute of limitations.  No tax liens have been filed against any
assets of Seller, Manager, any Intermediate Starwood Entity or Guarantor.  Seller does not intend to treat any Transaction
as being a “reportable transaction” as defined in Treasury Regulation
Section 1.6011—4.  If Seller
determines to take any action inconsistent with such intention, it will
promptly notify Buyer, in which case Buyer may treat each Transaction as subject
to Treasury Regulation Section 301.6112—1 and will maintain the lists and
other records required thereunder.

 

Section 7.05           Financial Condition.  The audited balance sheet of Guarantor as at
the fiscal year most recently ended for which such audited balance sheet is
available, and the related audited statements of income and retained earnings
and of cash flows for the fiscal year then ended, setting forth in each case,
except for the 2009 calendar year, in comparative form the figures for the
previous year, reported on without a “going concern” or like qualification
arising out of the audit conducted by Guarantor’s independent certified public
accountants, copies of which have been delivered to Buyer, are complete and
correct and present fairly the financial condition of Guarantor as of such date
and the results of its operations and cash flows for the fiscal year then
ended.  All such financial statements,
including related schedules and notes, were prepared in accordance with GAAP
except as disclosed therein.  Guarantor
does not have any material contingent liability or liability for taxes or any
long term lease or unusual forward or long term commitment, including any
Derivative Contract, which is not reflected in the foregoing statements or
notes.

 

Section 7.06           True and Complete Disclosure.  The information, reports, certificates,
documents, financial statements, operating statements, forecasts, books,
records, files, exhibits and schedules furnished by or on behalf of Seller to
Buyer in connection with the Repurchase Documents and the Transactions, when
taken as a whole, do not contain any untrue statement of material fact or omit
to state any material fact necessary to make the statements herein or therein,
in light of the circumstances under which they were made, not misleading.  All written information furnished after the
date hereof by or on behalf of Seller to Buyer in connection with the
Repurchase Documents and the Transactions will be true, correct and complete in
all material respects, or in the case of projections will be based on
reasonable estimates prepared and presented in good faith, on the date as of
which such information is stated or certified.

 

Section 7.07           Compliance with Laws.  Seller has complied in all material respects
with all Requirements of Laws, and, to Seller’s Actual Knowledge, no Purchased
Asset contravenes any Requirements of Laws. 
Neither Seller nor any Affiliate of Seller (a) is an “enemy” or an “ally
of the enemy” as defined in the Trading with the Enemy Act of 1917, (b) is
in violation of any Anti-Terrorism Laws, (c) is a blocked person described
in Section 1 of Executive Order 13224 or to its Knowledge engages in any
dealings or transactions or is otherwise associated with any such blocked
person, (d) is in violation of any country or list based economic and
trade sanction administered and enforced by the Office of Foreign Assets
Control, (e) is a Sanctioned Entity, (f) has more than 10% of its
assets located in Sanctioned Entities, or (g) derives more than 10% of its
operating income from investments in or transactions with Sanctioned
Entities.  The proceeds of any
Transaction have not been and will not be used to fund any operations in,
finance any investments or activities in or make any payments to a Sanctioned
Entity. Seller is a “qualified purchaser” as defined in the Investment Company
Act of 1940.  

 

43

 

None of Seller, Manager, any Intermediate Starwood
Entity or Guarantor (a) is or is controlled by an “investment company” as
defined in such Act or is exempt from the provisions of such Act, (b) is a
“broker” or “dealer” as defined in, or could be subject to a liquidation
proceeding under, the Securities Investor Protection Act of 1970, or
(c) is subject to regulation by any Governmental Authority limiting its
ability to incur the Repurchase Obligations. 
No properties presently or previously owned or leased by Seller,
Manager, any Intermediate Starwood Entity or Guarantor, or any of their
respective predecessors contain or previously contained any Materials of
Environmental Concern which constitute or constituted a violation of
Environmental Laws or reasonably could be expected to give rise to liability of
Seller, Manager, any Intermediate Starwood Entity or Guarantor thereunder.  Seller has no Actual Knowledge of any
violation, alleged violation, non-compliance, liability or potential liability
of Seller, Manager, any Intermediate Starwood Entity or Guarantor under any
Environmental Law.  Materials of
Environmental Concern have not been released, transported, generated, treated,
stored or disposed of in violation of Environmental Laws or in a manner which
reasonably could be expected to give rise to liability of Seller, Manager, any
Intermediate Starwood Entity or Guarantor thereunder.  Seller and all Affiliates of Seller are in
compliance with the Foreign Corrupt Practices Act of 1977 and any foreign
counterpart thereto.  Neither Seller nor
any Affiliate of Seller has made, offered, promised or authorized a payment of
money or anything else of value (a) in order to assist in obtaining or
retaining business for or with, or directing business to, any foreign official,
foreign political party, party official or candidate for foreign political
office, (b) to any foreign official, foreign political party, party
official or candidate for foreign political office, or (c) with the intent
to induce the recipient to misuse his or her official position to direct
business wrongfully to Seller, any Affiliate of Seller or any other Person, in
violation of the Foreign Corrupt Practices Act.

 

Section 7.08           Compliance with ERISA.  With respect to Guarantor, any Intervening
Starwood Entity or Seller, during the immediately preceding five (5) year
period, (a) neither a Reportable Event nor an “accumulated funding
deficiency” as defined in the Code or ERISA has occurred, (b) each Plan
has complied in all material respects with the applicable provisions of the
Code and ERISA, (c) no termination of a Single Employer Plan has occurred
resulting in any liability that has remained underfunded, and (d) no Lien in
favor of the Pension Benefit Guaranty Commission or a Plan has arisen.  The present value of all accrued benefits
under each Single Employer Plan (based on the assumptions used to fund such Plan)
relating to Guarantor, any Intervening Starwood Entity or Seller did not, as of
the last annual valuation date prior to the date hereof, exceed the value of
the assets of such Plan allocable to such accrued benefits.  None of Guarantor, any Intervening Starwood
Entity or Seller is currently subject to any liability for a complete or
partial withdrawal from a Multiemployer Plan.

 

Section 7.09           No Default or Material Adverse
Effect.  No Event of Default and, to
Seller’s Knowledge, no Default exists. 
Seller believes that it is and will be able to pay and perform each
agreement, duty, obligation and covenant contained in the Repurchase Documents
and Purchased Asset Documents to which it is a party, and that it is not
subject to any agreement, obligation, restriction or Requirements of Law which
would unduly burden its ability to do so or could reasonably be expected to
have a Material Adverse Effect.  Seller
has no Knowledge of any actual or prospective development, event or other fact
that could reasonably be expected to have a Material Adverse Effect.  No Internal Control Event has occurred.

 

44

 

Section 7.10           Purchased Assets.  Each Purchased Asset is an Eligible
Asset.  Each representation and warranty
set forth in the Repurchase Documents (including those set forth in Schedule 1(a),
1(b), 1(c) or 1(d) applicable to the Class of
such Purchased Asset) with respect to each Purchased Asset is true and
correct.  Seller has delivered to
Custodian true, correct and complete copies of the Purchased Asset Documents,
as applicable, relating to each Purchased Asset.  Seller has no Actual Knowledge of any fact
which could reasonably lead it to expect that any Purchased Asset will not be
paid in full.  None of the Purchased
Asset Documents have any marks or notations indicating that it has been sold,
assigned, pledged, encumbered or otherwise conveyed to any Person other than
Buyer.  If any Purchased Asset Document
requires the holder or transferee of the related Purchased Asset to be a
qualified transferee, qualified institutional lender or qualified lender
(however defined), Seller meets such requirement.  Assuming that Buyer also meets such
requirement, the assignment and pledge of such Purchased Asset to Buyer
pursuant to the Repurchase Documents do not violate such Purchased Asset
Document.  Seller and all Affiliates of
Seller (a) have sold and transferred all Servicing Rights with respect to
the Purchased Assets to Buyer, and (b) have no retained interests.

 

Section 7.11           Purchased Assets Acquired from
Transferors.  With respect to each
Purchased Asset purchased by Seller from a Transferor, (a) such Purchased
Asset was acquired and transferred pursuant to a Purchase Agreement,
(b) such Transferor received reasonably equivalent value in consideration
for the transfer of such Purchased Asset, (c) no such transfer was made
for or on account of an antecedent debt owed by such Transferor to Seller or an
Affiliate of Seller, (d) no such transfer is or may be voidable or subject
to avoidance under the Bankruptcy Code, and (e) the representations and
warranties made by such Transferor to Seller or such Affiliate in such Purchase
Agreement are hereby incorporated herein by reference and are hereby remade by
Seller to Buyer on each date as of which they speak in such Purchase Agreement.

 

Section 7.12           Transfer and Security Interest.  The Repurchase Documents constitute a valid
and effective transfer to Buyer of all right, title and interest of Seller in,
to and under all Purchased Assets (together with all related Servicing Rights),
free and clear of any Liens (other than Permitted Liens). With respect to the
protective security interest granted by Seller in Section 11.01,
upon the delivery of the Confirmations and the Purchased Asset Documents to
Custodian, the execution and delivery of the Controlled Account Agreements and
the filing of the UCC financing statements as provided herein, such security
interest shall be a valid first priority perfected security interest to the
extent such security interest can be perfected by possession, filing or control
under the UCC.  Upon receipt by Custodian
of each Purchased Asset Document required to be endorsed in blank by Seller and
payment by Buyer of the Purchase Price for the related Purchased Asset, Buyer
shall either (a) own such Purchased Asset and the related Purchased Asset
Documents or (b) have a valid first priority perfected security interest
in such Purchased Asset and the related Purchased Asset Documents.  At Buyer’s election (and at Buyer’s sole cost
and expense, or if completed and recorded following a Material Default or Event
of Default, at Seller’s sole cost and expense), Buyer or any nominee or agent
of Buyer may complete and record any or all of the Blank Assignment Documents
as further evidence of Buyer’s ownership interest in the related Purchased
Assets.  Seller has not authorized the
filing of and is not aware of any UCC financing statements filed against Seller
as 

 

45

 

debtor that relate to any Purchased Asset, other
than any financing statement that has been terminated or filed pursuant to this
Agreement.

 

Section 7.13           No Broker.  Neither Seller nor any Affiliate of Seller
has dealt with any broker, investment banker, agent or other Person, except for
Buyer or an Affiliate of Buyer, who may be entitled to any commission or
compensation in connection with any Transaction.

 

Section 7.14           Separateness.  Seller is in compliance with the requirements
of Article 9.

 

Section 7.15           REIT Status.  Guarantor has not engaged in any
material “prohibited transactions” as defined in Section 857(b)(6)(B)(iii)
and (C) of the Code.  Guarantor for its
current “tax year” (as defined in the Code) is entitled to a dividends paid
deduction under the requirements of Section 857 of the Code with respect
to any dividends paid by it with respect to each such year for which it claims
a deduction in its Form 1120-REIT filed with the United States Internal
Revenue Service for such year.

 

Section 7.16           Investment Company Act.  Neither Seller, any Intermediate Starwood
Entity or Guarantor is an “investment company”, or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act.

 

Section 7.17           Interest Rate Protection Agreements.  (a) Each Interest Rate Protection
Agreement with respect to each Purchased Asset is in full force and effect,
(b) no termination event, default or event of default (however defined)
exists thereunder, and (c) Seller has effectively assigned to Buyer all of
Seller’s rights (but none of its obligations) under each such Interest Rate
Protection Agreement.

 

ARTICLE 8

 

COVENANTS OF SELLER

 

From
the date hereof until the Repurchase Obligations are paid in full and the
Repurchase Documents are terminated, Seller shall perform and observe the
following covenants, which shall be given independent effect.

 

Section 8.01           Existence; Governing Documents;
Conduct of Business.  Seller shall
(a) preserve and maintain its legal existence, (b) qualify and remain
qualified in good standing in each jurisdiction where the failure to be so
qualified would have a Material Adverse Effect, (c) comply with its
Governing Documents, including all special purpose entity provisions, and
(d) not modify, amend or terminate its Governing Documents in any material
respect, without Buyer’s prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed. 
Seller shall (a) continue to engage in the same (and no other)
general lines of business as presently conducted by it, (b) maintain and
preserve all of its material rights, privileges, licenses and franchises
necessary for the operation of its business, and (c) maintain Seller’s
status as a qualified transferee, qualified institutional lender or qualified
lender (however defined) if and to the extent required under the Purchased
Asset Documents.  Seller shall not
(a) change its name, organizational number, tax identification number,
fiscal 

 

46

 

year, method of accounting, identity, structure or
jurisdiction of organization (or have more than one such jurisdiction), move
the location of its principal place of business and chief executive office, as
defined in the UCC) from the location referred to in Section 7.01,
or (b) move, or consent to Custodian moving, the Purchased Asset Documents
from the location thereof on the related Purchase Date, unless in each case
Seller has given at least thirty (30) days prior notice to Buyer and has taken
all actions required under the UCC to continue the first priority perfected
security interest of Buyer in the Purchased Assets.  Seller shall enter into each Transaction as
principal, unless Buyer agrees before a Transaction that Seller may enter into
such Transaction as agent for a principal and under terms and conditions
disclosed to Buyer.

 

Section 8.02           Compliance with Laws, Contractual
Obligations and Repurchase Documents. 
Seller shall comply in all material respects with all Requirements of
Laws, including those relating to any Purchased Asset and to the reporting and
payment of taxes.  No part of the
proceeds of any Transaction shall be used for any purpose that violates
Regulation T, U or X of the Board of Governors of the Federal Reserve
System.  Seller shall conduct the requisite
due diligence in connection with the origination or acquisition of each Asset
for purposes of complying with the Anti—Terrorism Laws, including with respect
to the legitimacy of the applicable Underlying Obligor and the origin of the
assets used by such Person to purchase the Underlying Mortgaged Property, and
will maintain sufficient information to identify such Person for purposes of
the Anti—Terrorism Laws.  Seller shall
maintain the Custodial Agreement and Controlled Account Agreement in full force
and effect.  Seller shall not directly or
indirectly enter into any agreement that would be violated or breached by any
Transaction or the performance by Seller of any Repurchase Document.

 

Section 8.03           Structural Changes.  Seller shall not enter into merger or
consolidation, or liquidate, wind up or dissolve, or sell all or substantially
all of its assets or properties, or permit any changes in the ownership of its
Equity Interests which results in a Change of Control of Seller, without the
consent of Buyer (unless, in any of the foregoing cases, the Repurchase
Obligations are paid in full in connection with any such transaction).  Seller shall ensure that all direct Equity
Interests of Seller shall continue to be owned by the owner or owners thereof
as of the date hereof.  Seller shall
ensure that neither the Equity Interests of Seller nor any property or assets
of Seller shall be pledged to any Person other than Buyer.  Seller shall not enter into any transaction
with an Affiliate of Seller unless such transaction is on market and arm’s-length
terms and conditions.

 

Section 8.04           Protection of Buyer’s Interest in
Purchased Assets.  With respect to
each Purchased Asset, Seller shall take all action necessary or required by the
Repurchase Documents, Purchased Asset Documents or Requirements of Law, or
reasonably requested by Buyer, to perfect, protect and more fully evidence
Buyer’s ownership of and first priority perfected security interest in such
Purchased Asset and related Purchased Asset Documents, including executing or
causing to be executed (a) such other instruments or notices as may be
necessary or appropriate and filing and maintaining effective UCC financing
statements, continuation statements and assignments and amendments thereto, and
(b) all documents necessary to both collaterally and absolutely and
unconditionally assign all rights (but none of the obligations) of Seller under
each Purchase Agreement, in each case as additional collateral security for the
payment and performance of each of the Repurchase Obligations, to the extent
permitted under the terms of each related Purchase Agreement.  Seller shall comply with all 

 

47

 

requirements of the Custodial Agreement with respect
to each Purchased Asset, including the delivery to Custodian of all required
Purchased Asset Documents.  Seller shall
(a) not assign, sell, transfer, pledge, hypothecate, grant, create, incur,
assume or suffer or permit to exist any security interest in or Lien (other
than Permitted Liens) on any Purchased Asset to or in favor of any Person other
than Buyer, (b) defend such Purchased Asset against, and take such action
as is necessary to remove, any such Lien, and (c) defend the right, title
and interest of Buyer in and to all Purchased Assets against the claims and
demands of all Persons whomsoever. 
Notwithstanding the foregoing, if Seller grants a Lien on any Purchased
Asset in violation of this Section 8.04 or any other Repurchase
Document, Seller shall be deemed to have simultaneously granted an equal and
ratable Lien on such Purchased Asset in favor of Buyer to the extent such Lien
has not already been granted to Buyer; provided, that such equal and
ratable Lien shall not cure any resulting Default or Event of Default.  Seller shall not materially amend, modify,
waive or terminate any provision of any Purchase Agreement or the Servicing and
Sub-Servicing Agreement.  Seller shall
mark its computer records and tapes to evidence the interests granted to Buyer
hereunder.  Seller shall not take any
action to cause any Purchased Asset that is not evidenced by an instrument or
chattel paper (as defined in the UCC) to be so evidenced.  If a Purchased Asset becomes evidenced by an
instrument or chattel paper, the same shall be immediately delivered to
Custodian on behalf of Buyer, together with endorsements required by Buyer.

 

Section 8.05           Actions of Seller Relating to
Distributions, Indebtedness, Guarantee Obligations, Contractual
Obligations, Investments and Liens. 
At any time after the occurrence and during the continuance of any
Default under Sections 10.01(a) or 10.01(f), any Event of
Default or any breach of the Debt Yield Test, Seller shall not declare or make
any payment on account of, or set apart assets for, a sinking or similar fund
for the purchase, redemption, defeasance, retirement or other acquisition of
any Equity Interest of Seller, Manager, any Intermediate Starwood Entity or
Guarantor, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of Seller, Manager, any Intermediate Starwood Entity or
Guarantor.  Seller shall not contract,
create, incur, assume or permit to exist any Indebtedness, Guarantee Obligations,
Contractual Obligations or Investments, except to the extent (a) arising
or existing under the Repurchase Documents, (b) existing as of the Closing
Date, as referenced in the financial statements delivered to Buyer prior to the
Closing Date, and any renewals, refinancings or extensions thereof in a
principal amount not exceeding that outstanding as of the date of such renewal,
refinancing or extension, (c) incurred after the Closing Date to originate
or acquire Assets or to provide funding with respect to Assets,
(d) required pursuant to any Interest Rate Protection Agreements entered
into pursuant to Section 8.11, and (e) unsecured trade payables and
personal property leases and financings incurred in the ordinary course of
business, so long as the maximum outstanding amount of all liabilities
described in this clause (e) shall at no time exceed an amount equal
to three hundred thousand dollars ($300,000) (it being agreed that, for
purposes hereof, “trade payables” shall not include unpaid legal fees and
unpaid transaction costs in connection with the execution of this
Agreement and the related Repurchase Documents, the acquisition or origination
of any Purchased Asset or any Transaction under this Agreement).  Seller shall not (I) contract, create, incur,
assume or permit to exist any Lien on or with respect to any of its property or
assets (including the Purchased Assets) of any kind (whether real or personal,
tangible or intangible), whether now owned or hereafter acquired, except for
Permitted Liens, or (II) except as provided in the preceding
clause (I), grant, allow or enter into any 

 

48

 

agreement or arrangement with any Person that
prohibits or restricts or purports to prohibit or restrict the granting of any
Lien on any of the foregoing.

 

Section 8.06           Maintenance Records.  Seller shall keep and maintain all documents,
books, records and other information (including with respect to the Purchased
Assets) that are reasonably necessary or advisable in the conduct of its
business.

 

Section 8.07           Financial Covenants.

 

(a)           Seller shall comply with the Debt Yield Test at all
times.  Buyer shall have the right to
test for compliance with the Debt Yield Test for any calendar quarter, which
may be tested at such times as Buyer determines, and any failure of Buyer to do
so as of any particular date shall not constitute a waiver of Buyer’s right to
do so at any time thereafter.  Buyer
agrees that in the event that it declares a Debt Yield Test compliance breach and
Seller pays any and all amounts payable in full with respect to such compliance
breach in accordance with Section 4.01(d), the Buyer shall not
declare an additional Debt Yield Test compliance breach with respect to the
calendar quarter that was the subject of the cured compliance breach; provided
that this sentence shall not prevent Buyer from making any declaration of any
other Event of Default hereunder and shall not act to prevent Buyer from
declaring a breach of the Debt Yield Test at any other time.

 

(b)           Seller shall not permit its Net Income during any fiscal
year to be less than zero.

 

(c)           Seller shall comply at all times with all applicable
Sub-Limits.

 

Section 8.08           Delivery of Income.  Seller shall, and pursuant to Irrevocable
Redirection Notices shall cause the Underlying Obligors under the Purchased
Assets and all other applicable Persons to, deposit all Income in respect of
the Purchased Assets into the Servicing Agreement Account or the Waterfall
Account in accordance with Section 5.01 hereof on the day the
related payments are due.  Seller,
Servicer and Sub-Servicer (a) shall comply with and enforce each
Irrevocable Redirection Notice, (b) shall not amend, modify, waive,
terminate or revoke any Irrevocable Redirection Notice without Buyer’s consent,
and (c) shall take all reasonable steps to enforce each Irrevocable
Redirection Notice.  In connection with
each principal payment or prepayment under a Purchased Asset, Seller shall
provide or cause to be provided to Buyer and Custodian sufficient detail to
enable Buyer and Custodian to identify the Purchased Asset to which such
payment applies.  If Seller receives any
rights, whether in addition to, in substitution of, as a conversion of, or in
exchange for any Purchased Assets, or otherwise in respect thereof, Seller
shall accept the same as Buyer’s agent, hold the same in trust for Buyer and
immediately deliver the same to Buyer or its designee in the exact form
received, together with duly executed instruments of transfer, stock powers or
assignment in blank and such other documentation as Buyer shall reasonably
request.  If any Income is received by
Seller or any Affiliate of Seller, Seller shall pay or deliver such Income to
Buyer on behalf of Buyer within two (2) Business Days after receipt, and,
until so paid or delivered, hold such Income in trust for Buyer, segregated
from other funds of Seller.

 

49

 

Section 8.09           Delivery of Financial Statements
and Other Information.  Seller shall
deliver the following to Buyer and any other Affiliated Hedge Counterparty, as
soon as available and in any event within the time periods specified:

 

(a)           within forty-five (45) days after the end of each fiscal
quarter and each fiscal year of Guarantor, (i) the unaudited balance
sheets of Guarantor as at the end of such period, (ii) the related
unaudited statements of income, retained earnings and cash flows for such
period and the portion of the fiscal year through the end of such period,
setting forth in each case in comparative form the figures for the previous
year, (iii) a Compliance Certificate, (iv) a schedule listing all
assets and liabilities excluded from the Leverage Covenant calculations, as
such covenant is set forth in Section 15(b) of the Guarantee Agreement
and (v) a written certification by Seller and Guarantor of the market value of
all Near Cash Securities as determined by an independent third party valuation
agent reasonably acceptable to Buyer, showing all calculations and supporting
materials;

 

(b)           within ninety (90) days after the end of each fiscal year
of Guarantor, (i) the audited balance sheets of Guarantor as at the end of
such fiscal year, (ii) the related statements of income, retained earnings
and cash flows for such year, setting forth in each case in comparative form
the figures for the previous year, (iii) an opinion thereon of independent
certified public accountants of recognized national standing, which opinion
shall not be qualified as to scope of audit or going concern and shall state that
said financial statements fairly present the financial condition and results of
operations of Guarantor as at the end of and for such fiscal year in accordance
with GAAP, (iv) a projections of Guarantor of the operating budget and
cash flow budget of Guarantor for the following fiscal year, to the extent such
is prepared and (v) a Compliance Certificate;

 

(c)           all reports submitted to Guarantor by independent
certified public accountants in connection with each annual, interim or special
audit of the books and records of Guarantor made by such accountants, including
any management letter commenting on Guarantor’s internal controls;

 

(d)           with respect to each Purchased Asset and related
Underlying Mortgaged Property, on or before each Remittance Date, all remittance,
servicing, securitization, exception and other reports, if any, and all
operating and financial statements and rent rolls of all Underlying Obligors
for all Mortgaged Properties during the prior month, when and as received from
Sub-Servicer, an Underlying Obligor, a third-party servicer or from any other
source;

 

(e)           all financial statements, reports, notices and other
documents that Guarantor sends to holders of its Equity Interests or makes to
or files with any Governmental Authority, promptly after the delivery or filing
thereof;

 

(f)            any other material agreements, correspondence, documents
or other information not included in an Underwriting Package on the related
Purchase Date, which is related to Seller or the Purchased Assets, as soon as possible
after the discovery thereof by Seller, any Intermediate Starwood Entity or
Guarantor; and

 

50

 

(g)           such other information regarding the financial condition,
operations or business of Seller, Guarantor or any Underlying Obligor as Buyer
may reasonably request including, without limitation, any such information
which is otherwise necessary to allow Buyer to monitor compliance with the
terms of the Repurchase Documents.

 

Section 8.10           Delivery of Notices.  Seller shall promptly (and in no event later
than one (1) Business Day from the date of each such occurrence) notify
Buyer and any other Affiliated Hedge Counterparty of the occurrence of any of
the following of which Seller has Knowledge, together with a certificate of a
Responsible Officer of Seller setting forth details of such occurrence and any
action Seller has taken or proposes to take with respect thereto:

 

(a)           a Representation Breach;

 

(b)           any of the following: (i) with respect to any
Purchased Asset or related Underlying Mortgaged Property: material change in
Market Value, material loss or damage, material licensing or permit issues,
violation of Requirements of Law, discharge of or damage from Material of
Environmental Concern or any other actual or expected event or change in
circumstances that could reasonably be expected to result in a default or
material decline in value or cash flow, and (ii) with respect to Seller:
violation of Requirements of Law, material decline in the value of Seller’s
assets or properties, an Internal Control Event or other event or circumstance
that could reasonably be expected to have a Material Adverse Effect;

 

(c)           the existence of any Default, Event of Default or material
default under or related to a Purchased Asset, Purchased Asset Document, Indebtedness,
Guarantee Obligation or Contractual Obligation of Seller;

 

(d)           the resignation or termination of Sub-Servicer under the
Servicing and Sub-Servicing Agreement;

 

(e)           the establishment of a rating by any Rating Agency
applicable to Seller, Guarantor, Manager or any Intermediate Starwood Entity,
and any downgrade in or withdrawal of such rating once established;

 

(f)            the commencement of, settlement of or material judgment
in any litigation, action, suit, arbitration, investigation or other legal or
arbitrable proceedings before any Governmental Authority that (i) affects
Seller, Guarantor, any Purchased Asset or any Underlying Mortgaged Property,
(ii) questions or challenges the validity or enforceability of any
Repurchase Document, Transaction, Purchased Asset or Purchased Asset Document,
or (iii) individually or in the aggregate, if adversely determined, could
reasonably be likely to have a Material Adverse Effect; and

 

(g)           promptly upon Knowledge thereof, notice of any change
in Guarantor’s status as a REIT.

 

Section 8.11           Hedging.  The terms and provisions governing hedging
under Section 8.11 are set forth in the Fee and Pricing Letter, and
are hereby incorporated by reference.

 

51

 

Section 8.12           Escrow Imbalance.  Seller shall, no later than ten (10) Business
Days after learning of any material overdraw, deficit or imbalance in any
escrow or reserve account relating to a Purchased Asset, use reasonable efforts
to cause the applicable Underlying Obligor to correct and eliminate the same,
including by depositing funds into such account.

 

Section 8.13           Guarantee Agreement.  If at any time (a) the obligations of
any Guarantor under the Guarantee Agreement shall cease to be in effect,
(b) any Insolvency Event has occurred with respect to Guarantor, or
(c) any violation of any provision set forth in Section 15 of the
Guarantee Agreement should occur and be continuing (any of the foregoing
events, a “Guarantee Default”), then, within sixty (60) days after the
occurrence of any such Guarantee Default, Seller shall cause a replacement
guarantor acceptable to Buyer to assume in writing all obligations of Guarantor
under the Guarantee Agreement or become a Guarantor, as Buyer deems necessary
to correct such Guarantee Default.

 

Section 8.14           Management Internalization.  Seller shall not permit Guarantor to
internalize its management without Buyer’s prior written approval, which shall
not be unreasonably withheld.

 

Section 8.15           REIT Status.  Guarantor shall at all times continue to
be (i) qualified as a REIT as defined in Section 856 of the Code
without giving any effect to any cure or corrective periods or allowances,
(ii) entitled to a dividends paid deduction under Section 857 of the
Code with respect to dividends paid by it with respect to each taxable year for
which it claims a deduction on its Form 1120 REIT filed with the United States
Internal Revenue Service for such year, or the entering into by it of any
material “prohibited transactions” as defined in Sections 857(b) and 856(c) of
the Code, and (iii) a publicly traded company listed, quoted or traded on
and in good standing in respect of any Stock Exchange.

 

Section 8.16           Post-Closing Obligations.  For any Purchased Asset acquired by Seller on
the secondary market from unaffiliated third parties, (a) Seller shall
deliver fully-executed Irrevocable Redirection Notices to Buyer prior to the
later to occur of (x) the next Remittance Date and (y) thirty (30)
days from the related Purchase Date, and (b) if, in Buyer’s determination,
Seller does not have a perfected first-priority security interest in each bank
account constituting a portion of the collateral pledged in connection with any
Purchased Asset and all amounts and assets at any time credited thereto, or any
such security interest is not fully assignable and fully assigned to Buyer,
Seller shall, as soon as reasonably practicable following the Purchase Date,
cause the Underlying Obligor and/or collection agent to enter into such
contractual arrangements including, without limitation, an Account Control
Agreement with Buyer and Seller that Buyer deems necessary or desirable in order
to perfect Seller’s security interest such accounts, amounts and assets and
assign such security interest and contract rights in such accounts, amounts and
assets, each in form and substance reasonably acceptable to Buyer.

 

ARTICLE 9

 

SINGLE-PURPOSE ENTITY

 

Section 9.01           Covenants Applicable to Seller.  Seller shall (a) own and has owned no
assets, and shall not engage in any business, other than the assets and
transactions 

 

52

 

specifically contemplated by this Agreement and any
other Repurchase Document, (b) not incur any Indebtedness or other
obligation, secured or unsecured, direct or indirect, absolute or contingent
(including guaranteeing any obligation), other than (i) with respect to the
Purchased Asset Documents and the Retained Interests, (ii) commitments to
make loans which may become Eligible Assets, and (iii) as otherwise
permitted under this Agreement, (c) not make any loans or advances to any
Affiliate or third party and shall not acquire obligations or securities of its
Affiliates, in each case other than in connection with the origination or
acquisition of Assets for purchase under the Repurchase Documents, (d) pay
its debts and liabilities (including, as applicable, shared personnel and overhead
expenses) only from its own assets, (e) comply with the provisions of its
Governing Documents, (f) do all things necessary to observe organizational
formalities and to preserve its existence, and shall not amend, modify, waive
provisions of or otherwise change its Governing Documents in any material
respect without the prior written approval of Buyer, (g) maintain all of
its books, records, financial statements and bank accounts separate from those
of its Affiliates (except that such financial statements may be consolidated to
the extent consolidation is required under GAAP or as a matter of Requirements
of Law; provided, that (i) appropriate notation shall be made on
such financial statements to indicate the separateness of Seller from such
Affiliate and to indicate that Seller’s assets and credit are not available to
satisfy the debts and other obligations of such Affiliate or any other Person
and (ii) such assets shall also be listed on Seller’s own separate balance
sheet) and file its own tax returns (except to the extent consolidation is
required or permitted under Requirements of Law), (h) be, and at all times
shall hold itself out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, and shall not identify itself or any of its
Affiliates as a division of the other, (i) maintain adequate capital for
the normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations and shall remain
Solvent, (j) not engage in or suffer any change of Control, dissolution,
winding up, liquidation, consolidation or merger in whole or in part or convey
or transfer all or substantially all of its properties and assets to any Person
(except as contemplated herein), (k) not commingle its funds or other
assets with those of any Affiliate or any other Person and shall maintain its
properties and assets in such a manner that it would not be costly or difficult
to identify, segregate or ascertain its properties and assets from those of
others, (l) maintain its properties, assets and accounts separate from
those of any Affiliate or any other Person, (m) not hold itself out to be
responsible for the debts or obligations of any other Person, (n) not,
without the prior unanimous written consent of all of its Independent
Directors, take any Insolvency Action, (o) (i) have at all times at
least one Independent Director, or such greater number if necessary to comply
with customary industry standards then-currently applicable to bankruptcy
remote entities, and (ii) provide Buyer with up-to-date contact
information for all Independent Director(s) and a copy of the agreement
pursuant to which each Independent Director consents to and serves as an “Independent
Director” for Seller, (p) the Governing Documents for Seller shall
provide (i) that Buyer be given at least two (2) Business Days prior
notice of the removal and/or replacement of the Independent Director, together
with the name and contact information of the replacement Independent Director
and evidence of the replacement’s satisfaction of the definition of Independent
Director and (ii) that any Independent Director of Seller shall not have
any fiduciary duty to anyone including the holders of the Equity Interest in
Seller and any Affiliates of Seller except Seller and the creditors of Seller
with respect to taking of, or otherwise voting on, the Insolvency Action; provided,
that the foregoing shall not 

 

53

 

eliminate the implied contractual covenant of good
faith and fair dealing, (q) not enter into any transaction with an
Affiliate of Seller except on commercially reasonable terms similar to those
available to unaffiliated parties in an arm’s-length transaction,
(r) maintain a sufficient number of employees in light of contemplated
business operations, (s) use separate stationary, invoices and checks
bearing its own name, and (t) allocate fairly and reasonably any overhead
for shared office space and for services performed by an employee of an
affiliate, and (u) not pledge its assets to secure the obligations of any
other Person, and (v) not form, acquire or hold any Subsidiary or own any
Equity Interest in any other entity.

 

Section 9.02           Additional Covenants Applicable to
Seller.  Seller (i) shall be a
Delaware limited liability company, (ii) shall have at least one
Independent Director or Independent Manager serving as manager of such company,
(iii) shall not take any Insolvency Action and shall not cause or permit
the members or managers of such entity to take any Insolvency Action, either
with respect to itself or, if the company is a Principal, with respect to
Seller, in each case unless all of its Independent Directors or Independent
Managers then serving as managers of the company shall have consented in
writing to such action, and (iv) shall have either (A) a member which
owns no economic interest in the company, has signed the company’s limited
liability company agreement and has no obligation to make capital contributions
to the company, or (B) two natural persons or one entity that is not a
member of the company, that has signed its limited liability company agreement
and that, under the terms of such limited liability company agreement becomes a
member of the company immediately prior to the resignation or dissolution of
the last remaining member of the company.

 

ARTICLE 10

 

EVENTS OF DEFAULT AND REMEDIES

 

Section 10.01         Events of Default.  Each of the following events shall be an “Event
of Default”:

 

(a)           Seller fails to make a payment of (i) Repurchase
Price (other than Price Differential) when due, whether by acceleration or
otherwise, (ii) Price Differential when due, or (iii) any other
amount (including all unpaid Margin Deficits) when due, in each case under the
Repurchase Documents;

 

(b)           Seller fails to observe or perform in any material respect
any other Repurchase Obligation of Seller under the Repurchase Documents or the
Purchased Asset Documents to which Seller is a party, and (except in the case
of a failure to perform or observe the Repurchase Obligations of Seller under Section 8.04
and 18.08(a)) such failure continues unremedied for five (5) Business
Days after the earlier of receipt of notice thereof from Buyer or the discovery
of such failure by Seller (or such longer period as agreed to by Buyer, not to
exceed fifteen (15) days from the date of the underlying breach, but only if such
underlying breach is capable of being cured and so long as Seller diligently
and continuously takes all actions necessary to cure such underlying breach);

 

(c)           any Representation Breach (other than a breach of any of
the representations and warranties set forth on Schedule 1(a), 1(b),
1(c) and 1(d) hereto, which will 

 

54

 

not, in and of themselves, be Events of Default)
exists and continues unremedied for ten (10) Business Days after the
earlier of receipt of notice thereof from Buyer or the discovery of such
Representation Breach by Seller;

 

(d)           Seller or Guarantor defaults beyond any applicable grace
period in paying any amount or performing any obligation under any
Indebtedness, Guarantee Obligation or Contractual Obligation with an
outstanding amount of at least $100,000 with respect to Seller, or $25,000,000
with respect to Guarantor, and the effect of such default is to permit the
acceleration thereof (regardless of whether such default is waived or such
acceleration occurs);

 

(e)           Seller or Guarantor defaults beyond any applicable grace
period in paying any amount or performing any obligation due to Buyer or any
Affiliate of Buyer under any other financing, hedging, security or other
agreement between Seller or Guarantor and Buyer or any Affiliate of Buyer;

 

(f)            an Insolvency Event occurs with respect to Seller, any
Intermediate Starwood Entity or Guarantor;

 

(g)           a Change of Control occurs with respect to Seller,
Manager, any Intermediate Starwood Entity or Guarantor, without the prior
written consent of Buyer, not to be unreasonably withheld;

 

(h)           a final judgment or judgments for the payment of money in
excess of $100,000 with respect to Seller, or $25,000,000 with respect to
Guarantor, in each case in the aggregate and in each case that is not insured
against is entered against Seller or Guarantor by one or more Governmental
Authorities and the same is not satisfied, discharged (or provision has not
been made for such discharge) or bonded, or a stay of execution thereof has not
been procured, within thirty (30) days from the date of entry thereof;

 

(i)            a Governmental Authority takes any action to
(i) condemn, seize or appropriate, or assume custody or control of, all or
any substantial part of the property of Seller, (ii) displace the
management of Seller or curtail its authority in the conduct of the business of
Seller, or (iii) terminate the activities of Seller as contemplated by the
Repurchase Documents;

 

(j)            Seller, any Intermediate Starwood Entity or Guarantor
admits in writing that it is not Solvent or is not able to perform any of its
Repurchase Obligations, Contractual Obligations, Guarantee Obligations, Capital
Lease Obligations or Off-Balance Sheet Obligations;

 

(k)           any provision of the Repurchase Documents, any right or
remedy of Buyer or obligation, covenant, agreement or duty of Seller
thereunder, or any Lien, security interest or control granted under or in
connection with the Repurchase Documents or Purchased Assets terminates, is
declared null and void, ceases to be valid and effective, ceases to be the
legal, valid, binding and enforceable obligation of Seller or any other Person,
or the validity, effectiveness, binding nature or enforceability thereof is
contested, challenged, denied or repudiated by Seller or any other Person, in
each case directly, indirectly, in whole or in part, except that, Seller have a
period of three (3) Business Days from the date of each such violation 

 

55

 

to either repurchase the related Purchased Asset
from Buyer pursuant to Section 3.04 or cure the related breach, as
such cure is determined by Buyer;

 

(l)            Buyer ceases for any reason to have a valid and perfected
first priority security interest in any Purchased Asset except that, Seller
have a period of three (3) Business Days from the date of each such
violation to cure the related breach, as such cure is determined by Buyer;

 

(m)          Seller, any Intermediate Starwood Entity or Guarantor is
required to register as an “investment company” (as defined in the Investment
Company Act) or the arrangements contemplated by the Repurchase Documents shall
require registration of Seller, Manager, any Intermediate Starwood Entity or
Guarantor as an “investment company”;

 

(n)           Seller engages in any conduct or action where Buyer’s
prior consent is required by any Repurchase Document and Seller fails to obtain
such consent;

 

(o)           Seller, Sub-Servicer, Guarantor, Manager, any Intermediate
Starwood Entity or any other Person or, due to the action or inaction of any of
the foregoing, (but not merely as a result of the unprompted failure by any
Underlying Obligor to make a payment under a Purchased Asset) any Underlying
Obligor or any other Person fails to deposit to the Servicing Agreement Account
or the Waterfall Account all Income and other amounts as required by Section 5.01
and other provisions of this Agreement within two (2) Business Days of when
due, or the occurrence of a Sub-Servicer Event of Default;

 

(p)           Guarantor’s audited annual financial statements or the
notes thereto or other opinions or conclusions stated therein are qualified or
limited by reference to the status of Guarantor as a “going concern” or a
reference of similar import, other than a qualification or limitation expressly
related to Buyer’s rights in the Purchased Assets;

 

(q)           Guarantor fails (i) to qualify as a REIT (without
giving any effect to any cure or corrective periods or allowances), or
(ii) to continue to be entitled to a dividend paid deduction under Section 857
of the Code with respect to dividends paid by it with respect to each taxable
year for which it claims a deduction on its Form 1120- REIT filed with the
United States Internal Revenue Service for such year, or the entering into by
Guarantor of “prohibited transactions” as defined in Sections 857(b)(6)(B)(iii)
of the Code (taking into account Sections 857(b)(6)(C), 857(b)(6)(D) and
857(b)(6)(E) of the Code) or (iii) to satisfy any of the income or
asset tests required to be satisfied by a REIT;

 

(r)            any termination event or event of default (however
defined) shall have occurred with respect to Seller or Guarantor, as
applicable, under any Interest Rate Protection Agreement and either (i) same
is not cured or (ii) a replacement Interest Rate Protection Agreement
acceptable to Buyer in its reasonable discretion has not been entered into and
assigned to Buyer on or before the earlier to occur of (I) the date that
is ten (10) Business Days after the occurrence of any such event and
(II) the next Remittance Date;

 

(s)           Guarantor breaches any of the obligations, terms or
conditions set forth in the Guarantee Agreement and such breach remains uncured
for at least three (3) Business Days; or

 

56

 

(t)            Any Material Modification is made to any Purchased Asset
Document without the prior written consent of Buyer.

 

Section 10.02         Remedies of Buyer as Owner of the
Purchased Assets.  If an Event of
Default exists, at the option of Buyer, exercised by notice to Seller (which option
shall be deemed to be exercised, even if no notice is given, automatically and
immediately upon the occurrence of an Event of Default under Section 10.01(f)),
the Repurchase Date for all Purchased Assets shall be deemed automatically and
immediately to occur (the date on which such option is exercised or deemed to
be exercised, the “Accelerated Repurchase Date”).  If Buyer exercises or is deemed to have
exercised the foregoing option:

 

(a)           All Repurchase Obligations shall become immediately due
and payable on and as of the Accelerated Repurchase Date.

 

(b)           All amounts in the Waterfall Account and/or the Servicing
Agreement Account and all Income paid after the Accelerated Repurchase Date
shall be retained by Buyer and applied in accordance with Article 5.

 

(c)           Buyer may complete any assignments, allonges,
endorsements, powers or other documents or instruments executed in blank and
otherwise obtain physical possession of all Purchased Asset Documents and other
instruments, certificates and documents then held by Custodian under the
Custodial Agreement.  Buyer may obtain
physical possession of all Servicing Files, Servicing Agreements and other
files and records of Seller, Servicer or Sub-Servicer.  Seller shall deliver to Buyer such
assignments and other documents with respect thereto as Buyer shall request.

 

(d)           Buyer may immediately, at any time and from time to time,
exercise either of the following remedies with respect to any or all of the
Purchased Assets:  (i) sell such
Purchased Assets on a servicing-released basis in a recognized market and by
means of a public or private sale at such price or prices as Buyer accepts, and
apply the net proceeds thereof in accordance with Article 5, or
(ii) retain such Purchased Assets and give Seller credit against the Repurchase
Price for such Purchased Assets (or if the amount of such credit exceeds the
Repurchase Price for such Purchased Assets, to other Repurchase Obligations due
and any other amounts then owing to Buyer by any other Person pursuant to any
Repurchase Document, in such order and in such amounts as determined by Buyer),
in an amount equal to the market value of such Purchased Assets.  Until such time as Buyer exercises either
such remedy with respect to a Purchased Asset, Buyer may hold such Purchased
Asset for its own account and retain all Income with respect thereto.

 

(e)           The Parties agree that the Purchased Assets are of such a
nature that they may decline rapidly in value, and may not have a ready or
liquid market.  Accordingly, Buyer shall
not be required to sell more than one Purchased Asset on a particular Business
Day, to the same purchaser or in the same manner.  Buyer may determine whether, when and in what
manner a Purchased Asset shall be sold, it being agreed that both a good faith
public and a good faith private sale shall be deemed to be commercially
reasonable.  Except as expressly required
herein or in the other Repurchase Documents, Buyer shall not be required to
give notice to Seller or any other Person prior to exercising any remedy in
respect of an Event of Default.  If no
prior 

 

57

 

notice is given, Buyer shall give notice to Seller
of the remedies exercised by Buyer promptly thereafter.  Buyer shall act in good faith in exercising
its rights and remedies under this Article 10.

 

(f)            Seller shall be liable to Buyer for (i) any amount
by which the Repurchase Obligations due to Buyer exceed the aggregate of the
net proceeds and credits referred to in the preceding clause (d),
(ii) the amount of all actual out-of-pocket expenses, including reasonable
legal fees and expenses, actually incurred by Buyer in connection with or as a
consequence of an Event of Default, (iii) any costs and losses payable under Section 12.03,
and (iv) any other actual loss, damage, cost or expense resulting from the
occurrence of an Event of Default.

 

(g)           Buyer shall be entitled to an injunction, an order of
specific performance or other equitable relief to compel Seller to fulfill any
of its obligations as set forth in the Repurchase Documents, including this Article 10,
if Seller fails or refuses to perform its obligations as set forth herein or
therein.

 

(h)           Seller hereby appoints Buyer as attorney-in-fact of Seller
for purposes of carrying out the Repurchase Documents, including executing,
endorsing and recording any instruments or documents and taking any other
actions that Buyer deems necessary or advisable to accomplish such purposes,
which appointment is coupled with an interest and is irrevocable.

 

(i)            Buyer may, without prior notice to Seller, exercise any
or all of its set-off rights including those set forth in Section 18.17.  This Section 10.02(i) shall
be without prejudice and in addition to any right of set-off, combination of
accounts, Lien or other rights to which any Party is at any time otherwise
entitled.

 

(j)            All rights and remedies of Buyer under the Repurchase
Documents, including those set forth in Section 18.17, are
cumulative and not exclusive of any other rights or remedies which Buyer may have
and may be exercised at any time when an Event of Default exists.  Such rights and remedies may be enforced
without prior judicial process or hearing. 
Seller agrees that nonjudicial remedies are consistent with the usages
of the trade, are responsive to commercial necessity and are the result of a
bargain at arm’s-length.  Seller hereby
expressly waives any defenses Seller might have to require Buyer to enforce its
rights by judicial process or otherwise arising from the use of nonjudicial
process, disposition of any or all of the Purchased Assets, or any other
election of remedies.

 

ARTICLE 11

 

SECURITY INTEREST

 

Section 11.01         Grant.  Buyer and Seller intend that all Transactions
shall be sales to Buyer of the Purchased Assets and not loans from Buyer to
Seller secured by the Purchased Assets. 
However, to preserve and protect Buyer’s rights with respect to the
Purchased Assets and under the Repurchase Documents in the event that any
Governmental Authority recharacterizes the Transactions as other than sales,
and as security for Seller’s performance of the Repurchase Obligations, Seller
hereby grants to Buyer a Lien on and security interest in all of the right,
title and interest of Seller in, to and under (i) the Purchased Assets
(which for this 

 

58

 

purpose shall be deemed to include the items
described in the proviso in the definition thereof), and (ii) each
Interest Rate Protection Agreement with each Hedge Counterparty relating to any
Purchased Asset, and the transfers of the Purchased Assets to Buyer shall be
deemed to constitute and confirm such grant, to secure the payment and
performance of the Repurchase Obligations (including the obligation of Seller
to pay the Repurchase Price, or if the Transactions are recharacterized as
loans, to repay such loans for the Repurchase Price).

 

Section 11.02         Effect of Grant.  If any circumstance described in Section 11.01
occurs, (i) this Agreement shall also be deemed to be a security agreement
as defined in the UCC, (ii) Buyer shall have all of the rights and
remedies provided to a secured party by Requirements of Law (including the
rights and remedies of a secured party under the UCC and the right to set off
any mutual debt and claim) and under any other agreement between Buyer and
Seller, (iii) without limiting the generality of the foregoing, Buyer
shall be entitled to set off the proceeds of the liquidation of the Purchased
Assets against all of the Repurchase Obligations, without prejudice to Buyer’s
right to recover any deficiency, (iv) the possession by Buyer or any of
its agents, including Custodian, of the Purchased Asset Documents, the
Purchased Assets and such other items of property as constitute instruments,
money, negotiable documents, securities or chattel paper shall be deemed to be
possession by the secured party for purposes of perfecting such security
interest under the UCC and Requirements of Law, and (v) notifications to
Persons (other than Buyer) holding such property, and acknowledgments, receipts
or confirmations from Persons (other than Buyer) holding such property, shall
be deemed notifications to, or acknowledgments, receipts or confirmations from,
securities intermediaries, bailees or agents (as applicable) of the secured
party for the purpose of perfecting such security interest under the UCC and
Requirements of Law.  The security
interest of Buyer granted herein shall be, and Seller hereby represents and
warrants to Buyer that it is, a first priority perfected security
interest.  For the avoidance of doubt,
(A) each Purchased Asset and each Interest Rate Protection Agreement
relating to a Purchased Asset secures the Repurchase Obligations of Seller with
respect to all other Transactions and all other Purchased Assets, including any
Purchased Assets that are junior in priority to the Purchased Asset in
question, and (B) if an Event of Default exists, no Purchased Asset or
Interest Rate Protection Agreement will be released from Buyer’s Lien or
transferred to Seller until the Repurchase Obligations are indefeasibly paid in
full; provided, however, notwithstanding the foregoing, Buyer
shall be required to release its Lien on any Purchased Asset in the event of a
repayment in full by the Underlying Obligor of any Whole Loan, Senior Interest,
Junior Interest, Mezzanine Loan or Mezzanine Participation Interest, and Seller’s
payment of the Repurchase Price with respect to such Purchased Asset in
accordance with Section 3.04. 
Notwithstanding the foregoing, the Repurchase Obligations shall be full
recourse to Seller.

 

Section 11.03         Seller to Remain Liable.  The parties agree that the grant of a
security interest under this Article 11 shall not constitute or result in
the creation or assumption by Buyer of any Retained Interest or other
obligation of Seller or any other Person in connection with any Purchased Asset
or any Interest Rate Protection Agreement, whether or not Buyer exercises any
right with respect thereto.  Seller shall
remain liable under the Purchased Assets, each Interest Rate Protection
Agreement and all Purchased Asset Documents to perform all of Seller’s duties
and obligations thereunder to the same extent as if the Repurchase Documents
had not been executed.

 

59

 

Section 11.04         Waiver of Certain Laws.  Seller agrees, to the extent permitted by
Requirements of Law, that neither it nor anyone claiming through or under it
will set up, claim or seek to take advantage of any appraisement, valuation,
stay, extension or redemption law now or hereafter in force in any locality
where any Purchased Assets may be situated in order to prevent, hinder or delay
the enforcement or foreclosure of this Agreement, or the absolute sale of any
of the Purchased Assets or Interest Rate Protection Agreement relating to a
Purchased Asset or any part thereof, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereof, and
Seller, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may be lawful so to do, the benefit
of all such laws and any and all right to have any of the properties or assets
constituting the Purchased Assets or Interest Rate Protection Agreement
relating to a Purchased Asset marshaled upon any such sale, and agrees that
Buyer or any court having jurisdiction to foreclose the security interests
granted in this Agreement may sell the Purchased Assets and each Interest Rate
Protection Agreement relating to a Purchased Asset as an entirety or in such
parcels as Buyer or such court may determine.

 

ARTICLE 12

 

INCREASED COSTS; CAPITAL ADEQUACY

 

Section 12.01         Market Disruption.  If prior to any Pricing Period, Buyer
determines that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the LIBO Rate for
such Pricing Period, Buyer shall give prompt notice thereof to Seller,
whereupon the Pricing Rate for such Pricing Period, and for all subsequent
Pricing Periods until such notice has been withdrawn by Buyer, shall be the
Alternative Rate.

 

Section 12.02         Illegality.  If the adoption of or any change in any
Requirements of Law or in the interpretation or application thereof after the
date hereof shall make it unlawful for Buyer to effect or continue Transactions
as contemplated by the Repurchase Documents, (a) any commitment of Buyer
hereunder to enter into new Transactions shall be terminated and the Maturity
Date shall be deemed to have occurred, (b) the Pricing Rate shall be converted
automatically to the Alternative Rate on the last day of the then current
Pricing Period or within such earlier period as may be required by Requirements
of Law, and (c) if required by such adoption or change, the Maturity Date
shall be deemed to have occurred.

 

Section 12.03         Breakfunding.  Seller shall indemnify Buyer and hold Buyer
harmless from any loss, cost or expense (including reasonable legal fees and
expenses) which Buyer may sustain or incur arising from (a) the failure by
Seller to terminate any Transaction after Seller has given a notice of
termination pursuant to Section 3.04, (b) any payment to Buyer
on account of the outstanding Repurchase Price, including a payment made
pursuant to Section 3.04 but excluding a payment made pursuant to Section 5.02,
on any day other than a Remittance Date (based on the assumption that Buyer
funded its commitment with respect to the Transaction in the London Interbank
Eurodollar market and using any reasonable attribution or averaging methods
which Buyer deems appropriate and practical) (upon request, Buyer shall provide
Seller with notice of the underlying calculation methodology), (c) any failure
by Seller to sell Eligible Assets to Buyer after Seller has notified Buyer of a
proposed Transaction and

 

60

 

Buyer has agreed to purchase such Eligible Assets in
accordance with this Agreement, or (d) any conversion of the Pricing Rate
to the Alternative Rate because the LIBO Rate is not available for any reason
on a day which is not the last day of the then current Pricing Period.  Notwithstanding the foregoing, in no event
shall any amounts be payable under this Section 12.03 in connection
with any voluntary and contractually permissible repurchase by Seller of a
Purchased Asset from Buyer.

 

Section 12.04                          Increased Costs.  If the adoption of or any change in any
Requirements of Law or in the interpretation or application thereof by any
Governmental Authority or compliance by Buyer with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority having jurisdiction over Buyer made after the date of
this Agreement (a) shall subject Buyer to any tax of any kind whatsoever
with respect to the Repurchase Documents, any Purchased Asset or any Transaction,
or change the basis of taxation of payments to Buyer in respect thereof (except
for income taxes and any changes in the rate of tax on Buyer’s overall net
income), (b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any office
of Buyer, or (c) shall impose on Buyer any other condition; and the result
of any of the preceding clauses (a), (b) and (c) is to increase
the cost to Buyer, by an amount which Buyer deems to be material, of entering
into, continuing or maintaining Transactions, or to reduce any amount
receivable under the Repurchase Documents in respect thereof, then, in any such
case, Seller shall pay to Buyer such additional amount or amounts as reasonably
necessary to fully compensate Buyer for such increased cost or reduced amount
receivable.

 

Section 12.05                          Capital
Adequacy.  If Buyer
determines that the adoption of or any change in any Requirements of Law
regarding capital adequacy or in the interpretation or application thereof or
compliance by Buyer or any corporation Controlling Buyer with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made after the date of this Agreement has or
shall have the effect of reducing the rate of return on Buyer’s or such
corporation’s capital as a consequence of its obligations hereunder to a level
below that which Buyer or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration Buyer’s or such
corporation’s policies with respect to capital adequacy) by an amount deemed by
Buyer to be material, then, in any such case, Seller shall pay to Buyer such
additional amount or amounts as reasonably necessary to fully compensate Buyer
for such reduction.

 

Section 12.06                          Withholding
Taxes.  (a) All payments made by
Seller to Buyer or any other Indemnified Person under the Repurchase Documents
and by Underlying Obligors with respect to the Purchased Assets shall be made
free and clear of and without deduction or withholding for or on account of any
taxes.  If any taxes are required to be
withheld from any amounts payable to Buyer and/or any other Indemnified Person,
then the amount payable to such Person will be increased (such increase, the “Additional
Amount”) such that every net payment made under this Agreement after
withholding for or on account of any taxes (including any taxes on such
increase and any penalties) is not less than the amount that would have been
paid absent such deduction or withholding provided, however, that
Seller shall not be required to pay any Additional Amount to Buyer, any
Eligible Assignee or any other Person that is not organized 

 

61

 

under the laws of the United States or any state
thereof if Buyer or such Person fails to comply with Section 12.06(b).
 The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to (i) net income
or franchise taxes imposed on Buyer and/or any other Indemnified Person, with
respect to payments required to be made by Seller under the Repurchase
Documents, by a taxing jurisdiction in which Buyer and/or any other Indemnified
Person is organized, conducts business or is paying taxes (as the case may
be).  Promptly after Seller pays any
taxes referred to in this Section 12.06, Seller will send Buyer
appropriate evidence of such payment, or (ii) any U.S. federal withholding
tax imposed on “withholdable payments” made after December 31, 2012 on any
Purchase Price payments made to Seller after March 18, 2012, if Buyer is a
“foreign financial institution” that fails to comply with the requirements of
section 1471(b) of the Code or a “non-financial foreign entity” that fails
to comply with section 1472(b) of the Code, each as in effect on the date
hereof, or Treasury regulations or administrative guidance promulgated
thereunder.

 

(b)                                 If a Person
acquires any of the rights and obligations of Buyer as an Eligible Assignee
under this Agreement, and such Person is not organized under the laws of the
United States, any state thereof or the District of Columbia (a “Non-U.S.
Person”), such Non-U.S. Person shall deliver to Seller on or before the
date on which such Person becomes a party to this Agreement, two duly completed
and executed copies of, as applicable, IRS Form W-8BEN or IRS Form W-8ECI
or any successor forms thereto designated as such by the IRS.  If the Non-U.S. Person is eligible for and
wishes to claim exemption from or reduction in U.S. federal withholding tax
through benefit of a treaty, such Person shall deliver a Form W-8ECI.  If the Non-U.S. Person is eligible for and
wishes to claim exemption from U.S. federal withholding tax under Section 871(h) or
Section 881(c) of the Code with respect to payments of “portfolio
interest,” such Person shall deliver both the Form W-8BEN and a statement
certifying that such Person is not a bank, a “10 percent shareholder” or a “controlled
foreign corporation” within the meaning of Section 881(c)(3) of the
Code.  If any previously delivered form
or statement becomes inaccurate with respect to the Non-U.S. Person that
delivered it, the Non-U.S. Person shall promptly notify Seller of this fact.

 

Section 12.07                          Payment and
Survival of Obligations. 
Buyer may at any time send Seller a notice showing the calculation of
any amounts payable pursuant to this Article 12, and Seller shall
pay such amounts to Buyer within ten (10) Business Days after Seller
receives such notice.  The obligations of
Seller under this Article 12 shall apply to Eligible Assignees and
Participants and survive the termination of the Repurchase Documents.

 

ARTICLE 13

 

INDEMNITY AND EXPENSES

 

Section 13.01                          Indemnity.

 

(a)                                  Seller shall
release, defend, indemnify and hold harmless Buyer, Affiliates of Buyer and its
and their respective officers, directors, shareholders, partners, members,
owners, employees, agents, attorneys, Affiliates and advisors (each an “Indemnified
Person” and collectively the “Indemnified Persons”), on a net
after-tax basis, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, taxes (other than 

 

62

 

income taxes and franchise taxes of Buyer), fees,
costs, expenses (including legal fees and expenses), penalties or fines of any
kind that may be imposed on, incurred by or asserted against such Indemnified
Person (collectively, the “Indemnified Amounts”) in any way relating to,
arising out of or resulting from or in connection with (i) the Repurchase
Documents, the Purchased Asset Documents, the Purchased Assets, the
Transactions, any Underlying Mortgaged Property or related property, or any
action taken or omitted to be taken by any Indemnified Person in connection
with or under any of the foregoing, or any transaction contemplated hereby or
thereby, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of any Repurchase Document or Transaction,
(ii) any claims, actions or damages by an Underlying Obligor or lessee
with respect to a Purchased Asset, (iii) any violation or alleged violation
of, non—compliance with or liability under any Requirements of Law,
(iv) ownership of, Liens on, security interests in or the exercise of
rights or remedies under any of the items referred to in the preceding
clause (i), (v) any accident, injury to or death of any person or
loss of or damage to property occurring in, on or about any Underlying
Mortgaged Property or on the adjoining sidewalks, curbs, parking areas, streets
or ways, (vi) any use, nonuse or condition in, on or about, or possession,
alteration, repair, operation, maintenance or management of, any Underlying
Mortgaged Property or on the adjoining sidewalks, curbs, parking areas, streets
or ways, (vii) any failure by Seller to perform or comply with any
Repurchase Document, Purchased Asset Document or Purchased Asset,
(viii) performance of any labor or services or the furnishing of any
materials or other property in respect of any Underlying Mortgaged Property or
Purchased Asset, (ix) any claim by brokers, finders or similar Persons
claiming to be entitled to a commission in connection with any lease or other
transaction involving any Repurchase Document, Purchased Asset or Underlying
Mortgaged Property, (x) any taxes attributable to the execution, delivery,
filing or recording of any Repurchase Document, Purchased Asset Document or any
memorandum of any of the foregoing, (xi) any Lien or claim arising on or
against any Purchased Asset or related Underlying Mortgaged Property under any
Requirements of Law or any liability asserted against Buyer or any Indemnified
Person with respect thereto, (xii) (1) a past, present or future
violation or alleged violation of any Environmental Laws in connection with any
property or Mortgaged Property by any Person or other source, whether related
or unrelated to Seller or any Underlying Obligor, (2) any presence of any
Materials of Environmental Concern in, on, within, above, under, near,
affecting or emanating from any Underlying Mortgaged Property, (3) the
failure to timely perform any Remedial Work, (4) any past, present or
future activity by any Person or other source, whether related or unrelated to
Seller or any Underlying Obligor in connection with any actual, proposed or
threatened use, treatment, storage, holding, existence, disposition or other
release, generation, production, manufacturing, processing, refining, control,
management, abatement, removal, handling, transfer or transportation to or from
any Underlying Mortgaged Property of any Materials of Environmental Concern at
any time located in, under, on, above or affecting any Underlying Mortgaged
Property, (5) any past, present or future actual Release (whether
intentional or unintentional, direct or indirect, foreseeable or unforeseeable)
to, from, on, within, in, under, near or affecting any Underlying Mortgaged
Property by any Person or other source, whether related or unrelated to Seller
or any Underlying Obligor, (6) the imposition, recording or filing or the
threatened imposition, recording or filing of any Lien on any Underlying
Mortgaged Property with regard to, or as a result of, any Materials of
Environmental Concern or pursuant to any Environmental Law, or (7) any
misrepresentation or failure to perform any obligations pursuant to any
Repurchase Document or Purchased Asset Document relating to environmental
matters in 

 

63

 

any way, (xiii) the Term Sheet or any business
communications or dealings between the Parties relating thereto, or
(xiv) Seller’s conduct, activities, actions and/or inactions in connection
with, relating to or arising out of any of the foregoing clauses of this Section 13.01,
that, in each case, results from anything whatsoever other than any Indemnified
Person’s gross negligence or willful misconduct, as determined by a court of
competent jurisdiction pursuant to a final, non—appealable judgment. In any
suit, proceeding or action brought by an Indemnified Person in connection with
any Purchased Asset for any sum owing thereunder, or to enforce any provisions
of any Purchased Asset, Seller shall defend, indemnify and hold such
Indemnified Person harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the account debtor or Underlying Obligor
arising out of a breach by Seller of any obligation thereunder or arising out
of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or Underlying Obligor from Seller.  In the case of an investigation, litigation
or other proceeding to which the indemnity in this Section 13.01
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by Seller, an Indemnified Person or any
other Person or any Indemnified Person is otherwise a party thereto and whether
or not any Transaction is entered into.

 

(b)                                 If for any
reason the indemnification provided in this Section 13.01 is
unavailable to the Indemnified Person or is insufficient to hold an Indemnified
Person harmless, even though such Indemnified Person is entitled to
indemnification under the express terms thereof, then Seller shall contribute
to the amount paid or payable by such Indemnified Person as a result of such
loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative benefits received by such Indemnified Person on the one
hand and Seller on the other hand, the relative fault of such Indemnified
Person, and any other relevant equitable considerations.

 

(c)                                  An Indemnified
Person may at any time send Seller a notice showing the calculation of
Indemnified Amounts, and Seller shall pay such Indemnified Amounts to such
Indemnified Person within ten (10) Business Days after Seller receives
such notice.  The obligations of Seller
under this Section 13.01 shall apply to Eligible Assignees and
Participants and survive the termination of this Agreement.

 

Section 13.02                          Expenses.  Seller shall promptly on demand pay to or as
directed by Buyer all third-party out-of-pocket costs and expenses (including
legal, accounting and advisory fees and expenses) incurred by Buyer in
connection with (a) the development, evaluation, preparation, negotiation,
execution, consummation, delivery and administration of, and any amendment,
supplement or modification to, or extension, renewal or waiver of, the
Repurchase Documents and the Transactions, (b) any Asset or Purchased
Asset, including due diligence, inspection, testing, review, recording,
registration, travel custody, care, insurance or preservation, (c) the
enforcement of the Repurchase Documents or the payment or performance by Seller
of any Repurchase Obligations, and (d) any actual or attempted sale,
exchange, enforcement, collection, compromise or settlement relating to the
Purchased Assets.

 

64

 

ARTICLE 14

 

INTENT

 

Section 14.01                          Safe Harbor
Treatment.  The Parties
intend (a) for this Agreement, the Fee and Pricing Letter, the Servicing
and Sub-Servicing Agreement, each supplement to this Agreement, including each
Transaction Request, Irrevocable Redirection Notice and Confirmation, and
each Transaction hereunder to constitute a single integrated, non-severable
agreement, (b) for each such integrated agreement and the Transactions
thereunder to qualify for the safe harbor treatment provided by the Bankruptcy
Code and for Buyer to be entitled to all of the rights, benefits and
protections afforded to Persons under the Bankruptcy Code with respect to a “repurchase
agreement” as defined in Section 101(47) of the Bankruptcy Code and a “securities
contract” as defined in Section 741(7) of the Bankruptcy Code and
that payments under this Agreement are deemed “margin payments” or “settlement
payments,” as defined in Sections 741(5) and 741(8) of the
Bankruptcy Code, and transfers in connection with a “securities contract” or “repurchase
agreement”, (c) for the grant of a security interest set forth in Article 11
to also be a “securities contract” as defined in Section 741(7)(A)(xi) of
the Bankruptcy Code and a “repurchase agreement” as that term is defined in
Section 101(47)(A)(v) of the Bankruptcy Code by virtue of it being “a
security agreement or arrangement or other credit enhancement”, (d) for
each of the Purchased Assets to constitute a “mortgage loan” or an “interest in
a mortgage loan” as the terms are used in the Bankruptcy Code and (e) that
Buyer (for so long as Buyer is a “financial institution,” “financial
participant” or other entity listed in Section 546, 555, 559, 362(b)(6) or
362(b)(7) of the Bankruptcy Code) shall be entitled to the “safe harbor”
benefits and protections afforded under the Bankruptcy Code with respect to a “repurchase
agreement” and a “securities contract,” including (x) the rights, set
forth in Article 10 and in Sections 555, 559 and 561 of the
Bankruptcy Code, to liquidate the Purchased Assets and terminate this
Agreement, and (y) the right to offset or net out as set forth in Article 10
and Section 18.17 and in Sections 362(b)(6) and 362(b)(7) of
the Bankruptcy Code.

 

Section 14.02                          Liquidation
Rights.  The Parties acknowledge and
agree that (a) Buyer’s right to liquidate Purchased Assets delivered to it
in connection with Transactions hereunder or to exercise any other remedies
pursuant to Articles 10 and 11 and as otherwise provided in
the Repurchase Documents is a “contractual right” to liquidate, terminate or
accelerate such Transactions as described in Section 555, 559 and 561 of
the Bankruptcy Code.

 

Section 14.03                          Qualified
Financial Contract.  The Parties
acknowledge and agree that if a Party is an “insured depository institution,”
as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”),
then each Transaction hereunder is a “qualified financial contract,” as that
term is defined in FDIA and any rules, orders or policy statements thereunder
(except insofar as the type of assets subject to such Transaction would render
such definition inapplicable).

 

Section 14.04                          Netting
Contract.  The Parties
acknowledge and agree that this Agreement constitutes a “netting contract” as
defined in and subject to Title IV of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (“FDICIA”) and each payment entitlement and
payment obligation under any Transaction shall constitute a “covered contractual
payment entitlement” or “covered contractual payment obligation,” respectively,
as defined in 

 

65

 

and subject to FDICIA (except insofar as one or both
of the parties is not a “financial institution” as that term is defined in
FDICIA).

 

Section 14.05                          Master Netting
Agreement.  The Parties
expressly represent, warrant, acknowledge and agree that this Agreement
constitutes a “master netting agreement” as defined in Section 101(38A) of
the Bankruptcy Code.

 

ARTICLE 15

 

DISCLOSURE RELATING TO CERTAIN
FEDERAL PROTECTIONS

 

The
Parties acknowledge that they have been advised and understand that:

 

(a)                                  in the case of
Transactions in which one of the Parties is a broker or dealer registered with
the Securities and Exchange Commission under Section 14 of the Securities
Exchange Act of 1934, the Securities Investor Protection Corporation has taken
the position that the provisions of the Securities Investor Protection Act of
1970 do not protect the other Party with respect to any Transaction;

 

(b)                                 in the case of
Transactions in which one of the Parties is a government securities broker or a
government securities dealer registered with the Securities and Exchange
Commission under Section 14C of the Securities Exchange Act of 1934, the
Securities Investor Protection Act of 1970 will not provide protection to the
other Party with respect to any Transaction;

 

(c)                                  in the case of
Transactions in which one of the Parties is a financial institution, funds held
by the financial institution pursuant to a Transaction are not a deposit and
therefore are not insured by the Federal Deposit Insurance Corporation or the
National Credit Union Share Insurance Fund, as applicable; and

 

(d)                                 in the case of
Transactions in which one of the Parties is an “insured depository institution”
as that term is defined in Section 1813(c)(2) of Title 12 of the
United States Code, funds held by the financial institution pursuant to a
Transaction are not a deposit and therefore are not insured by the Federal
Deposit Insurance Corporation, the Savings Association Insurance Fund or the
Bank Insurance Fund, as applicable.

 

ARTICLE 16

 

NO RELIANCE

 

Each
Party acknowledges, represents and warrants to the other Party that, in
connection with the negotiation of, entering into, and performance under, the
Repurchase Documents and each Transaction:

 

(a)                                  It is not
relying (for purposes of making any investment decision or otherwise) on any
advice, counsel or representations (whether written or oral) of the other
Party, other than the representations expressly set forth in the Repurchase
Documents;

 

66

 

(b)                                 It has
consulted with its own legal, regulatory, tax, business, investment, financial
and accounting advisors to the extent that it has deemed necessary, and it has
made its own investment, hedging and trading decisions (including decisions
regarding the suitability of any Transaction) based on its own judgment and on
any advice from such advisors as it has deemed necessary and not on any view
expressed by the other Party;

 

(c)                                  It is a
sophisticated and informed Person that has a full understanding of all the
terms, conditions and risks (economic and otherwise) of the Repurchase
Documents and each Transaction and is capable of assuming and willing to assume
(financially and otherwise) those risks;

 

(d)                                 It is entering
into the Repurchase Documents and each Transaction for the purposes of managing
its borrowings or investments or hedging its underlying assets or liabilities
and not for purposes of speculation;

 

(e)                                  It is not
acting as a fiduciary or financial, investment or commodity trading advisor for
the other Party and has not given the other Party (directly or indirectly
through any other Person) any assurance, guaranty or representation whatsoever
as to the merits (either legal, regulatory, tax, business, investment,
financial accounting or otherwise) of the Repurchase Documents or any
Transaction; and

 

(f)                                    No partnership
or joint venture exists or will exist as a result of the Transactions or
entering into and performing the Repurchase Documents.

 

ARTICLE 17

 

SERVICING

 

This
Article 17 shall apply to all Purchased Assets.

 

Section 17.01                          Servicing
Rights.  The terms and provisions
governing Servicing Rights under Section 17.01 are set forth in the
Fee and Pricing Letter, and are hereby incorporated by reference.

 

Section 17.02                          Accounts
Related to Purchased Assets.  All accounts directly related to the
Purchased Assets shall be maintained at institutions reasonably acceptable to
Buyer, and Seller shall cause each Underlying Obligor to enter into the
contractual arrangements with Seller that are necessary in order to create a
perfected security interest in favor of Seller in all such accounts, including,
without limitation, an Account Control Agreement in form and substance
reasonably acceptable to Buyer and its outside counsel.  Seller shall execute all documents necessary
to assign all of Seller’s rights in such accounts to Buyer.

 

Section 17.03                          Servicing
Reports.  Seller shall deliver and cause
Sub-Servicer to deliver to Buyer and Custodian a monthly remittance report on
or before the 15th day of each month containing servicing information,
including those fields reasonably requested by Buyer from time to time, on an
asset-by-asset and in the aggregate, with respect to the Purchased Assets for
the month (or any portion thereof) before the date of such report.

 

67

 

ARTICLE 18

 

MISCELLANEOUS

 

Section 18.01                          Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

 

Section 18.02                          Submission to
Jurisdiction; Service of Process.  Each Party irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
courts of the State of New York sitting in the Borough of Manhattan and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to the Repurchase Documents, or for recognition or enforcement of any
judgment, and each Party irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
State court or, to the fullest extent permitted by applicable law, in such
Federal court.  Each Party agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement or the other Repurchase Documents shall affect any right that Buyer
may otherwise have to bring any action or proceeding arising out of or relating
to the Repurchase Documents against Seller or its properties in the courts of
any jurisdiction.  Each Party irrevocably
and unconditionally waives, to the fullest extent permitted by Requirements of
Law, any objection that it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to the Repurchase Documents in
any court referred to above, and the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.  Each Party irrevocably consents to service of
process in the manner provided for notices in Section 18.12.  Nothing in this Agreement will affect the
right of any party hereto to serve process in any other manner permitted by
applicable law.

 

Section 18.03                          IMPORTANT
WAIVERS.

 

(a)                                  SELLER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO ASSERT A
COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR
PROCEEDING BROUGHT AGAINST IT BY BUYER OR ANY INDEMNIFIED PERSON.

 

(b)                                 TO THE EXTENT
PERMITTED BY REQUIREMENTS OF LAW, EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE BETWEEN THEM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING
OUT OF, CONNECTED WITH OR RELATED TO THE REPURCHASE DOCUMENTS, THE PURCHASED
ASSETS, THE TRANSACTIONS, ANY DEALINGS OR COURSE OF CONDUCT BETWEEN THEM, OR
ANY STATEMENTS (WRITTEN OR ORAL) OR OTHER ACTIONS OF EITHER PARTY. NEITHER
PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. 
INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.

 

68

 

(c)                                  TO THE EXTENT
PERMITTED BY REQUIREMENTS OF LAW, SELLER HEREBY WAIVES ANY RIGHT TO CLAIM OR
RECOVER IN ANY LITIGATION WHATSOEVER INVOLVING ANY INDEMNIFIED PERSON, ANY
SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND OR NATURE WHATSOEVER OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES, WHETHER SUCH WAIVED DAMAGES ARE BASED ON STATUTE,
CONTRACT, TORT, COMMON LAW OR ANY OTHER LEGAL THEORY, WHETHER THE LIKELIHOOD OF
SUCH DAMAGES WAS KNOWN AND REGARDLESS OF THE FORM OF THE CLAIM OF ACTION, INCLUDING
ANY CLAIM OR ACTION ALLEGING GROSS NEGLIGENCE, RECKLESS DISREGARD, WILLFUL OR
WONTON MISCONDUCT, FAILURE TO EXERCISE REASONABLE CARE OR FAILURE TO ACT IN
GOOD FAITH.  NO INDEMNIFIED PERSON SHALL
BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION
OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR
OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH ANY REPURCHASE
DOCUMENT OR THE TRANSACTIONS.

 

(d)                                 SELLER
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BUYER OR AN INDEMNIFIED
PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BUYER OR AN INDEMNIFIED
PERSON WOULD NOT SEEK TO ENFORCE ANY OF THE WAIVERS IN THIS SECTION 18.03
IN THE EVENT OF LITIGATION OR OTHER CIRCUMSTANCES.  THE SCOPE OF SUCH WAIVERS IS INTENDED TO BE
ALL—ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
AND THAT RELATE TO THE SUBJECT MATTER OF THE REPURCHASE DOCUMENTS, REGARDLESS
OF THEIR LEGAL THEORY.

 

(e)                                  EACH PARTY
ACKNOWLEDGES THAT THE WAIVERS IN THIS SECTION 18.03 ARE A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT SUCH PARTY HAS ALREADY
RELIED ON SUCH WAIVERS IN ENTERING INTO THE REPURCHASE DOCUMENTS, AND THAT SUCH
PARTY WILL CONTINUE TO RELY ON SUCH WAIVERS IN THEIR RELATED FUTURE
DEALINGS.  EACH PARTY FURTHER REPRESENTS
AND WARRANTS THAT IT HAS REVIEWED SUCH WAIVERS WITH ITS LEGAL COUNSEL AND THAT
IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL AND OTHER RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.

 

(f)                                    THE WAIVERS IN
THIS SECTION 18.03 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO ANY OF THE REPURCHASE DOCUMENTS.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

69

 

(g)                                 THE PROVISIONS
OF THIS SECTION 18.03 SHALL SURVIVE TERMINATION OF THE REPURCHASE
DOCUMENTS AND THE PAYMENT IN FULL OF THE OBLIGATIONS.

 

Section 18.04                          Integration.  The Repurchase Documents supersede and
integrate all previous negotiations, contracts, agreements and understandings
(whether written or oral) between the Parties relating to a sale and repurchase
of Purchased Assets and the other matters addressed by the Repurchase
Documents, and contain the entire final agreement of the Parties relating to
the subject matter thereof.

 

Section 18.05                          Single
Agreement.  Seller
agrees that (a) each Transaction is in consideration of and in reliance on
the fact that all Transactions constitute a single business and contractual
relationship, and that each Transaction has been entered into in consideration
of the other Transactions, (b) a default by it in the payment or
performance of any its obligations under a Transaction shall constitute a
default by it with respect to all Transactions, (c) Buyer may set off
claims and apply properties and assets held by or on behalf of Buyer with
respect to any Transaction against the Repurchase Obligations owing to Buyer
with respect to other Transactions, and (d) payments, deliveries and other
transfers made by or on behalf of Seller with respect to any Transaction shall
be deemed to have been made in consideration of payments, deliveries and other
transfers with respect to all Transactions, and the obligations of Seller to
make any such payments, deliveries and other transfers may be applied against
each other and netted.

 

Section 18.06                          Use of Employee
Plan Assets.  No assets
of an employee benefit plan subject to any provision of ERISA shall be used by
either Party in a Transaction.

 

Section 18.07                          Survival and
Benefit of Seller’s Agreements.  The Repurchase Documents and all Transactions
shall be binding on and shall inure to the benefit of the Parties and their
successors and permitted assigns.  All of
Seller’s representations, warranties, agreements and indemnities in the
Repurchase Documents shall survive the termination of the Repurchase Documents
and the payment in full of the Repurchase Obligations, and shall apply to and
benefit Eligible Assignees and Participants.  No other Person shall be entitled to any
benefit, right, power, remedy or claim under the Repurchase Documents.

 

Section 18.08                          Assignments and
Participations.

 

(a)                                  Seller shall
not sell, assign or transfer any of its rights or the Repurchase Obligations under
this Agreement without the prior written consent of Buyer, and any attempt by
Seller to do so without such consent shall be null and void.

 

(b)                                 Buyer may at
any time, without the consent of or notice to Seller, sell participations to
any Person (other than a natural person or Seller or any Affiliate of Seller)
(a “Participant”) in up to forty-nine percent (49%) (in the aggregate,
in one or more transactions, including any assignments under Section 18.08(c))
of Buyer’s rights and/or obligations under the Repurchase Documents; provided,
that (i) Buyer’s obligations and Seller’s rights and obligations under the
Repurchase Documents shall remain unchanged, (ii) Buyer shall remain
solely responsible to Seller for the performance of such obligations, and (iii) Seller
shall continue to

 

70

 

deal solely and directly with Buyer in connection
with Buyer’s rights and obligations under the Repurchase Documents.  No Participant shall have any right to
approve any amendment, waiver or consent with respect to any Repurchase
Document, except to the extent that the Repurchase Price or Price Differential
of any Purchased Asset would be reduced or the Repurchase Date of any Purchased
Asset would be postponed.  Each
Participant shall be entitled to the benefits of Article 12 to the
same extent as if it had acquired its interest by assignment pursuant to Section 18.08(c),
but shall not be entitled to receive any greater payment thereunder than Buyer
would have been entitled to receive with respect to the participation sold to
such Participant.  To the extent
permitted by Requirements of Law, each Participant shall be entitled to the
benefits of Sections 10.02(j) and 18.17 to the same extent
as if it had acquired its interest by assignment pursuant to Section 18.08(c).

 

(c)                                  Buyer may at
any time, upon notice to Seller, sell and assign to any Eligible Assignee up to
forty-nine percent (49%) (in the aggregate, in one or more transactions, and
including any participations under Section 18.08(b)) of the rights
and obligations of Buyer under the Repurchase Documents.  Each such assignment shall be made pursuant
to an Assignment and Acceptance substantially in the form of Exhibit F
(an “Assignment and Acceptance”). From and after the effective date of
such Assignment and Acceptance, (i) such Eligible Assignee shall be a
Party and, to the extent provided therein, have the rights and obligations of
Buyer under the Repurchase Documents with respect to the percentage and amount
of the Repurchase Price allocated to it; provided that Buyer shall
remain solely responsible to Seller for the performance of Buyer’s obligations
under the Repurchase Documents, (ii) Seller shall continue to deal solely
and directly with Buyer in connection with Buyer’s rights and obligations under
the Repurchase Documents, and (iii) Buyer will give prompt written notice
thereof (including identification of the Eligible Assignee and the amount of
Repurchase Price allocated to it) to each Party (but Buyer shall not have any
liability for any failure to timely provide such notice).  Any sale or assignment by Buyer of rights or
obligations under the Repurchase Documents that does not comply with this Section 18.08(c) shall
be treated for purposes of the Repurchase Documents as a sale by such Buyer of
a participation in such rights and obligations in accordance with Section 18.08(b).

 

(d)                                 Seller shall
cooperate with Buyer in connection with any such sale and assignment of
participations or assignments and shall enter into such restatements of, and
amendments, supplements and other modifications to, the Repurchase Documents to
give effect to any such sale or assignment; provided, that none of the
foregoing shall change any economic or other material term of the Repurchase
Documents in a manner adverse to Seller without the consent of Seller.

 

Section 18.09                          Ownership and
Hypothecation of Purchased Assets.  Title to all Purchased Assets shall pass to
and vest in Buyer on the applicable Purchase Dates and, subject to the terms of
the Repurchase Documents, Buyer or its designee shall have free and
unrestricted use of all Purchased Assets and be entitled to exercise all
rights, privileges and options relating to the Purchased Assets as the owner
thereof, including rights of subscription, conversion, exchange, substitution,
voting, consent and approval, and to direct any servicer or trustee.  Buyer or its designee may engage in
repurchase transactions with the Purchased Assets or otherwise sell, pledge,
repledge, transfer, hypothecate, or rehypothecate the Purchased Assets, all on
terms that Buyer may determine; provided, that no such transaction shall
affect the obligations of 

 

71

 

Buyer to transfer the Purchased Assets to Seller on
the applicable Repurchase Dates free and clear of any pledge, Lien, security
interest, encumbrance, charge or other adverse claim.

 

Section 18.10                          Confidentiality.  All information regarding the terms set forth
in any of the Repurchase Documents or the Transactions shall be kept
confidential and shall not be disclosed by either Party to any Person except
(a) to the Affiliates of such Party or its or their respective directors,
officers, employees, agents, advisors and other representatives who are
informed of the confidential nature of such information and instructed to keep
it confidential, (b) to the extent requested by any regulatory authority
or required by Requirements of Law, (c) to the extent required to be
included in the financial statements of either Party or an Affiliate thereof,
(d) to the extent required to exercise any rights or remedies under the
Repurchase Documents, Purchased Assets or Underlying Mortgaged Properties,
(e) to the extent required to consummate and administer a Transaction,
(f) to any actual or prospective Participant or Eligible Assignee which
agrees to comply with this Section 18.10; provided, that no
such disclosure made with respect to any Repurchase Document shall include a
copy of such Repurchase Document to the extent that a summary would suffice,
but if it is necessary for a copy of any Repurchase Document to be disclosed,
all pricing and other economic terms set forth therein shall be redacted before
disclosure.

 

Section 18.11                          No Implied
Waivers.  No failure on the part of
Buyer to exercise, or delay in exercising, any right or remedy under the
Repurchase Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right or remedy thereunder preclude any further
exercise thereof or the exercise of any other right.  The rights and remedies in the Repurchase
Documents are cumulative and not exclusive of any rights and remedies provided
by law.  Application of the Default Rate
after an Event of Default shall not be deemed to constitute a waiver of any
Event of Default or Buyer’s rights and remedies with respect thereto, or a consent
to any extension of time for the payment or performance of any obligation with
respect to which the Default Rate is applied. 
Except as otherwise expressly provided in the Repurchase Documents, no
amendment, waiver or other modification of any provision of the Repurchase
Documents shall be effective without the signed agreement of Seller and
Buyer.  Any waiver or consent under the
Repurchase Documents shall be effective only if it is in writing and only in
the specific instance and for the specific purpose for which given.

 

Section 18.12                          Notices and
Other Communications.  Unless
otherwise provided in this Agreement, all notices, consents, approvals,
requests and other communications required or permitted to be given to a Party
hereunder shall be in writing and sent prepaid by hand delivery, by certified
or registered mail, by expedited commercial or postal delivery service, or by
facsimile or email if also sent by one of the foregoing, to the address for
such Party specified in Annex I or such other address as such Party
shall specify from time to time in a notice to the other Party.  Any of the foregoing communications shall be
effective when delivered or upon the first attempted delivery on a Business
Day.  A Party receiving a notice that
does not comply with the technical requirements of this Section 18.12
may elect to waive any deficiencies and treat the notice as having been
properly given.

 

Section 18.13                          Counterparts;
Electronic Transmission.  Any
Repurchase Document may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall together constitute but one
and the same instrument.

 

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Section 18.14                          No Personal
Liability.  No
administrator, incorporator, Affiliate, owner, member, partner, stockholder,
officer, director, employee, agent or attorney of Buyer, any Indemnified
Person, Seller, any Intermediate Starwood Entity or Guarantor, as such, shall
be subject to any recourse or personal liability under or with respect to any
obligation of Buyer, Seller, any Intermediate Starwood Entity or Guarantor
under the Repurchase Documents, whether by the enforcement of any assessment,
by any legal or equitable proceeding, by virtue of any statute or otherwise; it
being expressly agreed that the obligations of Buyer, Seller and Guarantor
under the Repurchase Documents are solely their respective corporate, limited
liability company or partnership obligations, as applicable, and that any such
recourse or personal liability is hereby expressly waived.  This Section 18.14 shall survive
the termination of the Repurchase Documents.

 

Section 18.15                          Protection of
Buyer’s Interests in the Purchased Assets; Further Assurances.

 

(a)                                  Seller shall
cause the Repurchase Documents and/or all financing statements and continuation
statements and any other necessary documents covering the right, title and
interest of Buyer to the Purchased Assets to be promptly recorded, registered
and filed, and at all times to be kept recorded, registered and filed, all in
such manner and in such places as may be required by law fully to preserve and
protect such right, title and interest. 
Seller shall deliver to Buyer file—stamped copies of, or filing receipts
for, any document recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing.  Seller shall execute any and all documents
reasonably required to fulfill the intent of this Section 18.15.

 

(b)                                 Seller will
promptly at its expense execute and deliver such instruments and documents and
take such other actions as Buyer may reasonably request from time to time in
order to perfect, protect, evidence, exercise and enforce Buyer’s rights and
remedies under and with respect to the Repurchase Documents, the Transactions
and the Purchased Assets.

 

(c)                                  If Seller fails
to perform any of its Repurchase Obligations promptly after written request
from Buyer, Buyer may (but shall not be required to) perform or cause to be
performed such Repurchase Obligation, and the costs and expenses incurred by
Buyer in connection therewith shall be payable by Seller.  Without limiting the generality of the
foregoing, if Seller shall fail to do so promptly after written request from
Buyer, Seller authorizes Buyer, at the option of Buyer and the expense of
Seller, at any time and from time to time, to take all actions and pay all
amounts that Buyer deems necessary or appropriate to protect, enforce,
preserve, insure, service, administer, manage, perform, maintain, safeguard,
collect or realize on the Purchased Assets and Buyer’s Liens and interests
therein or thereon and to give effect to the intent of the Repurchase
Documents.  No Default or Event of
Default shall be cured by the payment or performance of any Repurchase
Obligation by Buyer on behalf of Seller. 
Buyer may make any such payment in accordance with any bill, statement
or estimate procured from the appropriate public office or holder of the claim
to be discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax
Lien, title or claim except to the extent such payment is being contested in
good faith by Seller in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.

 

73

 

(d)                                 Without
limiting the generality of the foregoing, Seller will no earlier than six (6) or
later than three (3) months before the fifth (5th) anniversary of the date
of filing of each UCC financing statement filed in connection with any
Repurchase Document or any Transaction, (i) deliver and file or cause to
be filed an appropriate continuation statement with respect to such financing
statement, and (ii) deliver or cause to be delivered to Buyer an opinion
of counsel, in form and substance reasonably satisfactory to Buyer, confirming
and updating the opinion delivered pursuant to Section 6.01(a) with
respect to perfection and otherwise to the effect that the security interests
hereunder continue to be enforceable and perfected security interests, subject
to no other Liens of record except as provided herein or otherwise permitted
hereunder, which opinion may contain usual and customary assumptions,
limitations and exceptions.

 

(e)                                  Except as
provided in the Repurchase Documents, the sole duty of Buyer, Custodian or any
other designee or agent of Buyer with respect to the Purchased Assets shall be
to use reasonable care in the custody, use, operation and preservation of the
Purchased Assets in its possession or control. 
Buyer shall incur no liability to Seller or any other Person for any act
of Governmental Authority, act of God or other destruction in whole or in part
or negligence or wrongful act of custodians or agents selected by and
supervised by Buyer with reasonable care, or Buyer’s failure to provide
adequate protection or insurance for the Purchased Assets.  Buyer shall have no obligation to take any
action to preserve any rights of Seller in any Purchased Asset against prior
parties, and Seller hereby agrees to take such action.  Buyer shall have no obligation to realize
upon any Purchased Asset except through proper application of any distributions
with respect to the Purchased Assets made directly to Buyer or its agent(s).  So long as Buyer and Custodian shall act in
good faith in their handling of the Purchased Assets, Seller waives or is
deemed to have waived the defense of impairment of the Purchased Assets by
Buyer and Custodian.

 

Section 18.16                          Default Rate.  To the extent permitted by Requirements of
Law, Seller shall pay interest at the Default Rate on the amount of all
Repurchase Obligations not paid when due under the Repurchase Documents until
such Repurchase Obligations are paid or satisfied in full.

 

Section 18.17                          Set-off.  In addition to any rights now or hereafter
granted under the Repurchase Documents, Requirements of Law or otherwise,
Seller, on behalf of itself and Guarantor, hereby grants to Buyer and each
Indemnified Person, to secure repayment of the Repurchase Obligations, a right
of set-off upon any and all of the following: monies, securities, collateral or
other property of Seller and Guarantor and any proceeds from the foregoing, now
or hereafter held or received by Buyer, any Affiliate of Buyer or any
Indemnified Person, for the account of Seller or Guarantor, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general, specified, special, time, demand,
provisional or final) and credits, claims or Indebtedness of Seller or
Guarantor at any time existing, and any obligation owed by Buyer or any
Affiliate of Buyer to Seller or Guarantor and to set—off against any Repurchase
Obligations or Indebtedness owed by Seller or Guarantor and any Indebtedness
owed by Buyer or any Affiliate of Buyer to Seller or Guarantor, in each case
whether direct or indirect, absolute or contingent, matured or unmatured,
whether or not arising under the Repurchase Documents and irrespective of the
currency, place of payment or booking office of the amount or obligation and in
each case at any time held or owing by Buyer, 

 

74

 

any Affiliate of Buyer or any Indemnified Person to
or for the credit of any Seller or Guarantor, without prejudice to Buyer’s
right to recover any deficiency.  Each of
Buyer, each Affiliate of Buyer and each Indemnified Person is hereby authorized
upon any amount becoming due and payable by Seller or Guarantor to Buyer or any
Indemnified Person under the Repurchase Documents, the Repurchase Obligations
or otherwise or upon the occurrence of an Event of Default, without notice to
Seller or Guarantor, any such notice being expressly waived by Seller and
Guarantor to the extent permitted by any Requirements of Law, to set-off,
appropriate, apply and enforce such right of set—off against any and all items
hereinabove referred to against any amounts owing to Buyer or any Indemnified
Person by Seller or Guarantor under the Repurchase Documents and the Repurchase
Obligations, irrespective of whether Buyer, any Affiliate of Buyer or any
Indemnified Person shall have made any demand under the Repurchase Documents
and regardless of any other collateral securing such amounts, and in all cases
without waiver or prejudice of Buyer’s rights to recover a deficiency.  Seller and Guarantor shall be deemed directly
indebted to Buyer and the other Indemnified Persons in the full amount of all
amounts owing to Buyer and the other Indemnified Parties by Seller and Guarantor
under the Repurchase Documents and the Repurchase Obligations, and Buyer and
the other Indemnified Persons shall be entitled to exercise the rights of
set-off provided for above.  ANY AND ALL
RIGHTS TO REQUIRE BUYER OR OTHER INDEMNIFIED PERSONS TO EXERCISE THEIR RIGHTS
OR REMEDIES WITH RESPECT TO THE PURCHASED ASSETS OR OTHER INDEMNIFIED PERSONS
UNDER THE REPURCHASE DOCUMENTS, PRIOR TO EXERCISING THE FOREGOING RIGHT OF SET—OFF,
ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY SELLER AND GUARANTOR.

 

Buyer
or any Indemnified Person shall promptly notify the affected Seller or
Guarantor after any such set—off and application made by Buyer or such
Indemnified Person, provided that the failure to give such notice shall
not affect the validity of such set—off and application.  If an amount or obligation is unascertained,
Buyer may in good faith estimate that obligation and set-off in respect of the
estimate, subject to the relevant Party accounting to the other Party when the
amount or obligation is ascertained. 
Nothing in this Section 18.17 shall be effective to create a
charge or other security interest.  This Section 18.17
shall be without prejudice and in addition to any right of set-off, combination
of accounts, Lien or other rights to which any Party is at any time otherwise
entitled.

 

Section 18.18                          Seller’s Waiver
of Setoff.  Seller
hereby waives any right of setoff it may have or to which it may be or become
entitled under the Repurchase Documents or otherwise against Buyer, any
Affiliate of Buyer, any Indemnified Person or their respective assets or
properties.

 

Section 18.19                          Periodic Due
Diligence Review.  Buyer may
perform continuing due diligence reviews with respect to the Purchased Assets,
Seller and Affiliates of Seller, including ordering new third party reports,
for purposes of, among other things, verifying compliance with the
representations, warranties, covenants, agreements, duties, obligations and
specifications made under the Repurchase Documents or otherwise. Upon
reasonable prior notice to Seller, unless a Default or Event of Default exists,
in which case no notice is required, Buyer or its representatives may during
normal business hours inspect any properties and examine, inspect and make
copies of the books and records of Seller and Affiliates of Seller, the
Purchased Asset Documents and the Servicing Files.  Seller shall make available to Buyer one or
more 

 

75

 

knowledgeable financial or accounting officers and
representatives of the independent certified public accountants of Seller for
the purpose of answering questions of Buyer concerning any of the
foregoing.  Seller shall cause Servicer
and Sub-Servicer to cooperate with Buyer by permitting Buyer to conduct due
diligence reviews of the Servicing Files. 
Buyer may purchase Purchased Assets from Seller based solely on the
information provided by Seller to Buyer in the Underwriting Materials and the
representations, warranties, duties, obligations and covenants contained herein,
and Buyer may at any time conduct a partial or complete due diligence review on
some or all of the Purchased Assets, including ordering new credit reports and
new Appraisals on the Underlying Mortgaged Properties and otherwise
re-generating the information used to originate and underwrite such Purchased
Assets.  Buyer may underwrite such
Purchased Assets itself or engage a mutually acceptable third-party underwriter
to do so.

 

Section 18.20                          Time of the
Essence.  Time is of the essence with
respect to all obligations, duties, covenants, agreements, notices or actions
or inactions of Seller under the Repurchase Documents.

 

Section 18.21                          Patriot Act
Notice.  Buyer hereby notifies Seller
that Buyer is required by the Patriot Act to obtain, verify and record information
that identifies Seller.

 

Section 18.22                          Successors and
Assigns; No Third Party Beneficiaries.  Subject to the foregoing, the Repurchase
Documents and any Transactions shall be binding upon and shall inure to the
benefit of the Parties and their successors and permitted assigns.  Nothing in the Repurchase Documents, express
or implied, shall give to any Person other than the Parties any benefit or any
legal or equitable right, power, remedy or claim under the Repurchase
Documents.

 

[ONE OR MORE UNNUMBERED SIGNATURE PAGES FOLLOW]

 

76

 

IN WITNESS WHEREOF, the Parties have caused
this Agreement to be duly executed as of the date first above written.

 

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STARWOOD PROPERTY MORTGAGE SUB-2, L.L.C., a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION, a national
  banking association

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
  Title:

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