Maryland
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1-13991
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13-3974868
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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350 Park Avenue, 20th Floor
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New York
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New York
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10022
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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MFA
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New York Stock Exchange
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7.50% Series B Cumulative Redeemable
Preferred Stock, par value $0.01 per share |
MFA/PB
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New York Stock Exchange
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6.50% Series C Cumulative Redeemable
Preferred Stock, par value $0.01 per share |
MFA/PC
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New York Stock Exchange
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8.00% Senior Notes due 2042
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MFO
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New York Stock Exchange
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•
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Term. The term of the Forbearance Agreement is from April 10, 2020, through 6:30 p.m. ET on April 27, 2020 (the “Forbearance Term”), unless terminated earlier upon the occurrence of a Termination Triggering Event (as defined under “Termination” below). The Forbearance Agreement does not provide for automatic extensions beyond the Forbearance Term. Rather, the Forbearance Agreement permits the parties to extend the term for a period of not less than 75 days (and, if not so extended, a non-extending counterparty will have certain of its rights with respect to collateral reduced). As such, a further agreement among the Company and the Participating Counterparties must be executed to extend the Forbearance Term.
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•
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Forbearance. During the Forbearance Term, each Participating Counterparty has agreed to forbear (“Forbearance”) from exercising any of its rights or remedies (including, without limitation, a Participating Counterparty’s right to sell collateral in order to enforce margin calls) as a result of specified events of defaults under the Repo Agreements, provided that each Participating Counterparty is permitted during the Forbearance Term to, among other things, (i) request, demand or provide notice of margin, collateral or payments under the applicable Repo Agreement and (ii) exercise any rights or remedies required by FINRA Rule 4210 (generally, the FINRA customer margin rule requirements) if, after good faith efforts, it is unable to obtain a waiver of, an extension pursuant to, or to otherwise excuse compliance with, FINRA Rule 4210.
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•
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Interest Rate. During the Forbearance Term, each Participating Counterparty will accrue interest on the outstanding balance under its Repo Agreement at a rate of one-month LIBOR plus 5%.
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•
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Termination. The Forbearance Agreement shall terminate upon the occurrence of certain events including, among others, the following: (i) the Company’s breaching any Forbearance Covenant (as defined under “Covenants by the Company” below), (ii) the filing of a voluntary or involuntary bankruptcy petition regarding the Company, (iii) Nonparticipating Counterparties (as defined below) exercising remedies under any Repo Agreements or any similar agreements with the Company to sell or otherwise dispose of assets corresponding to an aggregate gross principal balance in excess of $330 million, (iv) the Company’s making a dividend payment or other distribution on the Company’s preferred or common stock or (v) the CMBX.NA.AAA.13 Index (an objective, market-based index relating to the CMBS market) remaining 20% below the level of such index as of the commencement of the Forbearance Term for three (3) consecutive business days (each, a “Termination Triggering Event,” and collectively, the “Termination Triggering Events”).
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•
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No Company Remedies Upon Termination Triggering Event. Upon a Termination Triggering Event, Forbearance shall cease and each Participating Counterparty shall be permitted to liquidate any collateral it may hold under its applicable Repo Agreement, without any ability of the Company to cure or otherwise remedy the Termination Triggering Event.
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•
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Covenants by the Company. During the Forbearance Term, the Company covenants, among other agreements (each, a “Forbearance Covenant”), that: (i) no dividend or other distribution shall be made on the Company’s preferred or common stock, (ii) the terms of any forbearance agreement entered into with a Nonparticipating Counterparty (as defined below) on par with or more favorable than those under the Forbearance Agreement will be deemed incorporated without any further action, (iii) the Company will make no draws upon or otherwise access extensions of credit, subject to certain exceptions, and (iv) certain income and other proceeds received by the Company shall be applied to pay-down obligations under the Repo Agreements.
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Date: April 13, 2020
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MFA FINANCIAL, INC.
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By:
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/s/ Harold E. Schwartz
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Name:
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Harold E. Schwartz
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Title:
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Senior Vice President and General Counsel
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(a)
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the execution of this Agreement and the Security and Collateral Agency Agreement by the Companies on the same date, and the execution of this Agreement and the Security and Collateral Agency Agreement by each of the Minimum Counterparties, provided that, with respect to a Participating Counterparty that executes a counterpart of this Agreement after the Effective Date, this Agreement shall be effective as to such Participating Counterparty upon such execution by such Participating Counterparty;
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(b)
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the security interests granted pursuant to Section 2 hereof shall have been perfected (in the case of any assets that can be perfected with a UCC filing, on or before the day this Agreement has been executed by the Companies and each of the Minimum Counterparties) or are being perfected in accordance with the Security Documents;
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(c)
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any default or event of default that has occurred and is continuing under the Applicable Agreements other than the Acknowledged Events of Default that has been expressly waived by the applicable Participating Counterparty is set forth in Schedule 8;
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(d)
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to the extent invoiced at least one business day prior to the Effective Date, the Companies shall have paid the reasonable fees and out-of-pocket expenses of counsel and other professional advisors to each Participating Counterparty; and
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(e)
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immediately before and after giving effect to this Agreement, the representations and warranties of the Companies set forth in Section 8 and 9 herein shall be true and correct in all material respects on and as of the Effective Date.
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(a)
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Each of the Companies understands the temporary nature of the provisions of this Agreement and recognizes that no Participating Counterparty has any obligation to expand or extend any of the terms hereof;
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(b)
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The Designated Assets shown on Schedule 3 to this Agreement sets forth a true, accurate and complete list of substantially all of the material assets of the Companies that represent 100% of the unencumbered assets of the Companies and which the Companies believe to have a fair market value of approximately $1,000,000,000; provided, however, that certain assets that do not have material value, including without limitation, furniture, fixtures, and equipment, are not identified on Schedule 3;
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(c)
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The Companies own the unencumbered assets contemplated to be pledged to the Participating Counterparties free and clear of any lien, security, interest, charge or encumbrance, other than any lien, security, interest or encumbrance created as a result of this Agreement;
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(d)
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There are no material agreements between the Companies and any other counterparties that have not been disclosed to the Participating Counterparties;
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(e)
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The Companies are in good standing with respect to any governmental or other agency which may regulate them; and
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(f)
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The Companies have not received any notice of default or event of default under any Applicable Agreements and the Companies have not received any notice of default relating to any other indebtedness, except as specified in Schedule 5.
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(a)
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Such party has carefully read and fully understood all of the terms and conditions of this Agreement;
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(b)
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Such party has consulted with, or had a full and fair opportunity to consult with, an attorney regarding the terms and conditions of this Agreement;
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(c)
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Such party has had a full and fair opportunity to participate in the drafting of this Agreement;
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(d)
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Such party is freely, voluntarily, knowingly, and intelligently entering into this Agreement;
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(e)
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In entering into this Agreement, such party has not relied upon any representation, warranty, covenant or agreement not expressly set forth herein or in its respective Applicable Agreement;
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(f)
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This Agreement has been duly authorized and validly executed and delivered by such party and constitutes each such party’s legal, valid and binding obligation, enforceable in accordance with its terms;
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(g)
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Such party is executing this Agreement and agreeing to be bound on account of all Applicable Agreements to which it is a party; and
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(h)
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Such party is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and has the full power and legal authority to execute this Agreement, consummate the transactions contemplated hereby, and perform its obligations hereunder.
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(a)
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no dividend or other distribution shall be made on any preferred or common stock of any Seller Entity;
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(b)
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the independent directors of any Seller Entity shall be paid only with common stock in such Seller Entity, except with respect to Independent Directors of special purpose entity Seller Entity subsidiaries of MFA Financial, Inc.;
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(c)
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in connection with a Non-Participating Counterparty’s agreement to waive, or forbear from exercising remedies with respect to, a default or potential default under a repurchase agreement or similar agreement with such Non-Participating Counterparty, if any of the Companies agrees (x) to provide any benefit or consideration to such Non-Participating Counterparty that is more favorable than the consideration or benefits offered hereunder (including, without limitation, the benefit of a forbearance period of shorter duration than the Forbearance Period and the payment of any fees in connection with such waiver or forbearance) or (y) to any terms or conditions with such Non-Participating Counterparty that are more favorable than the terms set forth in this Agreement, (i) the Companies shall provide advance written notice to the Participating Counterparties of such consideration, benefit, terms or conditions and (ii) such consideration, benefit, terms or condition shall be deemed incorporated herein and each of the Participating Counterparties shall be provided with such consideration or benefit on the same terms as such Non-Participating Counterparty, without the need of any further action on the part of any party, except that the Companies shall take such actions as may be necessary or reasonably requested by any Participating Counterparty to perfect the rights of the Participating Counterparties in and to such benefits;
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(d)
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the Companies shall cooperate fully with the Participating Counterparties and their respective agents and professionals (legal and financial), including in connection with any financial review or appraisal of the businesses, assets or financial condition of the Companies, to provide the Participating Counterparties and their respective agents and professionals with all reasonably requested information, in all cases at the expense of the Companies. Without limiting the foregoing, (i) upon the request of any Participating Counterparty, and subject to compliance with the confidentiality provisions included in such Applicable Agreement, the Companies shall grant such Participating Counterparty and its respective professionals (including, without limitation, its lawyers, accountants, appraisers and financial advisors) reasonable access to, and shall as promptly as practical schedule meetings and conference calls with, management personnel and any financial advisors or restructuring consultants retained by the Companies, (ii) the Companies shall on or prior to the Effective Date have created a data room with outstanding principal balance and asset information in a form acceptable to the Participating Counterparties, including loan tapes and CUSIP numbers for all outstanding transactions, and (iii) the Companies’ financial advisor shall furnish the Participating Counterparties with daily reporting of transactions entered into by the Companies on the previous business day, including relevant details of any sales of encumbered assets and repayment of associated financing, principal and interest cash flows collected from encumbered assets that are used to pay down associated financing, and other significant cash flows from transactions involving (1) all dispositions pursuant to Section 7 of this Agreement, (2) settlement of sales of previously unsettled encumbered or unencumbered assets that occurred prior to execution of this agreement, (3) settlements or accommodations from financing counterparties not party to this agreement; (4) cash outflows and related details on payments for general and administrative or other expenses in the normal course of the Companies’ business to the extent that they exceed $500,000 on any given day as well as details on any single expense exceeding $200,000, and (5) consolidated financial balance sheet information for MFA Financial, Inc., and any other information required to be provided under any of the Applicable Agreements, including daily reporting on margin calls;
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(e)
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the Companies shall pay the reasonable and documented professional fees and expenses, including legal fees, of each Participating Counterparty incurred in connection with the consideration of the forbearance provided for herein (including any diligence and analysis in respect thereof) and the negotiation and execution of this Agreement and any extension or modification thereof, including fees and expenses of a financial advisor for the Participating Counterparties;
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(f)
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no draws shall be made under any Applicable Agreement of a Participating Counterparty, except with respect to the agreements set forth in Schedule 6 hereto;
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(g)
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the Companies shall make no draws upon or otherwise access extensions of credit, including any further sales or repurchases, including, without limitation, from affiliates, except with respect to the agreements set forth in Schedule 6 hereto;
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(h)
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no payments shall be made to any lender, creditor or other obligee under any indebtedness obligation of any kind of any of the Companies, including without limitation to the Participating Counterparties under the Applicable Agreements (other than as expressly permitted under this Agreement, including payments contemplated in the budget annexed hereto as Schedule 4);
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(i)
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all income, funds, cash collateral and other proceeds received under or in connection with any Applicable Agreement and/or any Applicable Assets thereunder (including any such income, funds, cash collateral or other proceeds that are in the possession of the applicable Participating Counterparty on the date hereof and/or would otherwise be required to be paid to the Companies pursuant to such Applicable Agreement) shall be applied by the relevant Participating Counterparty as follows: (i) first, to all accrued and unpaid interest (including price differential) owed under such Applicable Agreement and hereunder, (ii) second, to outstanding margin deficits under such Applicable Agreement, (iii) third, to reduce the outstanding principal amount (including any repurchase price) owed to such Participating Counterparty under such Applicable Agreement (notwithstanding any principal repayment schedule in the Applicable Agreement to the contrary), (iv) fourth, to all other obligations owed by the Companies or their affiliates to the relevant Participating Counterparty or its affiliates under any other Applicable Agreement (regardless of whether the applicable Participating Counterparty or such affiliate has a contractual right to do so under the Applicable Agreements or any other agreement with any of the Companies), including fees and expenses, and (v) fifth, any further proceeds shall be subject to the lien and security interest granted in Section 2 of this Agreement; provided, however, for the avoidance of doubt, that during the Forbearance Period payments of interest (including price differential), principal, and other obligations shall be made from income and other proceeds in accordance with the foregoing and not based on any due dates, schedules, or other timing set forth in the Applicable Agreements;
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(j)
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upon the reasonable request of any Participating Counterparty and at the Companies’ expense, shall make, execute, endorse, acknowledge, file, record, register and/or deliver such agreements, documents, instruments and further assurances (including, without limitation, financing statements in applicable jurisdictions, delivery of custodial receipts in the name of and for the benefit of the Collateral Agent from any custodians holding any mortgage-loan related assets, delivery, together with endorsements in blank, of all physical securities
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(k)
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immediately upon the effectiveness of this Agreement, the Companies shall make a good faith effort to develop a business plan and undertake a deleveraging process and use its commercially reasonable efforts to accomplish such deleveraging;
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(l)
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the Companies shall promptly notify each Participating Counterparty of the occurrence of any Triggering Event and in any event no later than one business day following the occurrence thereof (or in the case of a Triggering Event described in clauses (iii) (solely with respect to a voluntary filing), (vii), (viii), (ix), (xii) or (xiv) of the definition of “Triggering Event,” one business day prior to such expected filing or payment), which notice shall state that such Triggering Event occurred and set forth, in reasonable detail, the facts and circumstances that gave rise to such Triggering Event;
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(m)
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the Companies shall promptly, and in any event no later than one business day after receipt of notice thereof, notify each Participating Counterparty of any default, event of default, termination notices, enforcement notices, calculation statements, and related notices and correspondences received by the Companies in connection with any repurchase agreements with Non-Participating Counterparties or any material indebtedness of the Companies, or any other agreement that could give rise to a cross default under any of the foregoing;
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(n)
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the Companies acknowledge and agree that New York Governor Andrew Cuomo’s Executive Order No. 202.9, “Continuing Temporary Suspension and Modification of Laws Relating to Disaster Emergency” is inapplicable to any of the Applicable Agreements, and that the Companies will not seek to challenge or assert a claim or defense against any Participating Counterparty on the basis of such executive order;
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(o)
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unless otherwise agreed upon by the Required Counterparties, each Seller Entity shall not enter into any new repurchase agreements, forward transaction agreements, hedging agreements, ISDA agreements, warehouse agreements, swap agreements, loan agreements, and other related agreements or any transactions thereunder or any new transactions under an Applicable Agreements or any other similar agreement, or grant any liens upon its assets on account of the forgoing or incur any other indebtedness of the Companies;
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(p)
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the Companies shall provide notice to all Participating Counterparties promptly, and no later than one business day after, (i) the exercise of remedies in connection with a Triggering Event by any Participating Counterparty; or (ii) the termination of any forbearance or standstill or similar agreement by any Non-Participating Counterparty to any repurchase agreement, swap agreement or other derivative contract with any of the Companies; and
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(q)
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the Companies shall use best efforts to have all of the Security Documents fully executed, and to perfect on a first-priority basis the liens on the Designated Assets pursuant to the
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(a)
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This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, notwithstanding its conflict of laws principles or any other rule, regulation or principle that would result in the application of any other state’s law.
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(b)
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EACH PARTY HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE OF NEW YORK AND APPELLATE COURTS FROM EITHER OF THEM AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY HERETO EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.
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(c)
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EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
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(a)
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“Collateral Agent” shall mean Wilmington Trust as collateral agent for the Participating Counterparties, or such other collateral agent as agreed by the Companies and the Participating Counterparties.
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(b)
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“LIBOR” shall mean the 1-month London interbank offered rate as administered by ICE Benchmark Administration as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (the “LIBO Screen Rate”) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such interest period; provided that if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
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(c)
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“Minimum Counterparties” shall mean, as of the Effective Date, counterparties of the Companies that collectively hold at least 80% of the aggregate gross principal balance of Applicable Agreements and similar agreements with Non-Participating Counterparties to which one or more Companies is a party as of such date of determination.
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(d)
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“Non-Participating Counterparties” shall mean counterparties under repurchase agreements and other related agreements similar in nature to the Applicable Agreements with any one or more of the Companies, other than the Participating Counterparties.
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(e)
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“Pro Rata Realized Losses” shall mean for each Participating Counterparty a fraction the numerator of which is an amount equal to such Participating Counterparty’s realized losses under the applicable Applicable Agreements and the denominator of which is the sum of all Participating Counterparties’ realized losses, in each case, calculated upon the close-out of all of the transactions under the applicable Applicable Agreements (with realized losses being determined in each instance (after giving effect to the netting and setoff of any cash collateral or other margin held by such Participating Counterparty) by either (i) a disposition (including a Participating Counterparty’s buying in) of the related Applicable Assets within 180 days following the expiration of the Forbearance Period and in accordance with such Applicable Agreement or (ii) agreement of the Companies, in consultation with the Required Counterparties).
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(f)
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“Required Counterparties” shall mean, as of any date of determination, Participating Counterparties that collectively hold a majority of the aggregate gross principal balance of Applicable Agreements to which one or more Companies is a party as of such date of determination.
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(g)
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“Security and Collateral Agency Agreement” shall mean that certain Security and Collateral Agency Agreement dated as of the date hereof among the Companies, Wilmington Trust, National Association, as agent for the Participating Counterparties, and the Participating Counterparties, which is annexed hereto as Exhibit A.
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(h)
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“Security Documents” shall mean the Security and Collateral Agency Agreement, and any custodial, account or other agreements perfecting the liens granted in the Security and Collateral Agency Agreement, each in form and substance satisfactory to the Participating Counterparties.
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(i)
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“Triggering Event” shall mean any of the following:
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(i)
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the failure of any Company to comply with any term, condition, or covenant set forth in this Agreement or any of the Security Documents;
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(ii)
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the inaccuracy of any representation or warranty made by the Companies herein in any material respect on or as of the date made;
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(iii)
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any Seller Entity under the debtor relief laws of the United States or other applicable jurisdictions from time to time in effect, including but not limited to the United States Bankruptcy Code (a) commences or seeks to commence a voluntary case or proceeding; (b) consents to a voluntary case or proceeding; (c) consents to the appointment of a custodian, receiver, liquidator, trustee, monitor, sequestrator or similar official of it (or them) for all or any substantial part of its property; (d) makes or seeks to make a general assignment for the benefit of its (or their) creditors; (e) files or takes steps to file an answer or consent seeking reorganization or relief; or (f) consents to the filing of a petition in bankruptcy or any similar proceeding;
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(iv)
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an involuntary case under the United States Bankruptcy Code or other applicable debtor relief law is commenced against any Seller Entity and the petition is not controverted within 10 days, or is not dismissed within 45 days after the filing thereof;
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(v)
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a custodian, receiver, liquidator, trustee, monitor, sequestrator or similar official is appointed out of court with respect to any Seller Entity, or with respect to all or any substantial part of the assets or properties of the Seller Entities;
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(vi)
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Non-Participating Counterparties shall have exercised remedies under any repurchase agreements, any related agreements, or any similar agreements with the Companies to sell or otherwise dispose of assets corresponding to an aggregate gross principal balance of in excess of $330 million;
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(vii)
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any of the Seller Entities shall make a dividend or other distribution on any preferred or common stock;
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(viii)
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the independent directors of any Seller Entity shall receive compensation other than common stock in such Seller Entity, except with respect to independent directors of special purpose entity Seller Entity subsidiaries of MFA Financial, Inc.;
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(ix)
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other than as expressly permitted under this Agreement, including payments contemplated in the budget annexed hereto as Schedule 4, or as otherwise agreed to by the Participating Counterparties, any payments shall be made to or liens or collateral granted for the benefit of any repurchase agreement, forward transaction agreement, hedging agreement, ISDA agreement, warehouse agreement, swap agreement, or loan agreement counterparty other than to a Participating Counterparty under or in connection with an Applicable Agreement or to any agent or lender with respect to any material indebtedness of the Companies;
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(x)
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the exercise of remedies (i) in connection with a Triggering Event by any Participating Counterparty, or (ii) in connection with compliance with FINRA Rule 4210 by Participating Counterparties holding an aggregate gross principal balance in excess of $500 million as long as the applicable Participating Counterparties have exercised good faith efforts to obtain a waiver of, an extension pursuant to, or to otherwise excuse compliance with, FINRA Rule 4210;
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(xi)
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the Security Documents cease to create a valid and perfected first priority security interest in the Designated Assets after such perfection occurs in accordance with the terms of this Agreement and the Security Documents;
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(xii)
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payment being made by the Companies to any repurchase agreement counterparty, including without limitation the Participating Counterparties and the Non-Participating Counterparties (other than as expressly set forth herein); provided that no Triggering Event shall be deemed to have occurred pursuant to the foregoing clause (ix) or this clause (xii) due to any Seller Entity complying with its obligations as lender, buyer or other type of financing provider under any financing, repurchase transaction or similar arrangement;
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(xiii)
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the receipt by any of the Participating Counterparties from, or the publication by, any of the Companies of any threat of litigation (other than in connection with a breach of this Agreement by a Participating Counterparty); or
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(xiv)
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the commencement of any lawsuit by any of the Companies against any Participating Counterparty arising out of or with respect to, or in connection with, any repurchase agreements, or any related agreements (other than in connection with a breach of this Agreement by a Participating Counterparty);
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(xv)
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the failure by any Company to take the actions within such Company’s control by April 15, 2020, to have the DTC repo tracker turned “off” with respect to assets subject to the relevant Applicable Agreements;
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(xvi)
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the failure of any Company to remit to the applicable Participating Counterparty income or proceeds received by such Company with respect to assets subject to the relevant Applicable Agreements within one (1) business day of actual notice to, or actual knowledge by, such Company of receipt of such income or proceeds; or
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(xvii)
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the CMBX.NA.AAA.13 Index has remained 20% below the level of the CMBX.NA.AAA.13 Index as of the commencement of the Forbearance Period for three (3) consecutive business days.
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•
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Forbearance Agreement. On April 10, 2020, the Company and its repurchase agreement counterparties holding a significant majority of its outstanding repurchase obligations entered into a Forbearance Agreement. On March 24, 2020, the Company had announced that due to the turmoil in the financial markets resulting from the COVID-19 pandemic, the Company was engaged in discussions with its financing counterparties regarding forbearance with respect to the Company’s obligations under its repurchase agreement financing arrangements, which were approximately $9.5 billion as of March 20, 2020.
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◦
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Participating counterparties to the Forbearance Agreement represent repurchase obligations of an aggregate of $4.8 billion, or 83%, of repurchase agreement obligations outstanding as of the date of the Forbearance Agreement. In addition, the Company believes that it has good working relationships with certain other counterparties that are not participating in the Forbearance Agreement, representing the remaining 17% of total repurchase obligations.
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◦
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In connection with the Forbearance Agreement, the Company also granted the participating counterparties a security interest in Company assets that were unencumbered prior to the Forbearance Agreement, including residential whole loans, real estate owned, unrestricted cash and other assets with an estimated market value as of the date of the Forbearance Agreement of approximately $1.3 billion.
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◦
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Counterparties have agreed to forbear from exercising any rights or remedies for 15 days (unless terminated sooner upon the occurrence of certain events) under their respective repurchase agreements, including selling collateral to enforce margin calls. The Forbearance Agreement provides the Company with the ability, subject to counterparty consent, to extend forbearance for up to an additional 75 days, subject to the Company’s ongoing compliance with various obligations.
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◦
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During the period covered by the Forbearance Agreement, the Company intends to continue to pursue asset sales and explore other potential transactions to reduce its obligations under its repurchase agreements and raise cash to bolster its liquidity.
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•
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Liquidity and Portfolio Update. In response to the unprecedented market conditions experienced since mid-March, the Company has taken steps to manage and de-lever its portfolio and generate liquidity, particularly in relation to its investments in certain residential mortgage securities. Specific actions taken by the Company include:
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◦
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Sales of residential mortgage assets generating proceeds of $3.5 billion, which were used to reduce the associated repurchase agreement obligations. The Company has disposed of approximately $2.9 billion of residential mortgage securities, including $1.4 billion of Agency MBS, $1.3 billion of Non-Agency MBS and $44.7 million of CRT securities. In addition, the Company disposed of $659.9 million of residential whole loans and $136.8 million of MSR-related assets. As a result of these collective actions, the Company has reduced its overall exposure to unpaid margin calls by approximately 43%.
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◦
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The Company unwound all of its approximately $4.1 billion of swap hedging transactions, which resulted in the recovery of approximately $33.0 million of cash margin that had been posted with the relevant exchange during the period those transactions were outstanding.
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•
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Cash and liquidity update. As of April 9, 2020, the Company had total cash balances of $423.4 million, including unrestricted cash balances prior to the effectiveness of the Forbearance Agreement, totaling $225.3 million. Settlement on April 13, 2020, of certain sale transactions executed this week is expected to result in further net cash receipts of approximately $49.3 million. In addition, the Company has cash on deposit with repurchase agreement counterparties totaling $198.1 million, primarily reflecting margin posted prior to entering into Forbearance Agreement discussions.
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•
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Book value per common share. Through March 31, 2020, the Company estimates that GAAP book value per common share has decreased approximately 35-40% since December 31, 2019, to between $4.22 and $4.58, and its Economic book value per share, a non-GAAP financial measure, has decreased approximately 45-50% since December 31, 2019, to between $3.72 and $4.09.
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•
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Business Continuity. The Company has fully implemented its Business Continuity Plan and has transitioned completely to a remote work environment to address the operating risks associated with the global COVID-19 pandemic, has thus far not experienced any significant changes from normal working patterns, and continues to take decisive action to best position the Company's business and portfolio.
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