UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

 

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Date of Report ( Date of earliest event reported ): July 18, 2014

  

  

Five Oaks Investment Corp.

( Exact name of registrant as specified in its charter )

 

 

Maryland 001-35845  45-4966519
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)

 

540 Madison Avenue, 19 th Floor

New York, New York

10022
(Address of principal executive offices) (Zip Code)

     

(212) 257 5073

(Registrant’s telephone number, including area code)

  

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

         

 
 

 

Item 1.01. Entry into a Material Definitive Agreement

 

1. The Bank of America Loan Facility:

 

On July 18, 2014, Five Oaks Acquisition Corp. (“FOAC”), a wholly owned subsidiary of Five Oaks Investment Corp. (the “Company”), entered into that certain Loan and Security Agreement (the “Loan Agreement”) between Bank of America, N.A. (“Bank of America”) as lender, FOAC as borrower, for the purpose of financing the acquisition of prime jumbo residential mortgage loans, in furtherance of the Company’s previously announced strategy to aggregate and securitize such loans.

 

The Loan Agreement will be used by FOAC from time to time to finance the purchase of certain eligible residential mortgage loans, to be acquired by FOAC from one or more originators. The Loan Agreement provides for a short-term facility with an aggregate maximum capacity of $100,000,000 which is scheduled to mature on January 14, 2015, unless extended pursuant to its terms. FOAC’s obligations under the Loan Agreement will be secured by the mortgage loans purchased with advances made pursuant to the Loan Agreement. The Loan Agreement contains borrowing base provisions that provide Bank of America with certain rights if there has been a decline in the market value of the mortgage loans, such that Bank of America may require FOAC to repay any advance under the Loan Agreement to eliminate any borrowing base deficiency resulting from such decline. Wells Fargo Bank N.A. will act as mortgage loan custodian.

 

The Company also entered into a guaranty, in favor of Bank of America (the “Guaranty”), pursuant to which it guaranteed FOAC’s obligations under the Loan Agreement. The Company, as guarantor, is subject to certain financial covenants in respect of the Loan Agreement.

 

In addition, the Loan Agreement contains certain events of default (subject to certain materiality thresholds and cure periods), including payment defaults, breaches of covenants and/or any representations and warranties, cross-defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include, among others, repayment of any advances and the liquidation by Bank of America of the mortgage loans held as collateral securing FOAC’s obligations under the Loan Agreement.

 

The Company has outstanding master repurchase agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of Bank of America.

 

The foregoing descriptions of the Repurchase Agreement and Guaranty do not purport to be complete and are qualified in their entirety by reference to the full text of the Loan Agreement and Guaranty, respectively, which have been filed with this Current Report on Form 8-K as Exhibits 10.1 and 10.2, respectively.

 

2. The Barclays Repurchase Agreement:

 

On July 29, 2014, Five Oaks Acquisition Corp. (“FOAC”), a wholly owned subsidiary of Five Oaks Investment Corp. (the “Company”), entered into that certain Master Repurchase Agreement (the “Repurchase Agreement”) by and among Barclays Bank PLC (“Barclays”) as purchaser and agent, FOAC as seller, and the Company as guarantor, for the purpose of financing the acquisition of eligible residential mortgage loans, in furtherance of the Company’s previously announced strategy to aggregate and securitize such loans.

 

The Repurchase Agreement will be used by FOAC from time to time to sell certain eligible residential mortgage loans, to be acquired by FOAC from one or more originators, to Barclays. The Repurchase Agreement provides for a 364-day facility term with an aggregate maximum capacity of $100,000,000 which is scheduled to mature on July 28, 2015, unless extended pursuant to its terms. The Repurchase Agreement contains margin call provisions that provide Barclays with certain rights if there has been a decline in the market value of the purchased mortgage loans, such that Barclays may require FOAC to transfer cash or eligible mortgage loans to eliminate any margin deficit resulting from such decline. Wells Fargo Bank N.A. will act as mortgage loan custodian.

 

The Company also entered into a guaranty, in favor of Barclays (the “Guaranty”), pursuant to which it guaranteed FOAC’s obligations under the Repurchase Agreement. The Company, as guarantor, is subject to certain financial covenants in respect of the Repurchase Agreement.

 

In addition, the Repurchase Agreement contains certain events of default (subject to certain materiality thresholds and cure periods), including payment defaults, breaches of covenants and/or any representations and warranties, cross-defaults, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include, among others, repurchase of a purchased mortgage loan and the liquidation by Barclays of the mortgage loans under the Repurchase Agreement.

 

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The Company has outstanding master repurchase agreements with Barclays Capital Inc., an affiliate of Barclays.

 

The foregoing descriptions of the Repurchase Agreement and Guaranty do not purport to be complete and are qualified in their entirety by reference to the full text of the Repurchase Agreement and Guaranty, respectively, which have been filed with this Current Report on Form 8-K as Exhibits 10.3 and 10.4, respectively.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

See Item 1.01 above, the provisions of which are incorporated by reference into this Item 2.03.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits.

 

Exhibit No.   Description
     
10.1   Loan and Security Agreement dated as of July 18, 2014, between Bank of America, N.A. as lender, Five Oaks Acquisition Corp. as borrower.
     
10.2   Guaranty, dated as of July 18, 2014, by Five Oaks Investment Corp. in favor of Bank of America, N.A.
     
10.3   Master Repurchase Agreement dated as of July 29, 2014, by and among Barclays Bank PLC as purchaser and agent, Five Oaks Acquisition Corp. as seller and Five Oaks Investment Corp. as guarantor.
     
10.4   Guaranty, dated as of July 29, 2014, by Five Oaks Investment Corp. in favor of Barclays Bank PLC.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Five Oaks Investment Corp.
     
August 7, 2014 By: /s/ David Oston
    David Oston
    Chief Financial Officer, Secretary and Treasurer

 

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Exhibit Index

 

Exhibit No.   Description
     
10.1   Loan and Security Agreement dated as of July 18, 2014, between Bank of America, N.A. as lender, Five Oaks Acquisition Corp. as borrower.
     
10.2   Guaranty, dated as of July 18, 2014, by Five Oaks Investment Corp. in favor of Bank of America, N.A.
     
10.3   Master Repurchase Agreement dated as of July 29, 2014, by and among Barclays Bank PLC as purchaser and agent, Five Oaks Acquisition Corp. as seller and Five Oaks Investment Corp. as guarantor.
     
10.4   Guaranty, dated as of July 29, 2014, by Five Oaks Investment Corp. in favor of Barclays Bank PLC.

 

 

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Exhibit 10.1

 

EXECUTION VERSION

 

LOAN AND SECURITY AGREEMENT

 

between

 

BANK OF AMERICA, N.A.

( “Lender” )

 

and

 

FIVE OAKS ACQUISITION CORP.

( “Borrower” )

 

dated as of

 

July 18, 2014

 

 
 

 

TABLE OF CONTENTS

 

 

Page

   
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1
   
1.1 Defined Terms 1
1.2 Interpretation; Principles of Construction. 1
     
ARTICLE 2 AMOUNT AND TERMS OF THE ADVANCE 2
   
2.1 Agreement to Make the Advance 2
2.2 Note 2
2.3 Advance Limits 3
2.4 Description of Pledged Mortgage Loans 3
2.5 Use of Proceeds 3
2.6 Interest 3
2.7 Terms and Conditions of Advance 3
     
ARTICLE 3 PROCEDURES FOR MAKING THE ADVANCE 4
   
3.1 Policies and Procedures 4
3.2 Request for Advance 4
3.3 Delivery of Mortgage Loan Documents 4
3.4 Payment of Advance 4
     
ARTICLE 4 REPAYMENT; PREPAYMENTS 4
   
4.1 Repayment 4
4.2 Mandatory Prepayment Events 5
4.3 Optional Prepayments 5
4.4 Illegality or Impracticability 6
4.5 Increased Costs 6
4.6 Payments Pursuant to Sale to Approved Investors 7
4.7 Application of Payments from Borrower or Approved Investors 7
4.8 Method of Payment 8
4.9 Reserved 8
4.10 Book Account 8
4.11 Full Recourse 8
     
ARTICLE 5 FEES 8
   
5.1 Payment of Fees 8
     
ARTICLE 6 COLLATERAL SECURITY; SERVICING; BORROWING BASE MAINTENANCE; CUSTODY OF MORTGAGE LOAN DOCUMENTS 9
   
6.1 Grant of Security Interest in Pledged Mortgage Loans and Collateral 9
6.2 Further Documentation 10
6.3 Lender’s Appointment as Attorney-in-Fact 10
6.4 Performance by Lender of Borrower’s Obligations 12

 

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6.5 Proceeds 12
6.6 Limitation on Duties Regarding Presentation of Collateral 12
6.7 Powers Coupled with an Interest 12
6.8 Release of Security Interest 12
6.9 Servicing 13
6.10 Custodial Account 14
6.11 Borrowing Base Maintenance 15
6.12 Custody of Mortgage Loan Documents 15
6.13 Release of Pledged Mortgage Loans 16
     
ARTICLE 7 CONDITIONS PRECEDENT 17
   
7.1 Advance 17
7.2 Satisfaction of Conditions 18
     
ARTICLE 8 REPRESENTATIONS AND WARRANTIES 19
   
8.1 Representations and Warranties Concerning Borrower 19
8.2 Representations and Warranties Concerning Pledged Mortgage Loans. 22
     
ARTICLE 9 AFFIRMATIVE COVENANTS 22
   
9.1 Financial Statements and Other Reports. 22
9.2 Periodic Due Diligence 24
9.3 Notice 24
9.4 Existence, Etc. 25
9.5 Servicing of Mortgage Loans 26
9.6 Evidence of Pledged Mortgage Loans 26
9.7 Defense of Title; Protection of Collateral 26
9.8 Further Assurances 26
9.9 Fidelity Bonds and Insurance 26
9.10 Sharing of Information. 26
9.11 ERISA. 27
9.12 Financial Covenants and Ratios 27
9.13 Amendments, Waiver and Termination of Certain Documents 27
     
ARTICLE 10 NEGATIVE COVENANTS 28
   
10.1 Debt 28
10.2 Lines of Business 28
10.3 Debt and Subordinated Debt 28
10.4 Loss of Eligibility 28
10.5 Loans to Officers, Employees and Shareholders 28
10.6 Liens on Pledged Mortgage Loans and Collateral 28
10.7 Transactions with Affiliates 28
10.8 Consolidation, Merger, Sale of Mortgage Loans and Change of Control 29
10.9 Payment of Dividends and Retirement of Stock 29
10.10 Collateral 29
10.11 No Additional Facilities 29

 

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ARTICLE 11 DEFAULTS AND REMEDIES 29
   
11.1 Events of Default 29
11.2 Remedies 32
11.3 Treatment of Custodial Account 34
11.4 No Obligation to Pursue Remedy 34
11.5 No Judicial Process 34
11.6 Reimbursement of Costs and Expenses 34
11.7 Rights of Set-Off 34
11.8 Reasonable Assurances 35
     
ARTICLE 12 INDEMNIFICATION 36
   
12.1 Indemnification 36
12.2 Reimbursement 36
12.3 Payment of Taxes 36
12.4 Lender Payment 37
12.5 Agreement not to Assert Claims 37
12.6 Survival 38
     
ARTICLE 13 TERM AND TERMINATION 38
   
13.1 Term 38
13.2 Termination 38
     
ARTICLE 14 GENERAL 38
   
14.1 Integration 38
14.2 Amendments 38
14.3 No Waiver 38
14.4 Remedies Cumulative 39
14.5 Assignment 39
14.6 Successors and Assigns 39
14.7 Participations 39
14.8 Invalidity 39
14.9 Additional Instruments 39
14.10 Survival. 39
14.11 Notices 39
14.12 Governing Law 41
14.13 Submission to Jurisdiction; Service of Process; Waivers 41
14.14 Waiver of Jury Trial 41
14.15 Counterparts 41
14.16 Headings 41
14.17 Confidential Information 41
14.18 Tax Treatment 42
14.19 Examination and Oversight by Regulators 43

 

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EXHIBITS

 

Exhibit A: Glossary of Defined Terms
Exhibit B: Form of Promissory Note
Exhibit C: Secretary’s Certificate
Exhibit D: Corporate Resolutions
Exhibit E: Officer’s Certificate  
Exhibit F: Form of Power of Attorney
Exhibit G: Wiring Instructions

 

 

SCHEDULES

 

Schedule 1: Filing Jurisdictions and Offices
Schedule 2: List of Borrower’s Existing Debt
Schedule 3: List of Mortgage Loan Purchase Agreements

 

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LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement” ) is made and entered into as of July 18, 2014, by and between Bank of America, N.A., a national banking association ( “Lender” ), and Five Oaks Acquisition Corp., a Delaware corporation ( “Borrower” ).

 

RECITALS

 

A.      Borrower wishes to obtain financing for the acquisition from Lender of certain residential mortgage loans and/or other mortgage related assets and interests, which assets shall secure the Advance to be made by Lender hereunder and Borrower’s obligations in respect thereof.

 

B.       Lender has agreed, subject to the terms and conditions of this Agreement, to make such Advance to Borrower, subject to the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual rights and obligations provided herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower and Lender agree as follows:

 

ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

 

1.1 Defined Terms . As used in this Agreement, capitalized terms shall have the meanings set forth in Exhibit A hereto, unless the context otherwise requires. All such defined terms shall, unless specifically provided to the contrary, have the defined meanings set forth herein when used in any other agreement, certificate or document made or delivered pursuant hereto.

 

1.2 Interpretation; Principles of Construction . The following rules of this Section 1.2 apply unless the context requires otherwise. A gender includes all genders. Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. A reference to a subsection, Section, Schedule or Exhibit is, unless otherwise specified, a reference to a section of, or schedule or exhibit to, this Agreement. A reference to a party to this Agreement or another agreement or document includes the party’s successors and permitted substitutes or assigns. A reference to an agreement or document (including any Loan Document) is to the agreement or document as amended, modified, novated, supplemented or replaced, except to the extent prohibited thereby or by any Loan Document and in effect from time to time in accordance with the terms thereof. A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. A reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form. A reference to conduct includes, without limitation, an omission, statement or undertaking, whether or not in writing. The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “including” is not limiting and means “including without limitation”. 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”.

 

Except where otherwise provided in this Agreement, any determination, consent, approval, statement or certificate made or confirmed in writing with notice to Borrower by Lender or an authorized officer of Lender provided for in this Agreement is conclusive and binds the parties in the absence of manifest error. A reference to an agreement includes a security interest, guarantee, agreement or legally enforceable arrangement whether or not in writing related to such agreement.

 

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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 electronic form. Where Borrower is required to provide any document to Lender under the terms of this Agreement, the relevant document shall be provided in writing or printed form unless Lender requests otherwise. At the request of Lender, the document shall be provided in electronic form or both printed and electronic form.

 

This Agreement is the result of negotiations among, and has been reviewed by counsel to, Lender and Borrower, and is the product of all parties. In the interpretation of this Agreement, 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 this Agreement or this Agreement itself. Except where otherwise expressly stated, Lender may give or withhold, or give conditionally, approvals and consents and may form opinions and make determinations at its sole and absolute discretion. Any requirement of good faith, discretion or judgment by Lender shall not be construed to require Lender to request or await receipt of information or documentation not immediately available from or with respect to Borrower, a servicer of the Pledged Mortgage Loans, any other Person or the Pledged Mortgage Loans themselves. All references herein or in any Loan Document to “good faith” means good faith as defined in Section 1-201(19) of the Uniform Commercial Code.

 

ARTICLE 2
AMOUNT AND TERMS OF THE ADVANCE

 

2.1 Agreement to Make the Advance . Subject to the terms and conditions of this Agreement and provided that no Event of Default or Potential Default has occurred and is continuing, contemporaneous with, or subsequent to and in connection with Borrower’s acquisition of Eligible Mortgage Loans, and in order to facilitate the funding of such acquisition (including after such acquisition), Lender shall make certain loans (the “Advance” ) to Borrower; provided, however, that (a) the unpaid principal amount of the Advance as of any date of determination shall not exceed the lesser of (i) the Maximum Credit and (ii) the Collateral Value of the Pledged Mortgage Loans calculated as of such date of determination and (b) the unpaid principal amount of the Advance for any Type shall not exceed the applicable Type Sublimit. Lender shall have no obligation to enter into an Advance with an unpaid principal amount greater than the Maximum Credit or make any other loan other than the Advance. Amounts borrowed under this Section 2.1 and repaid or prepaid may not be reborrowed.

 

2.2 Note .

 

(a) The Advance made by Lender shall be evidenced by a single promissory note of Borrower substantially in the form of Exhibit B hereto (the “Note” ), dated as of the date hereof, payable to Lender in a principal amount not to exceed the Maximum Credit as originally in effect and otherwise duly completed. Lender shall have the right to have its Note subdivided, by exchange for promissory notes of lesser denominations or otherwise.

 

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

  

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2.3 Advance Limits . The Maximum Credit and each Type Sublimit shall be as set forth in the Loan Terms Letter.

 

2.4 Description of Pledged Mortgage Loans . With respect to the Advance, Borrower shall cause to be maintained with Lender the Pledged Mortgage Loans, which shall have a Collateral Value not less than, at any date, the outstanding principal amount of the Advance. With respect to the Advance, the type of Pledged Mortgage Loans shall be the Type as specified in the Loan Terms Letter as the Type. If there is uncertainty as to the Type of a Pledged Mortgage Loan, Lender shall determine the correct Type for such Pledged Mortgage Loan.

 

2.5 Use of Proceeds . Borrower shall use the Advance solely for the purpose of acquiring and holding the Eligible Mortgage Loans from Lender (including after the acquisition thereof).

 

2.6 Interest .

 

(a) Interest . Borrower shall pay Lender interest on the unpaid principal amount of the Advance ( “Accrued Interest” ) for the period from and including the Advance Date to but excluding the date such Advance shall be paid in full, at a rate per annum equal to the sum of the Applicable Interest Rate plus the applicable Type Margin. Notwithstanding the foregoing, Borrower shall pay to Lender Accrued Interest at a rate per annum equal to the Default Rate (i) on any principal amount of the Advance and on any other amount payable by Borrower hereunder or under the Note that shall not be paid in full when due (whether at stated maturity, by acceleration or by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full, and (ii) following the occurrence and during the continuance of an Event of Default, which interest shall accrue daily and shall be payable promptly upon receipt of invoice. Promptly after the determination of any interest rate provided for herein or any change therein, Lender shall give written notice thereof to Borrower. Accrued Interest will be calculated in accordance with this Section 2.6 .

 

(b) Time for Payment . Accrued Interest with respect to the Advance shall be due and payable monthly in arrears on the Payment Date occurring in the month following the Advance Date and thereafter on each subsequent Payment Date and on the Maturity Date.

 

(c) Computations . All computations of interest and fees payable hereunder shall be based upon the actual number of days (including the first day but excluding the last day) occurring in the relevant period, and a three-hundred sixty (360) day year.

 

2.7 Terms and Conditions of Advance . The terms and conditions of the Advance as set forth in the Loan Terms Letter, this Agreement, the Note or otherwise may be changed from time to time by written agreement of Lender and Borrower. The terms and conditions of the Loan Terms Letter are hereby incorporated and form a part of this Agreement as if fully set forth herein; provided however , to the extent of any conflict between the terms of this Agreement and the terms of the Loan Terms Letter, the Loan Terms Letter shall control.

 

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ARTICLE 3
PROCEDURES FOR MAKING THE ADVANCE

 

3.1 Policies and Procedures . In connection with the Advance contemplated hereunder, Borrower shall comply with all applicable policies and procedures of Lender as may currently exist or as hereafter created. Such policies and procedures may be in writing, published on Lender’s website(s) or otherwise contained in the Handbook. Lender shall have the right to change, revise, amend or supplement its policies and procedures and the Handbook from time to time to conform to current legal requirements or Lender practices by giving prior notice to Borrower of such changes, revisions, amendments or supplements. To the extent of any conflict between the terms of this Agreement and the terms of the Handbook, this Agreement shall control.

 

3.2 Request for Advance . To the extent not otherwise agreed to by the parties, Borrower shall request that Lender make the Advance by delivering written notice of such request to Lender, no later than 4:00 p.m. (New York City time) on the Business Day prior to the requested Advance Date, which written notice will also approve the Asset Data Record for each Mortgage Loan intended to be the subject of the Advance. Assuming the satisfaction of all conditions precedent set forth in Article 7 and as otherwise set forth in this Agreement, Lender shall confirm to Borrower the terms of the Advance electronically or in writing. Lender reserves the right to reject the Advance request if Lender determines it fails to comply with the terms and conditions of this Agreement or Lender’s then current policies and procedures.

 

3.3 Delivery of Mortgage Loan Documents .

 

(a) Mortgage Loans . Prior to the Advance, Borrower shall deliver, or cause to be delivered, the related Mortgage Loan Documents to Lender or its Custodian in accordance with and pursuant to the terms of Section 7.1 hereof and the Custodial Agreement (if any).

 

(b) Mortgage Loan Documents in Borrower’s Possession . At all times during which the Mortgage Loan Documents related to any Pledged Mortgage Loan are in the possession of Borrower, and until Lender releases its security interest in such Pledged Mortgage Loan, Borrower shall hold such Mortgage Loan Documents in trust separate and apart from Borrower’s own documents and assets and for the exclusive benefit of Lender and shall act only in accordance with Lender’s written instructions thereto.

 

3.4 Payment of Advance . On the Advance Date, Lender shall make the Advance by wire transfer in accordance with Borrower’s wire instructions set forth on Exhibit G (or such other wire instructions as directed by Borrower in writing). Any funds disbursed by Lender to Borrower shall be subject to all applicable federal, state and local laws, including, without limitation, regulations and policies of the Board of Governors of the Federal Reserve System on Reduction of Payments System Risk. Borrower acknowledges that as a result of such applicable laws, regulations and policies, equipment malfunction, Lender’s approval procedures or circumstances beyond the reasonable control of Lender, the payment of an Advance may be delayed.

 

ARTICLE 4
REPAYMENT; PREPAYMENTS

 

4.1 Repayment .

 

(a) Repayment of Advance . Borrower shall repay in full the then outstanding principal amount of the Advance (as evidenced by the Note) all unpaid Accrued Interest and all other Secured Obligations then due and owing by wire transfer in accordance with Lender’s wire instructions set forth on Exhibit G (or such other wire instructions as directed by Lender in writing) on the Termination Date. Upon the occurrence of a Mandatory Prepayment Event with respect to a Pledged Mortgage Loan, Borrower shall remit to Lender the Release Amount for such Pledged Mortgage Loan.

 

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(b) Effect of Payment of Repayment of the Advance . On any such date of repayment in full of the Advance (or allocable portion thereof) and all other Secured Obligations then due and owing as set forth in Section 4.1 of this Agreement, Lender shall have released all of its rights, title and interests in the Pledged Mortgage Loans (or the applicable Pledged Mortgage Loans, as the case may be); provided that , in no event shall Lender be deemed to have released any such rights, title or interests if an Event of Default shall then be continuing or shall be caused by such release or if such release gives rise to or perpetuates a Borrowing Base Deficiency that is not satisfied in accordance with Section 6.11(b) . Borrower is obligated to obtain the related Mortgage Loan Documents from the Custodian at Borrower’s expense on the date of any such release.

 

(c) Partial Prepayment Due to Borrowing Base Deficiency . In the event the Collateral Value of any Pledged Mortgage Loan is marked to zero and Borrower requests Lender to release its security interest in such Pledged Mortgage Loan or any Collateral related thereto, Lender shall not release any such security interest therein unless and until Borrower shall have repaid to Lender the Release Amount for such Pledged Mortgage Loan.

 

4.2 Mandatory Prepayment Events . The occurrence of any of the following events shall be a Mandatory Prepayment Event with respect to one or more Pledged Mortgage Loans, as the case may be:

 

(a) thirty (30) calendar days elapse from the date the related Mortgage Loan Documents were delivered to an Approved Investor and such Approved Investor has not returned such Mortgage Loan Documents or purchased such Pledged Mortgage Loan, unless an extension is granted by Lender;

 

(b) ten (10) Business Days elapse from the date a related Mortgage Loan Document was delivered to Borrower for correction or completion or for servicing purposes, without being returned to Lender or its designee, unless such Mortgage Loan Document is released to a Servicer pursuant to Section 6.12(b) of this Agreement;

 

(c) a foreclosure or similar type of proceeding is initiated with respect to such Pledged Mortgage Loan;

 

(d) the sale of such Pledged Mortgage Loan by Borrower to any party other than an Approved Investor; or

 

(e) the Custodian ceases to hold the related Mortgage Loan File and all Mortgage Loan Documents in respect thereof for the sole and exclusive benefit of Lender at any time, subject to any releases permitted under the terms of the Custodial Agreement.

 

4.3 Optional Prepayments . Borrower may prepay the Advance, in whole or in part, on any date that such Advance is outstanding, and such prepayment shall be without premium or penalty, and in the case of a partial prepayment shall specify the Pledged Mortgage Loans to be released in connection therewith. Notwithstanding the foregoing, in no event shall Borrower use selection procedures in connection with any such optional prepayment which identifies released Pledged Mortgage Loans as being more desirable or valuable than the Pledged Mortgage Loans that will continue to be subject to the Advance. Any amounts prepaid shall be applied to repay the outstanding principal amount of the Advance (together with any unpaid Accrued Interest thereon) until paid in full. Amounts repaid may not be reborrowed hereunder.

 

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4.4 Illegality or Impracticability . Notwithstanding anything to the contrary in this Agreement, if Lender determines that any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof, or any circumstance materially and adversely affecting the London interbank market, the finance market for mortgage loans or mortgage-backed securities market or the source or cost of Lender’s funds, shall make it:

 

(a) unlawful for Lender to enter into or maintain the Advance as contemplated by this Agreement, (i) the commitment of Lender hereunder to enter into or to continue to maintain the Advance shall be cancelled and (ii) the principal amount together with all unpaid Accrued Interest and all other Secured Obligations in respect of the Advance then outstanding shall be due and payable upon the earlier to occur of (x) the date required by any financial institution providing funds to Lender to fund Pledged Mortgage Loans and (y) the date as of which Lender determines that the Advance is unlawful to maintain; or

 

(b) commercially unreasonable for Lender to enter into or maintain the Advance as contemplated by this Agreement, (i) the commitment of Lender hereunder to enter into or to continue to maintain the Advance shall be cancelled and (ii) the principal amount together with all unpaid Accrued Interest and all other Secured Obligations in respect of the Advance then outstanding shall be due and payable upon the earlier to occur of (x) the date required by any financial institution providing funds to Lender and (y) the date as of which Lender determines that the Advance is commercially unreasonable to maintain.

 

Lender shall not be liable to Borrower for any costs, losses or damages arising from or relating from any actions taken by Lender pursuant to this Section 4.4 .

 

4.5 Increased Costs .

 

(a) Notwithstanding anything to the contrary in this Agreement, if Lender determines that any change in any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority or any change in the interpretation or application thereof or compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof (i) subjects Lender to any tax of any kind whatsoever with respect to this Agreement or any Pledged Mortgage Loans (excluding Net Income taxes) or changes the basis of taxation of payments to Lender in respect thereof, (ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory advance or similar requirement against assets held by deposits or other liabilities in or for the account of the Advance or extensions of credit by, or any other acquisition of funds by any office of Lender which is not otherwise included in the determination of the Applicable Interest Rate hereunder, or (iii) imposes on Lender any other condition, the result of which is to increase the cost to Lender, by an amount which Lender deems to be material, of effecting or maintaining the Advance hereunder, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, Borrower shall promptly pay Lender such additional amount or amounts as will compensate Lender for such increased cost or reduced amount receivable thereafter incurred.
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(b) If Lender has determined that the adoption of or any change in any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority regarding capital adequacy or in the interpretation or application thereof or compliance by Lender or any corporation that provides capital or funds to Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof has the effect of reducing the rate of return on Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Lender or such corporation but for such adoption, change or compliance (taking into consideration Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Lender to be material, then from time to time, Borrower shall promptly pay to Lender such additional amount or amounts as will thereafter compensate Lender for such reduction.

 

If Lender becomes entitled to claim any additional amounts pursuant to this Section 4.5 , it shall promptly notify Borrower of the event by reason of which it has become so entitled. Lender shall provide Borrower with written notice as to any additional amounts payable pursuant to this subsection, which notice shall be conclusive in the absence of manifest error.

 

4.6 Payments Pursuant to Sale to Approved Investors . Borrower shall direct each Approved Investor purchasing a Pledged Mortgage Loan to pay directly to Lender, by wire transfer of immediately available funds, the applicable Takeout Price in full and without set-off on the date of such purchase. Borrower shall provide Lender with a Wire Transfer Advice relating to such payment. Lender shall apply all amounts received from an Approved Investor for the account of Borrower in accordance with Section 4.7 below. In connection with any such sale, to the extent that (a) Lender does not receive the full Takeout Price in respect of the related Pledged Mortgage Loans, or (b) the amount received is not sufficient to pay the Release Amount for such Pledged Mortgage Loans (in each case, the “ Takeout Shortfall ” ), Lender shall not release the related Pledged Mortgage Loans until Lender has received from Borrower a wire transfer of immediately available funds in an amount equal to the Takeout Shortfall without set-off. If Borrower receives any funds intended for Lender, Borrower shall segregate and hold such funds in trust for Lender and immediately pay to Lender all such amounts by wire transfer of immediately available funds together with providing Lender with a settlement statement for the transaction.

 

4.7 Application of Payments from Borrower or Approved Investors . Unless Lender determines otherwise, payments made directly by Borrower or an Approved Investor to Lender shall be applied in the following order of priority:

 

(a) first , to any amounts due and owing to Lender pursuant to Section 6.11 ;

 

(b) second , to all costs, expenses and fees incurred or charged by Lender under this Agreement that are due and owing and related to the Advance;

 

(c) third , to all costs, expenses and fees incurred or charged by Lender under this Agreement that are due and owing and not related to the Advance;

 

(d) fourth , to the Accrued Interest then due and owing on the Pledged Mortgage Loans in connection with which the payment is made;

 

(e) fifth , to the Accrued Interest then due and owing on any other Pledged Mortgage Loans;

 

(f) sixth , to the outstanding principal amount of the Advance allocable to the Pledged Mortgage Loans, pro rata based upon the Release Amount of the Pledged Mortgage Loans as of the applicable date of determination in connection with which the payment is made;
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(g) seventh , to the outstanding principal amount of the Advance allocable to any other Pledged Mortgage Loans, pro rata based upon the Release Amount of such other Pledged Mortgage Loans as of the applicable date of determination; and

 

(h) eighth , to the amount of all other obligations then due and owing by Borrower to Lender under this Agreement and the other Loan Documents.

 

4.8 Method of Payment . Except as otherwise specifically provided herein, all payments hereunder must be received by Lender on the date when due and shall be made in United States dollars by wire transfer of immediately available funds in accordance with Lender’s wire instructions set forth on Exhibit G . Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day. All payments made by or on behalf of Borrower with respect to the Advance shall be applied to Borrower’s account in accordance with Section 4.7 above and shall be made in such amounts as may be necessary in order that all such payments after withholding for or on account of any present or future taxes, levies, imports, duties or other similar charges of whatsoever nature imposed by any government or any political subdivision or taxing authority hereof, other than any taxes on or measured by the Net Income of Lender pursuant to the state, federal and local tax laws of the jurisdiction where Lender’s principal office or offices or lending office or offices are located, compensate Lender for any additional cost or reduced amount receivable of making or maintaining the Advance as a result of such taxes, imports, duties or other charges. All payments to be made by or on behalf of Borrower with respect to the Advance shall be made without set-off, counterclaim or other defense.

 

4.9 Reserved .

 

4.10 Book Account . Lender and Borrower shall maintain an account on their respective books of the Advance entered into between Lender and Borrower. As a courtesy to Borrower, Lender shall provide such information to Borrower upon request by electronic mail, telephone or facsimile. Notwithstanding the foregoing, Borrower shall be responsible for maintaining its own book account and records of the Advance entered into with Lender, amounts due to Lender in connection with the Advance and for paying such amounts when due. Failure of Lender to provide Borrower with information regarding the Advance shall not excuse Borrower’s timely performance of all obligations under this Agreement, including, without limitation, payment obligations under this Agreement.

 

4.11 Full Recourse . Notwithstanding the fact that the Note is secured by the Collateral, the obligations of Borrower from time to time to make payments under the Note, satisfy Borrowing Base Deficiencies and pay all other amounts due under this Agreement shall be full recourse obligations of Borrower.

 

ARTICLE 5
FEES

 

5.1 Payment of Fees . Borrower shall pay to Lender those fees set forth in this Agreement when they become due and owing.

 

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ARTICLE 6
COLLATERAL SECURITY; SERVICING; BORROWING BASE MAINTENANCE; CUSTODY OF MORTGAGE LOAN DOCUMENTS

 

6.1 Grant of Security Interest in Pledged Mortgage Loans and Collateral . Each of the following items or types of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the “ Collateral ”:

 

(a) all Pledged Mortgage Loans, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans and the related Mortgage Loan Documents, securing the Advance and all Mortgage Loans, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans and the related Mortgage Loan Documents, which, from time to time, are delivered, or caused to be delivered, to Lender (including delivery to a custodian or other third party on behalf of Lender) as additional security for the performance of Borrower’s obligations hereunder or under the Note;

 

(b) all Income related to the Pledged Mortgage Loans and all rights to receive such Income;

 

(c) the Custodial Account and all amounts on deposit therein;

 

(d) all rights of Borrower under all related purchase commitments (including the right to receive the related Takeout Price), purchase agreements or other hedging arrangements relating to or covering all or any portion of the Pledged Mortgage Loans, agreements, contracts or take-out commitments relating to or constituting any or all of the foregoing, now existing and hereafter arising, covering any part of the Pledged Mortgage Loans, and all rights to receive documentation relating thereto, and all rights to deliver Pledged Mortgage Loans to permanent investors and other purchasers pursuant thereto and all Proceeds resulting from the disposition of such Pledged Mortgage Loans;

 

(e) all now existing and hereafter established accounts maintained with broker-dealers by Borrower for the purpose of carrying out transactions under purchase commitments relating to any part of the Pledged Mortgage Loans to the extent of the funds or other assets applied to the acquisition of Pledged Mortgage Loans ;

 

(f) all now existing and hereafter arising rights of Borrower to service, administer and/or collect on the Pledged Mortgage Loans hereunder and any and all rights to the payment of monies on account thereof;

 

(g) with respect to any Pledged Mortgage Loan, all Servicing Rights related to such Pledged Mortgage Loans, all related Servicing Records, and all rights of Borrower to receive from any third party or to take delivery of any Servicing Records or other documents or records which constitute a part of the Mortgage Loan Files;

 

(h) all rights of Borrower to receive from any third party or to take delivery of any records or other documents which constitute a part of the Mortgage Loan Files, including, without limitation, the Other Mortgage Loan Documents related to any Pledged Mortgage Loan;

 

(i) all now existing and hereafter arising accounts, contract rights and general intangibles constituting or relating to any of the Pledged Mortgage Loans;

 

(j) all mortgage and other insurance and all commitments issued by Insurers, to insure or guaranty any Pledged Mortgage Loan and the right to receive all insurance proceeds and condemnation awards that may be payable in respect of the premises encumbered by any Mortgage; and all other documents or instruments delivered to Lender in respect of the Pledged Mortgage Loans;
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(k) all documents, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data of Borrower relating to Pledged Mortgage Loans;

 

(l) all rights, but not any obligations or liabilities, of Borrower relating to Pledged Mortgage Loans with respect to the Approved Investors;

 

(m) all property of Borrower comprising Proceeds of the Pledged Mortgage Loans in any form or capacity now or at any time hereafter in the possession or control of Lender, including, without limitation, all deposit accounts and any funds at any time held therein, into which Proceeds of the Pledged Mortgage Loans are at any time deposited; and

 

(n) all Proceeds of the Pledged Mortgage Loans.

 

Borrower hereby assigns, pledges and grants a security interest to the Lender in all of its right, title and interest in, to and under all the Collateral, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to secure the repayment of principal of and interest on the Advance and all other amounts owing to the Lender hereunder, under the Note and under the other Loan Documents (collectively, the “ Secured Obligations ”). Possession of any promissory notes, instruments or documents by the Custodian shall constitute possession on behalf of Lender. Borrower agrees to mark its computer records and tapes to evidence the security interests granted to the Lender hereunder.

 

6.2 Further Documentation . At any time and from time to time, upon the written request of Lender, and at the sole expense of Borrower, Borrower will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as Lender may request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Pledged Mortgage Loans and related Collateral and the liens created hereby. Borrower also hereby authorizes Lender to file any such financing or continuation statement in a manner consistent with this Agreement to the extent permitted by applicable law. For purposes of the Uniform Commercial Code and all other relevant purposes, this Agreement shall constitute a security agreement.

 

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

 

(a) Borrower hereby irrevocably constitutes and appoints Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Borrower and in the name of Borrower or in its own name, from time to time, if an Event of Default shall have occurred and be continuing, in Lender’s discretion, for the purpose of carrying out the terms of this Agreement, including without limitation, protecting, preserving and realizing upon the Collateral, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including without limitation, to protect, preserve and realize upon the Collateral, and, without limiting the generality of the foregoing, Borrower hereby gives Lender the power and right, on behalf of Borrower, without assent by, but with notice to, Borrower, if an Event of Default shall have occurred and be continuing, to do the following:
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(i) in the name of Borrower or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any mortgage insurance or with respect to any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Lender for the purpose of collecting any and all such moneys due under any such mortgage insurance or with respect to any other Collateral whenever payable;

 

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

 

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

 

Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable during the term of this Agreement.

 

(b) Borrower also authorizes Lender, at any time and from time to time, to execute, in connection with the sale provided for in Section 11.2 of this Agreement, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

 

(c) The powers conferred on Lender are solely to protect Lender’s interests in the Collateral and shall not impose any duty upon Lender to exercise any such powers. Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither Lender nor any of its officers, directors, or employees shall be responsible to Borrower for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.
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6.4 Performance by Lender of Borrower’s Obligations . If Borrower fails to perform or comply with any of its material agreements contained in the Loan Documents and Lender may itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable out-of-pocket expenses of Lender incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Default Rate, shall be payable by Borrower to Lender on demand and shall constitute Secured Obligations.

 

6.5 Proceeds . If an Event of Default shall occur and be continuing, (a) Borrower shall redirect all proceeds of Collateral to be delivered to Lender directly, but if any such proceeds are otherwise received by Borrower consisting of cash, checks and other near-cash items, such proceeds shall be held by Borrower in trust for Lender, segregated from other funds of Borrower, and shall forthwith upon receipt by such Borrower be turned over to Lender in the exact form received by Borrower (duly endorsed by Borrower to Lender, if required) and (b) any and all such proceeds received by Lender will be applied by Lender against, the Secured Obligations (whether matured or unmatured), such application to be in such order as Lender shall elect. Any balance of such proceeds remaining after the Secured Obligations shall have been paid in full and this Agreement shall have been terminated shall be promptly paid over to Borrower or to whomsoever may be lawfully entitled to receive the same. For purposes hereof, “proceeds” shall include, but not be limited to, all principal and interest payments, all prepayments and payoffs, insurance claims, condemnation awards, sale proceeds, real estate owned rents and any other Income and all other amounts received with respect to the Collateral.

 

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

 

6.7 Powers Coupled with an Interest . All authorizations and agencies herein contained with respect to the Collateral are irrevocable during the term of this Agreement, and are powers coupled with an interest.

 

6.8 Release of Security Interest . Upon termination of this Agreement and repayment to Lender of all Secured Obligations and the performance of all obligations under the Loan Documents Lender shall release its security interest in any remaining Collateral and all powers of attorney, agencies and authorizations herein contained or delivered hereby shall terminate; provided, that if any payment, or any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or a trustee or similar officer for Borrower or any substantial part of its property, or otherwise, this Agreement, all rights hereunder and the Liens created, and all powers of attorney, agencies and authorizations contained or delivered, hereby shall continue to be effective, or be reinstated, until such payments have been made.

 

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6.9 Servicing .

 

(a) Servicing of Pledged Mortgage Loans . The Borrower has engaged Bank of America, N.A. and New Penn Financial, LLC to subservice the Pledged Mortgage Loans pursuant to certain subservicing agreements between the Borrower and Bank of America, N.A. and New Penn Financial, LLC, respectively. On or about August 30, 2014 (or such other date as mutually agreed upon between Bank of America, N.A. and Borrower (the “ Servicing Transfer Date ”), Bank of America, N.A. and New Penn Financial, LLC shall transfer such subservicing responsibilities to PHH Mortgage Corporation. The Borrower and Lender hereby acknowledge that the servicing rights with respect to certain Pledged Mortgage Loans (which shall not include those Pledged Mortgage Loans for which PHH Mortgage Corporation acts as a subservicer) are owned by PHH Mortgage Corporation pursuant to that certain Mortgage Loan Flow Purchase, Sale & Servicing Agreement, dated as of October 1, 2010, between PHH Mortgage Corporation and Borrower.

 

(b) Security Interest . During the term of this Agreement, Borrower (i) agrees that Lender has a first priority perfected security interest in all Servicing Records to the extent owned by Borrower, and (ii) grants to Lender a security interest in all servicing fees and rights relating to the Pledged Mortgage Loans and all Servicing Records to secure the obligation of Borrower or its designee to service in conformity with this Section and any other obligation of Borrower to Lender. To the extent Borrower obtains possession of any portion of the Servicing Records it owns, Borrower covenants to safeguard such Servicing Records and deliver them promptly to Lender or its designee (including Custodian) at Lender’s request.

 

(c) Servicing Agreement . Borrower shall enter into a Servicing Agreement with each Servicer, which such Servicing Agreement shall be on terms acceptable to Lender in its discretion, and which shall include (either in the Servicing Agreement or a Servicing Agreement Side Letter thereto), at a minimum (unless otherwise acceptable to Lender in its discretion), (i) a recognition by the Servicer of Lender’s interests and rights to the Pledged Mortgage Loans as provided under this Agreement; (ii) an obligation for the Servicer to subservice the Pledged Mortgage Loans consistent with the degree of skill and care that the Servicer customarily requires with respect to similar Mortgage Loans owned or managed by it but in no event no less than in accordance with Accepted Servicing Practices; (iii) an obligation to comply with all applicable federal, state and local laws and regulations; (iv) an obligation to maintain all state and federal licenses necessary for it to perform its subservicing responsibilities and (v) an obligation to collect all Income in respect of the Pledged Mortgage Loans on behalf of Lender, in trust, in segregated custodial accounts and remit such Income to the Custodial Account within two (2) Business Days of receipt.

 

(d) Servicing Agreement Side Letter . On or prior to the Servicing Transfer Date, Borrower, Lender and each Servicer shall enter into a Servicing Agreement Side Letter, in such form that is acceptable to Lender that, at a minimum, includes (a) an agreement by such Servicer to remit all collections it receives in respect of the Pledged Mortgage Loans directly to the Custodial Account, and (b) an agreement by such Servicer to comply exclusively with Lender’s instructions with respect to the Pledged Mortgage Loans and collections thereon upon receipt of a notice that an Event of Default has occurred.

 

(e) Notification of Servicer Defaults . If Borrower should discover that, for any reason whatsoever, any entity responsible to Borrower by contract for managing or servicing any Pledged Mortgage Loan has failed to perform fully any obligations with respect to the management or servicing of such Pledged Mortgage Loans as required under this Agreement or any of the obligations of such entities with respect to the Pledged Mortgage Loan as delegated pursuant to any Servicing Agreement, Borrower shall promptly notify Lender in writing.
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(f) Release of Mortgage Loan Files . Borrower shall release its custody of the contents of any Mortgage Loan File only in accordance with the written instructions of Lender, except when such release is required by law.

 

6.10 Custodial Account .

 

(a) Custodial Account . Borrower shall establish and maintain a segregated time or demand deposit account for the benefit of Lender (the “ Custodial Account ”) with an Eligible Bank. Borrower shall promptly deposit (but in no event later than twenty-four (24) hours after receipt thereof), and cause Servicer to promptly deposit (but in no event later two (2) Business Days of receipt after receipt thereof), into the Custodial Account all Income received with respect to each Pledged Mortgage Loan pledged hereunder. Under no circumstances shall Borrower deposit any of its own funds into the Custodial Account or otherwise commingle its own funds with funds belonging to Lender as owner of any Pledged Mortgage Loan. If Borrower fails to segregate any funds and commingles them with any source in breach of this Agreement, Borrower agrees that its share of the commingled funds are assumed to have been spent first with any remaining balance to be deemed to belong to Lender.

 

(b) Security Interest in Custodial Account . Borrower hereby grants to Lender a continuing first priority security interest in all right, title, and interest in and to the Custodial Account and all amounts on deposit therein.

 

(c) Income Payments . Any Income received with respect to a Pledged Mortgage Loan pledged hereunder shall be segregated as described above and shall be applied by Lender on the eighteenth (18th) day of each month, or if such date is not a Business Day, the next succeeding Business Day of the month, as follows:

 

(i) first , to pay to Lender an amount equal to the Accrued Interest with respect to the related Pledged Mortgage Loans;

 

(ii) second , to pay to Lender an amount sufficient to eliminate any outstanding Borrowing Base Deficiency with respect to the Pledged Mortgage Loans (without limiting Borrower’s obligation to satisfy a Borrowing Base Deficiency in a timely manner as required by Section 6.11(b) );

 

(iii) third , to pay to Lender an amount equal to all other fees, expenses and indemnity amounts due and payable by Borrower to Lender under the Loan Documents and allocable to the related Pledged Mortgage Loans;

 

(iv) fourth , to the outstanding principal amount of the Release Amount for the Pledged Mortgage Loans in connection with which such Income payment is made; and

 

(v) fifth , any remaining amounts for the benefit of Borrower.

 

(e) Location of Custodial Account . The Custodial Account shall remain at Lender at all times during the term of this Agreement. Borrower shall from time to time, at its own cost and expense, execute such directions to the depository Eligible Bank, and other papers, documents or instruments as may be reasonably requested by Lender to reflect Lender’s security interest in the Custodial Account.

 

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6.11 Borrowing Base Maintenance .

 

(a) Collateral Value . Lender shall have the right to determine the Collateral Value of each Pledged Mortgage Loan on a daily basis or more frequently in the sole discretion of Lender.

 

(b) Borrowing Base Deficiency and Deficiency Notices . If Lender shall determine at any time that (x) the Collateral Value of a Pledged Mortgage Loan subject to the Advance is less than the Collateral Value for such Pledged Mortgage Loan as calculated on the Advance Date (less any cash or other amounts previously applied to reduce the Release Amount for such Pledged Mortgage Loan) or (y) the aggregate Collateral Value of all Pledged Mortgage Loans subject to the Advance is less than the aggregate Collateral Value for such Pledged Mortgage Loans as calculated on the Advance Date (less any cash or other amounts previously applied to reduce the Advance) (in any such case, a “ Borrowing Base Deficiency ”), then Lender may, at its sole option and by notice to Borrower (as such notice is more particularly set forth below, a “ Deficiency Notice ”), require Borrower to repay the Advance in an amount sufficient to eliminate the Borrowing Base Deficiency in full.

 

If Lender delivers a Deficiency Notice to Borrower on or prior to 12:00 p.m. (New York City time) on any Business Day, then Borrower shall transfer cash, to Lender no later than 5:00 p.m. (New York City time) that same day. If Lender delivers a Deficiency Notice to Borrower after 12:00 p.m. (New York City time) on any Business Day, Borrower shall be required to transfer cash no later than 5:00 p.m. (New York City time) on the next subsequent Business Day. A Deficiency Notice may be provided by Lender to Borrower electronically or in writing, such as via electronic mail.

 

(c) Lender’s Discretion . Lender’s election not to deliver a Deficiency Notice at any time there is a Borrowing Base Deficiency shall not in any way limit or impair its right to deliver a Deficiency Notice at any time a Borrowing Base Deficiency exists.

 

(d) Credit to Advance . Any cash transferred to Lender pursuant to this Section 6.11 shall be used to reduce the amount outstanding on the Note in respect of the Advance.

 

6.12 Custody of Mortgage Loan Documents .

 

(a) Custodial Arrangements . With respect to Pledged Mortgage Loans, Lender may appoint any Person to act as the Custodian to hold possession of the Mortgage Loan Documents and to take actions at the direction of Lender. If any Person other than Lender is appointed as Custodian, it shall be a condition precedent to Lender entering into the Advance hereunder that Borrower, Lender and Custodian enter into a Custodial Agreement acceptable to Lender. Borrower hereby consents to any and all such appointments and agrees to deliver the Mortgage Loan Documents to the Custodian upon the direction of Lender. Borrower further agrees that (i) the Custodian shall be exclusively the agent, bailee and/or custodian of Lender; (ii) receipt of the Mortgage Loan Documents by the Custodian shall be constructive receipt by Lender of such documents; (iii) Borrower shall not have and shall not attempt to exercise any degree of control over the Custodian or any Mortgage Loan Document held by the Custodian; and (iv) Lender shall not be liable for any act or omission by the Custodian selected by Lender with reasonable care.

 

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(b) Temporary Withdrawal of Mortgage Loan Documents for Correction . Lender may permit Borrower or Servicer to obtain from the Custodian, for a period not to exceed ten (10) Business Days in the case of Borrower, specified Mortgage Loan Documents for the purpose of correcting or completing such documents or servicing the related Pledged Mortgage Loan; provided , however , that unless otherwise agreed to by Lender in writing, in no event shall more than ten (10) Mortgage Loan Files (or Mortgage Loan Documents from more than ten (10) Mortgage Loan Files) be released from Custodian’s possession at any one time; provided further , that any Mortgage Loan Documents that are withdrawn by or at the request of Borrower (and delivered to a Person other than Borrower) or a Servicer, shall at all times be covered by one or more Bailee Agreements, true and complete and fully executed copies of which shall be delivered to Lender. Notwithstanding the foregoing, Lender shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.12(b) , and the interest of Lender in the related Pledged Mortgage Loan shall continue unimpaired until the Mortgage Loan Documents are returned to, or the Release Amount for such Pledged Mortgage Loan, is received by, Lender.

 

(c) Delivery of Mortgage Loan Documents to Approved Investors . Provided that no Potential Default or Event of Default has occurred and is continuing, upon the written request of Borrower, Lender may, at its option, deliver to an Approved Investor or its custodian, the Mortgage Loan Documents relating to a specified Pledged Mortgage Loan. All such Pledged Mortgage Loans and the related Mortgage Loan Documents shall at all times be covered by one or more Bailee Agreements, and Lender or its designee will not release Mortgage Loan Documents to an Approved Investor unless Lender or its Custodian has received a true and complete and fully executed Bailee Agreement from the Approved Investor. Notwithstanding the foregoing, Lender shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.12(c) , and the interest of Lender in the related Pledged Mortgage Loan shall continue unimpaired until the Mortgage Loan Documents are returned to, or the Release Amount for such Pledged Mortgage Loan is received by, Lender. If the Approved Investor does not purchase a Pledged Mortgage Loan, Borrower shall, upon the request of Lender, assist Lender in the recovery of any Mortgage Loan Documents not returned by the Approved Investor to Lender.

 

6.13 Release of Pledged Mortgage Loans . Provided that no Event of Default or Potential Default has occurred and is continuing, Borrower may request that Lender release a Pledged Mortgage Loan by paying, or causing an Approved Investor to pay, to Lender, subject to Sections 4.6 and 4.7 above, the Release Amount for such Pledged Mortgage Loan. Upon receipt of the applicable amount, as set forth above, Lender shall, deliver or shall cause the Custodian to deliver the related Mortgage Loan Documents to Borrower or Borrower’s designee, if such documents have not already been delivered pursuant to a Bailee Agreement. If any such release gives rise to or perpetuates a Borrowing Base Deficiency, Lender shall notify Borrower of the amount thereof and Borrower shall thereupon satisfy the Borrowing Base Deficiency in the manner specified in Section 6.11(b) . Lender shall have no obligation to release a Pledged Mortgage Loan or terminate its security interest in such Pledged Mortgage Loan until such Borrowing Base Deficiency is satisfied.

 

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ARTICLE 7
CONDITIONS PRECEDENT

 

7.1 Advance . As conditions precedent to Lender making the Advance hereunder:

 

(a) Borrower shall have delivered to Lender, in form and substance satisfactory to Lender:

 

(i) the fully executed original Note;

 

(ii) each of the Loan Documents duly executed by each party thereto and in full force and effect, free of any modification, breach or waiver;

 

(iii) an opinion of Borrower’s and Guarantor’s counsel as to such matters as Lender may reasonably request, including, without limitation, with respect to Lender’s first priority lien on and perfected security interest in the Pledged Mortgage Loans and Collateral; a non-contravention, enforceability and corporate opinion with respect to Borrower and Guarantor, if any; an opinion with respect to the inapplicability of the Investment Company Act of 1940 to Borrower and Guarantor, each in form and substance acceptable to Lender;

 

(iv) a Power of Attorney duly executed by Borrower and notarized;

 

(v) a certified copy of articles or certificate of incorporation and bylaws of Borrower and any Guarantor (or corresponding organizational documents if such Person is not a corporation) and, if required by Lender, a certificate of good standing issued by the appropriate official in the jurisdiction of organization of Borrower and Guarantor, in each case, dated no less recently than fourteen (14) days prior to the Effective Date;

 

(vi) a certificate of the corporate secretary of Borrower and Guarantor, each substantially in the form of Exhibit C hereto, dated as of the Effective Date, as to the incumbency and authenticity of the signatures of the officers of Borrower and Guarantor executing the Loan Documents and the resolutions of the board of directors of Borrower and Guarantor (or its equivalent governing body or Person), substantially in the form of Exhibit D hereto;

 

(vii) independently audited financial statements of Borrower and Guarantor (and their Subsidiaries, on a consolidated basis) for each of the two (2) fiscal years most recently ended (if available), containing a balance sheet and related statements of income, stockholders’ equity and cash flows, all prepared in accordance with GAAP, applied on a basis consistent with prior periods, and otherwise acceptable to Lender, together with an auditor’s opinion that is unqualified or otherwise is consented to in writing by Lender;

 

(viii) if more than six (6) months has passed since the close of the most recently ended fiscal year, interim financial statements of Borrower and Guarantor covering the period from the first day of the current fiscal year to the last day of the most recently ended month;

 

(ix) financial statements of Borrower and Guarantor, signed by it, dated no less recently than three (3) months prior to the date of the Advance;

 

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(x) copies of Borrower’s and Guarantor’s errors and omissions insurance policy or mortgage impairment insurance policy and blanket bond coverage policy or certificates of insurance for such policies, all in form and content satisfactory to Lender, showing compliance by Borrower with Section 9.9 below;

 

(xi) any fees then due and owing hereunder or under any other Loan Document; and

 

(xii) such other documents as Lender or its counsel may reasonably request.

 

(b) Borrower shall have delivered, in form and substance satisfactory to Lender and not later than 4:00 p.m. (New York City time) on the date prior to the proposed Advance Date:

 

(i) to the Custodian, a complete Mortgage Loan File for each Mortgage Loan subject to the proposed Advance;

 

(ii) to Lender, such other documents pertaining to the Advance as Lender may reasonably request, from time to time;

 

(iii) to Lender, and Lender shall have received, satisfactory evidence, as determined by Lender, that the appropriate Uniform Commercial Code Financial Statements (UCC-1) and/or such other instruments as may be necessary in order to create in favor of Lender, a perfected first- priority security interest in the Pledged Mortgage Loans and related Collateral, and same shall have been duly executed, if applicable, and appropriately filed or recorded (or prepared for such filing or recordation) in each office of each jurisdiction in which such filings and recordations are required to perfect such first-priority security interest.

 

(c) No rescission notice and/or notice of right to cancel shall have been improperly delivered to the Mortgagor in respect of any Eligible Mortgage Loan, and the rescission period related to such Eligible Mortgage Loan shall have expired.

 

(d) The representations and warranties of Borrower set forth in Article 8 hereof shall be true and correct in all material respects as if made on and as of the date of the Advance. At the request of Lender, Lender shall have received an officer’s certificate signed by a responsible officer of Borrower certifying as to the truth and accuracy of same.

 

(e) If required by Lender, Borrower and Guarantor shall have performed all agreements to be performed by them hereunder and under the Guaranty, respectively, and after giving effect to the requested Advance, there shall exist no Event of Default or Potential Default hereunder.

 

(f) No Potential Default, Event of Default or Material Adverse Effect shall have occurred and be continuing.

 

7.2 Satisfaction of Conditions . The entering into of the Advance prior to or without the fulfillment by Borrower of all the conditions precedent thereto, whether or not known to Lender, shall not constitute a waiver by Lender of the requirements that all conditions, including the non- performed conditions, shall be required to be satisfied with respect to the Advance. All conditions precedent hereunder are imposed solely and exclusively for the benefit of Lender and may be freely waived or modified in whole or in part by Lender. Any waiver or modification asserted by Borrower to have been agreed by Lender must be in writing. Lender shall not be liable to Borrower for any costs, losses or damages arising from Lender’s determination that Borrower has not satisfactorily complied with any applicable condition precedent.

 

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ARTICLE 8
REPRESENTATIONS AND WARRANTIES

 

8.1 Representations and Warranties Concerning Borrower . Borrower represents and warrants to and covenants with Lender that the following representations and warranties are true and correct as of the Effective Date through and until the date on which all Secured Obligations of Borrower under this Agreement are fully satisfied.

 

(a) Due Formation and Good Standing . Borrower is (i) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has the full legal power and authority and has all governmental licenses, authorizations, consents and approvals, necessary to own its property and to carry on its business as currently conducted, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary.

 

(b) Authorization . The execution, delivery and performance by Borrower of the Loan Documents and all other documents and transactions contemplated thereby, are within Borrower’s corporate powers, have been duly authorized by all necessary corporate action and do not constitute or will not result in (i) a breach of any of the terms, conditions or provisions of Borrower’s articles or certificate of incorporation or bylaws (or corresponding organizational documents if Borrower is not a corporation); (ii) a material breach of any legal restriction or any agreement or instrument to which Borrower is now a party or by which it is bound; (iii) a material default or an acceleration under any of the foregoing; or (iv) the violation of any law, rule, regulation, order, judgment or decree to which Borrower or its property is subject.

 

(c) Enforceable Obligation . The Loan Documents and all other documents contemplated thereby constitute legal, binding and valid obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights.

 

(d) Approvals . The execution and delivery of the Loan Documents and all other documents contemplated thereby and the performance of Borrower’s obligations thereunder do not require any license, consent, approval, authorization or other action of any Governmental Authority or any other Person, or if required, such license, consent, approval, authorization or other action has been obtained prior to the Effective Date.

 

(e) Compliance with Laws . Borrower is not in violation of any of its articles or certificate of incorporation or bylaws (or corresponding organizational documents if Borrower is not a corporation), of any provision of any applicable law, or of any judgment, award, rule, regulation, order, decree, writ or injunction of any court or public regulatory body or authority that might have a Material Adverse Effect with respect to Borrower.

 

(f) Financial Condition . All financial statements of Borrower and Guarantor delivered to Lender fairly and accurately present the financial condition of the parties for whom such statements are submitted as of the date set forth therein. The financial statements of Borrower have been prepared in accordance with GAAP consistently applied throughout the periods involved, and there are no contingent liabilities not disclosed thereby that would adversely affect the financial condition of Borrower. Since the close of the period covered by the latest financial statement delivered to Lender with respect to Borrower, there has been no material adverse change in the assets, liabilities or financial condition of Borrower nor is Borrower aware of any facts that, with or without notice or lapse of time or both, would or could result in any such material adverse change. No event has occurred, including, without limitation, any litigation or administrative proceedings, and no condition exists or, to the knowledge of Borrower, is threatened, that (i) might render Borrower unable to perform its obligations under the Loan Documents and all other documents contemplated thereby; (ii) would constitute a Potential Default or Event of Default; or (iii) might have a Material Adverse Effect with respect to Borrower.

 

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(g) Credit Facilities . The only credit facilities, including repurchase agreements for mortgage loans and mortgage-backed securities, of Borrower that are presently in effect and are secured by mortgage loans or provide for the purchase, repurchase or early funding of mortgage loan sales, are with Persons disclosed to Lender at the time of application, or thereafter disclosed to Lender pursuant to Section 10.11 hereof.

 

(h) Title to Mortgage Loans . Borrower has good, valid, insurable (in the case of real property) and marketable title to all of its properties and other assets, whether real or personal, tangible or intangible, reflected on the financial statements delivered to Lender with respect to Borrower, except for such properties and other assets that have been disposed of in the ordinary course of business of Borrower’s mortgage banking business, and all such properties and other assets are free and clear of all liens except as disclosed in such financial statements.

 

(i) Litigation . There are no actions, claims, suits, investigations or proceedings pending, or to the knowledge of Borrower, threatened or reasonably anticipated against or affecting Borrower, Guarantor or any of their respective Subsidiaries or Affiliates or any of the property thereof in any court or before or by any arbitrator, government commission, board, bureau or other administrative agency that, if adversely determined, may reasonably be expected to result in a Material Adverse Effect.

 

(j) Payment of Taxes . Borrower has timely filed all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or its property or income that are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof. Any taxes, fees and other governmental charges payable by Borrower in connection with the Advance and the execution and delivery of the Loan Documents have been paid.

 

(k) No Defaults . Borrower is not in default under any indenture, mortgage, deed of trust, agreement or other instrument or contractual or legal obligation to which it is a party or by which it is bound in any respect that may reasonably be expected to result in a Material Adverse Effect.

 

(l) ERISA . Borrower is in compliance in all material respects with the requirements of ERISA and the Code, and no Reportable Event has occurred under any Plan maintained by Borrower. The present value of all accumulated benefit obligations under each Plan subject to Title IV of ERISA (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such Plans. Borrower and its Subsidiaries do not provide any material medical or health benefits to former employees other than as required by the Consolidated Omnibus Budget Reconciliation Act, as amended, or similar state or local law (collectively, “COBRA” ) at no cost to the employer. The assets of Borrower are not “plan assets” within the meaning of 29 CFR 2510.3-101 as modified by section 3(42) of ERISA.

 

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(m) Servicer . No Servicer is an Affiliate of Borrower or any Guarantor.

 

(n) True and Complete Disclosure . The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of Borrower or any of its Subsidiaries to Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or 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 Borrower or any of its Subsidiaries to Lender in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to Borrower that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Lender for use in connection with the transactions contemplated hereby or thereby.

 

(o) Ownership; Priority of Liens . Borrower owns all Mortgage Loans identified in the Loan Terms Letter that are to become Pledged Mortgage Loans, and shall pledge all of Borrower’s right, title and interest in and to the related Pledged Mortgage Loans and other Collateral to Lender, including the Servicing Rights (to the extent owned by Borrower) related thereto. This Agreement creates in favor of Lender, a valid, enforceable first priority lien and security interest in the Pledged Mortgage Loans and other Collateral, prior to the rights of all third Persons and subject to no other liens, except as limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights.

 

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

 

(q) Filing Jurisdictions . Schedule 1 hereto sets forth all of the jurisdictions and filing offices in which a financing statement should be filed in order for Lender to perfect its security interest in the Pledged Mortgage Loans and other Collateral.

 

(r) Borrower Solvent; Fraudulent Conveyance . As of the date hereof and immediately after giving effect to the Advance, the fair value of the assets of Borrower is greater than the fair value of the liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of Borrower in accordance with GAAP) of Borrower and Borrower is and will be solvent, is and will be able to pay its debts as they mature and does not and will not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. Borrower does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Borrower is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Borrower or any of its assets. Borrower is not transferring any Mortgage Loans with any intent to hinder, delay or defraud any of its creditors.

 

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(s) Custodial Account . All funds required to be segregated and deposited into the Custodial Account have been so segregated and deposited.

 

(t) Chief Executive Office . Borrower’s chief executive office on is located at 540 Madison Avenue, 19 th Floor, New York, New York 10022.

 

(u) Reserved .

 

(v) Reserved .

 

(w) Custodian . If the Custodian is a Person other than Lender, such Custodian is not an Affiliate of Borrower.

  

8.2 Representations and Warranties Concerning Pledged Mortgage Loans . Borrower represents and warrants to and covenants with Lender that the representations and warranties contained in each applicable Mortgage Loan Purchase Agreement are true and correct with respect to each Pledged Mortgage Loan as of the related Advance Date through and until the date that such Pledged Mortgage Loan is released from the Agreement pursuant to the terms hereof and the representations and warranties contained in each applicable Mortgage Loan Purchase Agreement are hereby incorporated by reference.

  

ARTICLE 9
AFFIRMATIVE COVENANTS

 

Borrower hereby covenants and agrees with Lender that during the term of this Agreement and for so long as there remain any obligations of Borrower to be paid or performed under the Loan Documents:

 

9.1 Financial Statements and Other Reports.  

 

(a) Interim Statements . Within thirty (30) days after the end of each calendar month, Borrower shall deliver to Lender financial statements of Borrower and Guarantor, including statements of income and changes in shareholders’ equity (or its equivalent) for the period from the beginning of such fiscal year to the end of such month, and the related balance sheet as of the end of such month, all in reasonable detail and certified by the chief financial officer of Borrower and Guarantor, as applicable, subject, however, to year-end audit adjustments;

 

(b) Annual Statements . Within ninety (90) days following the end of each fiscal year of Borrower and Guarantor, Borrower shall deliver to Lender audited financial statements of Borrower and Guarantor, including statements of income and changes in shareholders’ equity (or its equivalent) for such fiscal year and the related balance sheet as at the end of such fiscal year, all in reasonable detail and accompanied by an opinion of a certified public accounting firm reasonably satisfactory to Lender including a management representation letter signed by the chief financial officer of Borrower or Guarantor, as applicable, stating that the financial statements fairly present the financial condition and results of operations of Borrower or Guarantor, as applicable, as of the end of, and for, such year;

 

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(c) Officer’s Certificate . Together with the financial statements required to be delivered pursuant to Sections 9.1(a) and (b) , Borrower shall deliver to Lender an officer’s certificate substantially in a form to be provided by Lender, in which Borrower shall, among other things, (i) certify that no Potential Default or Event of Default has occurred and is continuing, (ii) demonstrate Guarantor’s compliance with financial covenants and provide support calculations in connection therewith, and (iii) include funding and production volume reports for the previous month;

 

(d) Reports of Auditors . Borrower shall deliver to Lender promptly upon receipt, any other report submitted by an independent public accountant in connection with any annual, interim or special audit of Guarantor and/or Borrower.

 

(e) Monthly Collateral Tape . Upon reasonable request, Borrower shall, or shall cause Servicer to, deliver within five (5) days after the end of each month, (i) a collateral tape including the data fields (to be determined) representing the Pledged Mortgage Loans subject to the Advance as of the end of such month, acceptable to Lender in its good faith discretion, and (ii) any additional information as reasonably requested.

 

(f) Hedging Reports . Borrower shall deliver to Lender, or cause to be delivered to Lender, by not later than 1:00 p.m. (New York City time) on each Monday, or Tuesday if Monday is not a Business Day, or as reasonably requested by Lender, a loan and rate lock position report and hedge report containing product level pricing and interest rate sensitivity analysis (shocks) or as requested by Lender (data elements to be agreed upon). To the extent Borrower retains any Person(s) to perform hedging services on behalf of Borrower, Borrower hereby grants Lender authority to contact, request and receive hedging reports directly from such Person(s) at no cost to Lender. Further, Borrower shall instruct such Person(s), upon reasonable notice from Lender and during normal business hours, to answer candidly and fully, at no cost to Lender, any and all questions that Lender may address to them in reference to the hedging reports of Borrower. Borrower may have its representatives in attendance at any meetings between Lender and such Person(s) held in accordance with this authorization.

 

(g) Reports and Information Regarding Pledged Mortgage Loans . Borrower shall deliver to Lender, with reasonable promptness, (i) copies of any reports related to the Pledged Mortgage Loans, (ii) with respect to Pledged Mortgage Loans with an application date on or after January 10, 2014, copies of all documentation in connection with the underwriting and origination of any Pledged Mortgage Loan that evidences compliance with the Ability to Repay Rule and the QM Rule, as applicable, and (iii) any other information in Borrower’s possession related to the Pledged Mortgage Loans as Lender may request.

 

(h) Other Reports . As may be reasonably requested by Lender from time to time, Borrower shall deliver to Lender, within thirty (30) days of filing or receipt (i) copies of all regular or periodic financial or other reports, if any, that Borrower files with any governmental, regulatory or other agency and (ii) copies of all audits, examinations and reports concerning the operations of Borrower from any Approved Investor, any Insurer or licensing authority. Borrower shall also deliver to Lender, with reasonable promptness, (x) if requested by Lender, a detailed aging report of all outstanding loans on warehouse/ purchase/ repurchase facilities, and detail of all uninsured government loans in a form reasonably acceptable to Lender and (y) such further information reasonably related to the business, operations, properties or financial condition of Borrower, in such detail and at such times as Lender may request. Borrower understands and agrees that all reports and information provided to Lender by or relating to Borrower may be disclosed to Lender’s Affiliates.

 

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9.2 Periodic Due Diligence . Borrower acknowledges that Lender has the right at any time during the term of this Agreement to perform continuing due diligence reviews with respect to the Pledged Mortgage Loans, Borrower and Guarantor, for purposes of verifying compliance with the representations, warranties, covenants and specifications made hereunder or under any other Loan Document, or otherwise, and Borrower agrees that upon reasonable (but no less than one (1) Business Day’s prior notice to Borrower (provided that upon the occurrence of a Potential Default or an Event of Default, no such prior notice shall be required), Lender or its authorized representatives will be permitted during normal business hours to examine, inspect, make copies of, and make extracts of any and all books and records of Borrower or Guarantor. Further, Borrower and Guarantor will make available to Lender a knowledgeable financial or accounting officer and will instruct such officer to answer candidly and fully, at no cost to Lender, any and all questions that any authorized representative of Lender may address to them in reference to the foregoing. Borrower and Lender further agree that all reasonable out-of-pocket costs and expenses incurred by Lender in connection with Lender’s activities pursuant to this Section 9.2 shall be paid by Borrower.

 

9.3 Notice . Borrower shall give Lender prompt (but in no event later than three (3) Business Days after becoming aware) written notice, in reasonable detail, of:

 

(a) any action, suit or proceeding instituted by or against Borrower or Guarantor in any federal or state court or before any commission or other regulatory body (federal, state or local, foreign or domestic), or any such action, suit or proceeding threatened against Borrower, in any case, if such action, suit or proceeding, or any such action, suit or proceeding threatened against Borrower or Guarantor, (i) involves a potential liability, on an individual or aggregate basis, reasonably expected to be equal to or greater than ten percent (10%) of the Tangible Net Worth of Guarantor, (ii) is reasonably likely to result in a Material Adverse Effect if determined adversely, (iii) questions or challenges the validity or enforceability of any of the Loan Documents or (iv) questions or challenges compliance of any Pledged Mortgage Loan (other than Pledged Mortgage Loans with an application date prior to January 10, 2014) with the Ability to Repay Rule or the QM Rule;

 

(b) the filing or recording of any federal, state or local tax lien against (i) any Pledged Mortgage Loan, or (ii) Borrower or any of its assets;

 

(c) the occurrence of any Potential Default or Event of Default;

 

(d) the actual or threatened suspension, revocation or termination of Borrower’s licensing or eligibility, in any respect, as an approved, licensed seller or mortgagee;

 

(e) the suspension, revocation or termination of any existing credit or investor relationships to facilitate the sale and/or origination of residential mortgage loans or residential mortgage-backed securities;
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(f) the resignation or termination of any Servicer under a Servicing Agreement or Custodian under the Custodial Agreement;

 

(g) a default or breach under the applicable Servicing Agreement or Custodial Agreement;

 

(h) any amendment to any Servicing Agreement or the Custodial Agreement without the prior written consent of Lender;

 

(i) any Pledged Mortgage Loan where a director, officer, shareholder, member, partner or owner of Borrower or any Guarantor is the Mortgagor or guarantor or where the related Mortgaged Property is being sold by a director, officer, shareholder, member, partner or owner of Borrower or any Guarantor;

 

(j) any Pledged Mortgage Loan ceases to be an Eligible Mortgage Loan;

 

(k) any Approved Investor that threatens to set-off amounts owed by Borrower to such Approved Investor against the purchase proceeds owed by the Approved Investor to Borrower for the Pledged Mortgage Loans (excluding amounts owed by Borrower to the Approved Investor which are directly related to Pledged Mortgage Loans and which are expressly allowed to be set-off by the Approved Investor pursuant to the Bailee Agreement);

 

(l) any change in the Executive Management of Borrower or Guarantor;

 

(m) any other action, event or condition of any nature that may reasonably be expected to lead to or result in a Material Adverse Effect with respect to Borrower or Guarantor;

 

(n) any (i) change to the location of its chief executive office/chief place of business from that specified in Section 8.1(t) , (ii) change in the name, identity or corporate structure (or the equivalent) or change in the location where Borrower maintains its records with respect to the Pledged Mortgage Loans or any Collateral, or (iii) reincorporation or reorganization of Borrower under the laws of another jurisdiction;

 

(o) any change to the date on which the fiscal year of Borrower or Guarantor begins from the current fiscal year beginning date of Borrower or Guarantor; and

 

(p) (i) the receipt of a written commitment by an Approved Investor to purchase a Pledged Mortgage Loan, (ii) the name of such Approved Investor and (iii) any other related information as requested by Lender in its sole good faith discretion.

 

9.4 Existence, Etc. Borrower shall (i) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises necessary for Borrower to conduct its business and to perform its obligations under the Loan Documents, (ii) comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, truth in lending, real estate settlement procedures and all environmental laws) if the failure to comply with such requirements would be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect, (iii) maintain adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, and (iv) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its properties prior to the date on which penalties attach thereto.

 

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9.5 Servicing of Mortgage Loans . Subject to Section 6.9 above, Borrower shall cause each Servicer to subservice or service, as applicable, all Pledged Mortgage Loans at Borrower’s expense and without charge of any kind to Lender.

 

9.6 Evidence of Pledged Mortgage Loans . Borrower shall indicate on its books and records (including its computer records) that each Pledged Mortgage Loan has been included in the Collateral.

 

9.7 Defense of Title; Protection of Collateral . Borrower warrants and will defend the security interest of Lender in and to all Collateral against all adverse claims and demands of all Persons whomsoever. Borrower will comply with all applicable laws, rules and regulations of any Governmental Authority applicable to Borrower or relating to the Collateral and cause the Collateral to comply with all applicable laws, rules and regulations of any such Governmental Authority. Borrower shall allow Lender (a) to inspect any Mortgaged Property relating to a Pledged Mortgage Loan; (b) to appear in or intervene in any proceeding or matter affecting any Pledged Mortgage Loan or other Collateral or the value thereof; (c) to initiate, commence, appear in and defend any foreclosure, action, bankruptcy or proceeding which could affect Lender’s security interest in the Collateral or the value thereof, or the rights and powers of Lender; (d) to contest by litigation or otherwise any lien asserted against any Pledged Mortgage Loan (or against the related Mortgaged Property) or against any other Collateral, the improvements, or the personal property identified therein; and/or (e) to make payments on account of such encumbrances, charges, or liens and to service any Pledged Mortgage Loans and take any action it may deem appropriate to collect all amounts due and owing with respect to any Collateral or any part thereof or to enforce any rights with respect thereto. All reasonable costs and expenses, including reasonable attorneys’ fees (including, but not limited to, those incurred on appeal), that Lender may incur with respect to any of the foregoing and any expenditures it may make to protect or preserve the Collateral or the rights of Lender, shall be payable by Borrower. Borrower shall repay the same to Lender upon demand with interest, at the Default Rate, from the date any such expenditure shall have been made until the day it is repaid.

 

9.8 Further Assurances . Borrower shall, at its expense, promptly procure, execute and deliver to Lender, upon request, all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of Borrower in this Agreement.

 

9.9 Fidelity Bonds and Insurance . Borrower shall maintain an insurance policy, in a form and substance satisfactory to Lender, covering against loss or damage relating to or resulting from any breach of fidelity by Borrower, or any officer, director, employee or agent of Borrower, any loss or destruction of documents (whether written or electronic), fraud, theft, misappropriation and errors and omissions, such that Lender shall have the right to pursue any claim for coverage available to any named insured to the full extent allowed by law. This policy shall name Lender as a loss payee with an unlimited right of action and shall provide coverage in an amount as required by the Fannie Mae Guide. Following approval by Lender of a specific insurance policy, Borrower shall not amend, cancel, suspend or otherwise change such policy without the prior written consent of Lender.

 

9.10 Sharing of Information . Notwithstanding anything herein or in any other Loan Document to the contrary, upon receipt of prior written notice from Lender, Borrower shall allow Lender to exchange information related to Borrower, the Advance hereunder and the terms and conditions of the Loan Documents with Persons who are providing or are, at the invitation of Borrower, contemplating providing credit of any kind to Borrower and Borrower shall permit each such Person to share such information with Lender.

 

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9.11 ERISA . As soon as reasonably possible, and in any event within fifteen (15) days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan has occurred or exists, a statement signed by a senior financial officer of Borrower setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to such event or condition):

 

(a) any Reportable Event or failure to meet minimum funding standards, provided that a failure to meet the minimum funding standard of Section 412 of the Code or Sections 302 or 303 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 430(j) of the Code or Section 303(j) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code or any request for a waiver under Section 412(c) of the Code for any Plan;

 

(b) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;

 

(c) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower, any Subsidiary or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

 

(d) the complete or partial withdrawal from a Multiemployer Plan by Borrower, any Subsidiary or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower, any Subsidiary or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

 

(e) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower, any Subsidiary or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and

 

(f) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower, any Subsidiary or an ERISA Affiliate fails to timely provide security to such Plan in accordance with the provisions of said Sections.

 

9.12 Financial Covenants and Ratios . Borrower and Guarantor shall at all times comply with any financial covenants and/or financial ratios set forth in the Loan Terms Letter.

 

9.13 Amendments, Waiver and Termination of Certain Documents . Borrower shall obtain Lender’s written consent, prior to (i) the effectuation of any amendment, modification, supplement or restatement of any Servicing Agreement or the Custodial Agreement (ii) the waiver of any default by Borrower occurring under any Servicing Agreement or the Custodial Agreement and (iii) the termination by Borrower of any Servicing Agreement or the Custodial Agreement.

 

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ARTICLE 10
NEGATIVE COVENANTS

 

Borrower hereby covenants and agrees with Lender that during the term of this Agreement and for so long as there remain any obligations of Borrower to be paid or performed under this Agreement, Borrower shall comply with the following:

 

10.1 Debt . Except as otherwise set forth in Section 10.11 of this Agreement, Borrower shall not incur any additional material Debt without the prior written consent of Lender, other than (i) the Existing Debt, (ii) Debt incurred with Lender or its Affiliates, and (iii) usual and customary accounts payable for a mortgage company.

 

10.2 Lines of Business . Borrower shall not engage to any substantial extent in any line or lines of business activity other than the businesses generally carried on by it as of the Effective Date.

 

10.3 Debt and Subordinated Debt . Borrower shall not, either directly or indirectly, without the prior written consent of Lender, pay any Debt or Subordinated Debt if such payment shall cause a Potential Default or Event of Default. Further, if a Potential Default or an Event of Default shall have occurred and for as long as such is occurring, Borrower shall not, either directly or indirectly, without the prior written consent of Lender, make any payment of any kind thereafter on such Debt or Subordinated Debt until all obligations of Borrower hereunder have been paid and performed in full.

 

10.4 Loss of Eligibility . Borrower shall not, either directly or indirectly, without the prior written consent of Lender, take, or fail to take, any action that would cause Borrower to lose all or any part of its status as an eligible seller or mortgagee or willfully terminate its status as an eligible seller or mortgagee without forty-five (45) days prior written notice to Lender.

 

10.5 Loans to Officers, Employees and Shareholders . Borrower shall not, either directly or indirectly, without the prior written consent of Lender, make any personal loans or advances to any officers, employees, shareholders, members, partners or owners of Borrower or any Guarantor in an aggregate amount exceeding ten percent (10%) of Borrower’s Tangible Net Worth; provided, however, that Borrower shall be entitled to make a personal loan or advance to a majority shareholder, member, partner or owner of Borrower without the prior written consent of Lender provided that (i) a Potential Default or an Event of Default is not existing and will not occur as a result thereof, (ii) such Person is also a Guarantor and (iii) such loan or advance is clearly reflected on Borrower’s financial reports provided to Lender.

 

10.6 Liens on Pledged Mortgage Loans and Collateral . Borrower acknowledges that with respect to the Advance it shall have pledged the Pledged Mortgage Loans and related Collateral and shall have granted to Lender a first priority security interest in such assets. Accordingly, Borrower shall not create, incur, assume or suffer to exist any lien upon the Pledged Mortgage Loans or the Collateral, other than as granted to Lender herein.

 

10.7 Transactions with Affiliates . Borrower shall not, directly or indirectly, enter into any transaction with its Affiliates, if any, without the prior written consent of Lender, including, without limitation, (a) making any loan, advance, extension of credit or capital contribution to an Affiliate, (b) transferring, selling, pledging, assigning or otherwise disposing of any of its assets to or on behalf of an Affiliate, (c) purchasing or acquiring assets from an Affiliate, or (d) paying management fees to or on behalf of an Affiliate; provided, however, that Borrower may, without the prior written consent of Lender, and provided that a Potential Default or an Event of Default is not existing and will not occur as a result thereof, engage in a transaction(s) with any or all of its Affiliates if (i) such transaction is in the ordinary course of Borrower’s mortgage conduit business, and (ii) such transaction is upon fair and reasonable terms no less favorable to Borrower had Borrower entered into a comparable arm length’s transaction with a Person which is not an Affiliate.

 

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10.8 Consolidation, Merger, Sale of Mortgage Loans and Change of Control . Borrower shall not, directly or indirectly, (a) wind up, liquidate or dissolve its affairs; (b) enter into any transaction of merger or consolidation with any Person; (c) convey, sell, lease or otherwise dispose of, or agree to do any of the foregoing at any future time, all or substantially all of its property or assets; (d) form or enter into any partnership, joint venture, syndicate or other combination which could have a Material Adverse Effect; or (e) allow a Change of Control to occur with respect to Borrower, without prior written consent of Lender; provided, however, that Borrower may, without the prior written consent of Lender, and provided that a Potential Default or an Event of Default is not existing and will not occur as a result thereof: (i) merge or consolidate with any Person if Borrower is the surviving and controlling entity, and (ii) in the ordinary course of Borrower’s mortgage conduit business, sell equipment that is uneconomic or obsolete and acquire Mortgage Loans for resale and sell Mortgage Loans.

 

10.9 Payment of Dividends and Retirement of Stock . If a Potential Default or an Event of Default has occurred and is continuing or will occur as a result of such payments, Borrower shall not pay any dividends or distributions with respect to any capital stock or other equity interests in Borrower, 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 Borrower.

 

10.10 Collateral . Borrower shall not attempt to sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge or otherwise encumber (except pursuant to this Agreement) any of the Pledged Mortgage Loans or other Collateral or any interest therein. Borrower shall not, without prior written consent of Lender, amend or modify, or waive any of the terms and conditions of, or settle or compromise any claim in respect of, any Pledged Mortgage Loan .

 

10.11 No Additional Facilities . Borrower shall not, without prior written notification to Lender, enter into any mortgage or mortgage servicing rights financing facility (including, without limitation, any warehouse, repurchase, purchase or off-balance sheet facility).

 

ARTICLE 11
DEFAULTS AND REMEDIES

 

11.1 Events of Default . The occurrence of any of the following conditions or events shall be an Event of Default:

 

(a) failure of Borrower to make any payment of Accrued Interest on the Advance on any Payment Date;

 

(b) failure of Borrower to (i) pay any portion of the Repayment Amount when due on the Maturity Date, upon acceleration or pursuant to Section 4.2 , or (ii) perform its obligations under Section 6.11(b) ;

 

(c) failure of Borrower to pay any other amount due under the Loan Documents within two (2) Business Days following the applicable due date;

 

(d) Borrower, any Guarantor or any of their respective Subsidiaries or Affiliates shall default under, or fail to perform as required under, or shall otherwise breach the terms of any instrument, agreement or contract between Borrower, any Guarantor or any of their respective Subsidiaries or Affiliates, on the one hand, and Lender or any of Lender’s Affiliates on the other;
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(e) Borrower, Guarantor or any of their respective Subsidiaries or Affiliates shall default under, or fail to perform as required under, the terms of (i) any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds or Debt obligation entered into by Borrower, Guarantor or any of their respective Subsidiaries or Affiliates, on the one hand, and any third party on the other, which default or failure entitles any party to require acceleration or prepayment of any indebtedness thereunder or (ii) any other material agreement entered into by Borrower, Guarantor or any of their respective Subsidiaries or Affiliates, on the one hand, and any third party on the other, which default or failure entitles any party to require acceleration or prepayment of any indebtedness thereunder;

 

(f) Borrower shall fail to remit Income to the Custodial Account in strict accordance with the provisions of Section 6.10 ;

 

(g) any representation, warranty or certification made or deemed made herein or in any other Loan Document by Borrower or any certificate furnished to Lender pursuant to the provisions thereof, shall prove to have been false or misleading in any material respect as of the time made or furnished and such occurrence shall not have been remedied within five (5) Business Days (other than the representations and warranties set forth in Section 8.2 which shall be considered solely for the purpose of determining the Collateral Value of the Pledged Mortgage Loans; unless (i) Borrower shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made or (ii) any such representations and warranties have been determined by Lender to be materially false or misleading on a regular basis, in which case there shall be no such cure period);

 

(h) (i) the failure of Borrower or Guarantor to perform, comply with or observe any term, covenant or agreement applicable to Borrower or Guarantor as contained in Articles 9 and 10 of this Agreement (other than a failure to give notice pursuant to Section 9.3(l) ), irrespective of any cure period, or (ii) the failure of Borrower or Guarantor to perform, comply with or observe any other term, covenant or agreement applicable to Borrower or Guarantor as contained in this Agreement and such occurrence shall not have been remedied within the cure period provided therein;

 

(i) an Insolvency Event shall have occurred with respect to Borrower, any Guarantor, any of their respective Subsidiaries or Affiliates; or Borrower shall admit in writing its inability to, or intention not to, perform any of its obligations under this Agreement or any of the other Loan Documents; or Lender shall have determined that Borrower is unable to meet its financial commitments as they come due;

 

(j) one or more judgments or decrees shall be entered against Borrower, any Guarantor or any of their respective Subsidiaries or Affiliates involving a liability of $500,000 or more (to the extent that it is, in the reasonable determination of Lender, uninsured and provided that any insurance or other credit posted in connection with an appeal shall not be deemed insurance for these purposes), and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within thirty (30) days after entry thereof;
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(k) any Plan maintained by Borrower, any Subsidiary of Borrower or any ERISA Affiliate shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by an appropriate United States District Court to administer any Plan, or the Pension Benefit Guaranty Corporation (or any successor thereto) shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan if as of the date thereof Borrower’s liability, any such Subsidiary’s liability or any ERISA Affiliate’s liability to the PBGC, the Plan or any other entity on termination under the Plan exceeds the then current value of assets accumulated in such Plan by more than fifty thousand ($50,000) dollars (or in the case of a termination involving Borrower as a “substantial employer” (as defined in Section 4001 (a)(2) of ERISA) the withdrawing employer’s proportionate share of such excess shall exceed such amount);

 

(l) Borrower as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in (i) an annual amount exceeding fifty thousand ($50,000) dollars, or (ii) an aggregate amount exceeding five hundred thousand ($500,000) dollars;

 

(m) (i) any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) a determination that a Plan is “at risk” (within the meaning of Section 303 of ERISA) or any Lien in favor of the PBGC or a Plan shall arise on the assets of Lender or any ERISA Affiliate, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of Lender, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA, (v) Borrower or any Subsidiary or any ERISA Affiliate shall, or in the reasonable opinion of Lender is likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan, (vi) Borrower or any ERISA Affiliate shall file an application for a minimum funding waiver under section 302 of ERISA or section 412 of the Code with respect to any Plan, (vii) any obligation for post-retirement medical costs (other than as required by COBRA) exists, or (viii) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (viii) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect, or (ix) the assets of Borrower become plan assets within the meaning of 29 CFR 2510.3-101 as modified by section 3(42) of ERISA;

 

(n) any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to (i) condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property or assets of Borrower, any Guarantor or any of their respective Affiliates or Subsidiaries; (ii) displace the management of Borrower, any Guarantor or any of their respective Affiliates or Subsidiaries or to curtail its authority in the conduct of their respective business; or (iii) to remove, limit or restrict the approval of Borrower, any Guarantor or any of their respective Affiliates or Subsidiaries as a buyer or a seller of Mortgage Loans or securities backed thereby, and any such action provided for in this subsection (n) shall not have been discontinued or stayed within thirty (30) days;
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(o) Borrower shall purport to disavow its obligations hereunder or shall contest the validity or enforceability of the Loan Documents or Lender’s interest in any Pledged Mortgage Loan or other Collateral;

 

(p) a default shall occur under the Guaranty that continues beyond the expiration of any applicable grace period or the Guarantor shall otherwise fail to perform its obligations under the Guaranty;

 

(q) Reserved;

 

(r) a Material Adverse Effect shall occur with respect to Borrower or any Guarantor;

 

(s) Reserved;

 

(t) any Loan Document shall for whatever reason (including an event of default thereunder) be terminated, without the consent of Lender (other than, with respect to the Custodial Agreement or Servicing Agreement, due to the resignation of the Custodian or Servicer for reasons other than a breach by Borrower of the Custodial Agreement or Servicing Agreement (subject to Section 11.1(v) below)), or this Agreement shall for any reason cease to create a valid, first priority security interest or ownership interest upon transfer in any of the Collateral;

 

(u) a Change of Control shall occur with respect to Borrower or any Guarantor without the consent of Lender; or

 

(v) a material breach by any Servicer under the applicable Servicing Agreement shall have occurred and be continuing and Borrower has not (A) appointed a successor servicer acceptable to Lender and (B) delivered a fully executed Servicing Agreement Side Letter with such successor servicer, in each case within thirty (30) days following the occurrence of such breach.

 

With respect to any Event of Default which requires a determination to be made as to whether such Event of Default has occurred, such determination shall be made in Lender’s good faith discretion and Borrower hereby agrees to be bound by and comply with any such determination by Lender. An Event of Default shall be deemed to be continuing unless expressly waived by Lender in writing.

 

11.2 Remedies . Upon the occurrence of an Event of Default, Lender may, by notice to Borrower, (i) immediately declare all or any portion of the principal amount of the Advance then outstanding under the Note together with all Accrued Interest thereon and any applicable fees and out-of-pocket expenses (including, without limitation, reasonable fees and disbursements of counsel) accruing under the Note, this Agreement and any other Loan Document to be due and payable; provided , that such acceleration shall immediately occur upon the occurrence of an Event of Default under Section 11.1(i) , (n) or (o) , notwithstanding that Lender may not have provided any such notice to Borrower, and (ii) exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the Uniform Commercial Code.

 

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Upon such declaration or such automatic acceleration, the balance then outstanding on the Note shall become immediately due and payable, without presentment, demand, protest or other formalities of any kind (except any notice required by law referred to below), all of which are hereby expressly waived by Borrower, and Lender shall have the right to exercise any remedies available to it at law and pursuant to the Loan Documents including, but not limited to, collecting, receiving, appropriating and realizing upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing) on a servicing released basis, in one or more parcels or as an entirety at public or private sale or sales, at any exchange, broker’s board or office of Lender or elsewhere upon such terms and conditions and at prices that are consistent with the prevailing market for similar collateral as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Lender shall act in good faith to obtain the best execution possible under prevailing market conditions. Because Borrower recognizes that it may not be possible to purchase or sell all of the Collateral on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Collateral may not be liquid, Borrower agrees that liquidation of the Collateral does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Lender may elect, in its sole discretion, the time and manner of liquidating any Collateral and nothing contained herein shall (A) obligate Lender to liquidate any Collateral on the occurrence of an Event of Default or to liquidate all Collateral in the same manner or on the same Business Day or (B) constitute a waiver of any of Lender’s rights or remedies. Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in Borrower, which right or equity is hereby waived or released. Borrower agrees, at Lender’s request, to assemble the Collateral and make it available to Lender at places which Lender shall reasonably select, whether at Borrower’s premises or elsewhere. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.

 

Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of Lender hereunder, including, without limitation, reasonable out-of-pocket attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as Lender may elect, and only after such application and after the payment by Lender of any other amount required or permitted by any provision of law, including, without limitation, Section 9-504(1)(c) of the Uniform Commercial Code, need Lender account for the surplus, if any, to Borrower. Borrower shall remain liable for any deficiency (plus Accrued Interest thereon at the Default Rate as contemplated pursuant to Section 2.6 of this Agreement) if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations and/or the reasonable fees and disbursements incurred by Lender, including reasonable fees and expenses of any attorneys employed by Lender to collect such deficiency.

 

It is understood and agreed that upon the occurrence of an Event of Default, Borrower shall strictly comply with the negative covenants contained in Article 10 hereunder and in no event shall Borrower declare and pay any dividends, incur additional Debt or Subordinated Debt, make payments on existing Debt or Subordinated Debt or otherwise distribute or transfer any of Borrower’s property and assets to any Person without the prior written consent of Lender. To the extent permitted by applicable law, Borrower waives all claims, damages and demands it may acquire against Lender arising out of the exercise by Lender of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of Lender.

 

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11.3 Treatment of Custodial Account . During the existence of a Potential Default or an Event of Default, notwithstanding any other provision of this Agreement, Borrower shall have no right to withdraw or release any funds in the Custodial Account to itself or for its benefit, nor shall it have any right to set-off any amount owed to it by Lender against funds held by it for Lender in the Custodial Account. During the existence of an Event of Default, Borrower shall promptly remit to or at the direction of Lender all funds related to the Pledged Mortgage Loans in the Custodial Account.

 

11.4 No Obligation to Pursue Remedy . Lender shall have the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind other than as expressly set forth herein, all of which are hereby expressly waived by Borrower. Borrower further waives any right to require Lender to (a) proceed against any Person, (b) proceed against or exhaust all or any of the Pledged Mortgage Loans or pursue its rights and remedies as against the Pledged Mortgage Loans in any particular order, or (c) pursue any other remedy in its power. Lender shall not be required to take any steps necessary to preserve any rights of Borrower against holders of mortgages prior in lien to the lien of any Pledged Mortgage Loan or to preserve rights against prior parties. No failure on the part of Lender to exercise, and no delay in exercising, any right, power or remedy provided hereunder, at law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise by Lender of any right, power or remedy provided hereunder, at law or in equity preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Without intending to limit the foregoing, all defenses based on the statute of limitations are hereby waived by Borrower. The remedies herein provided are cumulative and are not exclusive of any remedies provided at law or in equity.

 

11.5 No Judicial Process . Lender may enforce its rights and remedies hereunder without prior judicial process or hearing, and Borrower hereby expressly waives, to the extent permitted by law, any right Borrower might otherwise have to require Lender to enforce its rights by judicial process. Borrower also waives, to the extent permitted by law, any defense Borrower might otherwise have to its obligations under this Agreement arising from use of nonjudicial process, enforcement and sale of all or any portion of the Pledged Mortgage Loans or from any other election of remedies. Borrower recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

 

11.6 Reimbursement of Costs and Expenses . Lender may, but shall not be obligated to, advance any sums or do any act or thing necessary to uphold and enforce the lien and priority of, or the security intended to be afforded by, any Pledged Mortgage Loan, including, without limitation, payment of delinquent taxes or assessments and insurance premiums. All advances, charges, reasonable costs and expenses, including reasonable attorneys’ fees and disbursements and losses resulting from any hedging arrangements entered into by Lender pursuant to Section 11.2 , incurred or paid by Lender in exercising any right, power or remedy conferred by this Agreement, or in the enforcement hereof, together with interest thereon, at the Default Rate, from the time of payment until repaid, shall become a part of the Secured Obligations.

 

11.7 Rights of Set-Off . Lender shall have the following rights of set-off:

 

(a) If Borrower shall default in the payment or performance of any of its obligations under this Agreement, Lender shall have the right, at any time, and from time to time, without notice, to set-off claims and to appropriate or apply any and all deposits of money or property or any other indebtedness at any time held or owing by Lender to or for the credit of the account of Borrower against and on account of the obligations and liabilities of Borrower under this Agreement, irrespective of whether or not Lender shall have made any demand hereunder and whether or not said obligations and liabilities shall have become due; provided, however, that the aforesaid right to set-off shall not apply to any deposits of escrow monies being held on behalf of the Mortgagors related to the Pledged Mortgage Loans or other third parties. Lender may set off cash, the proceeds of any liquidation of the Pledged Mortgage Loans and all other sums or obligations owed by Lender to Borrower against all of Borrower’s obligations to Lender, whether under this Agreement, under the Advance, or under any other agreement between the parties, or otherwise, whether or not such obligations are then due, without prejudice to Lender’s right to recover any deficiency. Lender agrees promptly to notify Borrower after any such set-off and application made by Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.

 

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(b) In addition to the rights in subsection (a), Lender and its Affiliates (collectively, the “Bank of America Related Entities” ), shall have the right to set-off and to appropriate or apply any and all deposits of money or property or any other indebtedness at any time held or owing by the Bank of America Related Entities to or for the credit of the account of Borrower and Guarantor against and on account of the obligations of Borrower under any agreement(s) between Borrower and/or Guarantor, on the one hand, and the Bank of America Related Entities, on the other hand, irrespective of whether or not the Bank of America Related Entity shall have made any demand hereunder and whether or not said obligations shall have matured. In exercising the foregoing right to set-off, any Bank of America Related Entity shall be entitled to withdraw funds which are being held for or owing to Borrower to set-off against any amounts due and owing by Borrower to the Bank of America Related Entity. If a Bank of America Related Entity other than Lender intends to exercise its right to set-off in this subsection (b), such Bank of America Related Entity shall provide Borrower prior notice thereof, and upon Borrower’s receipt of such notice, if the basis for such right to set-off is Borrower’s breach or default of its obligations to the Bank of America Related Entity, Borrower shall have three (3) Business Days to cure any such breach or default in order to avoid such set-off.

 

11.8 Reasonable Assurances . If, at any time during the term of the Agreement, Lender has reason to believe that Borrower is not conducting its business in accordance with, or otherwise is not satisfying: (i) all applicable statutes, regulations, rules, and notices of federal, state, or local governmental agencies or instrumentalities, all applicable requirements of Insurers and prudent industry standards or (ii) all applicable requirements of Lender, as set forth in this Agreement, then, Lender shall have the right to demand, pursuant to notice from Lender to Borrower specifying with particularity the alleged act, error or omission in question, reasonable assurances from Borrower that such a belief is in fact unfounded, and any failure of Borrower to provide to Lender such reasonable assurances in form and substance reasonably satisfactory to Lender, within the time frame specified in such notice, shall itself constitute an Event of Default hereunder, without a further cure period. Borrower hereby authorizes Lender to take such actions as may be necessary or appropriate to confirm the continued eligibility of Borrower for Advance hereunder, including without limitation (i) ordering credit reports and/or appraisals with respect to any Pledged Mortgage Loan, (ii) contacting Mortgagors, licensing authorities and Approved Investors or Insurers, and (iii) performing due diligence reviews on Borrower and Guarantor pursuant to Section 9.2 of this Agreement.

 

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ARTICLE 12
INDEMNIFICATION

 

12.1 Indemnification . Borrower shall indemnify and hold harmless the Bank of America Related Entities and any of their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party” ) from and against any and all liabilities, obligations, losses, damages, penalties, judgments, suits, costs, expenses and disbursements of any kind whatsoever (including reasonable fees and disbursements of its counsel) that may be imposed upon, incurred by or asserted against such Indemnified Party in any way relating to or arising out of the Loan Documents or any of the transactions contemplated thereby, or any Pledged Mortgage Loans or Borrower’s obligations thereunder, except to the extent that such liabilities, obligations, losses, damages, penalties, judgments, suits, costs, expenses or disbursements are the direct result of such Indemnified Party’s gross negligence, bad faith or willful misconduct. Borrower also agrees to reimburse an Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Party’s costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Party’s rights under this Agreement, any other Loan Document (provided that if the terms of any Loan Document conflict with the foregoing, the terms of the Loan Document shall control) or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of its counsel.

 

12.2 Reimbursement . Borrower shall reimburse the Bank of America Related Entities for all expenses required in the Loan Terms Letter to be reimbursed when they become due and owing. In addition, Borrower agrees to pay as and when billed by Lender all of the reasonable out-of pocket costs and expenses incurred by Lender in connection with (i) the consummation and administration of the transactions contemplated hereby including, without limitation, all the due diligence, inspection, testing and review costs and expenses incurred by Lender with respect to Pledged Mortgage Loans and Borrower prior to the Effective Date or pursuant to Section 9.2 , or otherwise, (ii) the development, preparation and execution of, and any amendment, supplement or modification to, any Loan Document or any other documents prepared in connection therewith, and (iii) all the reasonable fees, disbursements and expenses of counsel to Lender incurred in connection with any of the foregoing.

 

12.3 Payment of Taxes .

 

(a) All payments made by Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto imposed by any Governmental Authority, excluding income taxes, branch profits taxes, franchise taxes or any other tax imposed on the Net Income by the United States, a state or a foreign jurisdiction under the laws of which Lender is organized or of its applicable lending office, or any political subdivision thereof (collectively, “Taxes” ), all of which shall be paid by Borrower for its own account not later than the date when due. If Borrower is required by law or regulation to deduct or withhold any Taxes from or in respect of any amount payable hereunder, it shall: (i) make such deduction or withholding; (ii) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due; (iii) deliver to Lender, promptly, original tax receipts and other evidence satisfactory to Lender of the payment when due of the full amount of such Taxes; and (iv) pay to Lender such additional amounts as may be necessary so that such Lender receives, free and clear of all Taxes, a net amount equal to the amount it would have received under this Agreement, as if no such deduction or withholding had been made. In addition, Borrower agrees to pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including, without limitation, mortgage recording taxes, transfer taxes and similar fees) imposed by the United States or any taxing authority thereof or therein that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement ( “Other Taxes” ).

 

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(b) Borrower shall pay and hold Lender harmless from and against any and all Taxes and Other Taxes arising with respect to the Pledged Mortgage Loans, the Loan Documents and other documents related thereto and hold Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.

 

(c) Any Lender that is not incorporated under the laws of the United States, any State thereof, or the District of Columbia (a “Foreign Lender” ) shall provide Borrower with properly completed United States Internal Revenue Service ( “IRS” ) Form W-8BEN or W-8ECI or any successor form prescribed by the IRS, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States on or prior to the date upon which each such Foreign Lender becomes a Lender. Each Foreign Lender will resubmit the appropriate form on the earliest of (A) the third anniversary of the prior submission or (B) on or before the expiration of thirty (30) days after there is a “change in circumstances” with respect to such Foreign Lender as defined in Treas. Reg. Section 1.1441(e)(4)(ii)(D). For any period with respect to which a Foreign Lender has failed to provide Borrower with the appropriate form or other relevant document pursuant to this Section 12.3(c) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Foreign Lender shall not be entitled to any “gross-up” of Taxes or indemnification under Section 12.3(b) with respect to Taxes imposed by the United States; provided, however, that should a Foreign Lender, which is otherwise exempt from a withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Borrower shall take such steps as such Foreign Lender shall reasonably request to assist such Foreign Lender to recover such Taxes.

 

(d) Nothing contained in this Section 12.3 shall require Lender to make available any of its tax returns or other information that it deems to be confidential or proprietary.

 

12.4 Lender Payment . If Borrower fails to pay when due any costs, expenses or other amounts payable by it under this Article 12 , such amount may be paid on behalf of Borrower by Lender, in its discretion and Borrower shall remain liable for any such payments by Lender. No such payment by Lender shall be deemed a waiver of any of Lender’s rights under any of the Loan Documents.

 

12.5 Agreement not to Assert Claims . Borrower agrees not to assert any claim against any Indemnified Party, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Loan Documents, the actual or proposed use of the proceeds of the Advance, this Agreement or any of the transactions contemplated hereby or thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.

 

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12.6 Survival . Without prejudice to the survival of any other agreement of Borrower hereunder, the covenants and obligations of Borrower contained in this Article 12 shall survive the repayment in full of the Secured Obligations and all other amounts payable hereunder and delivery of the Pledged Mortgage Loans by Lender against full payment therefor.

 

ARTICLE 13
TERM AND TERMINATION

 

13.1 Term . Provided that no Event of Default or Potential Default has occurred and is continuing, and except as otherwise provided for herein, this Agreement shall commence on the Effective Date and continue until the Termination Date. Following expiration or termination of this Agreement, all amounts due Lender under the Loan Documents shall be immediately due and payable without notice to Borrower and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Borrower in default, all of which are hereby expressly waived by Borrower.

 

13.2 Termination .

 

(a) Lender may terminate this Agreement for cause at any time by providing notice to Borrower. For the avoidance of doubt, cause shall be deemed to exist if Lender determines that there has been fraud, misrepresentation or any similar intentional conduct on behalf of Borrower, its officers, directors, employees, agents and/or its representatives with respect to any of Borrower’s obligations, responsibilities or actions undertaken in connection with this Agreement.

 

(b) Upon termination of this Agreement for any reason, all outstanding amounts due to Lender under the Loan Documents shall be immediately due and payable without notice to Borrower and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Borrower in default, all of which are hereby expressly waived by Borrower. Further, any termination of this Agreement shall not affect the outstanding obligations of Borrower under this Agreement or any other Loan Document and all such outstanding obligations and the rights and remedies afforded Lender in connection therewith, including, without limitation, those rights and remedies afforded Lender under this Agreement, shall survive any termination of this Agreement. Lender shall not be liable to Borrower for any costs, loss or damages arising from or relating to a termination by Lender in accordance with subsection (a) of this Section 13.2 .

 

ARTICLE 14
GENERAL

 

14.1 Integration . This Agreement, together with the other Loan Documents, and all other documents executed pursuant to the terms hereof and thereof, constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous oral or written communications with respect to the subject matter hereof, all of which such communications are merged herein.

 

14.2 Amendments . No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against whom the enforcement of such modification, waiver, amendment, discharge or change is sought.

 

14.3 No Waiver . No failure or delay on the part of Borrower or Lender in exercising any right, power or privilege hereunder and no course of dealing between Borrower and Lender shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

 

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14.4 Remedies Cumulative . The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies that Borrower or Lender would otherwise have. No notice or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Lender to any other or further action in any circumstances without notice or demand.

 

14.5 Assignment . The Loan Documents may not be assigned by Borrower. The Loan Documents, along with Lender’s right, title and interest, including its security interest, in any or all of the Pledged Mortgage Loans and other Collateral, may, at any time, be transferred or assigned, in whole or in part, by Lender, and upon providing notice to Borrower of such transfer or assignment, together with an acknowledgement from assignee accepting Lender’s rights and/or obligations hereunder, any transferee or assignee thereof may enforce the Loan Documents and such security interest directly against Borrower.

 

14.6 Successors and Assigns . The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

14.7 Participations . Lender may from time to time sell or otherwise grant participations in this Agreement, and the holder of any such participation, if the participation agreement so provides, (i) shall, with respect to its participation, be entitled to all of the rights of Lender and (ii) may exercise any and all rights of set-off or banker’s lien with respect thereto, in each case as fully as though Borrower were directly obligated to the holder of such participation in the amount of such participation; provided, however, that Borrower shall not be required to send or deliver to any of the participants other than Lender any of the materials or notices required to be sent or delivered by it under the terms of this Agreement, nor shall it have to act except in compliance with the instructions of Lender.

 

14.8 Invalidity . In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been included.

 

14.9 Additional Instruments . Borrower shall execute and deliver such further instruments and shall do and perform all matters and things necessary or expedient to be done or observed for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded by this Agreement.

 

14.10 Survival. All representations, warranties, covenants and agreements herein contained on the part of Borrower shall survive Advance and shall be effective so long as this Agreement is in effect or there remains any obligation of Borrower hereunder to be performed.

 

14.11 Notices .

 

(a) All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder in writing shall be mailed (first class, return receipt requested and postage prepaid) or delivered in person or by overnight delivery service or by facsimile, addressed to the respective parties hereto at their respective addresses set forth below or, as to any such party, at such other address as may be designated by it in a notice to the other:
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If to Borrower: The address set forth in the Loan Terms Letter

 

If to Lender: Bank of America, N.A.
4500 Park Granada
Mail Code: CA7-910-02-38
Calabasas, California 91302
Attention: Adam Gadsby, Managing Director
Telephone: (818) 225-6541
Facsimile: (213) 457-8707
Email: Adam.Gadsby@baml.com

 

With copies to:

 

Bank of America, N.A.

One Bryant Park, 11th Floor

Mail Code: NY1-100-11-01

New York, New York 10036

Attention: Eileen Albus, Director, Mortgage Finance

Telephone:  (646) 855-0946

Facsimile:  (646) 855-5050

Email: Eileen.Albus@baml.com

 

Bank of America, N.A.

One Bryant Park

New York, New York 10036

Mail Code: NY1-100-17-01

Attention: Michael J. Berg, Assistant General Counsel

Telephone: (646) 855-0706

Fax: (212) 378-3460

E-mail: Michael.J.Berg@bankofamerica.com

 

All written notices shall be conclusively deemed to have been properly given or made when duly delivered, if delivered in person or by overnight delivery service, or on the third (3 rd ) Business Day after being deposited in the mail, if mailed in accordance herewith, or upon transmission by the receiving party of a facsimile confirming receipt, if delivered by facsimile. Notwithstanding the foregoing, any notice of termination shall be deemed effective upon receipt.

 

(b) All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder which are not required to be in writing may also be provided electronically either (i) as an electronic mail sent and addressed to the respective parties hereto at their respective electronic mail addresses set forth below, or as to any such party, at such other electronic mail address as may be designated by it in a notice to the other or (ii) with respect to Lender, via a posting of such notice on Lender’s customer website(s).

 

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If to Borrower: The email address(es) specified in the Loan Terms Letter, if any.

 

If to Lender: Adam.Gadsby@baml.com, Adam.Robitshek@baml.com, Eileen.Albus@baml.com and Michael.J.Berg@bankofamerica.com.

 

14.12 Governing Law . This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of laws (other than Section 5-1401 of the New York General Obligations Law).

 

14.13 Submission to Jurisdiction; Service of Process; Waivers . All legal actions between or among the parties regarding this Agreement, including, without limitation, legal actions to enforce this Agreement or because of a dispute, breach or default of this Agreement, shall be brought in the federal or state courts located in New York County, New York, which courts shall have sole and exclusive in personam, subject matter and other jurisdiction in connection with such legal actions. The parties hereto irrevocably consent and agree that venue in such courts shall be convenient and appropriate for all purposes and, to the extent permitted by law, waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same. The parties hereto further irrevocably consent and agree that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to its address set forth in Section 14.11(a) , and that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.

 

14.14 Waiver of Jury Trial . Each of Borrower and Lender hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement, any other Loan Document or the transactions contemplated hereby or thereby.

 

14.15 Counterparts . This Agreement may be executed in any number of counterparts by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

 

14.16 Headings . The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning or interpretation of any provisions hereof.

 

14.17 Confidential Information . To effectuate this Agreement, Lender and Borrower may disclose to each other certain confidential information relating to the parties’ operations, computer systems, technical data, business methods, and other information designated by the disclosing party or its agent to be confidential, or that should be considered confidential in nature by a reasonable person given the nature of the information and the circumstances of its disclosure (collectively the “Confidential Information” ). Confidential Information can consist of information that is either oral or written or both, and may include, without limitation, any of the following: (i) any reports, information or material concerning or pertaining to businesses, methods, plans, finances, accounting statements, and/or projects of either party or their affiliated or related entities; (ii) any of the foregoing related to the parties or their related or affiliated entities and/or their present or future activities and/or (iii) any term or condition of any agreement (including this Agreement) between either party and any individual or entity relating to any of their business operations. With respect to Confidential Information, the parties hereby agree, except as otherwise expressly permitted in this Agreement:

 

(a) not to use the Confidential Information except in furtherance of this Agreement;

 

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(b) to use reasonable efforts to safeguard the Confidential Information against disclosure to any unauthorized third party with the same degree of care as they exercise with their own information of similar nature; and

 

(c) not to disclose Confidential Information to anyone other than employees, agents or contractors with a need to have access to the Confidential Information and who are bound to the parties by like obligations of confidentiality, except that the parties shall not be prevented from using or disclosing any of the Confidential Information which: (i) is already known to the receiving party at the time it is obtained from the disclosing party; (ii) is now, or becomes in the future, public knowledge other than through wrongful acts or omissions of the party receiving the Confidential Information; (iii) is lawfully obtained by the party from sources independent of the party disclosing the Confidential Information and without confidentiality and/or non-use restrictions; or (iv) is independently developed by the receiving party without any use of the Confidential Information of the disclosing party. Notwithstanding anything contained herein to the contrary, Lender may share any Confidential Information of Borrower with an Affiliate of Lender for any valid business purpose, such as, but not limited to, to assist an Affiliate in evaluating a current or potential business relationship with Borrower.

 

In addition, the Loan Documents and their respective terms, provisions, supplements and amendments, and transactions and notices thereunder (other than the tax treatment and tax structure of the transactions), are proprietary to Lender and shall be held by Borrower in strict confidence and shall not be disclosed to any third party without the consent of Lender except for (i) disclosure to Borrower’s direct and indirect parent companies, directors, attorneys, agents or accountants, provided that such attorneys or accountants likewise agree to be bound by this covenant of confidentiality, or are otherwise subject to confidentiality restrictions; (ii) upon prior written notice to Lender, disclosure required by law, rule, regulation or order of a court or other regulatory body; (iii) upon prior written notice to Lender, disclosure to any approved hedge counterparty to the extent necessary to obtain any hedging hereunder, (iv) any disclosures or filing required under Securities and Exchange Commission ( “SEC” ) or state securities’ laws; or (vi) the tax treatment and tax structure of the transactions, which shall not be deemed confidential; provided that in the case of (ii), (iii), and (iv), Borrower shall take reasonable actions to provide Lender with prior written notice; provided further that in the case of (iv), Borrower shall not file any of the Loan Documents other than the Agreement with the SEC or state securities office unless Borrower has (x) provided at least fifteen (15) days (or such lesser time as may be demanded by the SEC or state securities office) prior written notice of such filing to Lender, and (y) redacted all pricing information and other commercial terms to the extent permitted.

 

If any party or any of its successors, Subsidiaries, officers, directors, employees, agents and/or representatives, including, without limitation, its insurers, sureties and/or attorneys, breaches its respective duty of confidentiality under this Agreement, the nonbreaching party(ies) shall be entitled to all remedies available at law and/or in equity, including, without limitation, injunctive relief.

 

14.18 Tax Treatment . Each party to this Agreement acknowledges that it is its intent, solely for purposes of United States federal, state and local income and franchise taxes, and not for bankruptcy or any other purpose, to treat the Advance as indebtedness of Borrower that is secured by the Pledged Mortgage Loans and that the Pledged Mortgage Loans are owned by Borrower in the absence of an Event of Default by Borrower. All parties to this Agreement agree to such treatment and agree to take no action inconsistent with this treatment, unless required by law.

 

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14.19 Examination and Oversight by Regulators . Borrower agrees that the transactions with Lender under this Agreement may be subject to regulatory examination and oversight, including, without limitation, examination and oversight by the Office of the Comptroller of the Currency ( “OCC” ). Borrower shall comply with all regulatory requirements of Lender and Borrower shall grant regulatory agencies, including, but not limited to, the OCC, the right to audit the books and records of Borrower in order to monitor or verify Borrower’s performance under and compliance with the terms of this Agreement.

 

(Signature page to follow)

 

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

 

    BANK OF AMERICA, N.A., as Lender
       
    By: /s/ Adam Robitshek
    Name: Adam Robitshek
    Title: Vice President
     
    FIVE OAKS ACQUISITION CORP.,
    as Borrower
       
    By: /s/ Darren Comisso
    Name: Darren Comisso
    Title: Executive Vice President

 

Signature Page to Loan and Security Agreement

 

 
 

 

EXHIBIT A

 

GLOSSARY OF DEFINED TERMS

 

Ability to Repay Rule : 12 CFR 1026.43(c), including all applicable official staff commentary.

 

Accepted Servicing Practices : With respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.

 

Accrued Interest : Shall have the meaning specified in Section 2.6(a) of this Agreement.

 

Advance : Shall have the meaning specified in Section 2.1 of this Agreement.

 

Advance Date : The date on which an Advance is made hereunder. If the Advance is paid by wire transfer, the Advance Date shall be the date such funds are wired. If the Advance is paid by a cashier’s check, the Advance Date shall be the date such check is issued by the bank. If the Advance is paid by a funding draft, the Advance Date shall be the date that the draft is posted by the bank on which the draft is drawn.

 

Affiliate : With respect to any specified entity, any other entity controlling or controlled by or under common control with such specified entity. For the purposes of this definition, “control” when used with respect to a specified entity means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Agency : Fannie Mae, Freddie Mac or Ginnie Mae, as applicable.

 

Applicable Interest Rate : With respect to any date of determination, the greater of (i) LIBOR, and (ii) the LIBOR Floor. It is understood that the Applicable Interest Rate shall be adjusted on a daily basis.

 

Approved Investor : A Person, mutually agreed upon between Borrower and Lender, who shall purchase any Pledged Mortgage Loans from Borrower.

 

Asset Data Record : The data tape setting forth information regarding the Mortgage Loans intended to be sold to Borrower and subject to the Advance that is prepared by Bank of America, N.A. and delivered to Borrower in an electronic format prior to the Advance Date.

 

Assignment : A duly executed assignment to Lender in recordable form of a Pledged Mortgage Loan, of the indebtedness secured thereby and of all documents and rights related to such Pledged Mortgage Loan.

 

Bailee Agreement : A bailee agreement or bailee letter that is in a form acceptable to Lender.

 

Bankruptcy Code : Title 11 of the United States Code, now or hereafter in effect, as amended, or any successor thereto.

 

Borrowing Base Deficiency : A borrowing base deficiency, as defined and described in Section 6.11 of this Agreement.

 

Business Day : Any day, excluding Saturday, Sunday and any day that is a legal holiday under the laws of the State of New York and the State of California or as may otherwise be published on Lender’s website(s).

  

Exhibit A- 1
 

 

Cash Equivalents : Any (a) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and Eurodollar time deposits with maturities of ninety (90) days or less from the date of acquisition and overnight bank deposits of any commercial bank having capital, surplus and retained earnings in excess of $70,000,000, (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least “A-1” or the equivalent thereof by S&P or “p-1” or the equivalent thereof by Moody’s and in either case maturing within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least “A” by S&P or “A” by Moody’s, (f) securities with maturities of ninety (90) days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition, or (g) shares of money market, mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.

 

Change of Control : Change of Control shall mean any of the following with respect to any Person:

 

(a) if such Person is a corporation, any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” )), other than a trustee or other fiduciary holding securities of Borrower under an employee benefit plan of such Person, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of such Person representing 50% or more of (A) the outstanding shares of common stock of such Person or (B) the combined voting power of such Person’s then-outstanding securities;

 

(b)      if such Person is a legal entity other than a corporation, the majority voting control of such Person, or its equivalent, under such Person’s governing documents is transferred to any Person;

 

(c)      such Person is party to a merger or consolidation, or series of related transactions, which results in the voting securities or majority voting control interest of such Person outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities or a majority voting controlling interest of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities or majority voting control interest of such Person or such surviving or other entity outstanding immediately after such merger or consolidation;

 

(d)      the sale or disposition of all or substantially all of such Person’s assets (or consummation of any transaction, or series of related transactions, having similar effect);

 

(e)      there occurs a change in the composition of the Board of Directors or governing body of such Person within a six (6) month period, as a result of which fewer than a majority of the directors or governing body members are incumbent; provided, however, that this provision (e) shall not apply in the event that the composition of the Board of Directors or governing body changes as a result of such Person availing itself of the public or private debt or equity markets;

 

(f)      the dissolution or liquidation of such Person; or

 

(g)     any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing.

 

Exhibit A- 2
 

 

COBRA : As defined in Section 8.1(l) of this Agreement.

 

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

 

Collateral : As defined and described in Section 6.1 of this Agreement.

 

Collateral Value : With respect to each Pledged Mortgage Loan on any date of determination, an amount equal to the following, as the same may be reduced in accordance with Section 4.3 : the product of the related Type Collateral Percentage and the least of: (i) the Market Value of such Pledged Mortgage Loan; (ii) the unpaid principal balance of such Pledged Mortgage Loan; (iii) the purchase price paid by Borrower for such Pledged Mortgage Loan; and (iv) the Takeout Price committed by the related Approved Investor, if applicable.

 

Contingent Obligations : As of any date of determination, with respect to any Person, any obligation of such Person arising from an existing condition or situation that involves uncertainty as to outcome and that will be resolved by the occurrence or nonoccurrence of some future event, including, without limitation, any obligation guaranteeing or intended to guarantee any Debt, leases, dividends or other obligations of any other Person in any manner, whether directly or indirectly; provided; however, that endorsements of instruments for deposit or collection in the ordinary course of business shall not be included. With respect to guarantees, the amount of the Contingent Obligation shall be equal to the stated or determinable amount of the primary obligation in respect of the guarantee or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined by Lender.

 

Co-op Corporation : With respect to any Co-op Loan, the cooperative apartment corporation that holds legal title to the related Co-op Project and grants occupancy rights to units therein to stockholders through Proprietary Leases or similar arrangements.

 

Co-op Loan : A Mortgage Loan that is secured by a first lien on and a perfected security interest in Co-op Shares and the related Proprietary Lease granting exclusive rights to occupy the related Co-op Unit in the building owned by the related Co-op Corporation.

 

Co-op Project : With respect to any Co-op Loan, all real property and improvements thereto and rights therein and thereto owned by a Co-op Corporation including without limitation the land, separate dwelling units and all common elements.

 

Co-op Shares : With respect to any Co-op Loan, the shares of stock issued by a Co-op Corporation and allocated to a Co-op Unit and represented by a Stock Certificate.

 

Co-op Unit : The specific dwelling unit relating to a Co-op Loan.

 

Cumulative Equity Proceeds : As of any date of determination, the aggregate amount of all cash received on or prior to such date of determination by Guarantor and its Subsidiaries in respect of any issuance of Equity effected after Effective Date net of expenses incurred by Guarantor and its Subsidiaries in connection therewith.

 

Custodial Account : The account described in Section 6.10 of this Agreement.

 

Custodial Agreement : The Custodial Agreement (if any) executed among Lender, Borrower and Custodian with respect to this Agreement, as the same shall be modified and supplemented and in effect from time to time.

 

Custodian : Wells Fargo Bank, National Association, or such other custodian selected by Lender.

 

Exhibit A- 3
 

 

Debt : As of any date of determination, with respect to any Person, the debt of such Person consisting of, without duplication: (a) indebtedness for borrowed money, including principal, interest, fees and other charges; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations to pay the deferred purchase price of property or services; (d) obligations as lessee under leases that shall have been or should be in accordance with GAAP, recorded as capital leases; (e) obligations secured by any lien upon property or assets owned by such Person, even though such Person has not assumed or become liable for payment of such obligations; (f) obligations in connection with any letter of credit issued for the account of such Person; (g) obligations under direct or indirect guarantees in respect of and obligations, contingent or otherwise, to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to above; and (h) all Contingent Obligations.

 

Debt-to-Equity Ratio : As of any date of determination, with respect to any Person, a ratio equal to (i) the Debt of such Person, divided by (ii) the Equity of such Person.

 

Default Rate : As set forth in the Loan Terms Letter.

 

Deficiency Notice : A deficiency notice, as defined and described in Section 6.11 of this Agreement.

 

Effective Date : That effective date set forth in the Loan Terms Letter.

 

Electronic Tracking Agreement : An Electronic Tracking Agreement in a form acceptable to Lender.

 

Eligible Bank : Either (i) Lender, or (ii) a bank selected by Borrower and approved by Lender in writing and authorized to conduct trust and other banking business in any state in which Borrower conducts operations.

 

Eligible Mortgage Loan : A Mortgage Loan that meets the eligibility criteria set forth in the Loan Terms Letter.

 

Equity : As of any date of determination, with respect to any Person, the common stock and retained earnings of such Person, determined in accordance with GAAP, as reported on such Person’s balance sheet.

 

ERISA : The Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute.

 

ERISA Affiliate : Any person (as defined in section 3(9) of ERISA) that together with Borrower or any of its Subsidiaries would be a member of the same “controlled group” within the meaning of Section 414(b), (m), (c) and (o) of the Internal Review Code of 1986, as amended.

 

Event of Default : Any of the conditions or events set forth in Section 11.1 .

 

Executive Management : Borrower’s or any Guarantor’s (i) chairman of the board of directors, (ii) chief executive officer, (iii) president, (iv) chief financial officer, (v) chief operations officer and (vi) Head of Aggregation and Securitization of Mortgage Loans.

 

Existing Debt : Debt of Borrower existing on the date of this Agreement, as set forth on Schedule 2 hereto.

 

Extended Maturity Date : Shall mean any date selected by Borrower and Lender in connection with the extension of the term of this Agreement.

 

Exhibit A- 4
 

 

Fannie Mae : The Federal National Mortgage Association and any successor thereto.

 

Fannie Mae Guide : The Fannie Mae MBS Selling and Servicing Guide, as such guide may hereafter from time to time be amended.

 

Foreign Lender : As defined in Section 12.3(c) of this Agreement.

 

Freddie Mac : The Federal Home Loan Mortgage Corporation and any successor thereto.

 

GAAP : Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession and that are applicable to the circumstances as of the date of determination.

 

Ginnie Mae : Government National Mortgage Association or any successor thereto.

 

Governmental Authority : With respect to any Person, any nation or government, any state or other political subdivision, agency or instrumentality thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person, any of its Subsidiaries or any of its properties.

 

Guaranty : A guaranty signed by a Guarantor in favor of Lender, in a form acceptable to Lender.

 

Guarantor : As set forth in the Loan Terms Letter, if any.

 

Handbook : The guide prepared by Lender containing additional policies and procedures, as same may be amended from time to time.

 

Income : With respect to any Pledged Mortgage Loan at any time, any principal and/or interest thereon and all Proceeds and other collections and distributions thereon.

 

Indemnified Party or Indemnified Parties : As defined in Section 12.1 of this Agreement.

 

Insolvency Event : The occurrence of any of the following events:

 

(a)      such Person shall become insolvent or generally fail to pay, or admit in writing its inability to pay, its debts as they become due, or shall voluntarily commence any proceeding or file any petition under any bankruptcy, insolvency or similar law or seeking dissolution, liquidation or reorganization or the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial portion of its property, assets or business or to effect a plan or other arrangement with its creditors, or shall file any answer admitting the jurisdiction of the court and the material allegations of an involuntary petition filed against it in any bankruptcy, insolvency or similar proceeding, or shall be adjudicated bankrupt, or shall make a general assignment for the benefit of creditors, or such Person, or a substantial part of its property, assets or business, shall be subject to, consent to or acquiesce in the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial property, assets or business;

 

(b)     corporate action shall be taken by such Person for the purpose of effectuating any of the foregoing;

 

(c)      an order for relief shall be entered in a case under the Bankruptcy Code in which such Person is a debtor; or

 

Exhibit A- 5
 

 

(d)      involuntary proceedings or an involuntary petition shall be commenced or filed against such Person under any bankruptcy, insolvency or similar law or seeking the dissolution, liquidation or reorganization of such Person or the appointment of a receiver, trustee, custodian, conservator or liquidator for such Person or of a substantial part of the property, assets or business of such Person, or any writ, order, judgment, warrant of attachment, execution or similar process shall be issued or levied against a substantial part of the property, assists or business of such Person, and such proceeding or petition shall not be dismissed, or such execution or similar process shall not be released, vacated or fully bonded, within sixty (60) days after commencement, filing or levy, as the case may be.

 

Insurer : A private mortgage insurer, which is acceptable to Lender.

 

Jumbo Mortgage Loan : Unless defined otherwise in the Loan Terms Letter, a first lien mortgage loan or Co-op Loan that is acquired by Borrower pursuant to the Mortgage Loan Purchase Agreement and subject to this Agreement.

 

Lender’s Correspondent Guidelines : The standards, procedures and guidelines of Lender and its Affiliates for underwriting Mortgage Loans, a copy of which has been made available to Borrower.

 

LIBOR : The daily rate per annum (rounded to three (3) decimal places) for one-month U.S. dollar denominated deposits as offered to prime banks in the London interbank market, as published on the Official ICE LIBOR Fixings page by Bloomberg or in the Wall Street Journal as of the date of determination; provided, that if Lender determines that any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof, or any circumstance materially and adversely affecting the London interbank market, shall make it unlawful, impractical or commercially unreasonable for Lender to make Advances as contemplated by this Agreement using LIBOR, then Lender may, in addition to its rights under Section 4.4 herein, select an alternative rate of interest or index in its discretion which alternative rate shall be substantially similar to those rates implemented by Buyer in substantially similar facilities as this Agreement.

 

LIBOR Floor : As defined in the Loan Terms Letter.

 

Lien : Any mortgage, lien, pledge, charge, security interest or similar encumbrance.

 

Linked Transactions : Those transactions identified in Guarantor’s financial statements as forward purchase (derivative) contracts where the initial transfer of a financial asset and contemporaneous repurchase financing of such mortgage-backed security with the same counterparty is considered part of the same arrangement.

 

Liquidity : As of any date of determination, the sum of Borrower’s unrestricted and unencumbered cash and Cash Equivalents exclusive of funds held due to a Borrowing Base Deficiency. By way of example but not limitation, cash in escrow and/or impound accounts shall not be included in this calculation.

 

Loan Documents : This Agreement, the Note, the Loan Terms Letter, the Custodial Agreement, the Electronic Tracking Agreement, the Guaranty (if any), each Servicing Agreement Side Letter and all other documents and instruments evidencing the Advance, as same may from time to time be supplemented, modified or amended, and any other agreement entered into between Lender and Borrower in connection herewith or therewith.

 

Loan Terms Letter : The document executed by Lender, Borrower and Guarantor, referencing this Agreement and setting forth certain specific terms, and any additional terms, with respect to this Agreement.

 

Exhibit A- 6
 

 

Mandatory Prepayment Event : Any of the conditions or events set forth in Section 4.2 of this Agreement.

 

Market Value : With respect to a Mortgage Loan, the lesser of (i) the outstanding principal balance of the Mortgage Loan, (ii) the committed purchase price of the Mortgage Loan, and (iii) the fair market value of the Mortgage Loan as determined by Lender in its sole discretion without regard to any market value assigned to such Mortgage Loan by Borrower. Lender’s determination of Market Value shall be conclusive upon the parties, absent manifest error on the part of Lender. At no time and in no event will the Market Value of a Pledged Mortgage Loan be greater than the Market Value of such Pledged Mortgage Loan on the Advance Date. Any Mortgage Loan that is not an Eligible Mortgage Loan shall have a Market Value of zero.

 

Material Adverse Effect : Any of the following: (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or condition (financial or otherwise) of Borrower, Guarantor or any of their respective Subsidiaries or Affiliates that is a party to any Loan Document taken as a whole; (b) a material impairment of the ability of Borrower, Guarantor or any of their respective Subsidiaries or Affiliates that is a party to any Loan Document to perform under any Loan Document and to avoid any Event of Default; (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Loan Document against Borrower, Guarantor or any of their respective Subsidiaries or Affiliates that is a party to any Loan Document; (d) a material adverse effect on the rights and remedies of Lender under any of the Loan Documents; or (e) a material adverse effect on the marketability, collectability, value or enforceability of a material portion of the Pledged Mortgage Loans, in each case as determined by Lender in its sole good faith discretion.

 

Maturity Date : Shall mean, (a) the Maturity Date set forth in the Loan Terms Letter, or (b) or in the event that Borrower and Lender exercise the option to extend this Agreement, the Extended Maturity Date.

 

Maximum Credit : The maximum principal amount of the Advance that may be outstanding at any one time, as set forth in the Loan Terms Letter.

 

Maximum Dwell Time : The maximum number of days such Pledged Mortgage Loan can be subject to the Advance, as set forth in the Loan Terms Letter.

 

Moody’s : Moody’s Investors Service, Inc. or any successors thereto.

 

Mortgage : A first-lien or second-lien mortgage, deed of trust, security deed or similar instrument on either (i) with respect to a Mortgage Loan other than a Co-op Loan, improved real property or (ii) with respect to a Co-op Loan, the Proprietary Lease and related Co-op Shares.

 

Mortgage Loan : A Jumbo Mortgage Loan, as further specified in the Loan Terms Letter.

 

Mortgage Loan Documents : With respect to each Mortgage Loan, the related documents in the Mortgage Loan File.

 

Mortgage Loan File : With respect to each Mortgage Loan, as defined in the Custodial Agreement.

 

Mortgage Loan Purchase Agreement : Those certain Flow Sale and Interim Servicing Agreements and Mortgage Loan Flow Purchase, Sale and Servicing Agreements and the related Assignment, Assumption and Recognition Agreements (each as amended, supplemented or otherwise modified and in effect from time to time), by and among the Lender, the Borrower and the applicable Originator/Seller as set forth on Schedule 3 hereto.

 

Exhibit A- 7
 

 

Mortgage Note : A promissory note secured by a Mortgage and evidencing a Mortgage Loan.

 

Mortgaged Property : (a) With respect to each Mortgage Loan, the Mortgagor’s real property securing repayment of the debt evidenced by the related Mortgage Note, and (b) with respect to each Co-op Loan, the Co-op Shares and Proprietary Lease.

 

Mortgagor : The obligor of a Mortgage Loan.

 

Multiemployer Plan : A multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

 

Net Income : For any period, the net income of any Person for such period as determined in accordance with GAAP.

 

Net Worth : With respect to any Person, the excess of total assets of such Person, over total liabilities of such Person, determined in accordance with GAAP.

 

Note : Shall mean the promissory note provided for by Section 2.2(a) of this Agreement for the Advance and any promissory note delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time.

 

Originator/Seller : The entities listed as “Company” or “Seller” under the applicable Mortgage Loan Purchase Agreements.

 

Other Mortgage Loan Documents : In addition to the Mortgage Loan Documents, with respect to any Pledged Mortgage Loan, the following: (i) the original recorded Mortgage, if not included in the Mortgage Loan Documents; (ii) a copy of the preliminary title commitment showing the policy number or preliminary attorney’s opinion of title and the original policy of mortgagee’s title insurance or unexpired commitment for a policy of mortgagee’s title insurance, if not included in the Mortgage Loan Documents; (iii) the original of any assumption, modification, consolidation or extension agreements, with evidence of recording thereon or copies stamp certified by an authorized officer of Borrower to have been sent for recording, if any; (viii) copies of each instrument necessary to complete identification of any exception set forth in the exception schedule in the title policy; (ix) the loan application; (x) verification of the Mortgagor’s employment and income, if applicable; (xi) verification of the source and amount of the downpayment; (xii) credit report on Mortgagor; (xiii) appraisal of the Mortgaged Property; (xiv) the original executed disclosure statement; (xv) Tax receipts, insurance premium receipts, ledger sheets, payment records, insurance claim files and correspondence, current and historical computerized data files, underwriting standards used for origination and all other related papers and records; (xvi) the original of any guarantee executed in connection with the Mortgage Note (if any); (xvii) the original of any security agreement, chattel mortgage or equivalent document executed in connection with the Mortgage; (xviii) all copies of powers of attorney or similar instruments, if applicable and (xix) all other documents relating to the Pledged Mortgage Loan.

 

Other Taxes : As defined in Section 12.3(a) .

 

Payment Date : The fifth (5 th ) day of each month, or if such date is not a Business Day, the Business Day immediately succeeding the fifth (5 th ) day of the month; provided , however , Lender may change the Payment Date from time to time upon thirty (30) days prior notice to Borrower.

 

PBGC : The Pension Benefit Guaranty Corporation and any successor thereto.

 

Person : Includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

 

Exhibit A- 8
 

 

Plan : Any Multiemployer Plan or single-employer plan as defined in section 4001 of ERISA, that is maintained and contributed to by (or to which there is an obligation to contribute of), or at any time during the five (5) calendar years preceding the date of this Agreement was maintained or contributed to by (or to which there is an obligation to contribute of), Borrower or by a Subsidiary of Borrower or an ERISA Affiliate.

 

Pledged Mortgage Loan : A Mortgage Loan that has been pledged by Borrower to Lender in connection with the Advance.

 

Potential Default : The occurrence of any event or existence of any condition that, but for the giving of notice, the lapse of time, or both, would constitute an Event of Default.

 

Power of Attorney : A power of attorney, substantially in the form attached hereto as Exhibit F .

 

Proceeds : The meaning set forth in Section 9-102(a) of the Uniform Commercial Code.

 

Property Charges : All taxes, fees, assessments, water, sewer and municipal charges (general or special) and all insurance premiums, leasehold payments or ground rents.

 

Proprietary Lease : The lease on a Co-op Unit evidencing the possessory interest of the owner of the Co-op Shares in such Co-op Unit.

 

QM Rule : 12 CFR 1026.43(e), including all applicable official staff commentary.

 

Qualified Mortgage : A Mortgage Loan that satisfies the criteria for a “qualified mortgage” as set forth in the QM Rule.

 

Recognition Agreement : An agreement among a Co-op Corporation, a lender and a Mortgagor with respect to a Co-op Loan whereby such parties (i) acknowledge that such lender may make, or intends to make, such Co-op Loan, and (ii) make certain agreements with respect to such Co-op Loan.

 

Release Amount : That portion of the Advance equal to the Collateral Value of a Pledged Mortgage Loan determined as of the Advance Date (less any cash or other amounts applied to reduce the Advance for such Pledged Mortgage Loan) together with all related Accrued Interest thereon.

 

Repayment Amount : An amount equal to (a) the sum of (i) the related outstanding Advance, (ii) the unpaid Accrued Interest due pursuant to Section 2.6 as of the date of such determination, and (iii) any applicable fees, expenses and indemnities owed to Lender under the Note or the other Loan Documents less (b) the amount of any cash transferred by the Borrower to Lender pursuant to Section 6.11 of this Agreement.

 

Reportable Event : An event described in Section 4043(b) of ERISA with respect to a Plan as to which the thirty (30) days’ notice requirement has not been waived by the PBGC.

 

S&P : Standard & Poor’s Ratings Services, or any successor thereto.

 

Secured Obligations : As defined in Section 6.1 of this Agreement.

 

Servicer : Bank of America, N.A., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and PHH Mortgage Corporation or such other entities responsible for servicing or subservicing, as the case may be, the Pledged Mortgage Loans and that have been approved by Lender in writing, or, in each case, any successor or permitted assigns thereof.

 

Exhibit A- 9
 

 

Servicing Agreement : If the Pledged Mortgage Loans are serviced by any third party servicer, the agreement with that third party in form and substance acceptable to Lender.

 

Servicing Agreement Side Letter : (i) Servicing Agreement Side Letter, dated as of the date hereof, by and among Lender, Borrower and PHH Mortgage Corporation and (ii) Subservicing Agreement Side Letter, dated as of the date hereof, by and among Lender, Borrower and PHH Mortgage Corporation, and in each case, all amendments, modifications and supplements thereto.

 

Servicing Records : All servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of a Mortgage Loan.

 

Servicing Rights : The contractual, possessory or other rights of Borrower, the applicable Servicer or any other Person, whether arising under a servicing agreement, the Custodial Agreement or otherwise, to administer or service a Mortgage Loan or to possess related Servicing Records.

 

Stock Certificates : The certificates evidencing ownership of the Co-op Shares issued by the Co-op Corporation.

 

Subordinated Debt : Debt of Borrower that either (i) has been subordinated to Lender as provided in this Agreement or (ii) that has been otherwise approved by Lender.

 

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

 

Takeout Price : The purchase price to be paid for a Pledged Mortgage Loan by the related Approved Investor.

 

Takeout Shortfall : As defined in Section 4.6 of this Agreement.

 

Tangible Net Worth : As of any date of determination, (i) the Net Worth of Borrower and its consolidated Subsidiaries, on a combined basis, determined in accordance with GAAP, minus (ii) all intangibles determined in accordance with GAAP (including, without limitation, goodwill, capitalized financing costs and capitalized administration costs but excluding originated and purchased mortgage servicing rights) and any and all advances to, investments in and receivables held from Affiliates, and minus (iii) loans held for investment and real estate owned properties net of acceptable financing (financing must be deemed acceptable by Lender in its sole discretion).

 

Taxes : As defined in Section 12.3(a) of this Agreement.

 

Termination Date : The earliest to occur of (i) the Maturity Date, (ii) at Lender’s option, upon the occurrence of an Event of Default, or (iii) the date on which this Agreement shall terminate in accordance with the provisions hereof or by operation of law.

 

Exhibit A- 10
 

 

Total Adjusted Assets : As of any date of determination, the sum of (i) the total assets of Borrower on any given date of determination, to be determined in accordance with GAAP consistent with those applied in the preparation of Borrower’s financial statements, plus (ii) the gross fair value of securities related to Linked Transactions, minus (iii) the net value of Linked Transactions.

 

Total Adjusted Liabilities : As of any date of determination, the sum of (i) the total liabilities of Borrower on any given date of determination, to be determined in accordance with GAAP consistent with those applied in the preparation of Borrower’s financial statements, plus (ii) to the extent not already included under GAAP, the total aggregate outstanding amount owed by Borrower under any purchase, repurchase, refinance or other similar credit arrangements, plus (iii) to the extent not already included under GAAP, any “off balance sheet” purchase, repurchase, refinance or other similar credit arrangements, plus (iv) the gross amount of repurchase financing related to Linked Transactions, minus (v) non-recourse debt.

 

Type : A specific type of Pledged Mortgage Loan, as set forth in the Loan Terms Letter.

 

Type Collateral Percentage : With respect to each Type of Pledged Mortgage Loan, the corresponding collateral percentage for such Type, as set forth in the Loan Terms Letter.

 

Type Margin : With respect to each Type of Pledged Mortgage Loan, the corresponding annual rate of interest for such Type as set forth in the Loan Terms Letter that shall be added to the Applicable Interest Rate to determine the annual rate of interest for the Advance.

 

Type Sublimit : Any of the applicable Type Sublimits, as set forth in the Loan Terms Letter.

 

Uniform Commercial Code : The Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.

 

Wire Transfer Advice : In connection with each wire transfer to be made to Lender by Borrower or an Approved Investor, a written or electronic notification setting forth (a) the loan number assigned by Borrower or last name of the Mortgagor for each Mortgage Loan that is related to the Advance in connection with which a payment is being made; (b) the amount of the wire transfer to be applied in the Advance; and (c) the total amount of the wire.

 

Exhibit A- 11
 

 

EXHIBIT B

 

FORM OF PROMISSORY NOTE

 

$100,000,000  
July 18, 2014 New York, New York

 

 

FOR VALUE RECEIVED, Five Oaks Acquisition Corp., a Delaware corporation, ( “Borrower” ), hereby promises to pay to the order of Bank of America, N.A. ( “Lender” ), at the principal office of Lender located at One Bryant Park – 11th floor, NY1-100-11-01, New York, New York 10036, in lawful money of the United States, and in immediately available funds, the principal sum of ONE HUNDRED MILLION ($100,000,000) (or such lesser amount as shall equal the unpaid principal amount of the Advance made by Lender to Borrower under the Loan Agreement), on the dates and in the principal amounts provided in the Loan Agreement, and to pay interest on the unpaid principal amount of such Advance, at such office, in like money and funds, for the period commencing on the date of such Advance until such Advance shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement.

 

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

 

This Note is the Note referred to in the Loan and Security Agreement, dated as of July 18, 2014 (as amended, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement” ), between Borrower and Lender, and evidences the Advance made by Lender thereunder. Terms used but not defined in this Note have the respective meanings assigned to them in the Loan Agreement.

 

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

 

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

 

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

 

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

 

Exhibit B- 1
 

 

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

 

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

 

  Five Oaks Acquisition Corp. , as Borrower
     
  By:  
  Name:
  Title:

 

Exhibit B- 2
 

 

SCHEDULE OF ADVANCES

 

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

  

Date Made Principal Amount
of Loan 		Amount Paid
or Prepaid 		Unpaid Principal
Amount 		Notation
Made by
         

 

Exhibit B- 3
 

 

EXHIBIT C

 

FORM OF SECRETARY’S CERTIFICATE

 

I, _______________________, am the duly elected Secretary of Five Oaks Acquisition Corp. ( “Company” ), and I hereby certify that:

 

1. Each of the persons listed below has been duly elected to and now holds the office of the Company set forth opposite his or her name and is currently serving, in such capacity, and the signature of each such person set forth opposite his or her title is his or her true and genuine signature:

 

Name      Office      Signature
         
         
         
         
         
         
         
         
         

 

2. Attached hereto as Exhibit A is a true and complete copy of the Articles of Incorporation of the Company (or its equivalent if the Company is not a corporation), as in full force and effect. No amendment or other document relating to or affecting the Articles of Incorporation (or its equivalent) has been filed in the office of the Secretary of State of incorporation or formation and no action has been taken by the Company or its shareholders, directors or officers in contemplation of the filing of any such amendment or other documents and no proceedings therefore have occurred;

 

3. Attached hereto as Exhibit B is a true and complete copy of the By-laws of the Company (or its equivalent if the Company is not a corporation), as in full force and effect, and such By-laws (or its equivalent) have not been amended, except for amendments included in the copy attached hereto; and

 

4. Attached hereto as Exhibit C is true and complete copy of the resolutions duly and validly adopted either at a special or regular meeting or by unanimous consent that apply to the Loan and Security Agreement between the Company and Bank of America, N.A., and such resolutions have not been amended, modified or rescinded in any respect and remain in full force and effect without modification or amendment as of the date hereof.

 

Dated:     By:   
        Secretary

 

Exhibit C- 1
 

 

EXHIBIT D

 

FORM OF RESOLUTIONS

 

WHEREAS, Five Oaks Acquisition Corp. (the “Company” ) desires to obtain financing for its purchase of mortgage loan (the “Advance” ) in an aggregate amount not to exceed the Maximum Credit with Bank of America, N.A. ( “Lender” ) pursuant to a Loan and Security Agreement substantially in the form attached hereto (the “Agreement” ).

 

NOW, THEREFORE, IT IS RESOLVED BY THE BOARD OF DIRECTORS (OR ITS EQUIVALENT) OF THE COMPANY THAT:

 

1. Company is hereby authorized and directed to enter into and execute each of the following documents:

 

(a) the Agreement between Company and Lender, attached hereto; and

 

(b) any and all other agreements and documents in connection with the Advance,

 

2. Any one of the following officers are separately and independently authorized and directed to execute and deliver the Agreement and any and all other agreements and documents related to the Advance, and to do any and all things which he or she may deem necessary or desirable in connection with the Advance, including approving, executing and delivering any amendments or modifications to the Agreement.

 

Name/Title      Specimen Signature
     
     
     
     
     
     
     
     
     
     

 

3. Any one of the following officers, directors and/or employees is separately and independently authorized to take the following actions in connection with the Agreement and Advance: (a) request an Advance; (b) sign receipts acknowledging delivery of funds and documents from Lender; (c) request and effect transfers of funds; and (d) ship and release documents to Lender:

 

Name/Title   Specimen Signature   Restrictions, if any
         
         
         
         
         
         
         
         

 

Exhibit D- 1
 

 

I, ___________________, being the Secretary of Borrower, hereby certify that the foregoing is a true copy of the Resolutions duly adopted by the Board of Directors (or its equivalent) of Borrower, effective as of _________________, which is in full force and effect on this date and does not conflict with Borrower’s governing documents.

 

 

By:    
     
Name:       

 

Tile:  Secretary  

 

Exhibit D- 2
 

 

EXHIBIT E

 

FORM OF OFFICER’S CERTIFICATE

 

Period:
[DATE]

 

OFFICER CERTIFICATE

 

 

Period Ending: [DATE]
Borrower Name: Five Oaks Acquisition Corp.
Guarantor Name: Five Oaks Investment Corp.

 

I, ___________________________, do hereby certify that I am the duly elected authorized Chief Financial Officer of Five Oaks Acquisition Corp. (“ Borrower ”) and Five Oaks Investment Corp. (“ Guarantor ”). This certificate in connection with Section 9.1(c) of the Loan and Security Agreement, dated as of July 18, 2014, by and between Borrower and Bank of America, N.A. (“ Bank of America ” or “ Lender ”) (as amended, supplemented or otherwise modified from time to time, the “ Agreement ”) and the Guaranty, dated as of July 18, 2014 by Five Oaks Investment Corp. (“ Guarantor ”) to and for the benefit of Bank of America. I do hereby certify that, as of the date of the financial statements attached hereto and as of the date hereof, Borrower and Guarantor are and have been in compliance with all the terms of the Agreement and Guaranty and, without limiting the generality of the foregoing, I certify that:

 

1. Representations and Warranties: The representations and warranties made by Borrower and Guarantor under the Agreement, Guaranty, and other Loan Documents (between Bank of America and Borrower and Bank of America and Guarantor) are accurate and true on and as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, including, without limitation, the following:

 

1.1.    Financial Condition: All financial statements of Borrower and Guarantor delivered to Bank of America fairly and accurately present the financial condition of the parties for whom such statements are submitted as of the date set forth therein. The financial statements of Borrower and Guarantor have been prepared in accordance with GAAP consistently applied throughout the periods involved, and there are no contingent liabilities not disclosed thereby that would adversely affect the financial condition of Borrower and/or Guarantor. Since the close of the period covered by the latest financial statement delivered to Bank of America with respect to Borrower and Guarantor, there has been no material adverse change in the assets, liabilities or financial condition of Borrower and Guarantor nor is Borrower or Guarantor aware of any facts that, with or without notice or lapse of time or both, would or could result in any such material adverse change. No event has occurred, including, without limitation, any litigation or administrative proceedings, and no condition exists or, to the knowledge of Borrower or Guarantor, is threatened, that (i) might render Borrower or Guarantor unable to perform its obligations under the Loan Documents and all other documents contemplated thereby; (ii) would constitute a Potential Default or Event of Default; or (iii) is reasonably likely to have a Material Adverse Effect with respect to Borrower or Guarantor.

 

Exhibit E- 1
 

 

1.2.    Solvency: The fair value of the assets of Borrower and Guarantor is greater than the fair value of the liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of Borrower and Guarantor, respectively, in accordance with GAAP) of Borrower and Borrower is and will be solvent, is and will be able to pay its debts as they mature and does not and will not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. Borrower does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Borrower and Guarantor are not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Borrower and Guarantor or any of its assets. Borrower and Guarantor are not transferring any Mortgage Loans with any intent to hinder, delay or defraud any of its creditors.

 

2. Compliance with Agreement and other Loan Documents: Borrower and Guarantor are in full compliance with all of the terms and provisions set forth in the Agreement, Guaranty and other Loan Documents on its part to be performed and observed, and no Event of Default or Potential Default has occurred and is continuing.

 

3. Compliance with Other Agreements: Borrower and Guarantor are in full compliance with all of the terms and provisions set forth in any agreements between Borrower or Guarantor, Bank of America and/or Bank of America affiliates on its part to be performed and observed, and no Event of Default or Potential Default has occurred and is continuing.

 

4. No Change in Executive Management: Other than as previously disclosed to Lender, no material change in the Executive Management has occurred.

 

5. Reserved.

 

6. No Changes in Structure of Borrower or Guarantor: Other than as previously disclosed to Lender, there has been no (i) change to the location of Borrower or Guarantor’s chief executive office/chief place of business from that specified in Section 8.1(t) of the Agreement, (ii) change in the name, identity or corporate structure (or the equivalent) of the Borrower or Guarantor or change in the location where Borrower or Guarantor maintains its records with respect to the Pledged Mortgage Loans or any Collateral, or (iii) reincorporation or reorganization of Borrower or Guarantor under the laws of another jurisdiction.

 

7. Escrow and Mortgage Insurance Proceeds: To the extent applicable, Borrower and Guarantor has segregated all escrow and mortgage insurance proceeds into an individual custodial account and is in compliance with all applicable laws.

 

8. Liabilities and Advances: Except as otherwise permitted under the Agreement, Borrower has not, either directly or indirectly, without the prior written consent of Bank of America, made any personal loans or advances to any officers, employees, shareholders, members, partners or owners of Borrower or any Guarantor in an aggregate amount exceeding ten percent (10%) of Borrower’s Tangible Net Worth. Except as otherwise permitted under the Agreement, Borrower has not incurred any additional material Debt without the prior written consent of Bank of America.

 

Exhibit E- 2
 

 

9. Regulatory Action: Borrower has not, either directly or indirectly, without the prior written consent of Bank of America, taken, or failed to take, any action that would cause Borrower to lose all or any part of its status as an eligible seller or mortgagee or willfully terminate its status as an eligible seller or mortgagee by an Agency or Government Authority without forty-five (45) days prior written notice to Bank of America.

 

10. Attachments: The following attachments and information contained therein are accurate and true in all respects and do not fail to include any information which is necessary to not make such attachments and the information contained therein misleading.

 

11. Capitalized Terms: All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Agreement, Guaranty and Loan Documents between Bank of America and Borrower and between Bank of America and Guarantor.

 

Exhibit E- 3
 

 

Officer Certificate for: Five Oaks Investment Corp. as of:

 

Financial Ratios: The following financial ratios are accurate and true and are calculated in accordance with the Agreement and Loan Documents between Bank of America and Borrower and Bank of America and Guarantor as of the date hereof:

 

Covenant Calculations                
Minimum Tangible Net Worth     %          
Total Equity             [INPUT]  
Less: Receivables Due from Officers, Employees, and Shareholders             [INPUT]  
Less: Other Intangibles not acceptable under GAAP             [INPUT]  
Less: Loans Held for Investment             [INPUT]  
Less: Real Estate Owned             [INPUT]  
Plus: Cumulative Equity Proceeds     50 %     [INPUT]  
Covenant TNW (a)             #VALUEl  
Liquidity     %          
Unrestricted and unencumbered cash and Cash Equivalents             [INPUT]  
Less: Funds Held due to Borrowing Base Deficiency             [INPUT]  
Actual Liquidity (b)             #VALUEl  
Total Assets             [INPUT]  
Plus: Gross Assets related to Linked Transactions             [INPUT]  
Less: Linked Transactions, Net             [INPUT]  
Total Adjusted Assets (c)             #VALUEl  
Minimum Liquidity: 3% of (c)     3 %        
Leverage                
Total Liabilities on Balance Sheet             [INPUT]  
Plus Gross Liabilities related to Linked Transactions             [INPUT]  
Plus Aggregate amount owned by borrower under any credit arrangement             [INPUT]  
Plus Any "off balance sheet" credit arrangements not included under GAAP             [INPUT]  
Less non-recourse debt             [INPUT]  
Adjusted Total Liabilities (d)             #VALUEI  
Covenant TNW (e)             #VALUEI  
Leverage Ratio (d/f)             #VALUEl  

 

Covenant Compliance   As of: 07/31/14
Minimum Ratio of Total Equity to Required Capital  
     

Minimum Tangible Net Worth:

The sum of (i) $150,000,000 plus (ii) 50% of Cumulative Equity Proceeds.

Cumulative Equity Proceeds: As of any date of determination, the aggregate amount of all cash received on or prior to such date of determination by Guarantor and its Subsidiaries in respect of any issuance of Equity effected after Effective Date net of expenses incurred by Guarantor and its Subsidiaries in connection therewith.

Tangible Net Worth: As of any date of determination, (i) the Net Worth of Borrower and its consolidated Subsidiaries, on a combined basis, determined in accordance with GAAP, minus (ii) all intangibles determined in accordance with GAAP (including, without limitation, goodwill, capitalized financing costs and capitalized administration costs but excluding originated and purchased mortgage servicing rights) and any and all advances to, investments in and receivables held from Affiliates, and minus (iii) loans held for investment and real estate owned properties net of acceptable financing (financing must be deemed acceptable by Lender in its sole discretion).

  #VALUE!
Minimum   $150,000,000
In Compliance?    
Liquidity    

Minimum Liquidity: Not less than 3% of Total Adjusted Assets less cash and Cash Equivalents.

Liquidity: As of any date of determination, the sum of Borrower's unrestricted and unencumbered cash and Cash Equivalents exclusive of funds held due to a Borrowing Base Deficiency. By way of example but not limitation, cash in escrow and/or impound accounts shall not be included in this calculation.

Total Adjusted Assets: As of any date of determination, the sum of (i) the total assets of Borrower on any given date of determination, to be determined in accordance with GAAP consistent with those applied in the preparation of Borrower's financial statements, plus (ii) the gross fair value of securities related to Linked Transactions, minus (iii) the net value of Linked Transactions.

  #VALUEl
Minimum   3%
In Compliance?    
Leverage    

Borrower's ratio of Total Adjusted Liabilities to Tangible Net Worth has not exceeded 8:1

Total Adjusted Liabilities: As of any date of determination, the sum of (i) the total liabilities of Borrower on any given date of determination, to be determined in accordance with GAAP consistent with those applied in the preparation of Borrower's financial statements, plus (ii) to the extent not already included under GAAP, the total aggregate outstanding amount owed by Borrower under any purchase, repurchase, refinance or other similar credit arrangements, plus (iii) to the extent not already included under GAAP, any "off balance sheet" purchase, repurchase, refinance or other similar credit arrangements, plus (iv) the gross amount of repurchase financing related to Linked Transactions, minus (v) non-recourse debt.

  #VALUEl
Maximum   8.0x
In Compliance?    
Compliance with other agreements    
Is the Company in compliance with the terms of all other agreements pertaining to borrowed funds?   [INPUT Y or N]
Permitted Distributions    
Did the Company make distributions during the reporting period?   [INPUT Y or N]
Was the Company permitted to make distributions, i.e. No Default or Potential Event of Default?   [INPUT Y or N]
In Compliance?    

 

Exhibit E- 4
 

 

Officer Certificate for: Five Oaks Investment Corp. as of:

 

Repurchases/Indemnifications   UPB   Year to Date:   Billable / Actual or
Estimated Losses
Open repurchase requests   [INPUT]   [INPUT]   [INPUT]
Open repurchases being contested   [INPUT]   [INPUT]   [INPUT]
Repurchases settled YTD in 2014   [INPUT]   [INPUT]   [INPUT]

 

Repurchase Settlement Method YTD   Total # of
Loans 		  Indemnifications ($)   Cash ($)   Payment Installment Plan
($)
All Investors   [INPUT]   [INPUT]   [INPUT]   [INPUT]

 

Description of applicable settlement terms, duration etc:

 

To the extent applicable, please provide the values for the following (if not provided explicitly in the Balance Sheet):

 

Escrow or Liability   Value   Balance Sheet line item where data is recorded
Escrow Assets    
Escrow Liabilities    
Loans Held For Investment (LHFI)        
Real Estate Owned (REO)        
Loan Loss Reserves        
UPB of Loans Held for Sale        

  

Hedging / Derivative Assets and Liabilities    
     
Fair value portion of Loans Held For Sale   [INPUT]
Fair value of interest rate lock commitments (IRLC's) - Asset / (Liability)   [INPUT]
Notional Balance of IRLC's   [INPUT]
Fair value of pipeline hedging instruments - Asset / (Liability)   [INPUT]
Notional balance of hedging instruments   [INPUT]
Accounting methodology for MSR (Fair Value or LOCOM)   [INPUT]
If applicable - Fair value adjustment of MSR Asset - Gain / (Loss)   [INPUT]
If applicable - Fair value adjustment of MSR hedging instrument - Gain / (Loss)   [INPUT]

 

Servicing Portfolio as of period ending date: (as applicable)    
     
Servicing portfolio UPB   [INPUT]
Servicing sold (UPB of bulk sale)   [INPUT]
Value of servicing sold   [INPUT]
Cash proceeds of servicing sold   [INPUT]
Servicing acquired (UPB of bulk purchase)   [INPUT]
Value of servicing purchased   [INPUT]
Sub-servicer (If Applicable)   [INPUT]
Third party conducting valuation   [INPUT]
Most recent valuation date   [INPUT]
MSR valuation (at midpoint, if applicable)   [INPUT]

 

Exhibit E- 5
 

 

Officer Certificate for: Five Oaks Investment Corp. as of:

 

To the extent that the necessary data is provided in a different format that contains the same information - the below summary informatioin may be ommitted. Please insert / "drop" MTD and YTD origination data on "Origination" tab, or in a separate file.

  

    Month to Date:   Year to Date:
Originations   $   # units   $   # units
Conv Conf   [INPUT   [INPUT UNITS]   [INPUT   [INPUT UNITS]
Govt.   [INPUT   [INPUT UNITS]   [INPUT   [INPUT UNITS]
Jumbo   [INPUT   [INPUT UNITS]   [INPUT   [INPUT UNITS]
Other   [INPUT   [INPUT UNITS]   [INPUT   [INPUT UNITS]
% Retail ($)   [INPUT %]       [INPUT %]    
% TPO ($)   [INPUT %]       [INPUT %]    
% Correspondent ($)   [INPUT %]       [INPUT %]    
% Refi ($)   [INPUT %]       [INPUT %]    
Loans Banked within the Period   [INPUT   [INPUT UNITS]   [INPUT   [INPUT UNITS]
Loans Brokered within the Period ($)   [INPUT   [INPUT UNITS]   [INPUT   [INPUT UNITS]
Total Banked and Brokered   -   -   -   -

 

Warehouse Facilities as of period ending date:

 

Lender Name   Line
Amount 		  Amount Outstanding   Line Maturity
[INPUT]   [INPUT]   [INPUT]   [INPUT]
[INPUT]   [INPUT]   [INPUT]   [INPUT]
[INPUT]   [INPUT]   [INPUT]   [INPUT]
[INPUT]   [INPUT]   [INPUT]   [INPUT]
[INPUT]   [INPUT]   [INPUT]   [INPUT]
             
Total   0   0    

 

Other Indebtedness:   Total Facility
Size 		  Outstanding
Indebtedness 		  Expiration Date
1) [LENDER NAME]   [INPUT]   [INPUT]   [INPUT]
2) [LENDER NAME]   [INPUT]   [INPUT]   [INPUT]
Total   [INPUT]   [INPUT]    

 

Description of Other Indebtedness (Type of facility, security/collateral, etc.):

 

IN WITNESS WHEREOF, the undersigned has here unto signed his/her name on _________________, 201___.

 

Five Oaks Acquisition Corp.

Five Oaks Investment Corp.

 

 

By:     

 

Name:

 

Title: Chief Financial Officer

 

Exhibit E- 6
 

 

EXHIBIT F

 

FORM OF POWER OF ATTORNEY

 

KNOW ALL MEN BY THESE PRESENTS:

 

WHEREAS, Bank of America, N.A. ( “Lender” ) and Five Oaks Acquisition Corp. ( “Borrower” ) have entered into the Loan and Security Agreement, dated as of July 18, 2014 (the “Agreement” ), pursuant to which Borrower has agreed to pledge certain mortgage loans to Lender as collateral security for a loan, subject to the terms and conditions set forth therein;

 

WHEREAS, Borrower has agreed to give to Lender a power of attorney on the terms and conditions contained herein in order for Lender to take any action that Lender may deem necessary or advisable to accomplish the purposes of the Agreement;

 

NOW, THEREFORE, in accordance with the terms of the Agreement, Borrower hereby irrevocably constitutes and appoints Lender its true and lawful Attorney-in-Fact, with full power and authority hereby conferred in its name, place and stead and for its use and benefit, to do and perform the following in connection with assets purchased by Lender from Borrower under the Agreement (the “Pledged Mortgage Loans” ) or as otherwise provided below:

 

(1) to receive, endorse and collect all checks made payable to the order of Borrower representing any payment on account of the Pledged Mortgage Loans;

 

(2) to assign or endorse any mortgage, deed of trust, promissory note or other instrument relating to the Pledged Mortgage Loans;

 

(3) to correct any assignment, mortgage, deed of trust or promissory note or other instrument relating to the Pledged Mortgage Loans;

 

(4) to complete and execute lost note affidavits or other lost document affidavits relating to the Pledged Mortgage Loans;

 

(5) to issue title requests and instructions relating to the Pledged Mortgage Loans;

 

(6) to give notice to any individual or entity of its interest in the Pledged Mortgage Loans under the Agreement;

 

(7) to receive and enforce all of the Borrower’s rights and interests under the related Mortgage Loan Purchase Agreements, including, without limitation, the right to require the related Originator/Seller thereunder to repurchase the Pledged Mortgage Loans pursuant to the terms thereof;

 

(8) upon termination of Borrower by Lender as permitted under the Agreement, to service and administer the Pledged Mortgage Loans, including, without limitation, the receipt and collection of all sums payable in respect of the Pledged Mortgage Loans.

 

Borrower hereby ratifies and confirms all that said Attorney-in-Fact shall lawfully do or cause to be done by authority hereof.

 

Third parties without actual notice may rely upon the power granted under this Power of Attorney upon the exercise of such power by the Attorney-in-Fact.

 

Exhibit F- 1
 

 

Five Oaks Acquisition Corp.

  

By:    
   
Name:  
   
Title:  

  

WITNESS my hand this ____ day of _____________, 20___.

 

STATE OF    
     
County of    

  

This instrument was acknowledged, subscribed and sworn to before me this _____ day of _________, by ______________________________________

 

     
    Notary Public
     
My Commission Expires:      
     
    Notary Seal:

 

Exhibit F- 2
 

 

EXHIBIT G

 

WIRING INSTRUCTIONS

 

Borrower’s Wire Instructions :

 

Bank: Bank of America, N.A.
ABA No.: 026009593
Account No.: 0012913-41686
Account Name: Bank of America, N.A.

Credit: Trade Support Operations Account

Reference: A. Mahendru – Five Oaks

Lender’s Wire Instructions :

 

Bank: Bank of America, N.A.
ABA No.: 026009593
Account No.: 4426457864
Credit Account Name: Bilateral Trading Account

Reference: Whole Loans

Attention: Sec Finance Ops

 

These wiring instructions may not be changed except by an authorized representative of Lender or Borrower, as applicable. Lender shall be entitled to rely on these wiring instructions without further inquiry or verification.

 

Exhibit G- 1
 

 

SCHEDULE 1

 

Filing Jurisdictions and Offices

 

Delaware

 

Schedule 1
 

 

SCHEDULE 2

 

List of Borrower’s Existing Debt

 

As of July 18, 2014

 

1. Master Repurchase Agreement, dated February 25, 2014, among Credit Suisse First Boston Mortgage Capital LLC, as buyer, Five Oaks Acquisition Corp., as seller, and Five Oaks Investment Corp., as guarantor, with a maximum amount of $125 million.

 

Schedule 2
 

 

SCHEDULE 3

 

List of Mortgage Loan Purchase Agreements

 

1. (a) Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated as of October 1, 2010, as amended, between Bank of America, National Association and PHH Mortgage Corporation

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., and PHH Mortgage Corporation

 

2. (a) Flow Sale and Interim Servicing Agreement, dated as of January 1, 2011, as amended, between Bank of America, National Association and RPM Mortgage, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and RPM Mortgage, Inc.

 

3. (a) Flow Sale and Interim Servicing Agreement, dated as of September 1, 2012, as amended, between Bank of America, National Association and Everett Financial, Inc. 

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Everett Financial, Inc.

 

4. (a) Flow Sale and Interim Servicing Agreement, dated as of May 1, 2012, as amended, between Bank of America, National Association and Cornerstone Home Lending, Inc. f/k/a Cornerstone Mortgage Company

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Cornerstone Home Lending, Inc. f/k/a Cornerstone Mortgage Company

 

5. (a) Flow Sale and Interim Servicing Agreement, dated as of March 1, 2011, as amended, between Bank of America, National Association and Guaranteed Rate, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Guaranteed Rate, Inc.

 

6. (a) Flow Sale and Interim Servicing Agreement, dated as of March 1, 2012, as amended, between Bank of America, National Association and Opes Advisors, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Opes Advisors, Inc.

 

7. (a) Flow Sale and Interim Servicing Agreement, dated as of March 1, 2012, as amended, between Bank of America, National Association and Cobalt Mortgage, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Cobalt Mortgage, Inc.

 

8. (a) Flow Sale and Interim Servicing Agreement, dated as of June 1, 2011, as amended, between Bank of America, National Association and Amerisave Mortgage Corporation

 

Schedule 3
 

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Amerisave Mortgage Corporation

 

9. (a) Flow Sale and Interim Servicing Agreement, dated as of November 1, 2011, as amended, between Bank of America, National Association and Primelending, a Plains Capital Company

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Primelending, a Plains Capital Company

 

10. (a) Flow Sale and Interim Servicing Agreement, dated as of May 1, 2011, as amended, between Bank of America, National Association and First Savings Mortgage Corporation

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and First Savings Mortgage Corporation

 

11. (a) Flow Sale and Interim Servicing Agreement, dated as of March 1, 2012, as amended, between Bank of America, National Association and JMAC Lending, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and JMAC Lending, Inc.

 

12. (a) Flow Sale and Interim Servicing Agreement, dated as of June 1, 2011, as amended, between Bank of America, National Association and Guild Mortgage Company

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Guild Mortgage Company

 

13. (a) Flow Sale and Interim Servicing Agreement, dated as of June 1, 2012 as amended, between Bank of America, National Association and Paramount Residential Mortgage Group, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Paramount Residential Mortgage Group, Inc.

  

14. (a) Flow Sale and Interim Servicing Agreement, dated as of August 27, 2013 as amended, between Bank of America, National Association and loanDepot.com, LLC

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and loanDepot.com, LLC

  

15. (a) Flow Sale and Interim Servicing Agreement, dated as of August 8, 2013 as amended, between Bank of America, National Association and Caliber Home Loans, Inc.

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Caliber Home Loans, Inc.

  

16. (a) Flow Sale and Interim Servicing Agreement, dated as of August 22, 2013 as amended, between Bank of America, National Association and Stonegate Mortgage Corporation

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Stonegate Mortgage Corporation

 

Schedule 3
 

 

17. (a) Flow Sale and Interim Servicing Agreement, dated as of March 1, 2011 as amended, between Bank of America, National Association and NYCB Mortgage Company, LLC

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and NYCB Mortgage Company, LLC

  

18. (a) Flow Sale and Interim Servicing Agreement, dated as of February 1, 2013, as amended, between Bank of America, National Association and Pinnacle Capital Mortgage Corporation

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and Pinnacle Capital Mortgage Corporation

 

19. (a) Flow Sale and Interim Servicing Agreement, dated as of May 1, 2013 as amended, between Bank of America, National Association and RMR Financial, LLC

 

(b) Assignment, Assumption and Recognition Agreement, dated as of July 18, 2014, among Bank of America, National Association, Five Oaks Acquisition Corp., New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing and RMR Financial, LLC

 

Schedule 3

 

 

Exhibit 10.2

 

EXECUTION VERSION

 

 

GUARANTY

 

THIS GUARANTY (the “ Guaranty ”) is made and entered into as of July 18, 2014 by Five Oaks Investment Corp. the “ Guarantor ”), to and for the benefit of Bank of America, N.A. (“ Bank of America ”).

 

RECITALS

 

A. Subject to the terms and conditions of that certain Loan and Security Agreement, dated as of July 18, 2014 (including any amendments, restatements, supplements, modifications or other agreements or other documents referenced therein, collectively, the “ Loan Agreement ”), Bank of America has agreed to make certain loans to Five Oaks Acquisition Corp. (the “ Borrower ”) and Borrower has agreed to pledge certain mortgage loans to Bank of America.

 

B. As a condition precedent to Bank of America’s agreement to make the loans contemplated under the Loan Agreement and, in order to provide Bank of America with further assurances that Borrower will perform its obligations under the Loan Agreement, Guarantor is required to execute and deliver this Guaranty to Bank of America.

 

NOW, THEREFORE, in consideration of the mutual rights and obligations provided herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor hereby agrees as follows:

 

1. Guaranty of Obligations . Guarantor hereby irrevocably, absolutely and unconditionally guarantees the payment when due, upon maturity, acceleration or otherwise, of all obligations of Borrower to Bank of America under the Loan Agreement, howsoever evidenced, whether now existing or hereafter created or arising, whether voluntary or involuntary and however arising, absolute or contingent, liquidated or unliquidated, determined or undetermined (the “ Obligations ”), whether or not (i) such Obligations are from time to time reduced or extinguished and thereafter increased or incurred; (ii) Borrower may be liable individually or jointly with others; (iii) recovery upon such Obligations may be or hereafter become barred by any statute of limitations; and/or (iv) such Obligations may be or hereafter become unenforceable.

 

2. Guaranty Not Affected by Certain Events . Neither (a) the dissolution, insolvency or business failure of, or any assignment for the benefit of creditors by, or commencement of any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceedings by or against Borrower nor (b) the appointment of a receiver for, or the attachment, restraint of or making or levying of any order of court or legal process affecting, the property of Borrower shall affect the obligations of Guarantor hereunder and Bank of America may immediately pursue its rights under this Guaranty against Guarantor upon the occurrence of any such events even though Bank of America may be stayed from accelerating or collecting the Obligations from Borrower. Further, Bank of America may take any actions it deems necessary in any bankruptcy case by or against Borrower without releasing or exonerating Guarantor from its obligations under this Guaranty, including, without limitation, any of the following actions: (i) permit or suffer the impairment of any Obligations, (ii) make an election under Bankruptcy Code Section 1111(b)(2), (iii) permit or suffer the creation of secured or unsecured credit or debt under Bankruptcy Code Section 364 or (iv) permit or suffer the disallowance, avoidance or subordination of any Obligation or collateral (including, without limitation, the Pledged Mortgage Loans (as defined in the Loan Agreement)).

 

 
 

 

3. Modification of Obligations . Guarantor authorizes Bank of America (whether or not after termination of this Guaranty), without notice or demand (except as shall be required by applicable statute which cannot be waived), and without affecting or impairing its liability hereunder, from time to time to (a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of, Obligations or any part thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Obligations and exchange, enforce, waive and release any such security; (c) apply such security and direct the order or manner of sale thereof as Bank of America in its discretion may determine; and (d) release or substitute any one or more endorsers, guarantors, Borrower or other obligors. Bank of America may, without the further consent of Borrower or Guarantor, assign this Guaranty in whole or in part to any person acquiring an interest in the Obligations. Bank of America agrees promptly to notify the Guarantor of any assignment of this Guaranty; provided that the failure to give such notice shall not affect the validity of such assignment.

 

4. Independent Obligation . The obligations of Guarantor hereunder are independent of the Obligations of Borrower, and a separate action or actions may be brought and prosecuted against Guarantor whether or not action is brought against Borrower and whether or not Borrower is joined in any such action.

 

5. Primary Obligation . This Guaranty is one of payment, not of collection, and is the primary obligation of the undersigned. Guarantor waives any right to require Bank of America to (a) proceed against Borrower or any other party; (b) proceed against or exhaust any security held from Borrower; or (c) pursue any other remedy in Bank of America’s power whatsoever. Guarantor waives any personal defense based on or arising out of any personal defense of Borrower other than payment in full of the Obligations, including, without limitation, any defense based on or arising out of the disability of Borrower, or the invalidity or unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of Borrower other than payment in full of the Obligations. Bank of America may, at its election, exercise any right or remedy Bank of America may have against Borrower, or any security, without affecting or impairing in any way the liability of Guarantor hereunder except to the extent the Obligations have been paid. Guarantor waives any defense arising out of any such election, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Guarantor against Borrower or any security.

 

6. Waiver of Rights .

 

(a) Waiver of Subrogation, Reimbursement, Contribution and Similar Rights . As long as there are outstanding Obligations which have not been paid in full, Guarantor waives any claim, remedy or rights that Guarantor may now have or may hereafter acquire against Borrower or any guarantor of all or any of the Obligations, including, without limitation: (i) any rights of subrogation and contribution, (ii) any rights of reimbursement, (iii) any rights of performance, (iv) any rights of exoneration and/or any rights of indemnification and (v) any rights to participate in any claim or remedy that Bank of America has against Borrower or any collateral that Bank of America now has or hereafter acquire for the Obligations (including, without limitation, the Pledged Mortgage Loans), whether or not such claim, remedy or rights arise in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including, without limitation, the rights to take or receive from Borrower, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim, remedy or rights (such rights, collectively, the “ Guarantor’s Conditional Rights ”). If, notwithstanding the foregoing, any amount shall be paid to Guarantor on account of Guarantor’s Conditional Rights and either (A) such amount is paid to Guarantor at any time when there are outstanding Obligations or (B) regardless of when such amount is paid to Guarantor, any payment made by Borrower to Bank of America is at any time determined to be a preferential payment, then such amount paid to Guarantor shall be deemed to be held in trust for the benefit of Bank of America and shall immediately be paid to Bank of America to be credited and applied against the Obligations, whether matured or unmatured, in such order and manner as Bank of America, in its sole discretion, shall determine.

 

 
 

 

(b) Waiver Regarding Application of Payments . Guarantor irrevocably waives any rights that Guarantor may now have or may hereafter acquire to require Bank of America to apply any amounts received by Bank of America from whatever source on account of the Obligations in any order or application, it being expressly acknowledged and agreed by Guarantor that any amounts received by Bank of America from whatsoever source on account of the Obligations may be applied by Bank of America toward the payment of such of the Obligations, and in such order of payment and application, as Bank of America may from time to time elect in its sole and absolute discretion.

 

(c) Waiver of Notice, Presentment, Demand and Similar Rights . Guarantor irrevocably waives any rights that Guarantor may now have or may hereafter acquire with respect to all presentments, demands for performance, protests and notices, including, without limitation, notices of non-performance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty and notices of the existence, creation or incurring of new or additional Obligations.

 

(d) Waiver of Priority of Collection and Election of Remedies . Guarantor irrevocably waives any rights that Guarantor may now have or may hereafter acquire to require Bank of America to: (i) proceed against Borrower or any other party; (ii) proceed against or exhaust any security held from Borrower; or (iii) pursue any other remedy in Bank of America’s power whatsoever. Bank of America may, at its election, exercise any right or remedy Bank of America may have against Borrower without affecting or impairing in any way the liability of Guarantor under this Guaranty except to the extent the Obligations have been indefeasibly paid in full. Without expanding any rights of subrogation which Guarantor may possess as set forth in subsection (a) above, Guarantor understands that the exercise by Bank of America of certain rights and remedies contained in the Loan Agreement may affect or eliminate any such rights of subrogation against Borrower and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder, nevertheless, Guarantor hereby authorizes and empowers Bank of America to exercise, in its sole discretion, any rights and remedies, or any combination thereof, which may be available to Bank of America, since it is the intent and purpose of Guarantor that the obligations of Guarantor hereunder are absolute. Guarantor irrevocably waives all rights and any defenses arising out of any such election of remedies by Bank of America, even though such election of remedies, such as a nonjudicial foreclosure with respect to security for an Obligation, operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Guarantor against Borrower or any guarantor of the Obligations or any security.

 

(e) Waiver of Defenses . To the fullest extent permitted by law, Guarantor irrevocably waives any defense based on or arising out of any defense of Borrower other than payment in full of the Obligations, including, without limitation, any defense based upon or arising out of the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of Borrower other than payment in full of the Obligations.

 

(f) Waiver of Termination . Guarantor irrevocably waives any right it has to terminate or revoke the continuing nature of this Guaranty and its application to any Obligations.

 

(g) Waiver of Certain Statutory Rights . Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by Borrower or other circumstance that operate to toll any statute of limitations as to Borrower shall operate to toll the statute of limitations as to Guarantor.

 

 
 

 

(h) Subordination if Any Waiver is Invalid or Void . Guarantor further agrees that to the extent that any waiver of the rights described in this Guaranty is found by a court of competent jurisdiction to be unenforceable, invalid, void or voidable for any reason, any rights that Guarantor may have against Borrower or against any collateral (including, without limitation, the Pledged Mortgage Loans) or security related to all or some of the Obligations, and any rights Guarantor may have against any guarantor of all or some of the Obligations, shall be junior and subordinate to any rights that Bank of America may have against Borrower, any collateral (including, without limitation, the Pledged Mortgage Loans) or security or any other guarantor of all or some of the Obligations, and no such rights shall be exercised by Guarantor until such time as Bank of America shall have received indefeasible payment of the full amount of all Obligations and any obligations of Guarantor under this Guaranty.

 

7. Subordination of Debt and Obligations; Receipt of Payments . Any indebtedness or obligations of (i) Borrower to Guarantor or (ii) any guarantor of all or some of the Obligations to Guarantor, now or hereafter existing, is hereby subordinated to the obligations of Borrower to Bank of America. Upon the occurrence of an Event of Default under the Loan Agreement and for as long as such event is occurring, Guarantor agrees that, until the Obligations have been fully satisfied, it will not seek, accept or retain for its own accounts, any payment from Borrower or any such guarantor on account of such subordinated debt. Any payments received by Guarantor on account of such subordinated debt during such Event of Default shall be collected and received in trust for Bank of America and shall be immediately paid over by Guarantor to Bank of America without impairing or releasing the obligations of Guarantor hereunder.

 

8. Release of Guarantor .

 

(a) Release of Guarantor’s Obligations . This Guaranty shall in all respects be continuing, absolute and unconditional, and shall remain in full force and effect with respect to Guarantor until all Obligations shall have been fully satisfied and paid and Bank of America shall have executed and delivered to Guarantor an express written release or cancellation of this Guaranty. No compromise, settlement, release or discharge of, or indulgence with respect to, or failure, neglect or omission to enforce or exercise any right against Guarantor, or the fact that at any time or from time to time all the Obligations may have been paid in full, shall release or discharge Guarantor.

 

(b) Release of Liability . The liability of Guarantor hereunder is exclusive and independent of any security for or other guarantee of the Obligations, whether executed by Guarantor or by any other party, and the liability of Guarantor hereunder is not affected, impaired or released by (i) any direction of application of payment by Borrower or by any other party; (ii) any other guarantee, undertaking or maximum liability of Guarantor or of any other party as to the Obligations; (iii) any payment on or in reduction of any other guarantor of all or some of the Obligations; (iv) any revocation or release of any obligations of any other guarantor of all or some of the Obligations; (v) any dissolution, termination or increase, decrease or change in personnel of Borrower; (vi) any payment made to Bank of America on the Obligations that is required to be repaid to Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Guarantor waives any right to the deferral or modification of Guarantor’s obligations hereunder by reason of any such proceeding; (vii) any acceptance by Bank of America of any security or collateral for, or other guarantors or obligors upon, any Obligation; (viii) any change, modification or amendment of the Loan Agreement (other than one which expressly reduces the Obligations under this Guaranty or the amount due under the Loan Agreement); (ix) any failure, neglect or omission to perfect, protect, secure or insure any of the foregoing security interests, liens or encumbrances or the properties, or interest in properties, subject thereto; (x) an increase in the individual or aggregate transaction limits in excess of the amounts initially set forth in the Loan Agreement; (xi) any change in Borrower’s name or legal structure or the merger of Borrower into another legal entity or (xii) any act or omission of any kind or at any time upon the part of Bank of America with respect to any matter whatsoever, other than the execution and delivery by Bank of America to Guarantor of an express written release or cancellation of this Guaranty.

 

 
 

 

9. Financial Statements . Guarantor shall deliver, or cause to be delivered, to Bank of America those financial statements or other reports of Guarantor which are required to be delivered to Bank of America by Borrower under the Loan Agreement; including, without limitation, the financial statements and reports to be delivered under Section 9.1 of the Loan Agreement. Guarantor represents and warrants that the financial statements provided to Bank of America on or prior to the date of this Guaranty, and the financial statements provided on any date subsequently requested by Bank of America, have in each case been prepared in conformity with GAAP consistently applied and present fairly the financial position and assets and liabilities of Guarantor as of the date and period specified therein. Guarantor further agrees that it shall not (a) sell, transfer or otherwise dispose of for less than fair value without prior written notice to, and the consent of, Bank of America or (b) pledge or encumber to any person or entity without prior written notice to, and the consent of Bank of America, all or substantially all of the assets of Guarantor represented on any such financial statement.

 

10. Representations and Warranties of Guarantor . Guarantor hereby represents, warrants and covenants to Bank of America that:

 

(a) Guarantor is duly formed, validly existing and in good standing under the laws of the jurisdiction in which it is formed.

 

(b) Guarantor has the power and authority and the legal right to execute, deliver and perform this Guaranty and has taken all necessary action to authorize the execution, delivery and performance of this Guaranty.

 

(c) The Guarantor’s execution, delivery and performance of this Guaranty does not contravene any applicable law, and will not conflict with or result in a breach of the terms of its organizational documents.

 

(d) All filings and registrations, authorizations, approvals and consents necessary for the Guarantor’s execution, delivery and performance of this Guaranty and for the validity and enforceability thereof, have been made or obtained and are in full force and effect.

 

(e) This Guaranty has been duly and validly executed and delivered by Guarantor and is the legal, valid and binding obligation of Guarantor, enforceable against Guarantor, in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights and to the availability of equitable remedies.

 

(f) The execution, delivery and performance of this Guaranty will not violate in any material respect any requirement of law or contractual obligation of Guarantor or any of its subsidiaries and will not result in, or require, the creation or imposition of any lien on any of its or their respective properties or revenues pursuant to any such requirement of law or contractual obligation.

 

(g) Guarantor will not declare or pay any dividends upon any shares of Guarantor’s stock now or hereafter outstanding, except dividends payable in the capital stock or stock rights of Guarantor, or make any distribution of assets to its stockholders including, without limitation, pursuant to any stock repurchase, whether in cash, property or securities if; at the date of such payment or distribution, there shall have occurred and be continuing an Event of Default or Potential Default under the Loan Agreement.

 

(h) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body pending or, to Guarantor’s knowledge, threatened against or affecting Guarantor (or, to Guarantor’s knowledge, any basis therefor) wherein an unfavorable decision, ruling or finding would adversely affect the validity or enforceability of this Guaranty or Guarantor’s ability to carry out its obligations hereunder.

 

 
 

 

(i) Guarantor has reviewed and approved the Loan Agreement.

 

(j) Guarantor shall at all times comply with the financial covenants and/or financial ratios as set forth in the Loan Terms Letter (as defined in the Loan Agreement) related to the consolidating financials of Guarantor.

 

11. Events of Default . It is hereby understood and agreed that an Event of Default under Section 11.1(p) of the Loan Agreement shall be deemed to have occurred if (i) Guarantor shall default in the payment of any amount required to be paid by it hereunder, (ii) any representation, warranty or certification made or deemed made herein by Guarantor shall prove to have been false or misleading in any material respect as of the time made or furnished, or (iii) Guarantor shall fail to observe or perform or comply with any other covenant or provision contained in this Guaranty.

 

12. Authorization for Background Information . For as long as this Guaranty is in effect, Guarantor authorizes Bank of America to conduct periodic background investigations regarding Guarantor at any time and for any reason without further authorization from Guarantor, including, without limitation, obtaining an updated consumer report(s) about Guarantor from a credit reporting agency.

 

13. Set-off . Upon the occurrence and during the continuance of any Event of Default hereunder or under the Loan Agreement or the failure by Borrower or Guarantor to timely perform any of the Obligations in accordance with the Loan Agreement or this Guaranty, Guarantor hereby irrevocably authorizes Bank of America at any time and from time to time after the Obligations are due from Borrower, without notice to Guarantor, any such notice being expressly waived by Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Bank of America to or for the credit or the account of Guarantor, or any part thereof in such amounts as Bank of America may elect, against and on account of the obligations and liabilities of Guarantor to Bank of America hereunder, whether or not Bank of America has made any demand for payment. Bank of America shall notify Guarantor promptly of any such set-off and the application made by Bank of America; provided, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Bank of America under this Section 13 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such parties may have.

 

14. Reserved .

 

15. General .

 

(a) Entire Agreement; Severability . This Guaranty contains the entire agreement between Guarantor and Bank of America, is the final expression of its intentions and supersedes all negotiations, representations, warranties, commitments, offers, contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof. No prior or contemporaneous representations, warranties, understandings, offers or agreements of any kind or nature, whether oral or written, have been made by Bank of America or relied upon by Guarantor in connection with the execution hereof. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

 

(b) Amendments . No modification, waiver, amendment, discharge or change of this Guaranty shall be valid unless the same is in writing and signed by Bank of America and Guarantor.

 

 
 

 

(c) Costs and Expenses . In addition to the Obligations, Guarantor agrees to pay all costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Bank of America in enforcing this Guaranty in any action or proceeding arising out of, or relating to, this Guaranty.

 

(d) No Assignment . This Guaranty may not be assigned by Guarantor.

 

(e) Successors and Assigns . This Guaranty and the liability and obligations of Guarantor hereunder are binding upon Guarantor and its successors and assigns, and this Guaranty inures to the benefit of and is enforceable by Bank of America and its successors, transferees and assigns.

 

(f) No Waiver; Cumulative Remedies . No right or power of Bank of America hereunder shall be deemed to have been waived by any act or conduct on the part of Bank of America, or by any neglect to exercise such right or power, or by any delay in so doing, and every right or power shall continue in full force and effect until specifically waived or released by an instrument in writing executed by Bank of America. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

 

(g) Borrower’s Financial Condition . Guarantor assumes all responsibility for being and keeping itself informed of Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that Guarantor assumes and incurs hereunder, and agrees that Bank of America shall have no duty to advise Guarantor of information known to it regarding such circumstances or risks.

 

(h) Taxes . All payments made by Guarantor under this Guaranty shall be made without set-off or counterclaim and free and clear of and without deductions for any present or future taxes, fees, withholdings or conditions of any nature (“ Taxes ”). Guarantor shall pay any such Taxes, including Taxes on any amounts so paid, and will promptly furnish Bank of America with copies of any tax receipts or such other evidence of payment as Bank of America may require.

 

(i) Cooperation . Guarantor agrees to execute any and all further documents, instruments and agreements as Bank of America from time to time request to evidence Guarantor’s obligations hereunder.

 

(j) Governing Law . This Guaranty shall be deemed to be made under and shall be governed by the laws of the State of New York without regard to principles of conflicts of laws (except for Section 5-1401 of the New York General Obligations Law which shall govern). All legal actions between or among the parties regarding this Guaranty, including, without limitation, legal actions to enforce this Guaranty or because of a dispute, breach or default of this Guaranty, shall be brought in the federal or state courts located in New York County, New York, which courts shall have sole and exclusive in personam, subject matter and other jurisdiction in connection with such legal actions and the parties acknowledged and agree that venue in such courts shall be convenient and appropriate for all purposes.

 

(k) Waiver of Jury Trial . Each of Guarantor and Bank of America hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Guaranty.

 

(l) Invalidity . In case any one or more of the provisions contained in this Guaranty shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and this Guaranty shall be construed as if such invalid, illegal or unenforceable provision had not been included.

 

 
 

 

(m) Capitalized Terms . Capital terms not otherwise defined herein shall have the meanings assigned such terms in the Loan Agreement.

 

(n) Counterparts . This Guaranty may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same agreement. Facsimile signatures shall be deemed valid and binding to the same extent as the original.

 

[signature page follows]

 

 
 

 

IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date first above written.

 

Five Oaks Investment Corp., as Guarantor

 

By: /s/ David Carroll  
Name: David Carroll  
Title: Chief Executive Officer  

 

Signature Page to Guaranty

 

 

 

 

Exhibit 10.3

 

EXECUTION VERSION

 

 

 

MASTER REPURCHASE AGREEMENT

 

Between

 

BARCLAYS BANK PLC, as Purchaser and Agent,

 

FIVE OAKS ACQUISITION CORP., as Seller

 

and

 

FIVE OAKS INVESTMENT CORP., as Guarantor

 

Dated as of July 29, 2014

 

 

  

 
 

 

TABLE OF CONTENTS

 

1. APPLICABILITY   1
2. DEFINITIONS AND INTERPRETATION   1
3. THE TRANSACTIONS   15
4. CONFIRMATION   17
5. TAKEOUT COMMITMENTS   17
6. PAYMENT AND TRANSFER   18
7. MARGIN MAINTENANCE   18
8. TAXES; TAX TREATMENT   19
9. SECURITY INTEREST; PURCHASER’S APPOINTMENT AS ATTORNEY-IN-FACT   20
10. CONDITIONS PRECEDENT   21
11. RELEASE OF PURCHASED ASSETS   24
12. RELIANCE   24
13. REPRESENTATIONS AND WARRANTIES   24
14. COVENANTS OF SELLER AND GUARANTOR   27
15. REPURCHASE OF PURCHASED ASSETS   34
16. SERVICING OF THE MORTGAGE LOANS; SERVICER TERMINATION   34
17. EVENTS OF DEFAULT   37
18. REMEDIES   40
19. DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE   42
20. USE OF EMPLOYEE PLAN ASSETS   42
21. INDEMNITY   42
22. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS   43
23. REIMBURSEMENT; SET-OFF   43
24. FURTHER ASSURANCES   44
25. ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION   44
26. TERMINATION   45
27. REHYPOTHECATION; ASSIGNMENT   45
28. AMENDMENTS, ETC.   46
29. SEVERABILITY   46
30. BINDING EFFECT; GOVERNING LAW   46
31. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION AND VENUE; SERVICE OF PROCESS   46
32. SINGLE AGREEMENT   47
33. INTENT   47
34. NOTICES AND OTHER COMMUNICATIONS   47
35. CONFIDENTIALITY   49
36. DUE DILIGENCE   50

 

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SCHEDULES AND EXHIBITS

 

EXHIBIT A MONTHLY CERTIFICATION
EXHIBIT B REPRESENTATIONS AND WARRANTIES WITH RESPECT TO MORTGAGE LOANS
EXHIBIT C FORM OF TRANSACTION NOTICE
EXHIBIT D FORM OF GOODBYE LETTER
EXHIBIT E FORM OF WAREHOUSE LENDER’S RELEASE
EXHIBIT F [RESERVED]
EXHIBIT G [RESERVED]
EXHIBIT H FORM OF SELLER MORTGAGE LOAN SCHEDULE
EXHIBIT I EXISTING INDEBTEDNESS

 

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MASTER REPURCHASE AGREEMENT

 

Dated as of July 29, 2014

 

BETWEEN:

 

BARCLAYS BANK PLC, in its capacity as purchaser (“ Purchaser ”) and agent pursuant hereto (“ Agent ”),

 

FIVE OAKS ACQUISITION CORP. (“ Seller ”),

 

and

 

FIVE OAKS INVESTMENT CORP. (“ Guarantor ”).

 

1.            APPLICABILITY

 

Purchaser may from time to time, upon the terms and conditions set forth herein, agree to enter into transactions on an uncommitted basis in which Seller sells to Purchaser Eligible Mortgage Loans, on a servicing-released basis, against the transfer of funds by Purchaser, with a simultaneous agreement by Purchaser to transfer to Seller such Purchased Assets on a date certain less than one year following such transfer, against the transfer of funds by Seller; provided , that the Aggregate MRA Purchase Price shall not exceed, as of any date of determination, the lesser of (a) the Maximum Aggregate Purchase Price and (b) the Asset Base. Each such transaction shall be referred to herein as a “ Transaction ,” and shall be governed by this Agreement. This Agreement is not a commitment by Purchaser to enter into Transactions with Seller but rather sets forth the procedures to be used in connection with periodic requests for Purchaser to enter into Transactions with Seller.

 

2.            DEFINITIONS AND INTERPRETATION

 

(a)           Defined Terms.

 

“ 30+ Day Delinquent Mortgage Loan ” means any Mortgage Loan for which, at any time of determination, an outstanding Monthly Payment has not been received within twenty-nine (29) days after its Due Date.

 

“ Accepted Servicing Practices ” means with respect to any Mortgage Loan, those accepted, customary and prudent mortgage servicing practices (including collection procedures) of prudent mortgage banking institutions that service mortgage loans of the same type as the Mortgage Loans in the jurisdiction where the related Mortgaged Property is located, and which are in accordance with the requirements of applicable law and the requirements of any private mortgage insurer so that any applicable insurance or guarantee in respect of any Mortgage Loan is not voided or reduced.

 

“ Accrual Period ” means, with respect to each Monthly Payment Date for any Transaction, the period from and including the immediately prior Monthly Payment Date to but excluding such Monthly Payment Date; provided that with respect to the first Monthly Payment Date of a Transaction following the related Purchase Date, the Accrual Period shall commence on the related Purchase Date.

 

“ Act of Insolvency ” means, with respect to any Person,

 

 
 

 

(i)            the filing of a voluntary petition (or the consent by such Person to the filing of any such petition against it), commencing, or authorizing the commencement of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another; or such Person shall consent to or seek the appointment of or taking possession by a custodian, receiver, conservator, trustee, liquidator, sequestrator or similar official of such Person, or for any substantial part of its Property, or any general assignment for the benefit of creditors;

 

(ii)          a proceeding shall have been instituted against such Person under any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution, moratorium, delinquency or liquidation law of any jurisdiction, whether now or subsequently in effect, or a custodian, receiver, conservator, liquidator, trustee, sequestrator or similar official for such Person or such Person’s Property (as a debtor or creditor protection procedure) is appointed by any Governmental Authority having the jurisdiction to do so or takes possession of such Property and any such proceeding is not dismissed within sixty (60) days of filing; provided, that if, under any other agreement for Indebtedness, Seller or Guarantor is subject to a shorter time period to dismiss any such proceeding, such shorter time period shall be automatically incorporated into this Agreement as if fully set forth herein without the need of any further action on the part of any party;

 

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

 

(iv)         that such Person shall (a) admit in writing its inability to pay or discharge its debts or obligations generally as they become due or mature, (b) admit in writing its inability to, or intention not to, perform any of its material obligations, or (c) generally fail to pay any of its debts or obligations as they become due or mature;

 

(v)          any Governmental Authority shall have seized or appropriated, or assumed custody or control of, all or any substantial part of the Property of such Person, or shall have taken any action to displace the executive management of such Person; or

 

(vi)         the audited annual financial statements of such Person or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of such Person as a “going concern” or a reference of similar import or shall indicate that such Person has a negative net worth or is insolvent; or

 

(vii)        if such Person or any Affiliate is a corporation or limited liability company, such Person or any Affiliate or any of their Subsidiaries, shall take any entity action in furtherance of, or the action of which would result in any of the foregoing actions.

 

“ Additional Eligible Loan Criteria ” shall have the meaning assigned thereto in the Pricing Side Letter.

 

“ Additional Purchased Mortgage Loans ” shall have the meaning assigned thereto in Section 7(b) hereof.

 

“ Adjustable Rate Mortgage Loan ” means a Mortgage Loan which provides for the adjustment of the Mortgage Interest Rate payable in respect thereto.

 

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“ Affiliate ” means, with respect to (i) any specified Person (other than Seller or Guarantor), any other Person controlling or controlled by or under common control with such specified Person, (ii) Seller, its Subsidiaries and Guarantor, and (iii) Guarantor, Seller. For the purposes of this definition, “control” means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms “controlling,” “controlled by” and “under common control with” have meanings correlative to the meaning of “control.”

 

“ Agency Guide ” means the Freddie Mac Guide, the Fannie Mae Guide, or the Ginnie Mae Guide, as applicable.

 

“ Agent ” means Barclays Bank PLC and its successors in interest, as administrative agent for Purchaser and any additional purchasers that may become a party hereto.

 

“ Aggregate MRA Purchase Price ” means as of any date of determination, an amount equal to the aggregate Purchase Price for all Mortgage Loans then subject to Transactions under this Agreement.

 

“ Agreement ” means this Master Repurchase Agreement (including all exhibits, schedules and other addenda thereto), as it may be amended, further supplemented or otherwise modified from time to time.

 

“ Applicable Margin ” shall have the meaning assigned thereto in the Pricing Side Letter.

 

“ Applicable Agency ” means Ginnie Mae, Fannie Mae, or Freddie Mac, as applicable.

 

“ Approvals ” means with respect to Seller and Servicer the approvals obtained from the Applicable Agency or HUD in designation of Seller and/or Servicer as a Ginnie Mae-approved issuer, an FHA-approved mortgagee, a VA-approved lender, a Fannie Mae-approved lender or a Freddie Mac-approved Seller/Servicer, as applicable, in good standing.

 

“ Asset Base ” means, on any date of determination and with respect to all Purchased Assets then subject to Transactions and, to the extent applicable, all Eligible Mortgage Loans proposed to be sold to Purchaser as of such date of determination, the lesser of (i) 100% of the unpaid principal balance of such Purchased Assets and Eligible Mortgage Loans as of such date of determination and (ii) the product of the applicable Purchase Price Percentage multiplied by the Market Value of such Purchased Assets and Eligible Mortgage Loans.

 

“ Assignment and Acceptance ” shall have the meaning assigned thereto in Section 27(b).

 

“ Assignment of Mortgage ” means, with respect to any Mortgage, an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the assignment of the Mortgage to Purchaser.

 

“ Backup Servicer Agreement ” means any backup servicing agreement among Purchaser, Seller and a backup servicer appointed pursuant to Section 16(d), as the same may be amended, modified or supplemented from time to time.

 

“ Bank ” means (i) Wells Fargo Bank, National Association and its successors and permitted assigns or (ii) such other bank as may be mutually acceptable to Seller and Purchaser.

 

“ Bankruptcy Code ” means 11 U.S.C. Section 101 et seq. , as amended from time to time.

 

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“ Business Day ” means any day other than (i) a Saturday or Sunday, (ii) a day upon which the New York Stock Exchange or the Federal Reserve Bank of New York is closed or (iii) with respect to any day on which the parties hereto have obligations to Custodian or on which Custodian has obligations to any party hereto, a day upon which Custodian’s offices are closed.

 

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

 

“ Certified Mortgage Loan Trust Receipt ” shall have the meaning assigned thereto in the Custodial Agreement.

 

“ Change in Control ” shall mean (a) any transaction or event as a result of which Guarantor ceases to own, directly or indirectly, beneficially or of record, at least 50.1% of the membership interests of Seller, (b) the sale, transfer, or other disposition of all or substantially all of Seller’s assets (excluding any such action taken in connection with any securitization transaction or routine sales of Mortgage Loans), or (c) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s equity outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not equityholders of Seller immediately prior to such merger, consolidation or other reorganization.

 

“ Change in Law ” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement, or (c) compliance by Purchaser (or any Affiliate thereof) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

 

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

 

“ Collection Account ” means the account to be established by Seller in accordance with Section 16(e) for the benefit of Purchaser.

 

“ Collection Account Control Agreement ” means that certain Deposit Account Control Agreement, entered into with respect to the Collection Account as provided in Section 16(e), as the same may be amended, modified or supplemented from time to time.

 

“ Collection Account Direction Letter ” means that certain direction letter, dated on or about July 29, 2014, among Purchase, Seller and Bank, entered into with respect to the Collection Account and in form and substance acceptable to Purchaser and Seller.

 

“ Confirmation ” shall have the meaning assigned thereto in Section 4 hereof.

 

“ Custodial Agreement ” means that certain Custodial Agreement, to be dated on or about July 29, 2014, among Seller, Purchaser, and Custodian, entered into in connection with this Agreement, as the same may be amended, modified or supplemented from time to time.

 

“ Custodian ” means (i) Wells Fargo Bank, N.A., and its successors and permitted assigns or (ii) a custodian mutually acceptable to Seller, Purchaser and Agent.

 

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“ Default ” means any event that, with the giving of notice or the passage of time or both, would constitute an Event of Default.

 

“ Default Rate ” shall have the meaning assigned thereto in the Pricing Side Letter.

 

“ Dodd-Frank Act ” shall mean the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, and any regulations, rulings, interpretations or orders promulgated by any Governmental Authority having jurisdiction thereunder including, without limitation, the Consumer Financial Protection Bureau.

 

“ Dollars ” or “ $ ” means, unless otherwise expressly stated, lawful money of the United States of America.

 

“ Due Date ” means the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.

 

“ Effective Date ” means July 29, 2014.

 

“ Electronic Tracking Agreement ” means the electronic tracking agreement in form and substance acceptable to Purchaser and Seller, to be dated on or about July 29, 2014 among Purchaser, Seller, MERSCORP Holdings, Inc. and MERS, entered into in connection with this Agreement, as the same may be amended, modified or supplemented from time to time.

 

“ Electronic Transmission ” means the delivery of information in an electronic format acceptable to the applicable recipient thereof. An Electronic Transmission shall be considered written notice for all purposes hereof (except when a request or notice by its terms requires execution).

 

“ Eligible Mortgage Loan ” means a Mortgage Loan that (i) satisfies each of the representations and warranties in Exhibit B to this Agreement in all material respects, (ii) contains all required documents in the Mortgage Loan File without exceptions unless otherwise waived by Purchaser or permitted pursuant to this Agreement, and (iii) meets each of the applicable Additional Eligible Loan Criteria.

 

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

 

“ Escrow Payments ” means, with respect to a Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water charges, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges and other payments as may be required to be escrowed by the Mortgagor with the Mortgagee pursuant to the terms of the Mortgage or any other document.

 

“ Event of Default ” shall have the meaning assigned thereto in Section 17 hereof.

 

“ Existing Indebtedness ” means all Indebtedness in excess of $25,000,000 (other than Indebtedness evidenced by this Agreement) of Seller existing on the date hereof listed on Exhibit I hereto.

 

“ Fannie Mae ” means Fannie Mae or any successor thereto.

 

“ Fannie Mae Guide ” means the Fannie Mae MBS Selling and Servicing Guide, as such guide may hereafter from time to time be amended.

 

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“ FDIC ” means the Federal Deposit Insurance Corporation or any successor thereto.

 

“ FHA ” means the Federal Housing Administration, an agency within HUD, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA regulations.

 

“ Foreign Purchaser ” shall have the meaning assigned thereto in Section 8(d).

 

“ Freddie Mac ” means Freddie Mac, and its successors in interest.

 

“ Freddie Mac Guide ” means the Freddie Mac Sellers’ and Servicers’ Guide, as such Guide may hereafter from time to time be amended.

 

“ GAAP ” means generally accepted accounting principles as in effect from time to time in the United States of America.

 

“ Ginnie Mae ” means the Government National Mortgage Association and its successors in interest, a wholly-owned corporate instrumentality of the government of the United States of America.

 

“ Ginnie Mae Guide ” means the Ginnie Mae Mortgage-Backed Securities Guide, as such Guide may hereafter from time to time be amended.

 

“ Governmental Authority ” means any nation or government, any state or other political subdivision, agency or instrumentality thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over Seller, any of its Subsidiaries or any of their Property.

 

“ Guarantee ” means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “ Guarantee ” shall not include (a) endorsements for collection or deposit in the ordinary course of business, or (b) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgage Loan or Mortgaged Property. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.

 

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

 

“ Guaranty ” means the Guaranty Agreement of Guarantor in favor of Purchaser, dated as of the date hereof, as the same may be amended, supplemented or otherwise modified from time to time.

 

“ Hedge Instrument ” means any interest rate cap agreement, interest rate floor agreement, interest rate swap agreement or other interest rate hedging agreement entered into by Seller with a counterparty reasonably acceptable to Agent, in each case with respect to the Mortgage Loans.

 

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“ High Cost Mortgage Loan ” means a Mortgage Loan that is (a) subject to, covered by or in violation of the provisions of the Homeownership and Equity Protection Act of 1994, as amended, (b) a “high cost,” “covered,” “abusive,” “predatory” or “high risk” mortgage loan under any federal, state or local law, or any similarly classified loan using different terminology under any law imposing heightened regulation, scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees, or any other state or other regulation providing assignee liability to holders of such mortgage loans, (c) subject to or in violation of any such comparable federal, state or local statutes or regulations, or (d) a “High Cost Loan” or “Covered Loan,” as applicable, as such terms are defined in the current version of the Standard & Poor’s LEVELS® Glossary Revised, Appendix E.

 

“ HUD ” means the Department of Housing and Urban Development, or any federal agency or official thereof which may from time to time succeed to the functions thereof with regard to FHA mortgage insurance. The term “HUD,” for purposes of this Agreement, is also deemed to include subdivisions thereof such as the FHA and Government National Mortgage Association.

 

“ Income ” means, with respect to any Purchased Asset at any time, any principal and/or interest thereon and all dividends, sale proceeds and all other proceeds as defined in Section 9-102(a)(64) of the Uniform Commercial Code and all other collections and distributions thereon (including, without limitation, any proceeds received in respect of mortgage insurance).

 

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

 

“ Indemnified Party ” shall have the meaning assigned thereto in Section 21(a).

 

“ Investment Company Act ” means the Investment Company Act of 1940, as amended, including all rules and regulations promulgated thereunder.

 

“ Investment Manager ” means Oak Circle Capital Partners LLC.

 

“ Jumbo Mortgage Loan ” means a first lien mortgage loan that is underwritten as a jumbo mortgage loan in compliance with Purchaser’s underwriting guidelines as in effect as of the date hereof, or in compliance with such other underwriting guidelines as approved by Agent in its discretion.

 

“ LIBOR ” means for each day, the rate (adjusted for statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits for a period equal to one month appearing on Bloomberg Screen US 0001M Page or if such rate ceases to appear on Bloomberg Screen US 0001M Page, or any other service providing comparable rate quotations at approximately 11:00 a.m., London time, on the applicable date of determination, or such interpolated rate as determined by Agent.

 

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“ Lien ” means any mortgage, deed of trust, lien, claim, pledge, charge, security interest or similar encumbrance.

 

“ Margin Call ” shall have the meaning assigned thereto in Section 7(b) hereof.

 

“ Margin Deficit ” shall have the meaning assigned thereto in Section 7(b) hereof.

 

“ Market Value ” means, with respect to any Transaction and as of any date of determination, (i) the value ascribed to a Purchased Asset or a Mortgage Loan by Agent, in its sole good faith discretion, using methodology and parameters customarily used by Agent to value similar assets, as may be as marked to market daily, and (ii) zero, with respect to any Mortgage Loan that is not an Eligible Mortgage Loan.

 

“ Material Adverse Change ” means, with respect to a Person, any material adverse change in the business, condition (financial or otherwise), operations, performance or Property of such Person including the insolvency of such Person or its Parent Company, if applicable.

 

“ Material Adverse Effect ” means (a) a Material Adverse Change with respect to Seller, Servicer, Guarantor or any of their respective Affiliates; (b) a material impairment of the ability of Seller, Servicer, Guarantor or any of their respective Affiliates that is a party to any Program Document to perform under any Program Document to which it is a party; (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Document against Seller, Servicer, Guarantor or any of their respective Affiliates that is a party to any Program Document; or (d) a material adverse effect on the Market Value of the Purchased Assets, in each case as determined by Purchaser in its sole good faith discretion.

 

“ Maturity Date ” means July 28, 2015.

 

“ Maximum Age Since Origination ” shall have the meaning assigned thereto in the Pricing Side Letter.

 

“ Maximum Aggregate Purchase Price ” shall have the meaning assigned thereto in the Pricing Side Letter.

 

“ MERS ” means Mortgage Electronic Registration Systems, Inc., a Delaware corporation, or any successor in interest thereto.

 

“ MERS Designated Mortgage Loan ” means any Mortgage Loan as to which the related Mortgage or Assignment of Mortgage, has been recorded in the name of MERS, as agent for the holder from time to time of the Mortgage Note.

 

“ MERS Identification Number ” shall have the meaning assigned thereto in the Custodial Agreement.

 

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

 

“ Monthly Payment Date ” means the twentieth (20th) day of each calendar month beginning with August 2014; provided that if such day is not a Business Day, the next succeeding Business Day.

 

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“ Mortgage ” means a mortgage, deed of trust, or other security instrument, securing a Mortgage Note.

 

“ Mortgage Interest Rate ” means, with respect to each Mortgage Loan, the annual rate at which interest accrues on such Mortgage Loan from time to time in accordance with the provisions of the related Mortgage Note.

 

“ Mortgage Loan ” means a Jumbo Mortgage Loan.

 

“ Mortgage Loan File ” shall have the meaning assigned thereto in the Custodial Agreement.

 

“ Mortgage Note ” means a promissory note or other evidence of indebtedness of the obligor thereunder, evidencing a Mortgage Loan, and secured by the related Mortgage.

 

“ Mortgaged Property ” means the real property (or leasehold estate, if applicable) securing repayment of the debt evidenced by a Mortgage Note.

 

“ Mortgagee ” means the record holder of a Mortgage Note secured by a Mortgage.

 

“ Mortgagor ” means the obligor or obligors on a Mortgage Note, including any person who has assumed or guaranteed the obligations of the obligor thereunder.

 

“ Negative Amortization ” means the portion of interest accrued at the Mortgage Interest Rate in any month which exceeds the Monthly Payment on the related Mortgage Loan for such month and which, pursuant to the terms of the Mortgage Note, is added to the principal balance of the Mortgage Loan.

 

“ Notice Date ” shall have the meaning assigned thereto in Section 3(c) hereof.

 

“ Obligations ” means (a) all amounts due and payable by Seller to Purchaser in connection with a Transaction hereunder, together with interest thereon (including interest which would be payable as post-petition interest in connection with any bankruptcy or similar proceeding) and other obligations and liabilities of Seller to Purchaser arising under, or in connection with, the Program Documents or directly related to the Purchased Assets, whether now existing or hereafter arising; (b) any and all sums paid by Purchaser or on behalf of Purchaser pursuant to the Program Documents in order to preserve any Purchased Asset or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Seller’s indebtedness, obligations or liabilities referred to in clause (a), the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Asset, or of any exercise by Purchaser of its rights under the Program Documents, including without limitation, reasonable attorneys’ fees and disbursements and court costs; and (d) all of Seller’s indemnity obligations to Purchaser pursuant to the Program Documents.

 

“ Origination Date ” means the date on which a Mortgage Loan was originated by Seller, or purchased or acquired by Seller and subsequently sold to Purchaser, as applicable.

 

“ Other Taxes ” shall have the meaning assigned thereto in Section 8(b).

 

“ OTS ” means Office of Thrift Supervision or any successor thereto.

 

“ Parent Company ” means a corporation or other entity owning at least 50% of the outstanding shares of voting stock of Seller.

 

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“ Person ” means any legal person, including any individual, corporation, partnership, association, joint stock company, trust, limited liability company, unincorporated organization, governmental entity or other entity of similar nature.

 

“ Price Differential ” means, with respect to any Purchased Asset or Transaction as of any date of determination, an amount equal to the product of (A) the Pricing Rate (or during the continuation of an Event of Default, by daily application of the Default Rate) and (B) the Purchase Price for such Purchased Asset or Transaction. Price Differential will be calculated in accordance with Section 3(e) herein for the actual number of days elapsed during the applicable Accrual Period on the basis of a 360-day year.

 

“ Price Differential Determination Date ” means, with respect to any Monthly Payment Date, the second (2 nd ) Business Day preceding such date.

 

“ Pricing Rate ” means, as of any date of determination and with respect to an Accrual Period for any Purchased Asset or Transaction, an amount equal to the sum of (i) LIBOR plus (ii) the Applicable Margin.

 

“ Pricing Side Letter ” means that certain Pricing Side Letter, dated as of July 29, 2014, among Seller, Guarantor and Purchaser, entered into in connection with this Agreement, as the same may be amended, modified or supplemented from time to time.

 

“ Program Documents ” means this Agreement, the Pricing Side Letter, the Custodial Agreement, the Servicing Side Letter, the Collection Account Direction Letter, the Collection Account Control Agreement, any assignment of Hedge Instrument, the Electronic Tracking Agreement, the Guaranty, any Backup Servicer Agreement, and all other agreements, documents and instruments entered into by Seller on the one hand, and Purchaser or one of its Affiliates (or Custodian on its behalf) and/or Agent or one of its Affiliates on the other, in connection herewith or therewith with respect to the transactions contemplated hereunder or thereunder and all amendments, restatements, modifications or supplements thereto.

 

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

 

“ Purchase Date ” means, with respect to each Transaction, the date on which Purchased Assets are sold by Seller to Purchaser or its designee hereunder.

 

“ Purchase Price ” means the price at which Purchased Assets subject to a Transaction are sold by Seller to Purchaser or its designee on a Purchase Date (which includes a mutually negotiated premium allocable to the portion of the related Purchased Assets that constitutes the related Servicing Rights), which shall (unless otherwise agreed to by Seller and Purchaser) be equal to the lesser of (i) 100% of the unpaid principal balance of such Purchased Assets as of such date of determination and (ii) the product of the applicable Purchase Price Percentage multiplied by the Market Value of such Purchased Assets as of such date of determination.

 

“ Purchase Price Percentage ” shall have the meaning assigned thereto in the Pricing Side Letter.

 

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“ Purchased Assets ” means, with respect to each Eligible Mortgage Loan sold by Seller to Purchaser in a Transaction, whether now existing or hereafter acquired: (i) the Mortgage Loans, (ii) the Servicing Rights, (iii) Seller’s rights under any related Hedge Instruments to the extent related to the Mortgage Loans, (iv) such other Property, rights, titles or interest as are specified on the related Transaction Notice, (v) all mortgage guarantees and insurance relating to the individual Mortgage Loans (issued by governmental agencies or otherwise) or the related Mortgaged Property and any mortgage insurance certificate or other document evidencing such mortgage guarantees or insurance and all claims and payments related to the Mortgage Loans, (vi) all guarantees or other support for the Mortgage Loans, (vii) all rights to Income and the rights to enforce such payments arising from the Mortgage Loans and any other contract rights, payments, rights to payment (including payments of interest or finance charges) with respect thereto, (viii) all Takeout Commitments and Trade Assignments, (ix) the Collection Account and all amounts on deposit therein, (x) all Additional Purchased Mortgage Loans, (xi) all “accounts,” “deposit accounts,” “securities accounts,” “chattel paper,” “commercial tort claims,” “deposit accounts,” “documents,” “general intangibles,” “instruments,” “investment property,” and “securities accounts,” relating to the foregoing as each of those terms is defined in the Uniform Commercial Code and all cash and cash equivalents and all products and proceeds relating to or constituting any or all of the foregoing, (xii) any purchase agreements or other agreements or contracts relating to or constituting any or all of the foregoing, (xiii) any other collateral pledged or otherwise relating to any or all of the foregoing, together with all files, material documents, instruments, surveys (if available), certificates, correspondence, appraisals, computer records, computer storage media, accounting records and other books and records relating to the foregoing, and (xiv) any and all replacements, substitutions, distributions on, or proceeds with respect to, any of the foregoing. The term “Purchased Assets” with respect to any Transaction at any time also shall include Additional Purchased Mortgage Loans delivered pursuant to Section 7(b) hereof.

 

“ Purchaser ” shall have the meaning set forth in the preamble hereof.

 

“ Purchaser’s Wire Instructions ” shall have the meaning set forth in the Pricing Side Letter.

 

“ Quality Control Program ” shall have the meaning assigned thereto in Section 14(z).

 

“ Records ” means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller or any other person or entity with respect to a Purchased Asset. Records shall include, without limitation, the Mortgage Notes, any Mortgages, the Mortgage Loan Files, the Servicing Files, and any other instruments necessary to document or service a Mortgage Loan that is a Purchased Asset, including, without limitation, the complete payment and modification history of each Mortgage Loan that is a Purchased Asset.

 

“ REIT ” means a real estate investment trust, as defined in Section 856 of the Code.

 

“ REO Property ” means a residential real property including land and improvements, together with all buildings, fixtures and attachments thereto, all insurance proceeds, liquidation proceeds, condemnation proceeds, and all other rights, benefits, proceeds and obligations arising from or in connection therewith.

 

“ Repurchase Date ” means, with respect to any Transaction, the earliest of (i) the Termination Date, (ii) the date set forth in the related Transaction Notice as the scheduled Repurchase Date, (iii) the second Business Day following Seller’s written notice to Purchaser requesting a repurchase of such Transaction, (iv) the conclusion of the Maximum Age Since Origination for each such Transaction, or if such day is not a Business Day, the immediately following Business Day, or (v) the conversion of the related Mortgage Loan into an REO Property.

 

“ Repurchase Price ” means the price at which Purchased Assets are to be transferred from Purchaser or its designee to Seller upon termination of a Transaction, which will be determined in each case as the sum of: (i) any portion of the Purchase Price not yet repaid to Purchaser, (ii) the Price Differential accrued and unpaid thereon, and (iii) any accrued and unpaid fees or expenses or indemnity amounts and any other outstanding amounts owing under the Program Documents from Seller to Purchaser.

 

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“ Request for Release of Documents ” shall mean the Request for Release of Documents set forth as Exhibit 15 to the Custodial Agreement, as applicable.

 

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

 

“ Restricted Mortgage Loan ” means (i) a “Growing Equity Loan,” “Manufactured Home Loan,” “Graduated Payment Loan,” “Buydown Loan,” “Project Loan,” “Construction Loan” or “HECM Loan,” each as defined in the applicable Agency Guide, (ii) a 30+ Day Delinquent Mortgage Loan, (iii) a Mortgage Loan for which the related Escrow Payments have not been made by the next succeeding Due Date, or (iv) a High Cost Mortgage Loan.

 

“ SEC ” shall have the meaning ascribed thereto in Section 35.

 

“ Section 404 Notice ” means the notice required pursuant to Section 404 of the Helping Families Save Their Homes Act of 2009 (P.L. 111-22), which amends 15 U.S.C. Section 1641 et seq. , to be delivered by a creditor that is an owner or an assignee of a Mortgage Loan to the related Mortgagor within thirty (30) days after the date on which such Mortgage Loan is sold or assigned to such creditor.

 

“ Seller ” shall have the meaning set forth in the preamble hereof.

 

“ Seller Mortgage Loan Schedule ” means the list of Purchased Assets proposed to be purchased by Purchaser, in the form of Exhibit H hereto, that will be delivered in an excel spreadsheet format by Seller to Agent, Purchaser and Custodian together with each Transaction Notice and attached by Custodian to the related Certified Mortgage Loan Trust Receipt.

 

“ Servicer ” means PHH Mortgage Corporation, or any other servicer approved by Agent, in its sole discretion, which may be Seller.

 

“ Servicing Agreement ” means that certain Mortgage Loan Subservicing Agreement, dated as of February 25, 2014, between Seller and Servicer, or such other servicing agreement acceptable to Purchaser.

 

“ Servicing File ” means with respect to each Mortgage Loan, the file retained by Seller or its designee consisting of all documents that a prudent originator and servicer would include (including copies of the Mortgage Loan File), all documents necessary to document and service the Mortgage Loans and any and all documents required to be delivered in connection with any transfer of servicing pursuant to the Program Documents.

 

“ Servicing Records ” means with respect to a Mortgage Loan, the related servicing records, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of such Mortgage Loan.

 

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“ Servicing Rights ” means contractual, possessory or other rights of Seller or any other Person to administer or service a Mortgage Loan or to possess the Servicing File.

 

“ Servicing Side Letter ” means that certain servicing side letter agreement, dated as of July 29, 2014, among Seller, Guarantor, Servicer and Purchaser, entered into in connection with this Agreement and the Servicing Agreement, in form and substance acceptable to Purchaser.

 

“ Servicing Term ” shall have the meaning assigned thereto in Section 16(b).

 

“ Set Off Eligible Agreement ” means any lending or hedging agreement (including, without limitation, the Master Repurchase Agreement) entered into between Seller on the one hand, and Purchaser or any of its Affiliates on the other hand. For avoidance of doubt, Purchaser agrees that any flow agreement for the purchase and sale of Mortgage Loans or any securitization, debt or equity transaction with respect to which Purchaser or any of its Affiliates acts as underwriter, placement agent, securities administrator or in a similar capacity shall not constitute a Set Off Eligible Agreement.

 

“ Statement Date ” shall have the meaning assigned thereto in Section 13(e).

 

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

 

“ Takeout Commitment ” means a fully executed trade confirmation from the related Takeout Investor to Seller confirming the details of a forward trade between the Takeout Investor and Seller with respect to one or more Purchased Assets, which trade confirmation shall be enforceable and in full force and effect, and shall be validly and effectively assigned to Purchaser pursuant to a Trade Assignment, and relate to pools of Mortgage Loans that satisfy the “good delivery standards” of the Securities Industry and Financial Markets Association as set forth in the Securities Industry and Financial Markets Association Uniform Practices Manual, as amended from time to time.

 

“ Takeout Investor ” means either (i) Barclays Capital Inc., or any successor thereto, (ii) any member of the Mortgage Backed Securities Division of the Fixed Income Clearing Corporation or (iii) any other Person approved by Agent, in its sole discretion.

 

“ Taxes ” shall have the meaning assigned thereto in Section 8(a).

 

“ Termination Date ” means the earliest to occur of (i) the Maturity Date, (ii) at the option of Agent, the occurrence of an Event of Default under this Agreement after the expiration of any applicable grace period and (iii) the later of (A) the fifteenth (15 th ) Business Day after Purchaser delivers a notice of termination to Seller, or (B) the Monthly Repayment Date following delivery of such notice by Purchaser, and (iv)   the thirtieth (30th) day after Seller delivers a notice of termination to Purchaser.

 

“ Trade Assignment ” means an assignment to Purchaser of a forward trade between the Takeout Investor and Seller with respect to one or more Purchased Assets, together with the related trade confirmation from the Takeout Investor to Seller that has been fully executed, is enforceable and is in full force and effect and confirms the details of such forward trade.

 

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“ Transaction ” has the meaning assigned thereto in Section 1.

 

“ Transaction Notice ” means a written request of Seller to enter into a Transaction in a form attached as Exhibit C hereto or such other form as shall be mutually agreed upon between Seller and Purchaser, which is delivered to Purchaser in accordance with Section 3(c) herein.

 

“ Uniform Commercial Code ” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Purchased Assets or the continuation, renewal or enforcement thereof is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

 

“ VA ” shall mean the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.

 

“ Warehouse Lender ” means any lender providing financing to Seller for the purpose of warehousing, originating or purchasing a Mortgage Loan, which lender has a security interest in such Mortgage Loan to be purchased by Purchaser.

 

“ Warehouse Lender’s Release ” means a letter, substantially in the form of Exhibit E , from a Warehouse Lender to Purchaser, unconditionally releasing all of Warehouse Lender’s right, title and interest in certain Mortgage Loans identified therein upon payment to the Warehouse Lender.

 

(b)           Interpretation .

 

Headings are for convenience only and do not affect interpretation. The following rules of this subsection (b) 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 a subsection, Section, Annex or Exhibit is, unless otherwise specified, a reference to a section of, or annex or exhibit to, this Agreement. A reference to a party to this Agreement or another agreement or document includes the party’s successors and permitted 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 Program Document. A reference to legislation or to a provision of legislation includes any modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. A reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form. A reference to conduct includes, without limitation, an omission, statement or undertaking, whether or not in writing. An Event of Default exists until it has been waived in writing by Purchaser or has been cured. The words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “including” is not limiting and means “including without limitation.” 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.” 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 terms. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. References herein to “fiscal year” and “fiscal quarter” refer to such fiscal periods of Seller.

 

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Except where otherwise provided in this Agreement, any determination, consent, approval, statement or certificate made or confirmed in writing with notice to Seller by Purchaser or an authorized officer of Purchaser as required by this Agreement is conclusive in the absence of manifest error. A reference to an agreement includes a security interest, guarantee, agreement or legally enforceable arrangement whether or not in writing related to such agreement.

 

A reference to a document includes an agreement in writing or a certificate, notice, instrument or document, or any information recorded in electronic form. Where Seller is required to provide any document to Purchaser under the terms of this Agreement, the relevant document shall be provided in writing or printed form unless Purchaser requests otherwise.

 

This Agreement is the result of negotiations among, and has been reviewed by counsel to, Purchaser and Seller, and is the product of all parties. In the interpretation of this Agreement, 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 this Agreement or this Agreement itself. Except where otherwise expressly stated, Purchaser may give or withhold, or give conditionally, approvals and consents and may form opinions and make determinations in its absolute sole discretion. Except as specifically required herein, any requirement of good faith, discretion or judgment by Purchaser or Agent shall not be construed to require Purchaser to request or await receipt of information or documentation not immediately available from or with respect to Seller, any other Person or the Purchased Assets themselves.

 

3.            THE TRANSACTIONS

 

(a)           It is acknowledged and agreed that, notwithstanding any other provision of this Agreement to the contrary, the facility provided under this Agreement is an uncommitted facility and Purchaser shall have no obligation to enter into any Transactions hereunder.

 

(b)           Subject to the terms and conditions of the Program Documents, Purchaser may enter into Transactions provided , that the Aggregate MRA Purchase Price shall not exceed, as of any date of determination, the lesser of (a) the Maximum Aggregate Purchase Price and (b) the Asset Base.

 

(c)           Unless otherwise agreed, Seller shall request that Purchaser enter into a Transaction with respect to any Eligible Loan by delivering to the indicated required parties (each, a “Required Recipient”) the required delivery items (each, a “Required Delivery Item”) set forth in the table below by the corresponding required delivery time (the “Required Delivery Time”), and such Transaction shall occur no later than the corresponding required purchase time (the “Required Purchase Time”):

 

Purchased
Asset Type 		  Required Delivery Items   Required Delivery Time   Required
Recipient 		  Required
Purchase Time
Eligible Mortgage Loans   (i) a Transaction Notice and (ii) Seller Mortgage Loan Schedule   No later than 3:00 p.m. (New York City time) on the Business Day prior to the requested Purchase Date   Purchaser and Custodian   No later than 5:00 p.m. (New York City time) on the requested Purchase Date

 

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Purchased
Asset Type 		  Required Delivery Items   Required Delivery Time   Required
Recipient 		  Required
Purchase Time
    The complete Mortgage Files to Custodian for each Mortgage Loan subject to such Transaction   No later than 3:00 p.m. (New York City time) on the Business Day prior to the requested Purchase Date   Custodian    

 

The date on which any notice pursuant to this Section 3(c) is given is known as the “ Notice Date. ”

 

(d)          Upon Seller’s request to enter into a Transaction pursuant to Section 3(c) and assuming all conditions precedent set forth in this Section 3 and in Sections 10(a) and (b) have been met, and provided no Default or Event of Default shall have occurred and be continuing, on the requested Purchase Date, Purchaser may, in its sole discretion, purchase the Eligible Mortgage Loans included in the related Transaction Notice by transferring the Purchase Price (net of any fees and expenses then due and payable by Seller to Purchaser pursuant to this Agreement) in accordance with the following wire instructions or as otherwise provided:

 

Receiving Bank: Bank of America

ABA#: 026009593

Account Name: Five Oaks Acquisition Corp.

Account Number: 237025398780

 

Seller acknowledges and agrees that the Purchase Price includes a mutually negotiated premium allocable to the portion of the Purchased Assets that constitutes the related Servicing Rights.

 

(e)          On the related Price Differential Determination Date, Agent shall calculate the Price Differential for each outstanding Transaction payable on the Monthly Payment Date utilizing the Pricing Rate. Not less than two (2) Business Days prior to each Monthly Payment Date, Agent shall provide Seller with an invoice for the amount of the Price Differential due and payable with respect to all outstanding Transactions, setting forth the calculations thereof in reasonable detail and all accrued fees and expenses then due and owing to Purchaser. On the earliest of (1) the Monthly Payment Date or (2) the Termination Date, Seller shall pay to Purchaser the Price Differential then due and payable for (x) all outstanding Transactions and (y) Purchased Assets for which Purchaser has received the related Repurchase Price (other than Price Differential) pursuant to Section 3(f).

 

(f)           With respect to a Transaction, upon the earliest of (1) the Repurchase Date and (2) the Termination Date, Seller shall pay to Purchaser the related Repurchase Price (other than the related accrued Price Differential) together with any other Obligations then due and payable, and shall repurchase all Purchased Assets then subject to such Transaction. The Repurchase Price shall be transferred directly to Purchaser.

 

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(g)           If Agent determines in its sole discretion that any Change in Law or any change in accounting rules regarding capital requirements has the effect of reducing the rate of return on Purchaser’s capital or on the capital of any Affiliate of Purchaser in respect of Transactions under this Agreement as a consequence of such Change in Law or change in accounting rules, then from time to time Seller will compensate Purchaser or Purchaser’s Affiliate, as applicable, for such reduced rate of return suffered as a consequence of such Change in Law or change in accounting rules on terms similar to those imposed by Purchaser. Further, if due to the introduction of, any change in, or the compliance by Purchaser with (i) any eurocurrency reserve requirement, or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority whether or not having the force of law, there shall be an increase in the cost to Purchaser or any Affiliate of Purchaser in engaging in the present or any future Transactions, then Seller shall, from time to time and upon demand by Purchaser, compensate Purchaser or Purchaser’s Affiliate for such increased costs, and such amounts shall be deemed a part of the Obligations hereunder. Purchaser shall provide Seller with notice as to any such Change in Law, change in accounting rules or change in compliance promptly following Purchaser’s receipt of actual knowledge thereof.

 

(h)           [Reserved].

 

(i)           If on any Business Day Agent determines (which determination shall be conclusive absent manifest error) (a) that adequate and reasonable means do not exist for ascertaining LIBOR; or (b) that LIBOR will not adequately and fairly reflect the cost to Purchaser of entering into or maintaining outstanding Transactions; or (c) that it has become unlawful for it to honor its obligation to enter into or maintain outstanding Transactions hereunder using LIBOR, then Purchaser may give written notice thereof to Seller and, until Purchaser notifies Seller that the circumstances giving rise to such notice no longer exist, the Pricing Rate included in any Confirmation with respect to new Transactions and in any calculation of the Price Differential with respect to outstanding Transactions will be determined at such other rate per annum or based on such other index that Purchaser determines in it reasonable discretion adequately reflects the cost to Purchaser of making or maintaining such Transactions. Any alternative rate selected by Purchaser shall be consistent with the rate selected by Purchaser for similar facilities offered by Purchaser with respect to mortgage loans similar to the Mortgage Loans.

 

4.            CONFIRMATION

 

In the event that parties hereto desire to enter into a Transaction on terms other than as set forth in this Agreement, the parties shall execute a confirmation prior to entering into such Transaction, which confirmation shall be in a form that is mutually acceptable to Purchaser and Seller and shall specify such terms, including, without limitation, the Purchase Date, the Purchase Price, the Pricing Rate therefor and the Repurchase Date (a “ Confirmation ”). Any such Confirmation and the related Transaction Notice, together with this Agreement, shall constitute conclusive evidence of the terms agreed to between Purchaser and Seller with respect to the Transaction to which the Confirmation relates. In the event of any conflict between this Agreement and a Confirmation, the terms of the Confirmation shall control with respect to the related Transaction.

 

5.            TAKEOUT COMMITMENTS

 

Seller hereby assigns to Purchaser, free of any security interest, lien, claim or encumbrance of any kind, Seller’s rights under each Takeout Commitment to deliver the Purchased Assets specified therein to the related Takeout Investor and to receive the purchase price therefor from such Takeout Investor. Seller shall deliver to Purchaser a duly executed and enforceable Trade Assignment on the date such Trade Assignment is executed by the related Takeout Investor. Subject to Purchaser’s rights hereunder, Purchaser agrees that it will satisfy the obligation under the Takeout Commitment to deliver the related Purchased Assets to the Takeout Investor on the date specified therein. Seller understands that, as a result of this Section 5 and each Trade Assignment, Purchaser will succeed to the rights and obligations of Seller with respect to each Takeout Commitment subject to a Trade Assignment, and that in satisfying each such Takeout Commitment, Purchaser will stand in the shoes of Seller and, consequently, will be acting as a non-dealer in exercising its rights and fulfilling its obligations assigned pursuant to this Section 5 and each Trade Assignment. Each Trade Assignment delivered by Seller to Purchaser shall be delivered by Seller in a timely manner sufficient to enable Purchaser to facilitate the settlement of the related trade on the trade date in accordance with “good delivery standards” of the Securities Industry and Financial Markets Association as set forth in the Securities Industry and Financial Markets Association Uniform Practices Manual, as amended from time to time.

 

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6.            PAYMENT AND TRANSFER

 

Unless otherwise agreed by Seller and Purchaser, all transfers of funds hereunder shall be in Dollars in immediately available funds. Seller shall remit (or, if applicable, shall cause to be remitted) directly to Purchaser all payments required to be made by it to Purchaser hereunder or under any other Program Document in accordance with wire instructions provided by Purchaser. Any payments received by Purchaser after 5:00 p.m. (New York City time) shall be applied on the next succeeding Business Day.

 

7.            MARGIN MAINTENANCE

 

(a)           Agent shall determine the Market Value of the Purchased Assets on a daily basis as determined by Agent, in its sole good faith discretion.

 

(b)           If, as of any date of determination, the lesser of (i) 100% of the unpaid principal balance as of such date of all Purchased Assets then subject to all Transactions and (ii) the product of (x) the aggregate Market Value of all Purchased Assets then subject to all Transactions, taking into account the cash then on deposit in the Collection Account, multiplied by (y) the applicable Purchase Price Percentage, is less than the Repurchase Price (less the related Price Differential) for all such Transactions (a “ Margin Deficit ”), then Agent may, by notice to Seller (as such notice is more particularly set forth below, a “ Margin Call ”), require Seller to transfer to Purchaser or its designee cash or, at Purchaser’s option (and provided Seller has additional Eligible Mortgage Loans), additional Eligible Mortgage Loans to Purchaser (“ Additional Purchased Mortgage Loans ”) to cure the Margin Deficit. If Agent delivers a Margin Call to Seller on or prior to 11:00 a.m. (New York City time) on any Business Day, then Seller shall transfer cash or Additional Purchased Mortgage Loans to Purchaser or its designee no later than (i) 5:00 p.m. (New York City time) on the same Business Day. In the event Agent delivers a Margin Call to Seller after 11:00 a.m. (New York City time) on any Business Day, Seller shall be required to transfer cash or Additional Purchased Mortgage Loans no later than (i) 12:00 p.m. (New York City time) on the next succeeding Business Day.

 

(c)           Any cash transferred to Purchaser or its designee pursuant to Section 16(f)(ii) herein shall reduce the Repurchase Price of the related Transactions.

 

(d)           The failure of Purchaser, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions of this Agreement or limit the right of Purchaser to do so at a later date. Seller and Purchaser each agree that a failure or delay by a Purchaser to exercise its rights hereunder shall not limit or waive Purchaser’s rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.

 

(e)           For the avoidance of doubt, it is hereby understood and agreed that Seller shall be responsible for satisfying any Margin Deficit existing as a result of any cram down of the unpaid principal balance of any Purchased Asset pursuant to any action by any bankruptcy court.

 

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8.            TAXES; TAX TREATMENT

 

(a)           All payments made by Seller under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto imposed by any Governmental Authority therewith or thereon, excluding income taxes, branch profits taxes, franchise taxes or any other tax imposed on net income by the United States, a state or a foreign jurisdiction under the laws of which Purchaser is organized or of its applicable lending office, or a state or foreign jurisdiction with respect to which Purchaser has a present or former connection, or any political subdivision thereof (collectively, “ Taxes ”), all of which shall be paid by Seller for its own account not later than the date when due. If Seller is required by law or regulation to deduct or withhold any Taxes from or in respect of any amount payable hereunder, it shall: (a) make such deduction or withholding, (b) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due, (c) deliver to Purchaser, promptly, original tax receipts and other evidence satisfactory to Purchaser of the payment when due of the full amount of such Taxes; and (d) pay to Purchaser such additional amounts as may be necessary so that Purchaser receives, free and clear of all Taxes, a net amount equal to the amount it would have received under this Agreement, as if no such deduction or withholding had been made.

 

(b)           In addition, Seller agrees to pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including, without limitation, mortgage recording taxes, transfer taxes and similar fees) imposed by the United States or any taxing authority thereof or therein that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (“ Other Taxes ”).

 

(c)           Seller agrees to indemnify Purchaser for the full amount of Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable under this Section 8, and any liability (including penalties, interest and expenses arising thereon or with respect thereto) arising therefrom or with respect thereto, provided that Purchaser shall have provided Seller with evidence, reasonably satisfactory to Seller, of payment of Taxes or Other Taxes, as the case may be.

 

(d)           Agent and any Purchaser that either (i) is not incorporated under the laws of the United States, any State thereof, or the District of Columbia or (ii) whose name does not include “Incorporated,” “inc.,” “Corporation,” “Corp.,” “P.C.,” “insurance company,” or “assurance company” (a “ Foreign Purchaser ”) shall provide Seller and Agent with original properly completed and duly executed United States Internal Revenue Service (“ IRS ”) Forms W-8BEN, W-8BEN-E or W-8ECI or any successor form prescribed by the IRS, certifying that such Person is entitled to benefits under an income tax treaty to which the United States is a party which eliminates withholding tax on payments to it or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States on or prior to the date upon which each such Foreign Purchaser becomes a Purchaser. In addition, Agent shall be a “qualified intermediary” (as defined in Treas. Reg. Section 1.1441-1(e)(5)) and provide Seller with an original properly completed and duly executed IRS Form W-8IMY with “qualified intermediary” checked in Part I and Part II properly completed to provide that Agent is a “qualified intermediary” for Purchaser with respect to payments under this Agreement and the other Program Documents (with all appropriate attachments) for any amount received on behalf of a Purchaser which eliminates withholding tax on payments to it on or prior to the date it becomes an Agent. Agent and each Foreign Purchaser will resubmit the appropriate form eliminating withholding tax on payments to it on the earliest of (A) the third anniversary of the prior submission, or (B) on or before the expiration of thirty (30) days after there is a “change in circumstances” with respect to such Person as defined in Treas. Reg. Section 1.1441-1(e)(4)(ii)(D). For any period with respect to which Agent or a Foreign Purchaser has failed to provide Seller with the appropriate form or other relevant document pursuant to this Section 8(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided) such Person shall not be entitled to “gross-up” of Taxes or indemnification under Section 8(c) with respect to Taxes imposed by the United States; provided, however that should a Foreign Purchaser, which is otherwise exempt from a withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Seller shall take such steps as such Foreign Purchaser shall reasonably request to assist such Foreign Purchaser to recover such Taxes.

 

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(e)           Without prejudice to the survival or any other agreement of Seller hereunder, the agreements and obligations of Seller contained in this Section 8 shall survive the termination of this Agreement. Nothing contained in this Section 8 shall require Purchaser to make available any of their tax returns or other information that it deems to be confidential or proprietary.

 

(f)           Each party to this Agreement acknowledges that it is its intent solely for purposes of U.S. federal, state and local income and franchise taxes to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets and that the Purchased Assets are owned by Seller in the absence of an Event of Default by Seller. All parties to this Agreement agree to such treatment and agree to take no action inconsistent with this treatment, unless required by law.

 

9.            SECURITY INTEREST; PURCHASER’S APPOINTMENT AS ATTORNEY-IN-FACT

 

(a)           Seller and Purchaser intend that (other than for tax and accounting purposes) the Transactions hereunder be sales to Purchaser of the Purchased Assets and not loans from Purchaser to Seller secured by the Purchased Assets. However, in order to preserve Purchaser’s rights under this Agreement in the event that a court or other forum recharacterizes the Transactions hereunder as other than sales, and as security for Seller’s performance of all of its Obligations, Seller hereby grants to Purchaser a first priority security interest in the Purchased Assets. Seller acknowledges and agrees that its rights with respect to the Purchased Assets are and shall continue to be at all times junior and subordinate to the rights of Purchaser hereunder.

 

(b)           Seller hereby irrevocably constitutes and appoints Purchaser and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Purchaser’s discretion, to file such financing statement or statements relating to the Purchased Assets as Purchaser at its option may deem appropriate, and if an Event of Default shall have occurred and be continuing, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be reasonably necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, Seller hereby gives Purchaser the power and right, on behalf of Seller, without assent by, but with notice to, Seller, to do the following if an Event of Default shall have occurred and be continuing and Purchaser has elected to exercise its remedies pursuant to Section 18 hereof:

 

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

 

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(ii)         to pay or discharge taxes and Liens levied or placed on or threatened against the Purchased Assets;

 

(iii)        (A) to direct any party liable for any payment under any Purchased Assets to make payment of any and all moneys due or to become due thereunder directly to Purchaser or as Purchaser shall direct, (B) in the name of Seller, or in its own name, or otherwise as appropriate, to directly send or cause the applicable servicer to send “hello” letters, “goodbye” letters in the form of Exhibit D , and Section 404 Notices; (C) to ask or demand for, collect, receive payment of and receipt for any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Purchased Assets; (D) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Purchased Assets; (E) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Purchased Assets or any proceeds thereof and to enforce any other right in respect of any Purchased Assets; (F) to defend any suit, action or proceeding brought against Seller with respect to any Purchased Assets; (G) to settle, compromise or adjust any suit, action or proceeding described in clause (F) above and, in connection therewith, to give such discharges or releases as Purchaser may deem appropriate; and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Purchased Assets as fully and completely as though Purchaser was the absolute owner thereof for all purposes, and to do, at Purchaser’s option and Seller’s expense, at any time, and from time to time, all acts and things which Purchaser deems necessary to protect, preserve or realize upon the Purchased Assets and Purchaser’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller might do.

 

Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

 

Seller also authorizes Purchaser, from time to time if an Event of Default shall have occurred and be continuing, to execute any endorsements, assignments or other instruments of conveyance or transfer with respect to the Purchased Assets in connection with any sale provided for in Section 18 hereof.

 

The powers conferred on Purchaser hereunder are solely to protect Purchaser’s interests in the Purchased Assets and shall not impose any duty upon it to exercise any such powers. Purchaser shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither Purchaser nor any of its officers, directors, employees or agents shall be responsible to Seller for any act or failure to act hereunder.

 

10.          CONDITIONS PRECEDENT

 

(a)           As conditions precedent to the effectiveness of this Agreement, Seller shall have paid to Purchaser and Purchaser shall have received on or before the Effective Date all accrued and unpaid fees and expenses owed to Purchaser in accordance with the Program Documents, in immediately available funds, and without deduction, set-off or counterclaim.

 

(b)           As conditions precedent to each Transaction (including the initial Transaction), each of the following conditions shall have been satisfied:

 

(i)           Purchaser or its designee shall have received on or before the Purchase Date with respect to Eligible Mortgage Loans that are to be the subject of such Transaction (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Purchaser and (if applicable) duly executed:

 

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(A) Seller shall have paid to Purchaser and Purchaser shall have received all accrued and unpaid fees and expenses owed to Purchaser in accordance with the Program Documents in immediately available funds, and without deduction, set-off or counterclaim;

 

(B) The Transaction Notice and Seller Mortgage Loan Schedule with respect to such Purchased Assets, delivered pursuant to Section 3(c);

 

(C) Such certificates, customary opinions of counsel or other documents as Purchaser or Agent may reasonably request, provided that such opinions of counsel shall not be required routinely in connection with each Transaction but shall only be required from time to time as deemed necessary by Purchaser in its commercially reasonable judgment;

 

(D) An original trust receipt executed by Custodian without exceptions;

 

(E) Such other certifications of Custodian as are required under Sections 2 and 4 of the Custodial Agreement; and

 

(F) a duly executed Warehouse Lender’s Release from any Warehouse Lender (including any party that has a precautionary security interest in a Mortgage Loan) having a security interest in any Mortgage Loans, addressed to Purchaser, releasing any and all of its right, title and interest in, to and under such Mortgage Loan (including, without limitation, any security interest that such secured party or secured party’s agent may have by virtue of its possession, custody or control thereof) and, to the extent applicable, has filed Uniform Commercial Code termination statements in respect of any Uniform Commercial Code filings made in respect of such Mortgage Loan, and each such Warehouse Lender’s Release and Uniform Commercial Code termination statement has been delivered to Purchaser prior to such Transaction and to Custodian as part of the Mortgage Loan File.

 

(ii)         No Default or Event of Default shall have occurred and be continuing;

 

(iii)        Purchaser shall not have reasonably determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any requirement of law applicable to Purchaser has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Purchaser to enter into Transactions with the applicable Pricing Rate;

 

(iv)        All representations and warranties in the Program Documents shall be true and correct on the date of such Transaction and Seller is in compliance with the terms and conditions of the Program Documents, other than as may be expressly waived by Purchaser;

 

(v)         The then Aggregate MRA Purchase Price when added to the Purchase Price for the requested Transaction, shall not exceed the lesser of (a) the Maximum Aggregate Purchase Price and (b) the Asset Base;

 

(vi)        The Purchase Price for the requested Transaction shall not be less than $500,000;

 

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(vii)       Satisfaction of any conditions precedent to the initial Transaction as set forth in clause (a) of this Section 10 that were not satisfied prior to such initial Purchase Date;

 

(viii)      Purchaser shall have determined that all actions necessary to maintain Purchaser’s perfected security interest in the Purchased Assets have been taken;

 

(ix)         Purchaser or its designee shall have received any other documents reasonably requested by Purchaser;

 

(x)           There is no Margin Deficit at the time immediately prior to entering into a new Transaction (other than a Margin Deficit that will be cured contemporaneous with such Transaction in accordance with the provisions of Section 7 hereof);

 

(xi)         Purchaser and/or Agent shall have completed the due diligence review pursuant to Section 36, and such review shall be satisfactory to Purchaser and Agent in their sole discretion;

 

(xii)        Each of the Program Documents has been duly executed and delivered by the parties thereto prior to such Transaction or, with respect to the Collection Account Control Agreement, in accordance with Section 16(e), and is in full force and effect, free of any modification, breach or waiver;

 

(xiii)       Certificates of an officer of each of Seller and Guarantor attaching certified copies of Seller’s and Guarantor’s respective charter, bylaws and corporate resolutions, as applicable, approving the Program Documents and Transactions thereunder (either specifically or by general resolution), and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Documents;

 

(xiv)      A certificate of an officer of Seller reporting on Quality Control Program and certifying to the compliance of the Quality Control Program with the requirements of Section 14(z);

 

(xv)       Certified copies of good standing certificates from the jurisdictions of organization of each of Seller and Guarantor, dated as of no earlier than the date which is ten (10) Business Days prior to the Purchase Date with respect to the initial Transaction hereunder;

 

(xvi)      An incumbency certificate of the secretary of each of Seller and Guarantor certifying the names, true signatures and titles of Seller’s and Guarantor’s representatives who are duly authorized to request Transactions hereunder and to execute the Program Documents and the other documents to be delivered thereunder;

 

(xvii)     An opinion of Seller’s counsel as to such matters as Purchaser or Agent may reasonably request including, without limitation, with respect to Purchaser’s first priority lien on and perfected security interest in the Purchased Assets, a no material litigation, non-contravention, enforceability and corporate opinion with respect to Seller, an opinion with respect to the inapplicability of the Investment Company Act to Seller and Guarantor, an opinion that this Agreement constitutes a “repurchase agreement” and a “securities contract” within the meaning of the Bankruptcy Code and that no Transaction constitutes an avoidable transfer under Section 546(f) of the Bankruptcy Code, in form and substance acceptable to Purchaser and Agent in their reasonable discretion, and from nationally recognized outside counsel acceptable to Purchaser and Agent in their reasonable discretion;

 

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(xviii)    A copy of the insurance policies required by Section 14(o) of this Agreement;

 

(xix)       Evidence that all other actions necessary to perfect and protect Purchaser’s interest in the Purchased Assets have been taken, including, without limitation, the establishment of the Collection Account, and duly executed and filed Uniform Commercial Code financing statements acceptable to Purchaser and covering the Purchased Assets on Form UCC1; and

 

(xx)        Any other documents reasonably requested by Purchaser or Agent.

 

11.          RELEASE OF PURCHASED ASSETS

 

Upon timely payment in full of the Repurchase Price and all other Obligations (if any) then owing with respect to a Purchased Asset pursuant to Section 3(f) hereof, unless a Margin Deficit or an Event of Default shall have occurred and be continuing: (a) Purchaser shall be deemed to have terminated any security interest that Purchaser may have in such Purchased Asset, (b) all of Purchaser’s right, title and interest in such Purchased Assets shall automatically transfer to Seller, and (c) with respect to such Purchased Asset, Purchaser shall or shall direct Custodian to release such Purchased Asset to Seller. Except as set forth in Sections 15 and 16(f)(ii), Seller shall give at least two (2) Business Days prior written notice to Purchaser if such repurchase shall occur on any date other than the Repurchase Date.

 

If such a Margin Deficit is applicable, Purchaser shall notify Seller of the amount thereof and Seller may thereupon satisfy the Margin Call in the manner specified in Section 7.

 

12.          RELIANCE

 

With respect to any Transaction, Purchaser may conclusively rely upon, and shall incur no liability to Seller in acting upon, any request or other communication that Purchaser reasonably believed to have been given or made by a person authorized to enter into a Transaction on Seller’s behalf.

 

13.          REPRESENTATIONS AND WARRANTIES

 

Seller and Guarantor hereby represent and warrant to Purchaser and Agent, and shall on and as of the Purchase Date for any Transaction and on and as of each date thereafter through and including the related Repurchase Date be deemed to represent and warrant to Purchaser and Agent that:

 

(a)            Due Organization, Qualification, Power, Authority and Due Authorization . Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and it has qualified to do business in each jurisdiction in which it is legally required to do so. Seller has the power and authority under its certificate of incorporation, bylaws and applicable law to enter into this Agreement and the Program Documents and to perform all acts contemplated hereby and thereby or in connection herewith and therewith; this Agreement and the Program Documents and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and do not require any additional approvals or consents or other action by, or any notice to or filing with, any Person other than any that have heretofore been obtained, given or made.

 

(b)            Noncontravention . The consummation of the transactions contemplated by this Agreement and the Program Documents are in the ordinary course of business of Seller and will not conflict with, result in the breach of or violate any provision of the charter or by-laws of Seller or result in the breach of any provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any agreement, indenture, loan or credit agreement or other instrument to which Seller, the Mortgage Loans or any of Seller’s Property is or may be subject to, or result in the violation of any law, rule, regulation, order, judgment or decree to which Seller, the Mortgage Loans or Seller’s Property is subject.

 

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(c)            Legal Proceeding . There is no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body pending or, to Seller’s knowledge, threatened against or affecting Seller or Guarantor (or, to Seller’s knowledge, any basis therefor) wherein an unfavorable decision, ruling or finding would adversely affect the validity or enforceability of this Agreement, the Program Documents or any agreement or instrument to which Seller or Guarantor is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby, would adversely affect the proceedings of Seller or Guarantor in connection herewith or would or could materially and adversely affect Seller’s ability to carry out its obligations hereunder or Guarantor’s obligations under the Guaranty.

 

(d)            Valid and Binding Obligations . This Agreement, the Program Documents and every other document to be executed by Seller in connection with this Agreement is and will be legal, valid, binding and subsisting obligations of Seller, enforceable in accordance with their respective terms, except that (A) the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

(e)            Financial Statements . Guarantor has heretofore furnished to Purchaser a copy of (a) its consolidated balance sheet and the consolidated balance sheets of its consolidated Subsidiaries for the fiscal year of Guarantor ended December 31, 2013 and the related consolidated statements of income and retained earnings and of cash flows for Guarantor and its consolidated Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous year, with the opinion thereon of Grant Thornton LLP and (b) its consolidated balance sheet and the consolidated balance sheets of its consolidated Subsidiaries for the quarterly fiscal period of Guarantor ended March 31, 2014 and the related consolidated statements of income and retained earnings and of cash flows for Guarantor and its consolidated Subsidiaries for such quarterly fiscal period, setting forth in each case in comparative form the figures for the previous year. All such financial statements are complete and correct and fairly present, in all material respects, the consolidated financial condition of Guarantor and its Subsidiaries and the consolidated results of their operations as at such dates and for such fiscal periods, all in accordance with GAAP (other than monthly financial statements solely with respect to footnotes, year-end adjustments and cash flow statements) applied on a consistent basis. Since December 31, 2013, there has been no material adverse change in the consolidated business, operations or financial condition of Guarantor and its consolidated Subsidiaries taken as a whole from that set forth in said financial statements nor is Seller aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change. Guarantor has, on the date of the statements delivered pursuant to this Section (the “ Statement Date ”) no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements.

 

(f)            Accuracy of Information . Neither this Agreement nor any representations and warranties or information relating to Seller, Guarantor or any Affiliate thereof that Seller has delivered or caused to be delivered to Purchaser, including, but not limited to, all documents related to this Agreement, the Program Documents or financial statements, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein or herein in light of the circumstances under which they were made, not misleading. Since the furnishing of such documents or information, there has been no change, nor any development or event involving a prospective change that would render any of such documents or information untrue or misleading in any material respect.

 

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(g)            No Consents . No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental Person, is required in connection with the execution, delivery and performance by Seller or Guarantor of this Agreement or the Guaranty, respectively, or any other Program Document to which it is a party, other than any that have heretofore been obtained, given or made.

 

(h)            Compliance With Law, Etc. No practice, procedure or policy employed or proposed to be employed by Seller in the conduct of its businesses violates any law, regulation, judgment, agreement, regulatory consent, order or decree applicable to it which, if enforced, would result in a Material Adverse Effect.

 

(i)            Solvency . Each of Seller and Guarantor is solvent and will not be rendered insolvent by any Transaction and, after giving effect to each such Transaction, neither Seller nor Guarantor will be left with an unreasonably small amount of capital with which to engage in its business. Each of Seller and Guarantor does not intend to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature. Each of Seller and Guarantor is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Seller, Guarantor or any of its respective assets.

 

(j)            Fraudulent Conveyance. The amount of consideration being received by Seller in respect of each Transaction, taken as a whole, constitutes reasonably equivalent value and fair consideration for the related Purchased Assets. Seller is not transferring any Purchased Assets with any intent to hinder, delay or defraud any of its creditors. This Agreement and the Program Documents, any other document contemplated hereby or thereby and each transaction have not been entered into fraudulently by Seller hereunder, or with the intent to hinder, delay or defraud any creditor or Purchaser.

 

(k)            Investment Company Act Compliance . Neither Seller, Guarantor nor any of their Subsidiaries is required to be registered as an “investment company” as defined under the Investment Company Act or as an entity under the control of an entity required to be registered as an “investment company” as defined under the Investment Company Act.

 

(l)            Taxes . Each of Seller, Guarantor and their Subsidiaries have filed all federal and state tax returns that are required to be filed and paid all taxes, including any assessments received by it, to the extent that such taxes have become due (other than for taxes that are being contested in good faith or for which it has established adequate reserves). Any taxes, fees and other governmental charges payable by Seller, Guarantor or their Subsidiaries in connection with a Transaction and the execution and delivery of the Program Documents have been paid.

 

(m)            Additional Representations . With respect to each Mortgage Loan to be sold hereunder by Seller to Purchaser, Seller hereby makes all of the applicable representations and warranties set forth in Exhibit B as of the date the related Mortgage Loan File is delivered to Purchaser or Custodian with respect to the Mortgage Loans and continuously while such Mortgage Loan is subject to a Transaction. Further, as of each Purchase Date, Seller shall be deemed to have represented and warranted in like manner that Seller has no knowledge that any such representation or warranty may have ceased to be true in a material respect as of such date, except as otherwise stated in a Transaction Notice, any such exception to identify the applicable representation or warranty and specify in reasonable detail the related knowledge of Seller.

 

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(n)            No Broker . Seller has not dealt with any broker, investment banker, agent, or other person, except for Purchaser, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement; provided , that if Seller has dealt with any broker, investment banker, agent, or other person, except for Purchaser, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement, such commission or compensation shall have been paid in full by Seller.

 

(o)            Good Title . Seller has not sold, assigned, transferred, pledged or hypothecated any interest in any individual Mortgage Loan to any person other than any sale, assignment, transfer, pledge or hypothecation that is released in conjunction with the sale to Purchaser hereunder, and upon delivery of a Purchased Asset to Purchaser, Purchaser will be the sole owner thereof (other than for tax and accounting purposes), free and clear of any lien, claim or encumbrance other than those arising under this Agreement.

 

(p)           [Reserved].

 

(q)            No Adverse Actions . Neither Seller nor Servicer has received from any Agency a notice of extinguishment or a notice indicating material breach, default or material non-compliance which could entitle an Agency to terminate, suspend, sanction or levy penalties against Seller or reasonably be expected to have a Material Adverse Effect, or a notice from any Agency, HUD, FHA or VA indicating any adverse fact or circumstance in respect of Seller (i) which could entitle such Agency, HUD, FHA or VA, as the case may be, to revoke any Approval or otherwise terminate or suspend Seller as an Agency approved issuer or servicer, (ii) which could reasonably be expected to have a Material Adverse Effect, or (iii) with respect to which such adverse fact or circumstance has caused any Agency, HUD, FHA or VA, as the case may be, to terminate Seller, without any subsequent rescission thereof in such notice.

 

(r)            Mortgage Recordation . Seller has submitted the original Mortgage in respect of each Mortgage Loan for recordation in the appropriate public recording office in the applicable jurisdictions wherein such recordation is necessary to perfect the lien thereof as against creditors of the applicable Mortgagor.

 

(s)            Affiliated Parties . Seller is not an Affiliate of Custodian or any other party to a Program Document hereunder other than Guarantor.

 

The representations and warranties set forth in this Agreement shall survive transfer of the Purchased Assets to Purchaser and shall continue for so long as the Purchased Assets are subject to this Agreement.

 

14.          COVENANTS OF SELLER AND GUARANTOR

 

Seller and Guarantor hereby covenant and agree with Purchaser and Agent as follows:

 

(a)            Defense of Title . Seller warrants and will defend the right, title and interest of Purchaser in and to all Purchased Assets against all adverse claims and demands.

 

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(b)            No Amendment or Compromise . None of Seller or those acting on Seller’s behalf shall amend, modify, or waive any term or condition of, or settle or compromise any claim in respect of, any item of the Purchased Assets, any related rights or any of the Program Documents without the prior written consent of Purchaser, unless such amendment or modification does not (i) affect the amount or timing of any payment of principal or interest payable with respect to a Purchased Asset, extend its scheduled maturity date, modify its interest rate, or constitute a cancellation or discharge of its outstanding principal balance or (ii) materially and adversely affect the security afforded by the real property, furnishings, fixtures, or equipment securing the Purchased Asset. Notwithstanding the foregoing, Seller may amend, modify or waive any term or condition of the individual Mortgage Loans in accordance with Accepted Servicing Practices; provided, that Seller shall promptly notify Purchaser of any amendment, modification or waiver that causes any Mortgage Loan to cease to be an Eligible Mortgage Loan.

 

(c)            No Assignment . Except as permitted herein, Seller shall not sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in, or Lien on or otherwise encumber (except pursuant to the Program Documents) any of the Purchased Assets or any interest therein, provided that this Section 14(c) shall not prevent any of the following: any contribution, sale, assignment, transfer or conveyance of Purchased Assets in accordance with the Program Documents and any forward purchase commitment or other type of take out commitment for the Purchased Assets (without vesting rights in the related purchasers as against Purchaser until the Repurchase Price for such Purchased Assets is paid).

 

(d)            No Economic Interest . None of Seller, Guarantor nor any of their respective Affiliates will acquire any economic interest in or obligation with respect to any Mortgage Loan except for record title to the Mortgage relating to the Mortgage Loan and the right and obligation to repurchase the Mortgage Loan hereunder.

 

(e)            Preservation of Purchased Assets . Seller shall take all actions necessary or, in the opinion of Purchaser, desirable, to preserve the Purchased Assets so that they remain subject to a first priority perfected security interest hereunder and deliver evidence that such actions have been taken, including, without limitation, duly executed and filed Uniform Commercial Code financing statements on Form UCC1. Without limiting the foregoing, Seller will comply with all applicable laws, rules, regulations and other laws of any Governmental Authority applicable to Seller relating to the Purchased Assets and cause the Purchased Assets to comply with all applicable laws, rules, regulations and other laws of any such Governmental Authority. Seller will not allow any default to occur for which Seller is responsible under any Purchased Assets or any Program Documents and Seller shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets or the Program Documents.

 

(f)            Maintenance of Papers, Records and Files .

 

(i)           Seller shall maintain all Records relating to the Purchased Assets not in the possession of Custodian in good and complete condition in accordance with industry practices and preserve them against loss. Seller shall collect and maintain or cause to be collected and maintained all such Records in accordance with industry custom and practice, and all such Records shall be in Purchaser’s or Custodian’s possession unless Purchaser otherwise approves in writing. Seller will not cause or authorize any such papers, records or files that are an original or an only copy to leave Custodian’s possession, except for individual items removed in connection with servicing a specific Mortgage Loan, in which event Seller will obtain or cause to be obtained a receipt from Custodian for any such paper, record or file, or as otherwise permitted under the Custodial Agreement.

 

(ii)         For so long as Purchaser has an interest in or Lien on any Purchased Asset, Seller will hold or cause to be held all related Records for the sole benefit of Purchaser.

 

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(iii)        Upon reasonable advance notice from Custodian, Agent or Purchaser, Seller shall (x) make any and all such Records available to Custodian or Agent for examination, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, (y) permit Agent or its authorized agents to discuss the affairs, finances and accounts of Seller with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants.

 

(g)            Financial Statements and Other Information; Financial Covenants .

 

(i)           Seller and Guarantor shall keep or cause to be kept in reasonable detail books and records setting forth an account of its assets and business and, as applicable, shall clearly reflect therein the transfer of Purchased Assets to Purchaser. Seller shall furnish or cause to be furnished to Purchaser and Agent the following:

 

(A)          Financial Statements .

 

(1)         Within ninety (90) days after the end of each fiscal year of Guarantor, the consolidated audited balance sheets of Guarantor and its consolidated Subsidiaries, which will be in conformity with GAAP, and the related consolidated audited statements of income and changes in equity showing the financial condition of Guarantor and its consolidated Subsidiaries as of the close of such fiscal year and the results of operations during such year, and consolidated audited statements of cash flows, as of the close of such fiscal year, setting forth, in each case, in comparative form the corresponding figures for the preceding year. The foregoing consolidated financial statements are to be reported on by, and to carry the unqualified report (acceptable in form and content to Purchaser and Agent) of, an independent public accountant of national standing acceptable to Purchaser and Agent, which shall include KPMG LLP, PricewaterhouseCoopers LLP, Deloitte LLP, Grant Thornton LLP and any other similarly situated independent public account;

 

(2)         Within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of Guarantor, consolidated unaudited balance sheets and consolidated statements of income and changes in equity and unaudited statement of cash flows, all to be in a form acceptable to Purchaser and Agent, showing the financial condition and results of operations of Guarantor and its consolidated Subsidiaries, each on a consolidated basis as of the end of each such quarter and for the then elapsed portion of the fiscal year, setting forth, in each case, in comparative form the corresponding figures for the corresponding periods of the preceding fiscal year, certified by a financial officer of Guarantor (acceptable to Purchaser and Agent) as presenting fairly the financial position and results of operations of Guarantor and its consolidated Subsidiaries and as having been prepared in accordance with GAAP consistently applied, in each case, subject to normal year-end audit adjustments;

 

(3)         Within forty-five (45) days after the end of each month, consolidated unaudited balance sheets and consolidated statements of income and changes in equity and unaudited statement of cash flows, all to be in a form acceptable to Purchaser and Agent, showing the financial condition and results of operations of Guarantor and its consolidated Subsidiaries on a consolidated basis as of the end of each such month and for the then elapsed portion of the fiscal year, setting forth, in each case, in comparative form the corresponding figures for the corresponding month of the preceding fiscal year, certified by a financial officer of Guarantor (acceptable to Purchaser and Agent) as presenting fairly the financial position and results of operations of Guarantor and its consolidated Subsidiaries and as having been prepared in accordance with GAAP consistently applied, in each case, subject to normal year-end audit adjustments;

 

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(4)         Promptly upon receipt thereof, a copy of each other report submitted to Seller or Guarantor by its independent public accountants in connection with any annual, interim or special audit of Seller or Guarantor;

 

(5)         Promptly upon becoming available, copies of all financial statements, reports, notices and proxy statements sent by Seller or Guarantor or any of their respective consolidated Subsidiaries in a general mailing to their respective stockholders and of all reports and other material (including copies of all registration statements under the Securities Act of 1933, as amended) filed by any of them with any securities exchange or with the SEC or any governmental authority succeeding to any or all of the functions of the SEC;

 

(6)         Promptly upon becoming available, copies of any press releases issued by Seller or Guarantor and copies of any annual and quarterly financial reports and any reports on Form H-(b)12 that Seller or Guarantor may be required to file with the SEC, the FDIC or the OTS or comparable reports which such Seller or Guarantor may be required to file with the SEC, the FDIC or the OTS or any other federal banking agency containing such financial statements and other information concerning such Seller’s or Guarantor’s business and affairs as is required to be included in such reports in accordance with the rules and regulations of the SEC, the OTS, the FDIC or such other banking agency, as may be promulgated from time to time;

 

(7)         Such supplements to the aforementioned documents and such other information regarding the operations, business, affairs and financial condition of Seller or Guarantor or any of their respective consolidated Subsidiaries as Purchaser may reasonably request.

 

Seller’s obligation to deliver any report or other document under this Section 14(g)(i)(A) shall be deemed to have been satisfied if, and as of the date, such report or other document is filed with the SEC pursuant to the SEC’s Electronic Data Gathering & Analysis Recovery system.

 

(A)          Warehouse Capacity . On or prior to the date on which Seller is required to deliver the monthly financial report required in Section 14(g)(i)(A)(3), Seller shall provide to Agent a report detailing its total warehouse capacity and utilization for the prior calendar month. Such warehouse capacity shall be (i) issued directly to Seller or Guarantor and (ii) in an amount equal to or greater than $1,000,000 or such other amount as may be required by a Governmental Authority.

 

(B)          Other Information . Upon the request of Purchaser or Agent, such other information or reports as Purchaser or Agent may from time to time reasonably request.

 

(ii)         Guarantor shall at all times satisfy the financial covenants set forth in Section 3 of the Pricing Side Letter.

 

(iii)         [Reserved].

 

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(iv)         Certifications . Seller shall execute and deliver a monthly certification substantially in the form of Exhibit A attached hereto within ten (10) days after the end of each calendar month.

 

(h)           Notice of Material Events . Seller shall promptly inform Purchaser and Agent in writing of any of the following:

 

(i)           any Default, Event of Default by Seller or Guarantor or any other Person (other than Purchaser or Purchaser’s Affiliates) of any material obligation under any Program Document, or the occurrence or existence of any event or circumstance that Seller reasonably expects will with the passage of time become an Event of Default by Seller or any other Person;

 

(ii)         any material change in the insurance coverage of Seller as required to be maintained pursuant to Section 14(o) hereof, or any other Person pursuant to any Program Document, with copy of evidence of same attached;

 

(iii)        the commencement of, or any determination in, any material dispute, litigation, investigation, proceeding, sanctions or suspension between Seller or Guarantor, on the one hand, and any Governmental Authority or any other Person, on the other;

 

(iv)        any material change in accounting policies or financial reporting practices of Seller or Guarantor which could reasonably be expected to have a Material Adverse Effect;

 

(v)         any event, circumstance or condition that has resulted, or has a reasonable likelihood of resulting in either a Material Adverse Change or a Material Adverse Effect with respect to Seller or Guarantor;

 

(vi)        any material modifications to the underwriting or acquisition guidelines used by Seller with respect to the origination or acquisition of Eligible Mortgage Loans;

 

(vii)       any additional material Indebtedness incurred by Seller, including without limitation, any Indebtedness relating to any mortgage servicing rights or corporate or servicing advances, (other than (i) the Existing Indebtedness in amounts not to exceed the amounts specified on Exhibit I hereto and (ii) usual and customary accounts payable for a mortgage company) without the prior written consent of Purchaser;

 

(viii)      any penalties, sanctions or charges levied, or threatened to be levied, against Seller or any change, or threatened change, in Approval status, or actions taken, or threatened to be taken, against Seller by or disputes between Seller and any Applicable Agency, or any supervisory or regulatory Government Authority supervising or regulating the origination or servicing of mortgage loans by, or the issuer status of, Seller; or

 

(ix)         any Change in Control of Seller or Guarantor.

 

(i)            Maintenance of Licenses . Seller shall (i) maintain all licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Documents, (ii) remain in good standing under, and comply in all material respects with, all laws of each state in which it conducts business or any Mortgaged Property is located, and (iii) conduct its business strictly in accordance with applicable law.

 

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(j)            Taxes, Etc . Seller shall pay and discharge or cause to be paid and discharged, when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits or upon any of its Property, real, personal or mixed (including without limitation, the Purchased Assets) or upon any part thereof, as well as any other lawful claims which, if unpaid, might become a Lien upon such properties or any part thereof, except for any such taxes, assessments and governmental charges, levies or claims as are appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are provided. Seller shall file on a timely basis all federal, and state and local tax and information returns, reports and any other information statements or schedules required to be filed by or in respect of it.

 

(k)            Nature of Business . Seller shall not make any material change in the nature of its business as carried on at the date hereof.

 

(l)            Limitation on Distributions . Seller shall not make any payment of any dividends or make distributions on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any capital stock, senior or subordinate debt of Seller or other equity interests, respectively, thereof, 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.

 

(m)            Use of Custodian . Without the prior written consent of Purchaser, Seller shall use no third party custodian as document custodian other than Custodian for the Mortgage Loan File relating to the Mortgage Loans.

 

(n)            Merger of Seller . Seller shall not, at any time, directly or indirectly (i) liquidate or dissolve or enter into any consolidation or merger or be subject to a Change in Control or sell all or substantially all of its Property (other than in connection with an asset-based financing or other secondary market transaction related to Seller’s assets in the ordinary course of Seller’s business); (ii) form or enter into any partnership, joint venture, syndicate or other combination which would have a Material Adverse Effect with respect to Seller; or (iii) make any Material Adverse Change with respect to Seller.

 

(o)            Insurance . Seller shall obtain and maintain insurance with responsible companies in such amounts and against such risks as are customarily carried by business entities engaged in similar businesses similarly situated including, without limitation, the insurance required to be obtained and maintained by the Fannie Mae Guide, and will furnish Purchaser on request full information as to all such insurance, and provide within fifteen (15) days after receipt of such request the certificates or other documents evidencing renewal of each such policy. Seller shall continue to maintain coverage, for itself and its Subsidiaries, that encompasses employee dishonesty, forgery or alteration, theft, disappearance and destruction, robbery and safe burglary, Property (other than money and securities), and computer fraud in an aggregate amount of at least such amount as required by the Fannie Mae Guide.

 

(p)            Affiliate Transactions . Seller shall not, at any time, directly or indirectly, sell, lease or otherwise transfer any Property or assets to, or otherwise acquire any Property or assets from, or otherwise engage in any transactions with, any of its Affiliates unless the terms thereof are no less favorable to Seller, than those that could be obtained at the time of such transaction in an arm’s length transaction with a Person who is not such an Affiliate.

 

(q)            Change of Fiscal Year . Seller shall not, at any time, directly or indirectly, except upon sixty (60) days’ prior written notice to Purchaser, change the date on which its fiscal year begins from its current fiscal year beginning date.

 

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(r)            Transfer of Servicing Rights, Servicing Files and Servicing . With respect to the Servicing Rights of each Mortgage Loan, Seller shall transfer such Servicing Rights to Purchaser or its designee on the related Purchase Date. With respect to the Servicing Files and the physical and contractual servicing of each Mortgage Loan to the extent in the possession of Seller, Seller shall deliver such Servicing Files and the physical and contractual servicing to Purchaser or its designee upon the expiration of the Servicing Term unless either such Servicing Term is renewed by Purchaser or the termination of Seller as servicer pursuant to Section 16. Seller’s transfer of the Servicing Rights, Servicing Files and the physical and contractual servicing under this Section shall be in accordance with customary standards in the industry including the transfer of the gross amount of all escrows held for the related Mortgagors (without reduction for unreimbursed advances or “negative escrows”).

 

(s)            MERS . Seller is a member of MERS in good standing and current in the payment of all fees and assessments imposed by MERS, and has complied with all rules and procedures of MERS. In connection with the assignment of any Mortgage Loan registered on the MERS System, Seller agrees that at the request of Purchaser it will, at Purchaser’s cost and expense prior to the occurrence of an Event of Default, but at Seller’s cost and expense following the occurrence and during the continuance of an Event of Default, cause the MERS System to indicate that such Mortgage Loan has been transferred to Purchaser in accordance with the terms of this Agreement by including in MERS’ computer files (a) the code in the field which identifies the specific owner of the Mortgage Loans and (b) the code in the field “Pool Field” which identifies the series in which such Mortgage Loans were sold. Seller further agrees that it will not alter codes referenced in this paragraph with respect to any Mortgage Loan at any time that such Mortgage Loan is subject to this Agreement, and Seller shall retain its membership in MERS at all times during the term of this Agreement.

 

(t)            Fees and Expenses . Seller shall timely pay to Purchaser all fees and actual out of pocket expenses required to be paid by Seller hereunder and under any other Program Document to Purchaser in immediately available funds, and without deduction, set-off or counterclaim in accordance with Purchaser’s Wire Instructions.

 

(u)            Further Documents . Seller shall, upon request of Purchaser or Agent, promptly execute and deliver to Purchaser or Agent all such other and further documents and instruments of transfer, conveyance and assignment, and shall take such other action as Purchaser or Agent may require more effectively to transfer, convey, assign to and vest in Purchaser and to put Purchaser in possession of the Property to be transferred, conveyed, assigned and delivered hereunder and otherwise to carry out more effectively the intent of the provisions under this Agreement.

 

(v)            Due Diligence . Seller will permit Purchaser, Agent or their respective agents or designees to perform due diligence reviews on the Mortgage Loans subject to each Transaction hereunder and within thirty (30) days following the related Purchase Date. Seller shall cooperate in all respects with such diligence and shall provide Purchaser, Agent or their respective agents or designees with all loan files and other information (including, without limitation, Seller’s quality control procedures and results) reasonably requested by Purchaser, Agent or their respective agents or designees and shall bear all costs and expenses associated with such due diligence identified in this Section 14(v).

 

(w)            Guarantees . Seller shall not create, incur, assume or suffer to exist any Guarantees, except (i) to the extent reflected in Seller’s financial statements or notes thereto or (ii) to the extent the aggregate Guarantees of Seller do not exceed $100,000.

 

(x)            [Reserved].

 

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

 

(z)            Quality Control . Seller shall maintain or shall cause a third-party to maintain an internal quality control program (the “ Quality Control Program ”) that verifies, on a regular basis, the existence and accuracy of all legal documents, credit documents, property appraisals, and underwriting decisions related to Mortgage Loans and shall provide a report on the results of the Quality Control Program in the officer’s certificate provided pursuant to Section 10(b)(xiv). Such program shall be capable of evaluating and monitoring the overall quality of Seller’s loan production and servicing activities. Such program shall (i) ensure that the Mortgage Loans are originated and serviced in accordance with prudent mortgage banking practices and accounting principles; (ii) guard against dishonest, fraudulent, or negligent acts; and (iii) guard against errors and omissions by officers, employees, or other authorized persons.

 

15.          REPURCHASE OF PURCHASED ASSETS

 

Upon discovery by Seller of a breach of any of the representations and warranties set forth on Exhibit B to this Agreement, Seller shall give prompt written notice thereof to Purchaser. Upon any such discovery by Purchaser, Purchaser will notify Seller. It is understood and agreed that the representations and warranties set forth in Exhibit B to this Agreement with respect to the Purchased Assets shall survive delivery of the respective Mortgage Loan Files to Purchaser or Custodian with respect to the Purchased Assets and shall inure to the benefit of Purchaser. The fact that Purchaser has conducted or has failed to conduct any partial or complete due diligence investigation in connection with their purchase of any Purchased Asset shall not affect Purchaser’s right to demand repurchase or any other remedy as provided under this Agreement. Seller shall, within five (5) Business Days of the earlier of Seller’s discovery or receipt of notice with respect to any Purchased Asset of (i) any breach of a representation or warranty contained in Exhibit B of this Agreement or (ii) any failure to deliver any of the items required to be delivered as part of the Mortgage Loan File within the time period required for delivery pursuant to the Custodial Agreement, promptly cure such breach or delivery failure in all material respects. If within five (5) Business Days after the earlier of Seller’s discovery of such breach or delivery failure or receipt of notice thereof that such breach or delivery failure has not been remedied by Seller, Seller shall promptly upon receipt of written instructions from Purchaser, at Purchaser’s option, repurchase such Purchased Asset at a purchase price equal to the Repurchase Price with respect to such Purchased Asset by wire transfer to the account designated by Purchaser.

 

16.          SERVICING OF THE MORTGAGE LOANS; SERVICER TERMINATION

 

(a)            Seller to Subservice .

 

(i)           Upon payment of the Purchase Price, Purchaser shall own the servicing rights related to the Mortgage Loans including the Mortgage Loan File. Seller and Purchaser each agrees and acknowledges that the Mortgage Loans sold hereunder shall be sold to Purchaser on a servicing released basis, and that Purchaser is engaging and hereby does engage Seller to provide subservicing of each Mortgage Loan for the benefit of Purchaser.

 

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(ii)         So long as a Mortgage Loan is outstanding, subject to subsection (h) below, Seller shall neither assign, encumber or pledge its obligation to subservice the Mortgage Loans in whole or in part, nor delegate its rights or duties under this Agreement (to other than a subservicer) without the prior written consent of Purchaser, the granting of which consent shall be in the sole discretion of Purchaser. Seller hereby acknowledges and agrees that (i) Purchaser is entering into this Agreement in reliance upon Seller’s representations as to the adequacy of its financial standing, servicing facilities, personnel, records, procedures, reputation and integrity, and the continuance thereof; and (ii) Seller’s engagement hereunder to provide mortgage servicing for the benefit of Purchaser is intended by the parties to be a “personal service contract” and Seller is hereunder intended by the parties to be an “independent contractor.”

 

(iii)        Seller shall subservice and administer the Mortgage Loans on behalf of Purchaser in accordance with Accepted Servicing Practices. Seller shall have no right to modify or alter the terms of any Mortgage Loan or consent to the modification or alteration of the terms of any Mortgage Loan except in accordance with Accepted Servicing Practices. Seller shall at all times maintain accurate and complete records of its servicing of the Mortgage Loans, and Agent may, at any time during Seller’s business hours on reasonable notice, examine and make copies of such Servicing Records. Seller agrees that Purchaser is the 100% beneficial owner of all Servicing Records relating to the Mortgage Loans. Seller covenants to hold such Servicing Records for the benefit of Purchaser and to safeguard such Servicing Records and to deliver them promptly to Agent or its designee (including Custodian) at Agent’s request or otherwise as required by operation of this Section 16.

 

(b)            Servicing Term . Seller shall subservice such Mortgage Loans for a term of thirty (30) days commencing as of the related Purchase Date, which term may be extended in writing by Purchaser (which writing may be, without limitation, the monthly invoice provided by Purchaser) in its sole discretion for an additional thirty-day period (each, a “ Servicing Term ”); provided, that Purchaser shall have the right to immediately terminate the Servicer at any time following the occurrence of a Servicer Termination Event. If such Servicing Term is not extended by Purchaser or if Purchaser has terminated Seller as a result of a Servicer Termination Event, Seller shall transfer such servicing to Purchaser or its designee at no cost or expense to Purchaser as provided in Section 14(r). Seller shall hold or cause to be held all Escrow Payments collected with respect to the Mortgage Loans in segregated accounts for the sole benefit of the Mortgagor and shall apply the same for the purposes for which such funds were collected. If Seller should discover that, for any reason whatsoever, it has failed to perform its servicing obligations in any material respect with respect to the Mortgage Loans, Seller shall promptly notify Purchaser.

 

(c)            Servicing Reports . As requested by Purchaser from time to time, Seller shall furnish to Purchaser reports in form and scope satisfactory to Purchaser, setting forth (i) data regarding the performance of the individual Mortgage Loans, (ii) a summary report of all Mortgage Loans serviced by Seller (on a portfolio basis), in each case, for the immediately preceding month, including, without limitation, all collections, delinquencies, defaults, defects, claim rates, losses and recoveries, and (iii) any other information reasonably requested by Purchaser or Agent.

 

(d)            Backup Servicer . Agent, in its sole discretion, may appoint a backup servicer at any time during the term of this Agreement. In such event, Seller shall commence monthly delivery to such backup servicer of the servicing information required to be delivered to Purchaser pursuant to Section 16(c) hereof and any other information reasonably requested by backup servicer, all in a format that is reasonably acceptable to such backup servicer. Purchaser shall pay all costs and expenses of such backup servicer, including, but not limited to all fees of such backup servicer in connection with the processing of such information and the maintenance of a servicing file with respect to the Purchased Assets. Seller shall cooperate fully with such backup servicer in the event of a transfer of servicing hereunder and will provide such backup servicer with all documents and information necessary for such backup servicer to assume the servicing of the Purchased Assets.

 

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(e)            Collection Account . Prior to the initial Purchase Date, Seller shall establish and maintain, or cause to be established and maintained, a separate account (the “ Collection Account ”) with the Bank in Agent’s name for the sole and exclusive benefit of Purchaser. On or before the ninetieth (90th) day after the Closing Date, Purchaser, Seller and Bank shall enter into a Collection Account Control Agreement, in form and substance acceptable to Purchaser in its reasonable discretion, with respect to the Collection Account. Seller shall deposit or credit, or cause to be deposited and credited, to the Collection Account all amounts collected on account of the Mortgage Loans within two (2) Business Days of receipt and such amounts shall be deposited or credited irrespective of any right of setoff or counterclaim arising in favor of Seller (or any third party claiming through it) under any other agreement or arrangement. Amounts on deposit in the Collection Account shall be distributed as provided in Section 16(f). Seller shall have the right to withdraw amounts on deposit therein at any time subject to the restrictions set forth in subsections 16(f)(ii) and (iv); provided, that Agent shall have the right to block such withdrawals at any time by providing written notice thereof to Seller and Bank in accordance with the terms of the Collection Account Control Agreement. Seller shall deliver, or cause Bank to deliver, to Purchaser, daily account statements in respect of the Collection Account.

 

(f)            Income Payments .

 

(i)           Where a particular term of a Transaction extends over the date on which Income is paid in respect of any Purchased Asset subject to that Transaction, (i) Seller shall deposit or cause to be deposited such Income into the Collection Account no later than two (2) Business Days after receipt thereof, and (ii) such Income shall be the Property of Purchaser subject to subsections 16(f)(ii), (iii) and (iv) below.

 

(ii)         Seller shall have the right to withdraw from the Collection Account up to $25,000 in the aggregate on any day without Purchaser’s prior written consent (the “ Daily Withdrawal Limit ”), and may withdraw larger amounts with Purchaser’s prior written consent, which consent may be given or withheld by Purchaser in its sole discretion and a copy of which shall be delivered by Purchaser to the Bank. If, on any day, the amounts on deposit in the Collection Account exceed $25,000 (such excess amounts, the “ Excess Funds ”), Seller shall cause the Bank to disburse such Excess Funds to Purchaser or as directed by Purchaser, which amounts, unless otherwise directed by Purchaser, shall be applied by Purchaser in the following order of priority (i) to reduce outstanding Price Differential due and payable in respect of Purchased Assets for which Purchaser has received the related Repurchase Price (other than Price Differential) pursuant to Section 3(f) during the prior calendar month, (ii) to reduce the Repurchase Price for all outstanding Transactions, and (iii) to pay all other Obligations then due and payable to Purchaser.

 

(iii)        Notwithstanding anything herein or in the Collection Account Control Agreement to the contrary, Seller shall in no event be permitted to withdraw funds from the Collection Account to the extent that such action would result in the creation of a Margin Deficit (unless prior thereto or simultaneously therewith Seller cures such Margin Deficit in accordance with Section 16), or if an Event of Default is then continuing. Further, if an uncured Margin Deficit exists as of such Monthly Payment Date, Seller shall cause the Bank to disburse the Income related to the Transaction for which the Margin Deficit exists to Purchaser (up to the amount of such Margin Deficit), which amounts shall be applied by Purchaser to reduce the related Repurchase Price.

 

(iv)        If successor Servicer takes delivery of such Mortgage Loans either under the circumstances set forth in Section 16(g) or otherwise, all amounts deposited in the Custodial Account shall be paid to Purchaser promptly upon such delivery.

 

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(g)            Servicer Termination . Purchaser, in its sole discretion, may terminate Seller’s rights and obligations as subservicer of the affected Mortgage Loans and require Seller to deliver the related Servicing Records to Purchaser or its designee upon the occurrence of (i) an Event of Default or (ii) upon the expiration of the Servicing Term as set forth in Section 16(b) by delivering written notice to Seller requiring such termination. Such termination shall be effective upon Seller’s receipt of such written notice; provided , that Seller’s subservicing rights shall be terminated immediately upon the occurrence of any event described in Section 17(t), regardless of whether notice of such event shall have been given to or by Purchaser or Seller. Upon any such termination, all authority and power of Seller respecting its rights to subservice and duties under this Agreement relating thereto, shall pass to and be vested in the successor Servicer appointed by Purchaser and Purchaser is hereby authorized and empowered to transfer such rights to subservice the Mortgage Loans for such price and on such terms and conditions as Purchaser shall reasonably determine. Seller shall promptly take such actions and furnish to Purchaser such documents that Purchaser deems necessary or appropriate to enable Purchaser to enforce such Mortgage Loans and shall perform all acts and take all actions so that the Mortgage Loans and all files and documents relating to such Mortgage Loans held by Seller, together with all escrow amounts relating to such Mortgage Loans, are delivered to successor Servicer, including but not limited to preparing, executing and delivering to the successor Servicer any and all documents and other instruments, placing in the successor Servicer’s possession all Servicing Records pertaining to such Mortgage Loans and doing or causing to be done, all at Seller’s sole expense. All amounts paid by any purchaser of such rights to service or subservice the Mortgage Loans shall be the Property of Purchaser. The subservicing rights required to be delivered to successor Servicer in accordance with this Section 16(g) shall be delivered free of any servicing rights in favor of Seller or any third party (other than Purchaser) and free of any title, interest, lien, encumbrance or claim of any kind of Seller other than record title to the Mortgages relating to the Mortgage Loans and the right and obligation to repurchase the Mortgage Loans hereunder. No exercise by Purchaser of its rights under this Section 16(g) shall relieve Seller of responsibility or liability for any breach of this Agreement.

 

(h)            Subservicing by Servicer . Notwithstanding anything else to the contrary set forth herein, Purchaser acknowledges that Seller shall engage Servicer to subservice the Mortgage Loans on behalf of Seller, and Purchaser hereby consents to the subservicing of the Mortgage Loans by Servicer and agrees that the subservicing of the Mortgage Loans by Servicer for Seller, in and of itself, shall not constitute a default hereunder or under any other Program Document; provided , that Seller and Servicer have each executed the Servicing Side Letter and are in compliance with each provision thereof.

 

17.          EVENTS OF DEFAULT

 

With respect to any Transactions covered by or related to this Agreement, the occurrence of any of the following events shall constitute an “ Event of Default ”:

 

(a)           Seller fails to transfer the Purchased Assets to the applicable Purchaser on the applicable Purchase Date (provided Purchaser has tendered the related Purchase Price);

 

(b)           Seller either fails to repurchase the Purchased Assets on the applicable Repurchase Date or fails to perform its obligations under Section 7 or the last sentence of Section 15;

 

(c)           Seller or Servicer shall fail to (i) remit to Purchaser when due any payment required to be made under the terms of this Agreement, any of the other Program Documents or any other contracts or agreements delivered in connection herewith or therewith, or (ii) perform, observe or comply with any material term, condition, covenant or agreement contained in this Agreement or any of the other Program Documents (other than the other “Events of Default” set forth in this Section 17) or any other contracts or agreements delivered in connection herewith or therewith, and such failure is not cured within the time period expressly provided for therein, or, if no such cure period is provided, within two (2) Business Days of the earlier of (x) Seller’s receipt of written notice from Purchaser or Custodian of such breach or (y) the date on which Seller obtains notice or knowledge of the facts giving rise to such breach;

 

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(d)           Any representation or warranty made by Seller or Guarantor (or any of Seller’s or Guarantor’s officers) in the Program Documents or in any other document delivered in connection therewith, or in any other contract or agreement, shall have been incorrect or untrue in any material respect when made or repeated or deemed by the terms thereof to have been incorrect or untrue in any material respect when made or repeated (other than the representations or warranties in Exhibit B which shall be considered solely for the purpose of determining whether the related Purchased Asset is an Eligible Mortgage Loan, unless (i) Seller shall have made any such representation or warranty with the knowledge that it was materially false or misleading at the time made or repeated or deemed to have been made or repeated, or (ii) any such representation or warranty shall have been determined by Purchaser in its sole discretion to be materially false or misleading on a regular basis);

 

(e)           Seller, Guarantor or any of their Affiliates or Subsidiaries shall be in default under, or fail to perform as requested under, or shall otherwise breach, beyond any applicable cure period, the (i) the terms of any warehouse, credit, repurchase, line of credit, financing or other similar agreement relating to any Indebtedness between Seller, Guarantor or any of their respective Affiliates, on the one hand, and any Person, on the other, which default or failure entitles any party to require acceleration or prepayment of any Indebtedness thereunder; (ii) any payment obligation under any other material agreement between Seller, Guarantor or any of their respective Affiliates, on the one hand, and any Person, on the other (it being understood that an agreement is material if the payment obligations thereunder exceed three percent (3%) of Stockholder’s Equity in the aggregate, over the term of such agreement).

 

(f)           Any Act of Insolvency of Seller or Guarantor or any of their respective Affiliates;

 

(g)           Any final judgment or order for the payment of money in excess of $1,000,000 in the aggregate (to the extent that it is, in the reasonable determination of Purchaser, uninsured and provided that any insurance or other credit posted in connection with an appeal shall not be deemed insurance for these purposes) shall be rendered against Seller or Guarantor or any of their respective Affiliates by one or more courts, administrative tribunals or other bodies having jurisdiction over them and the same shall not be discharged (or provisions shall not be made for such discharge) satisfied, or bonded, or a stay of execution thereof shall not be procured, within sixty (60) days from the date of entry thereof or Seller, Guarantor or any of their respective Affiliates, as applicable, shall not, within said period of sixty (60) days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal;

 

(h)           Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority (i) shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of Seller or Guarantor or any of their respective Affiliates, or shall have taken any action to displace the management of Seller, Guarantor or any of their respective Affiliates or to curtail its authority in the conduct of the business of Seller, Guarantor or any of their respective Affiliates, or (ii) takes any action in the nature of enforcement to remove, limit or restrict the approval of Seller, Guarantor or any of their respective Affiliates as an issuer, Purchaser or a seller/servicer of Mortgage Loans or securities backed thereby;

 

(i)           Guarantor fails to comply with any of the financial covenants set forth in or incorporated by operation of Section 3 of the Pricing Side Letter, or as set forth in the Guaranty;

 

(j)           Any Material Adverse Effect shall have occurred;

 

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(k)           This Agreement shall for any reason cease to create a valid first priority security interest or ownership interest upon transfer in any material portion of the Purchased Assets purported to be covered hereby;

 

(l)            A Change in Control of Seller or Guarantor shall have occurred that has not been approved by Agent;

 

(m)           Purchaser or Agent shall reasonably request, specifying the reasons for such request, reasonable information, and/or written responses to such requests, regarding the financial well-being of Seller or Guarantor, and such reasonable information and/or responses shall not have been provided within ten (10) Business Days of such request;

 

(n)           A default by Seller or Guarantor or any of their respective Affiliates or Subsidiaries shall have occurred and be continuing beyond the expiration of any applicable cure periods under any material agreement (including, without limitation, the Program Documents) or obligation entered into between such Person and Purchaser or any of its Affiliates;

 

(o)           Seller ceases to be a member of MERS in good standing for any reason (unless MERS is no longer acting in such capacity);

 

(p)           A change or the resignation of Servicer without the appointment of a successor Servicer, acceptable to Agent, within thirty (30) days of such change or resignation;

 

(q)           Failure of Servicer to service the Mortgage Loans in accordance with Accepted Servicing Practices or breach by Servicer of the applicable Servicing Agreement and Seller has not appointed a successor Servicer reasonably acceptable to Purchaser within thirty (30) days;

 

(r)            Failure of Servicer to meet the qualifications to obtain or maintain all requisite Approvals, any such Approvals are revoked or any such Approvals are materially modified;

 

(s)            If, at any time, Servicer’s HUD ranking falls below “Tier 2” lender;

 

(t)            Failure by Servicer to remit when due Income payments required to be made under the terms of this Agreement or such Mortgage Loan;

 

(u)           Guarantor or any of its respective Affiliates fails to operate or conduct its business operations or any material portion thereof in the ordinary course;

 

(v)           Guarantor shall fail to maintain its status as a REIT;

 

(w)           The Investment Manager shall cease to act at any time as the investment manager of Guarantor in the same or similar capacity as it does as of the date of this Agreement;

 

(x)           Any repudiation of the Guaranty by Guarantor or if the Guaranty is not enforceable against Guarantor;

 

(y)           Seller’s or Guarantor’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller or Guarantor as a “going concern” or a reference of similar import;

 

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(z)           Seller agrees to any amendment or modification of the Servicing Agreement that may affect the Purchased Assets without the prior written consent of Purchaser; or

 

(aa)         Seller, Purchaser and Bank have not entered into the Collection Account Control Agreement within the timeframe provided for execution thereof in Section 16(e) of this Agreement.

 

18.          REMEDIES

 

Upon the occurrence of an Event of Default, Purchaser, at its option, shall have the right to exercise any or all of the following rights and remedies:

 

(a)           (i)           The Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled). Seller’s Obligations hereunder, to repurchase all Purchased Assets at the Repurchase Price therefor on the Repurchase Date in such Transactions shall thereupon become immediately due and payable; all Income paid after such exercise or deemed exercise shall be remitted to and retained by Purchaser and applied to the aggregate Repurchase Prices and any other amounts owing by Seller hereunder; Seller shall immediately deliver to Purchaser or its designee any and all original papers, records and files relating to the Purchased Assets subject to such Transaction then in its possession and/or control; and all right, title and interest in and entitlement to such Purchased Assets and Servicing Rights thereon shall become Property of Purchaser.

 

(ii)         Purchaser may (A) sell, on or following the Business Day following the date on which the Repurchase Price becomes due and payable pursuant to Section 18(a)(i) without notice or demand of any kind, at a public or private sale and at such price or prices as Purchaser may reasonably deem satisfactory, any or all or portions of the Purchased Assets on a servicing-released or servicing-retained basis, as Purchaser may determine in its sole discretion and/or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Assets, to give Seller credit for such Purchased Assets (including the Servicing Rights in respect of sales on a servicing-retained basis) in an amount equal to the Market Value of the Purchased Assets against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder. Seller shall remain liable to Purchaser for any amounts that remain owing to Purchaser following a sale and/or credit under the preceding sentence. The proceeds of any disposition of Purchased Assets shall be applied first to the reasonable costs and expenses including but not limited to legal fees incurred by Purchaser in connection with or as a result of an Event of Default; second to costs of cover and/or related hedging transactions; third to the aggregate Repurchase Prices; fourth to all other Obligations; and fifth , to Seller.

 

(iii)        The parties recognize that it may not be possible to purchase or sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Assets may not be liquid. In view of these characteristics of the Purchased Assets, the parties agree that liquidation of a Transaction or the underlying Purchased Assets does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Purchaser may elect the time and manner of liquidating any Purchased Asset and nothing contained herein shall obligate Purchaser to liquidate any Purchased Asset upon the occurrence of an Event of Default or to liquidate all Purchased Assets in the same manner or on the same Business Day or shall constitute a waiver of any right or remedy of Purchaser. Notwithstanding the foregoing, the parties to this Agreement agree that the Transactions have been entered into in consideration of and in reliance upon the fact that all Transactions hereunder constitute a single business and contractual obligation and that each Transaction has been entered into in consideration of the other Transactions.

 

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(iv)        Purchaser may terminate this Agreement.

 

(b)           Seller hereby acknowledges, admits and agrees that Seller’s obligations under this Agreement are recourse obligations of Seller. In addition to their rights hereunder, Purchaser shall have the right to proceed against any of Seller’s assets which may be in the possession of Purchaser, any of Purchaser’s Affiliates or their designee (including Custodian), including the right to liquidate such assets and to set-off the proceeds against monies owed by Seller to Purchaser pursuant to this Agreement. Purchaser may set off cash, the proceeds of the liquidation of the Purchased Assets and Additional Purchased Mortgage Loans and all other sums or obligations owed by Purchaser to Seller or against all of Seller’s Obligations to Purchaser, or Seller’s obligations to Purchaser under any other agreement between the parties, or otherwise, whether or not such obligations are then due, without prejudice to Purchaser’s right to recover any deficiency.

 

(c)           Purchaser shall have the right to obtain physical possession of the Records and all other files of Seller relating to the Purchased Assets and all documents relating to the Purchased Assets which are then or may thereafter come into the possession of Seller or any third party acting for Seller and Seller shall deliver to Purchaser such assignments as Purchaser shall request.

 

(d)           Purchaser shall have the right to direct all Persons servicing the Purchased Assets to take such action with respect to the Purchased Assets as Purchaser determines appropriate, including, without limitation, using its rights under a power of attorney granted pursuant to Section 9(b) hereof.

 

(e)           Purchaser shall, without regard to the adequacy of the security for the Obligations, be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Purchased Assets or any portion thereof, collect the payments due with respect to the Purchased Assets or any portion thereof, and do anything that Purchaser is authorized hereunder to do. Seller shall pay all costs and expenses incurred by Purchaser in connection with the appointment and activities of such receiver, and such shall be deemed part of the Obligations hereunder.

 

(f)           Purchaser may, at its option, enter into one or more hedging transactions covering all or a portion of the Purchased Assets, and Seller shall be responsible for all damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against Purchaser relating to or arising out of such hedging transactions; including without limitation any losses resulting from such hedging transactions, and such shall be deemed part of the Obligations hereunder.

 

(g)           In addition to all the rights and remedies specifically provided herein, Purchaser shall have all other rights and remedies provided by applicable federal, state, foreign and local laws, whether existing at law, in equity or by statute, including, without limitation, all rights and remedies available to a purchaser/secured party under the Uniform Commercial Code.

 

Except as otherwise expressly provided in this Agreement, Purchaser shall have the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind, other than as expressly set forth herein, all of which are hereby expressly waived by Seller.

 

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Purchaser may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives, to the extent permitted by law, any right Seller might otherwise have to require Purchaser to enforce its rights by judicial process. Seller also waives, to the extent permitted by law, any defense Seller might otherwise have to the Obligations, or any guaranty thereof, arising from use of nonjudicial process, enforcement and sale of all or any portion of the Purchased Assets or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

 

Seller shall be liable to Purchaser for the amount of all losses, costs and/or expenses (plus interest thereon at a rate equal to the Default Rate) which Purchaser may sustain or incur in connection with hedging transactions relating to the Purchased Assets, conduit advances and payments for mortgage insurance.

 

19.          DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE

 

No failure on the part of Purchaser to exercise, and no delay by Purchaser in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Purchaser of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All rights and remedies of Purchaser provided for herein are cumulative and in addition to any and all other rights and remedies provided by law, the Program Documents and the other instruments and agreements contemplated hereby and thereby, and are not conditional or contingent on any attempt by Purchaser to exercise any of its rights under any other related document. Purchaser may exercise at any time after the occurrence of an Event of Default one or more remedies permitted hereunder, as it so desires, and may thereafter at any time and from time to time exercise any other remedy or remedies permitted hereunder.

 

20.          USE OF EMPLOYEE PLAN ASSETS

 

No assets of an employee benefit plan subject to any provision of ERISA shall be used by either party hereto in a Transaction.

 

21.          INDEMNITY

 

(a)           Seller agrees to indemnify and hold harmless Purchaser, Agent and their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “ Indemnified Party ”) from and against (and will reimburse each Indemnified Party as the same is incurred within thirty (30) days following receipt of an invoice therefor) any and all claims, damages, losses, liabilities, Taxes and Other Taxes (as provided in Section 8 ), increased costs (as provided in this Agreement) and all other related expenses including out-of-pocket expenses (including, without limitation, reasonable fees and expenses of outside counsel and audit and due diligence fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including without limitation, in connection with) (i) any investigation, litigation or other proceeding (whether or not such Indemnified Party is a party thereto) relating to, resulting from or arising out of any of the Program Documents and all other documents related thereto, any breach by Seller of any representation or warranty or covenant in this Agreement or any other Program Document, and all actions taken pursuant thereto, (ii) the Transactions, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby, including, without limitation, any acquisition or proposed acquisition, or any indemnity payable under the servicing agreement or other servicing arrangement, (iii) the actual or alleged presence of hazardous materials on any Property or any environmental action relating in any way to any Property, (iv) the actual or alleged violation of any federal, state, municipal or local predatory lending laws, or (v) the reduction of the unpaid principal balance due to a cram down or similar action authorized by any bankruptcy proceeding or other case arising out of or relating to any petition under the Bankruptcy Code, in each case, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted directly from such Indemnified Party’s gross negligence or willful misconduct or is the result of a claim made by Seller against the Indemnified Party, and Seller is ultimately the successful party in any resulting litigation or arbitration. Seller hereby agrees not to assert any claim against Purchaser or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Program Documents, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.

 

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(b)           If Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, reasonable fees and expenses of counsel and indemnities, such amount may be paid on behalf of Seller by Purchaser, in its sole discretion, and Seller shall remain liable for any such payments by Purchaser and such amounts shall be deemed part of the Obligations hereunder. No such payment by Purchaser shall be deemed a waiver of any of Purchaser’s rights under the Program Documents.

 

(c)           Without prejudice to the survival of any other agreement of Seller hereunder, the covenants and obligations of Seller contained in this Section 21 shall survive the payment in full of the Repurchase Price and all other amounts payable hereunder and delivery of the Purchased Assets by Purchaser against full payment therefor.

 

22.          WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS

 

Seller hereby expressly waives, to the fullest extent permitted by law, every statute of limitation on a deficiency judgment, any reduction in the proceeds of any Purchased Assets as a result of restrictions upon Purchaser or Custodian contained in the Program Documents or any other instrument delivered in connection therewith, and any right that they may have to direct the order in which any of the Purchased Assets shall be disposed of in the event of any disposition pursuant hereto.

 

23.          REIMBURSEMENT; SET-OFF

 

(a)           Seller agrees to pay on demand all reasonable out-of-pocket costs and expenses of Purchaser in connection with the initial and subsequent negotiation, modification, renewal and amendment of the Program Documents (including, without limitation, (A) all collateral review and UCC search and filing fees and expenses and (B) the reasonable fees and expenses of outside counsel for Purchaser with respect to advising Purchaser as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under this Agreement and any other Program Document, with respect to negotiations with Seller or with other creditors of Seller arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto). Seller agrees to pay on demand, with interest at the Default Rate to the extent that an Event of Default has occurred, all costs and expenses, including without limitation, reasonable attorneys’ fees and disbursements (and fees and disbursements of Purchaser’s outside counsel) expended or incurred by Purchaser in connection with the modification, renewal, amendment and enforcement (including any waivers) of the Program Documents (regardless of whether a Transaction is entered into hereunder), the taking of any action, including legal action, required or permitted to be taken by Purchaser and/or Custodian (without duplication to Purchaser) pursuant thereto or by refinancing or restructuring in the nature of a “workout.” Further, Seller agrees to pay, with interest at the Default Rate to the extent that an Event of Default has occurred and is continuing, all costs and expenses, including without limitation, reasonable attorneys’ fees and disbursements (and fees and disbursements of Purchaser’s outside counsel) expended or incurred by Purchaser in connection with (a) the rendering of legal advice as to Purchaser’s rights, remedies and obligations under any of the Program Documents, (b) the collection of any sum which becomes due to Purchaser under any Program Document, (c) any proceeding for declaratory relief, any counterclaim to any proceeding, or any appeal, or (d) the protection, preservation or enforcement of any rights of Purchaser. For the purposes of this Section 23(a), attorneys’ fees shall include, without limitation, fees incurred in connection with the following: (1) discovery; (2) any motion, proceeding or other activity of any kind in connection with a bankruptcy proceeding or case arising out of or relating to any petition under Title 11 of the United States Code, as the same shall be in effect from time to time, or any similar law; (3) garnishment, levy, and debtor and third party examinations; and (4) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment. Any and all of the foregoing amounts referred to in this Section 23(a) shall be deemed a part of the Obligations hereunder. Without prejudice to the survival of any other agreement of Seller hereunder, the covenants and obligations of Seller contained in this Section 23(a) shall survive the payment in full of the Repurchase Price and all other amounts payable hereunder and delivery of the Purchased Assets by Purchaser against full payment therefor.

 

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(b)           In addition to any rights and remedies of Purchaser under this Agreement and by law, Purchaser and its Affiliates shall have the right, without prior notice to Seller, any such notice being expressly waived by Seller to the extent permitted by applicable law, upon any amount becoming due and payable (whether at the stated maturity, by acceleration or otherwise) by Seller hereunder or under any Set Off Eligible Agreement, to set-off and appropriate and apply against such amount (subject to any existing limitations on recourse) any and all Property and deposits (general or special, time or demand, provisional or final), in any currency, or any other credits, indebtedness or claims, in any currency, or any other collateral (in the case of collateral not in the form of cash or such other marketable or negotiable form, by selling such collateral in a recognized market therefor or as otherwise permitted by law or as may be in accordance with custom, usage or trade practice), in each case, whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Purchaser or any Affiliate thereof to or for the credit or the account of Seller except and to the extent that any of the same are held by Seller for the account of another Person. Purchaser may also (subject to any existing limitations on recourse) set-off cash and all other sums or obligations owed by Purchaser or its Affiliates to Seller hereunder or under any Set Off Eligible Agreement against all of Seller’s obligations to Purchaser or its Affiliates hereunder or under any Set Off Eligible Agreement, whether or not such obligations are then due. The exercise of any such right of set-off shall be without prejudice to Purchaser’s or its Affiliate’s right to recover any deficiency. Purchaser agrees to promptly notify Seller after any such set-off and application made by Purchaser; provided that the failure to give such notice shall not affect the validity of such set-off and application.

 

24.          FURTHER ASSURANCES

 

Seller agrees to do such further acts and things and to execute and deliver to Purchaser such additional assignments, acknowledgments, agreements, powers and instruments as are reasonably required by Purchaser and Agent to carry into effect the intent and purposes of this Agreement, to perfect the interests of Purchaser in the Purchased Assets or to better assure and confirm unto Purchaser its rights, powers and remedies hereunder.

 

25.          ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION

 

This Agreement supersedes and integrates all previous negotiations, contracts, agreements and understandings between the parties relating to a sale and repurchase of Purchased Assets and Additional Purchased Mortgage Loans, and it, together with the other Program Documents, and the other documents delivered pursuant hereto or thereto, contains the entire final agreement of the parties. No prior negotiation, agreement, understanding or prior contract shall have any validity hereafter.

 

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26.          TERMINATION

 

This Agreement shall remain in effect until the Termination Date. However, no such termination shall affect Seller’s outstanding obligations to Purchaser at the time of such termination. Seller’s obligations to indemnify Purchaser pursuant to this Agreement and the other Program Documents shall survive the termination hereof.

 

27.          REHYPOTHECATION; ASSIGNMENT

 

(a)           Purchaser may, in its sole election, and without the consent of Seller engage in repurchase transactions with the Purchased Assets or otherwise pledge, hypothecate, assign, transfer or otherwise convey the Purchased Assets with a counterparty of Purchaser’s choice, in all cases subject to Purchaser’s obligation to re-convey the Purchased Assets (and not substitutes therefor) on the Repurchase Date, all at no cost to Seller. In the event Purchaser engages in a repurchase transaction with any of the Purchased Assets or otherwise pledges or hypothecates any of the Purchased Assets, Purchaser shall have the right to assign to Purchaser’s counterparty any of the applicable representations or warranties in Exhibit B to this Agreement and the remedies for breach thereof, as they relate to the Purchased Assets that are subject to such repurchase transaction.

 

(b)           The Program Documents and Seller’s rights and obligations thereunder are not assignable by Seller without the prior written consent of Purchaser. Any Person into which Seller may be merged or consolidated, or any corporation resulting from any merger, conversion or consolidation to which Seller shall be a party, or any Person succeeding to the business of Seller, shall be the successor of Seller hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Without any requirement for further consent of Seller and at no cost or expense to Seller, each of Purchaser and Agent may, in its sole discretion, elect to assign or participate all or a portion of its rights and obligations under this Agreement and the Program Documents with a counterparty of Purchaser’s or Agent’s choice. Purchaser or Agent shall notify Seller of any such assignment and participation and shall maintain, for review by Seller upon written request, a register of assignees and participants and a copy of any executed assignment and acceptance by Purchaser or Agent and assignee (“ Assignment and Acceptance ”), specifying the percentage or portion of such rights and obligations assigned. Seller agrees that, for any such permitted assignment, Seller will cooperate with the prompt execution and delivery of documents reasonably necessary for such assignment process to the extent that Seller incurs no cost or expense that is not paid by Purchaser or Agent, as applicable. Upon such assignment, (a) such assignee shall be a party hereto and to each Program Document to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Purchaser or Agent hereunder, and (b) Purchaser or Agent shall, to the extent that such rights and obligations have been so assigned by it to either (i) an Affiliate of Purchaser or Agent which assumes the obligations of Purchaser or Agent hereunder or (ii) to another Person which assumes the obligations of Purchaser or Agent hereunder, be released from their obligations hereunder accruing thereafter and under the Program Documents.

 

(c)           Purchaser and Agent may distribute to any prospective assignee, participant or pledgee any document or other information delivered to Purchaser by Seller subject to the confidentiality restrictions contained in Section 35 hereof; accordingly, such prospective assignee, participant or pledgee shall be required to agree to confidentiality provisions similar to those set forth in Section 35.

 

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28.          AMENDMENTS, ETC.

 

No amendment or waiver of any provision of this Agreement nor any consent to any failure to comply herewith or therewith shall in any event be effective unless the same shall be in writing and signed by Seller, Purchaser and Agent, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

29.          SEVERABILITY

 

If any provision of any Program Document is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision of the Program Documents, and each Program Document shall be enforced to the fullest extent permitted by law.

 

30.          BINDING EFFECT; GOVERNING LAW

 

This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

31.          WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION AND VENUE; SERVICE OF PROCESS

 

SELLER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE PROGRAM DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SELLER HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS, ON BEHALF OF ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE PROGRAM DOCUMENTS IN ANY ACTION OR PROCEEDING. SELLER HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, NON-EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM DOCUMENTS. SELLER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF A SUMMONS AND COMPLAINT AND OTHER PROCESS IN ANY ACTION, CLAIM OR PROCEEDING BROUGHT BY ANOTHER PARTY IN CONNECTION WITH THIS AGREEMENT OR THE OTHER PROGRAM DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS, ON BEHALF OF ITSELF OR ITS PROPERTY, IN THE MANNER SPECIFIED IN THIS SECTION 31 AND TO SUCH PARTY’S ADDRESS SPECIFIED IN SECTION 34 OR SUCH OTHER ADDRESS AS SUCH PARTY SHALL HAVE PROVIDED IN WRITING TO THE OTHER PARTIES HERETO. NOTHING IN THIS SECTION 31 SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO (I) SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW, OR (II) BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY OR ITS PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTIONS.

 

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32.          SINGLE AGREEMENT

 

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

 

33.          INTENT

 

Seller, Purchaser and Agent recognize that each of the Transactions and this Agreement is a “repurchase agreement” as that term is defined in Section 101 of the Bankruptcy Code, and a “securities contract” as that term is defined in Section 741 of the Bankruptcy Code, or a “qualified financial contract” as that term is defined in the Federal Deposit Insurance Act, as applicable, and a “master netting agreement” as that term is defined in Section 101 of the Bankruptcy Code.

 

It is understood that Purchaser’s right to liquidate, the Purchased Assets and terminate and accelerate the Transactions and this Agreement or to exercise any other remedies pursuant to Section 18 hereof is a contractual right to liquidate, terminate and accelerate the Transactions under a repurchase agreement, a securities contract, a master netting agreement, and a qualified financial contract as described in Sections 559, 555 and 561 of the Bankruptcy Code and Section 1821(e)(8)(A)(i) of the Federal Deposit Insurance Act, as applicable, and a contractual right to offset under a master netting agreement and across contracts, as described in Section 561 of the Bankruptcy Code. It is understood that Seller’s right to accelerate the Repurchase Date with respect to the Purchased Assets and any Transaction hereunder pursuant to Section 22 hereof is a contractual right to liquidate, terminate and accelerate the Transactions under a repurchase agreement, a securities contract, a master netting agreement, and a qualified financial contract as described in Sections 559, 555 and 561 of the Bankruptcy Code and Section 1821(e)(8)(A)(i) of the Federal Deposit Insurance Act, as applicable.

 

The parties hereby intend that any provisions hereof or in any other document, agreement or instrument that is related in any way to the servicing of the individual Mortgage Loans shall be deemed “related to” this Agreement within the meaning of Sections 101(38A)(A) and 101(47)(A)(v) of the Bankruptcy Code and part of the “contract” as such term is used in Section 741 of the Bankruptcy Code.

 

34.          NOTICES AND OTHER COMMUNICATIONS

 

Except as provided herein, all notices required or permitted by this Agreement shall be in writing (including without limitation by Electronic Transmission, email or facsimile) and shall be effective and deemed delivered only when received by the party to which it is sent; provided that notices of Events of Default and exercise of remedies or under Sections 6 or 18 shall be sent via overnight mail and by electronic transmission. Any such notice shall be sent to a party at the address, electronic mail or facsimile transmission number set forth below:

 

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if to Seller:   Five Oaks Acquisition Corp.
    c/o Oak Circle Capital Partners LLC
    540 Madison Avenue, 19th Floor
    New York, New York 10022
    Email: LOANOPS@oakcirclecapital.com
    Telephone: (212) 257-5072
    Facsimile: (212) 257-5099
     
if to Guarantor:   Five Oaks Investment Corp.
    c/o Oak Circle Capital Partners LLC
    540 Madison Avenue, 19th Floor
    New York, New York 10022
    Email: OPS@oakcirclecapital.com
    Telephone: (212) 257-5072
    Facsimile: (212) 257-5099
     
if to Purchaser:   Barclays Bank PLC – Mortgage Finance
    745 Seventh Avenue, 4th Floor
    New York, New York 10019
    Attention:  Joseph O’Doherty
    Telephone:  (212) 412-7990
    Facsimile: (212) 412-7333
    E-mail: joseph.o’doherty@barclayscapital.com
     
    With a copy to:
     
    Barclays Bank PLC – Legal Department
    745 Seventh Avenue, 20th Floor
    New York, New York 10019
    Telephone:  (212) 412-1494    
    Facsimile: (212) 412-1288
     
    Barclays Capital – Operations
    1301 Avenue of the Americas, 8th Floor
    New York, NY 10019
    Attention: Hánsel Nieves
    Telephone: (212) 320-7370
    Facsimile:  (646) 845-6464
    Email: hansel.nieves@barclayscapital.com
     
if to Agent:   Barclays Bank PLC – Mortgage Finance
    745 Seventh Avenue, 4th Floor
    New York, New York 10019
    Attention:  Joseph O’Doherty
    Telephone:  (212) 412-7990
    Facsimile: (212) 412-7333
    E-mail: joseph.o’doherty@barclayscapital.com
     
    With a copy to:

 

- 48 -
 

 

    Barclays Bank PLC – Legal Department
    745 Seventh Avenue, 20th Floor
    New York, New York 10019
    Telephone:  (212) 412-1494    
    Facsimile: (212) 412-1288
     
    Barclays Capital – Operations
    1301 Avenue of the Americas, 8th Floor
    New York, NY 10019
    Attention: Hánsel Nieves
    Telephone: (212) 320-7370
    Facsimile:  (646) 845-6464
    Email: hansel.nieves@barclayscapital.com

 

or to such other address, e-mail address or facsimile number as either party may notify to the others in writing from time to time.

 

35.          CONFIDENTIALITY

 

Seller, Purchaser and Agent each hereby acknowledge and agree that all written or computer-readable information provided by one party to the other in connection with the Program Documents or the Transactions contemplated thereby, including without limitation, Seller’s Mortgagor information in the possession of Purchaser (the “ Confidential Terms ”) shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except for (i) disclosure to Seller’s direct and indirect parent companies, directors, attorneys, agents or accountants, provided that such attorneys or accountants likewise agree to be bound by this covenant of confidentiality, or are otherwise subject to confidentiality restrictions or (ii) with prior (if feasible, and if not feasible, as promptly as possible) written notice to Purchaser, disclosure required by law, rule, regulation or order of a court or other regulatory body or (iii) with prior (if feasible, and if not feasible, as promptly as possible) written notice to Purchaser, disclosure to any approved hedge counterparty to the extent necessary to obtain any Hedge Instrument hereunder or (iv) with prior (if feasible) written notice to Purchaser, any disclosures or filing required under Securities and Exchange Commission (“ SEC ”) or state securities’ laws; provided that in the case of clause (iv), Seller shall not file the Pricing Side Letter. Notwithstanding anything herein to the contrary, except as reasonably necessary to comply with applicable securities laws, each party (and each employee, representative, or other agent of each party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. For this purpose, tax treatment and tax structure shall not include (i) the identity of any existing or future party (or any Affiliate of such party) to this Agreement or (ii) any specific pricing information or other commercial terms, including the amount of any fees, expenses, rates or payments arising in connection with the transactions contemplated by this Agreement.

 

- 49 -
 

 

36.          DUE DILIGENCE

 

Subject to Section 14(v), (i) Purchaser, Agent or any of their respective agents, representatives or permitted assigns shall have the right, upon reasonable prior notice and during normal business hours, to conduct inspection and perform continuing due diligence reviews of (x) Seller, Guarantor and their respective Affiliates, directors, officers, employees and significant shareholders, including, without limitation, their respective financial condition and performance of its obligations under the Program Documents, and (y) the Servicing File and the Purchased Assets and (ii) Seller agrees promptly to provide Purchaser, Agent and their respective agents with access to, copies of and extracts from any and all documents, records, agreements, instruments or information (including, without limitation, any of the foregoing in computer data banks and computer software systems) relating to Seller’s respective business, operations, servicing, financial condition, performance of their obligations under the Program Documents, the documents contained in the Servicing Files or the Purchased Assets or assets proposed to be sold hereunder in the possession, or under the control, of Seller. In addition, Seller shall also make available to Purchaser and/or Agent, upon reasonable prior notice and during normal business hours, a knowledgeable financial or accounting officer of Seller for the purpose of answering questions respecting any of the foregoing. Without limiting the generality of the foregoing, Seller acknowledges that Purchaser shall enter into transactions with Seller based solely upon the information provided by Seller to Purchaser and/or Agent and the representations, warranties and covenants contained herein, and that Purchaser and/or Agent, at its option, shall have the right at any time to conduct itself or through its agents, or require Seller to conduct quality reviews and underwriting compliance reviews of the individual Mortgage Loans at the expense of Seller. Any such diligence conducted by Purchaser and/or Agent shall not reduce or limit Seller’s representations, warranties and covenants set forth herein. Seller agrees to reimburse Purchaser and/or Agent for all reasonable out-of-pocket due diligence costs and expenses incurred pursuant to this Section 36.

 

[SIGNATURE PAGE FOLLOWS]

 

- 50 -
 

 

IN WITNESS WHEREOF, Seller, Agent and Purchaser have caused their names to be signed to this Master Repurchase Agreement by their respective officers thereunto duly authorized as of the date first above written.

 

  FIVE OAKS ACQUISITION CORP.,
  as Seller
   
  By: /s/ Darren Comisso
  Name: Darren Comisso
  Title: Executive Vice President
   
  FIVE OAKS INVESTMENT CORP.,
  as Guarantor
   
  By: /s/ David Carroll
  Name: David Carroll
  Title: Chief Executive Officer
   
  BARCLAYS BANK PLC, as Purchaser and Agent
   
  By: /s/ Ellen V. Kiernan
  Name: Ellen V. Kiernan
  Title: Director

 

Signature Page to Master Repurchase Agreement

 

 
 

  

EXHIBIT A

 

MONTHLY CERTIFICATION

 

I, _______________________, _______________________ of Five Oaks Acquisition Corp. (“ Seller ”), in accordance with that certain Master Repurchase Agreement (the “ Agreement ”), dated as of July 29, 2014, by and between Barclays Bank PLC, Five Oaks Investment Corp. and Seller do hereby certify that:

 

(i) To the best of my knowledge, no Default or Event of Default has occurred and is continuing;

 

(ii) Attached hereto as Schedule One is a schedule of each financial covenant that Seller is subject to under any agreement (other than this Agreement), and a calculation which demonstrates compliance with each such financial covenant; and

 

(iii) Seller has complied with each of the covenants set forth in Section 14(g)(ii), as evidenced by the worksheet attached hereto as Schedule Two .

 

[Signature Page Follows]

 

A - 1
 

  

Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Agreement.

 

IN WITNESS WHEREOF, I have signed this certificate.

 

Date: ____________________, 201[     ]    
     
    FIVE OAKS ACQUISITION CORP.
     
    By:  
    Name:
    Title:

 

[SEAL]

 

I, ________________________, ___________________ of Seller, do hereby certify that _____________________ is the duly elected or appointed, qualified and acting __________________of Seller, and the signature set forth above is the genuine signature of such officer on the date hereof.

 

A - 2
 

  

SCHEDULE ONE TO EXHIBIT A

 

OTHER FINANCIAL COVENANTS

 

A - 3
 

 

SCHEDULE TWO TO EXHIBIT B

 

FINANCIAL COVENANTS WORKSHEET

 

A - 4
 

  

EXHIBIT B

 

REPRESENTATIONS AND WARRANTIES
with respect to Mortgage Loans

 

Capitalized terms used but not defined in this Exhibit B have the meanings assigned to such terms in the Master Repurchase Agreement dated as of July 29, 2014 (the “ Agreement ”), by and between Barclays Bank PLC (“ Purchaser ” or “ Agent ”), Five Oaks Investment Corp. (“ Guarantor ”) and Five Oaks Acquisition Corp. (“ Seller ”). Seller and Guarantor hereby represent and warrant to Purchaser and Agent that, for each Mortgage Loan as of the related Purchase Date and the related Repurchase Date and on each date that such Mortgage Loan is subject to a Transaction:

 

(a)           All information provided to Purchaser by Seller, including without limitation the information set forth in Seller Mortgage Loan Schedule, with respect to the Mortgage Loan is true and correct in all material respects;

 

(b)           Such Mortgage Loan is an Eligible Mortgage Loan;

 

(c)           Such Mortgage Loan was owned solely by Seller, is not subject to any lien, claim or encumbrance, including, without limitation, any such interest pursuant to a loan or credit agreement for warehousing mortgage loans, and was originated or acquired by Seller, underwritten and serviced in accordance with Purchaser’s underwriting guidelines or such other underwriting guidelines as approved by Agent in its discretion, Accepted Servicing Practices and all applicable law and regulations, including without limitation the Federal Truth-in-Lending Act, the Real Estate Settlement Procedures Act, regulations issued pursuant to any of the aforesaid;

 

(d)           The improvements on the land securing such Mortgage Loan are and will be kept insured at all times by responsible insurance companies reasonably acceptable to Purchaser against fire and extended coverage hazards under policies, binders or certificates of insurance with a standard mortgagee clause in favor of Seller and its assigns, providing that such policy may not be canceled without prior notice to Seller. Any proceeds of such insurance shall be held in trust for the benefit of Purchaser. The scope and amount of such insurance shall satisfy Accepted Servicing Practices, and shall in all cases be at least equal to the lesser of (A) the principal amount of such Mortgage Loan or (B) the maximum amount permitted by applicable law, and shall not be subject to reduction below such amount through the operation of a coinsurance, reduced rate contribution or similar clause;

 

(e)           Each Mortgage is a valid first lien on the Mortgaged Property and is covered by an attorney’s opinion of title or by a policy of title insurance on a standard ALTA or similar lender’s form (or a binding commitment therefor) in favor of Seller and its assigns. Seller shall hold for the benefit of Purchaser such policy of title insurance, and, upon request of Purchaser, shall immediately deliver such policy to Purchaser or to Custodian on behalf of Purchaser;

 

(f)           A mortgage identification number (“ MIN ”) has been assigned by MERS and such MIN is accurately provided on Seller Mortgage Loan Schedule. Either the Mortgage is in favor of MERS or an Assignment of Mortgage to MERS has been duly and properly recorded;

 

(g)           Seller has not received any notice of liens or legal actions with respect to such Mortgage Loan and no such notices have been electronically posted by MERS;

 

(h)           There are no restrictions, contractual or governmental, which would impair the ability of Seller from servicing the Mortgage Loans;

 

B - 1
 

  

(i)           The terms of such Mortgage Loan may not result in Negative Amortization;

 

(j)           The Mortgagor is one or more natural persons and/or trustees for an Illinois land trust or a trustee under a “living trust” and such “living trust” is in compliance with Applicable Agency guidelines for such trusts;

 

(k)           Such Mortgage Loan is not a High Cost Mortgage Loan;

 

(l)           No predatory, abusive or deceptive lending practices, including but not limited to, the extension of credit to a Mortgagor without regard for the Mortgagor’s ability to repay the Mortgage Loan and the extension of credit to a Mortgagor which has no tangible net benefit to the Mortgagor, were employed in connection with the origination of the Mortgage Loan;

 

(m)           [Reserved.]

 

(n)           If such Mortgage Loan was pledged to another warehouse, credit, repurchase or other financing facility immediately prior to the related Purchase Date, (i) such pledge has been released immediately prior to, or concurrently with, the related Purchase Date hereunder and (ii) Purchaser has received a Warehouse Lender’s Release Letter in respect of such Mortgage Loan;

 

(o)           Such Mortgage Loan has not been released from the possession of Custodian under Section 9 of the Custodial Agreement to Seller or its bailee for a period in excess of thirty (30) calendar days (or if such thirtieth (30 th ) day is not a Business Day, the next succeeding Business Day) or such earlier time period as indicated on the related Request for Release of Documents;

 

(p)           Such Mortgage Loan is a MERS Designated Mortgage Loan;

 

(q)           Each Mortgage Loan has been fully disbursed and is secured by a first lien on an underlying property as a “closed-end” Mortgage Loan with no further disbursements required by any party;

 

(r)           The Mortgage Loan is not secured by property located in (a) a state where Seller is not licensed as a lender/mortgage banker or (b) a state that Purchaser has notified Seller is unacceptable due to a high cost, predatory lending or other law in such state;

 

(s)           The Mortgage Loan has not been converted to an ownership interest in real property through foreclosure or deed-in-lieu of foreclosure;

 

(t)           The Mortgage Loan relates to a Mortgaged Property that consists of (i) a detached single family dwelling, (ii) a two-to-four family dwelling, (iii) a one-family dwelling unit in a condominium project, (iv) a townhouse, or (v) a detached single family dwelling in a planned unit development none of which is a cooperative or commercial property; and is not related to a Mortgaged Property that consists of (a) mixed use properties, (b) log homes, (c) earthen homes, (d) underground homes, (e) mobile homes or manufactured housing units (whether or not secured by real property), (f) any dwelling situated on more than ten acres of property or (g) any dwelling situated on a leasehold estate;

 

(u)           The Mortgage Loan is not a Restricted Mortgage Loan;

 

(v)           The related Mortgagor under the related Mortgage Loan made its first scheduled Monthly Payment when it was due (inclusive of any applicable grace period), unless such time frame has not occurred yet;

 

B - 2
 

  

(w)          The Mortgage Loan is a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code and Treasury Regulations Section 1.860G-2(a)(1); and

 

(x)           The Mortgage Loan is both a “qualified mortgage” and a “qualified residential mortgage” as each such term is defined in the Dodd-Frank Act. Seller has made a reasonable and good faith determination that the Mortgagor with respect to each Mortgage Loan had, at the time of origination of such Mortgage Loan, a reasonable ability to repay the related Mortgage Loan in accordance with its terms in compliance with the Dodd-Frank Act.

 

B - 3
 

  

EXHIBIT C

 

FORM Of TRANSACTION NOTICE

 

  [insert date]

 

Barclays Bank PLC

745 Seventh Avenue, 4th Floor

New York, New York 10019

Attention: Mary Logan

 

Re: Master Repurchase Agreement, dated as of July 29, 2014 by and between Barclays Bank PLC (“ Purchaser ” and “ Agent ”), Five Oaks Investment Corp. and Five Oaks Acquisition Corp. (“ Seller ”)

 

Ladies/Gentlemen:

 

Reference is made to the above-referenced Master Repurchase Agreement (the “Repurchase Agreement”; capitalized terms used but not otherwise defined herein shall have the meaning given them in the Repurchase Agreement).

 

In accordance with Section 3(c) of the Repurchase Agreement, the undersigned Seller hereby requests, and Purchaser agrees, to enter into a Transaction with us, in connection with our delivery of Eligible Mortgage Loans and all related Servicing Rights, on ____________________ [insert requested Purchase Date, which must be at least one (1) Business Day following the date of the request] (the “ Purchase Date ”), in connection with which we shall sell to you such Eligible Mortgage Loans on the Seller Mortgage Loan Schedule attached hereto. The unpaid principal balance of the Eligible Mortgage Loans is $________ and the Purchase Price shall be ______ [insert applicable Purchase Price]. Purchaser shall transfer to Seller an amount equal to $ _______ [insert amount which represents the Purchase Price net of any fees then due and payable by Seller to Purchaser pursuant to the Repurchase Agreement]. Seller agrees to repurchase such Purchased Asset on the Repurchase Date(s) at the Repurchase Price(s) listed below.

 

The Eligible Mortgage Loans have the characteristics on the electronic file or computer tape or disc delivered by Seller to Purchaser with respect thereto in connection with this Transaction Notice.

 

Seller hereby certifies, as of such Purchase Date, that:

 

(1)          no Default or Event of Default has occurred and is continuing on the date hereof (or to the extent existing, shall be cured after giving effect to such Transaction) nor will occur after giving effect to such Transaction as a result of such Transaction;

 

(2)          each of the representations and warranties made by Seller in or pursuant to the Program Documents is true and correct in all material respects on and as of such date as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date);

 

C - 1
 

  

(3)          Seller is in compliance with all governmental licenses and authorizations and are qualified to do business and are in good standing in all required jurisdictions, except as would not be reasonably likely to have a Material Adverse Effect; and

 

(4)          Seller has satisfied all applicable conditions precedent in Sections 10(a) and (b) of the Repurchase Agreement and all other requirements of the Program Documents.

 

The undersigned duly authorized officer of Seller further represents and warrants that (1) with respect to the Eligible Mortgage Loans subject to the Transaction requested herein, the documents constituting the Mortgage Loan Files (as defined in the Custodial Agreement), as more specifically identified on the Seller Mortgage Loan Schedule delivered to Purchaser and Custodian in connection herewith (the “ Receipted Assets ”), have been or are hereby submitted to Custodian and such required documents are to be held by Custodian for Purchaser, (2) all other documents related to such Receipted Assets (including, but not limited to, mortgages, insurance policies, loan applications and appraisals) have been or will be created and held by Seller for Purchaser, (3) all documents related to such Receipted Assets withdrawn from Custodian shall be held by Seller for Purchaser, and (4) upon Purchaser’s wiring of the Purchase Price pursuant to Section 3(b) of the Repurchase Agreement, Purchaser will have agreed to the terms of the Transaction as set forth herein and purchased the Receipted Assets from Seller.

 

Seller hereby represents and warrants that (x) the Receipted Assets have an unpaid principal balance as of the date hereof of $__________ and (y) the number of Receipted Assets is ______.

 

  Very truly yours,
   
  FIVE OAKS ACQUISITION CORP.
   
  By:  
  Name:
  Title:

 

C - 2
 

  

EXHIBIT D

 

FORM OF GOODBYE LETTER

 

«Primary_Borrower»                                                                                            [_______] [__], 201[  ]

«Mailing_address_line_1»

«Mail_city», «Mail_state» «Mail_zip»

 

RE: Transfer of Mortgage Loan Servicing
  Mortgage Loan «Account_number»

 

Dear Customer:

 

[_____] is the present servicer of your mortgage loan. Effective [Date] the servicing of your mortgage will be transferred to _______. This transfer does not affect the terms and conditions of your mortgage, other than those directly related to servicing. Because of the change in servicer, we are required to provide you with this disclosure.

 

[_____] cannot accept any payments received after [Date]. Effective [Date], all payments are to be made to __________. Any payments received by [_____] after [Date] will be forwarded to _________________. ___________________ will be contacting you shortly with payment instructions. Please make future payments to:

 

_______________________                     

Attn:  ______________

[Address]

 

If you currently make payments by an automatic checking or savings account deduction, that service will discontinue effective with the transfer date. After the servicing transfer, you may request this service from _____________.

 

In [Date], you will receive a statement from [_____] reflecting the amount, if any, of the interest and taxes paid on your behalf in 201[ ]. A similar statement will be sent __________________ for the period beginning [Date] through year-end. Both statements must be added together for income tax purposes.

 

If you have any questions concerning your account through [Date], you should continue to contact [_____], at <Servicer’s Phone Number>, <HOURS OF OPERATION>. Questions after the transfer date should be directed to ___________________Customer Service Department at 1-800-_____________, Monday – Friday, 7 a.m. – 7 p.m. EST.

 

Sincerely,

 

Loan Servicing Department

[_____]

 

D - 1
 

  

NOTICE OF ASSIGNMENT, SALE OR TRANSFER

 

OF SERVICING RIGHTS

 

You are hereby notified that the servicing of your mortgage loan, that is the right to collect payments from you, is being assigned, sold or transferred.

 

The assignment, sale or transfer of the servicing of the mortgage loan does not affect any term or condition of the mortgage instruments, other than the terms directly related to the servicing of your loan.

 

Except in limited circumstances, the law requires that your present servicer send you a notice at least 15 days before the effective date, or at closing. Your new servicer must also send you this notice no later than 15 days after this effective date.

 

This notification is a requirement of Section 6 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. 2605). You should also be aware of the following information, which is set out in more detail in Section 6 of RESPA (12 U.S.C. 2605).

 

During the 60 day period following the effective date of the transfer of the loan servicing, a loan payment received by your old servicer before its due date may not be treated by the new loan servicer as late, and a late fee may not be imposed upon you.

 

Section 6 of RESPA (12 U.S.C. 2605) gives you certain consumer rights. If you send a “qualified written request” to you loan servicer concerning the servicing of your loan, your servicer must provide you with a written acknowledgement within 20 Business Days of receipt of your request. A “qualified written request” is written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, which includes your name and account number and your reasons for the request. If you want to send a “qualified written request” regarding the servicing of your loan, it must be sent to this address:

 

___________________

[Address]

 

No later than 60 Business Days after receiving your request, your servicer must make any appropriate corrections to your account, and must provide you with a written clarification regarding any dispute. During this 60 Business Day period, your servicer may not provide information to a consumer reporting agency concerning any overdue payment related to such period or qualified written request. However, this does not prevent the servicer from initiating foreclosure if proper grounds exist under the mortgage documents.

 

A Business Day is any day excluding legal public holidays (State or federal), Saturday and Sunday.

 

Section 6 of RESPA also provides for damages and costs for individuals or classes of individuals, in circumstances where servicers are shown to have violated the requirements of that Section. You should seek legal advice if you believe your rights have been violated.

 

MIRANDA DISCLOSURE – For your protection, please be advised that we are attempting to collect a debt and any information obtained will be used for that purpose. Calls will be monitored and recorded for quality assurance purposes. If you do not wish for your call to be recorded please notify the customer service associate when calling.

 

D - 2
 

  

BANKRUPTCY INSTRUCTION – Attention to any customer in Bankruptcy or who has received a bankruptcy discharge of this debt. Please be advised that this letter constitutes neither a demand for payment of the captioned debt nor a notice of personal liability to any recipient hereof who might have received a discharge of such debt in accordance with applicable bankruptcy laws or who might be subject to the automatic stay of Section 362 of the United States Bankruptcy Code. However, it may be a notice of possible enforcement of our lien against the collateral property, which has not been discharged in your bankruptcy.

 

D - 3
 

  

EXHIBIT E

 

FORM OF WAREHOUSE LENDER’S RELEASE

 

                         (Date)
   

Barclays Bank PLC – Mortgage Finance

745 Seventh Avenue, 4th Floor

New York, New York 10019

Attention: Joseph O’Doherty

 

Barclays Bank PLC – Legal Department

745 Seventh Avenue, 20th Floor

New York, New York 10019

 

Barclays Capital – Operations

1301 Avenue of the Americas, 8th Floor

New York, NY 10019

Attention: Hánsel Nieves

Five Oaks Acquisition Corp.
c/o Oak Circle Capital Partners LLC
540 Madison Avenue, 19th Floor
New York, New York 10022

 

Five Oaks Investment Corp.
c/o Oak Circle Capital Partners LLC
540 Madison Avenue, 19th Floor
New York, New York 10022

 

Re: Certain Assets Identified on Schedule A hereto and owned by Five Oaks Acquisition Corp.

 

Capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the Master Repurchase Agreement, dated as of July 29, 2014 (the “Repurchase Agreement”), between Barclays Bank PLC, Five Oaks Investment Corp. and Five Oaks Acquisition Corp.

 

The undersigned hereby releases all right, interest, lien or claim of any kind with respect to the Mortgage Loans described in the attached Schedule A , such release to be effective automatically without any further action by any party upon receipt by Barclays Bank PLC in immediately available funds of $__________________, in accordance with the following wire instructions:

 

[                             ]

 

  Very truly yours,
   
  [WAREHOUSE LENDER]
   
  By:  
  Name:
  Title:

 

E - 1
 

  

[Schedule A to exhibit E – List of Assets to be Released]

 

E - 2
 

  

EXHIBIT F

 

[RESERVED ]

 

F - 1
 

   

EXHIBIT G

 

[RESERVED ]

 

G - 1
 

 

EXHIBIT H

 

form of SELLER mortgage loan schedule

 

[SEE ATTACHED]

 

H - 1
 

  

EXHIBIT I

 

EXISTING INDEBTEDNESS

 

I - 1

 

 

Exhibit 10.4

 

EXECUTION VERSION

  

GUARANTY

 

This GUARANTY (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “ Guaranty ”), dated as of July 29, 2014, is by Five Oaks Investment Corp., a Maryland corporation (“ Guarantor ”).

 

WHEREAS, Guarantor is furnishing its guaranty of the Guaranteed Obligations (as hereinafter defined) in order to induce Purchaser (as hereinafter defined) to purchase certain Eligible Mortgage Loans under the Master Repurchase Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Master Repurchase Agreement ”), dated as of July 29, 2014, among Five Oaks Acquisition Corp. (“ Seller ”), Guarantor and Barclays Bank PLC (“ Purchaser ” and “ Agent ”).

 

Capitalized terms not otherwise defined herein are used herein with the same meanings given to such terms in the Master Repurchase Agreement.

 

Therefore, for good and valuable consideration, the receipt of which is hereby acknowledged by each Guarantor, the parties hereto agree as follows:

 

SECTION 1.           Guarantee .

 

(a)           Guarantor unconditionally and irrevocably guarantees to Agent the due and punctual payment by, and performance of, the Obligations (as defined in the Master Repurchase Agreement) by Seller arising under or in connection with the Program Documents (the “ Guaranteed Obligations ”). Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and it will remain bound upon this Guaranty notwithstanding any extension or renewal of any Guaranteed Obligation until the Guaranteed Obligations have been paid in full. Anything contained herein to the contrary notwithstanding, the obligations of Guarantor hereunder at any time shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any similar federal or state law.

 

(b)           Guarantor, to the extent permitted by applicable law, waives presentation to, demand for payment from and protest to Seller, and also waives notice of protest for nonpayment, notice of acceleration and notice of intent to accelerate. The obligations of Guarantor hereunder shall not be affected by (i) the failure of Agent or Purchaser to assert any claim or demand or to enforce any right or remedy against Seller under the provisions of the Program Documents or any other agreement or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of the Program Documents or of any other agreement; (iv) the release, exchange, waiver or foreclosure of any security held by Agent or Purchaser for the Guaranteed Obligations or any of them or (v) the failure of Agent or Purchaser to exercise any right or remedy against any other guarantor of the Guaranteed Obligations.

 

(c)           Guarantor further agrees that this Guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives, to the extent permitted by applicable law, any right to require that any resort be had by Agent or Purchaser to any security held for payment of the Guaranteed Obligations or to any balance of any deposit, account or credit on the books of Agent in favor of Seller or to any other Person.

 

 
 

  

(d)           Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Seller and any and all endorsers and/or other guarantors of all or any part of the Guaranteed Obligations, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations, or any part thereof, that diligent inquiry would reveal, and Guarantor hereby agrees that Agent shall have no duty to advise Guarantor of information known to it regarding such condition or any such circumstances. In the event Agent, in its sole discretion, undertakes at any time or from time to time to provide any such information to Guarantor, Agent shall be under no obligation (i) to undertake any investigation not a part of its regular business routine, (ii) to disclose any information which Agent, pursuant to accepted or reasonable commercial finance or banking practices, wishes to maintain confidential or (iii) to make any other or future disclosures of such information or any other information to Guarantor.

 

(e)           This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Guaranteed Obligations, the Program Documents or any other instrument evidencing any of the Guaranteed Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefore or by any other circumstance relating to the Guaranteed Obligations which might otherwise constitute a defense to this Guaranty. Agent makes no representation or warranty in respect to any such circumstances or has any duty or responsibility whatsoever to Guarantor in respect to the management and maintenance of the Guaranteed Obligations or any collateral which may secure the Guaranteed Obligations.

 

SECTION 2.           No Impairment of Guaranty . The obligations of Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, until the Guaranteed Obligations have been paid in full, shall not be released, discharged or otherwise affected by:

 

(a)           any extension, renewal, settlement, indulgence, compromise, claim, waiver, release, surrender, of or with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, whether (in any such case) by operation of law or otherwise, or any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto;

 

(b)           any modification, amendment or restatement of or supplement to the Program Documents or any other instrument or document delivered in connection therewith, including, without limitation, any such amendment which may increase the amount of, or the interest rates applicable to, any of the Guaranteed Obligations guaranteed hereby;

 

(c)           any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any collateral securing the Guaranteed Obligations or any part thereof, or any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof, or any nonperfection or invalidity of any direct or indirect security for the Guaranteed Obligations;

 

(d)           any change in the corporate, partnership or other existence, structure or ownership of Seller, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting Seller, or any of their respective assets or any resulting release or discharge of any obligation of Seller;

 

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(e)           the existence of any setoff, claim, counterclaim, recoupment, termination or other rights which Guarantor may have at any time against Seller or any other person, whether in connection herewith or in connection with any unrelated transactions; provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

 

(f)           the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to any collateral securing the Guaranteed Obligations or any part thereof, or any other invalidity or unenforceability relating to or against Seller for any reason related to the Program Documents, or any provision of applicable law, decree, order or regulation of any jurisdiction purporting to prohibit the payment by Seller of any of the Guaranteed Obligations or otherwise affecting any term of any of the Guaranteed Obligations;

 

(g)           the failure of Agent or Purchaser to take any steps to perfect and maintain any security interest in, or to preserve any rights to, any security or collateral for the Guaranteed Obligations, if any;

 

(h)           the election by, or on behalf of Agent or Purchaser, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et. seq.) (the “ Bankruptcy Code ”), of the application of Section 1111(b)(2) of the Bankruptcy Code;

 

(i)           any borrowing or grant of a security interest by Seller, as debtor-in-possession, under Section 364 of the Bankruptcy Code;

 

(j)           the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of the claims of Agent for repayment of all or any part of the Guaranteed Obligations; or

 

(k)           any other act or omission to act or delay of any kind by Seller, willful or otherwise, Agent or any other person or any other circumstance whatsoever which might, but for the provisions of this SECTION 2 , constitute a legal or equitable discharge of Guarantor’s obligations hereunder.

 

SECTION 3.           Continuation and Reinstatement, etc .

 

(a)           Guarantor further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by Agent upon the bankruptcy or other reorganization of Seller or otherwise. In furtherance of the provisions of this Guaranty, and not in limitation of any other right which Agent may have at law or in equity against Seller by virtue hereof, upon failure of Seller to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice or otherwise, Guarantor hereby promises to and will, upon receipt of written demand by Agent, forthwith pay or cause to be paid to Agent in cash an amount equal to the unpaid amount of all such Guaranteed Obligation, and thereupon Agent shall assign such Guaranteed Obligation, together with all security interests, if any, then held by Agent or Purchaser in respect of such Guaranteed Obligation, to Guarantor.

 

(b)           Upon payment by Guarantor of any sums to Agent hereunder, all rights of Guarantor against Seller involved, arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final and indefeasible payment in full of all the Guaranteed Obligations (other than unasserted contingent indemnification obligations) to Agent. If an amount shall be paid to Guarantor for the account of Seller, such amount shall be held in trust for the benefit of Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured.

 

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SECTION 4.           Representation and Warranties . Guarantor makes the following representations and warranties to Agent, all of which shall survive the execution and delivery of this Guaranty and the issuance and purchase of the Notes:

 

(a)           Guarantor is a corporation duly organized, validly existing and in good standing under the laws the State of Maryland and is in good standing as a foreign corporation in all jurisdictions where the nature of its properties or business so requires, except where the failure to be in good standing in such other jurisdiction would not, in the aggregate, have a Material Adverse Effect. Guarantor has the power and authority to own its properties and carry on its businesses as now being conducted and to execute, deliver and perform its obligations under this Guaranty.

 

(b)           The execution, delivery and performance of this Guaranty (i) have been duly authorized by all necessary corporate action on the part of Guarantor, (ii) will not violate any provision of applicable law or any approval of a Governmental Authority applicable to Guarantor, (iii) will not violate any provision of the charter, bylaws or any other operating or organizational document of Guarantor, (iv) will not violate or result in a default under any provision of any indenture, material agreement, bond, note or other similar material instrument to which Guarantor is a party or by which Guarantor or any of its properties or assets are bound, and (v) will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any properties or assets of Guarantor.

 

(c)           This Guaranty when executed will constitute the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms, subject (i) as to the enforcement of remedies, to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and (ii) to general principles of equity.

 

(d)           Guarantor will realize a direct economic benefit as a result of the amounts paid by Purchaser to Seller pursuant to the Master Repurchase Agreement.

 

SECTION 5.           Covenants of Guarantor . Guarantor hereby covenants and agrees that it shall comply with the covenants included in Section 3 of the Pricing Side Letter, each of which is included herein by reference.

 

SECTION 6.           General Waivers; Additional Waivers .

 

(a)           General Waivers . To the extent permitted by applicable law, Guarantor irrevocably waives acceptance hereof, presentment, demand or action on delinquency, protest, the benefit of any statutes of limitations and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any person against Seller or any other person.

 

(b)           Additional Waivers . Notwithstanding anything herein to the contrary, to the extent permitted by applicable law, Guarantor hereby absolutely, unconditionally, knowingly, and expressly waives:

 

(1)          any right it may have to revoke this Guaranty as to future indebtedness or notice of acceptance hereof;

 

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(2)          (i) notice of acceptance hereof; (ii) notice of any Transactions, purchases, loans or other financial accommodations made or extended under the Program Documents or the creation or existence of any Guaranteed Obligations; (iii) notice of the amount of the Guaranteed Obligations, subject, however, to Guarantor’s right to make inquiry of Agent to ascertain the amount of the Guaranteed Obligations at any reasonable time; (iv) notice of any adverse change in the financial condition of Seller or of any other fact that might increase Guarantor’s risk hereunder; (v) notice of presentment for payment, demand, protest, and notice thereof as to any instruments among the Program Documents; (vi) notice of any Event of Default or Servicer Termination Event; and (vii) all other notices (except if such notice is specifically required to be given to Guarantor hereunder) and demands to which Guarantor might otherwise be entitled;

 

(3)          its right, if any, to require Agent to institute suit against, or to exhaust any rights and remedies which Agent has or may have against any third party, or against any collateral provided by any third party. In this regard, Guarantor agrees that it is bound to the payment of each and all Guaranteed Obligations, whether now existing or hereafter arising, as fully as if the Guaranteed Obligations were directly owing to Agent by Guarantor. Guarantor further waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid) of Guarantor in respect thereof;

 

(4)          (i) any rights to assert against Agent or Purchaser any defense (legal or equitable), set-off, counterclaim, or claim which Guarantor may now or at any time hereafter have against any other party liable to Agent; (ii) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guaranteed Obligations or any security therefor; (iii) any defense Guarantor has to performance hereunder, and any right Guarantor has to be exonerated, arising by reason of the alteration by Agent of the Guaranteed Obligations or the acceptance by Agent or Purchaser of anything in partial satisfaction of the Guaranteed Obligations; and (iv) the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Guaranteed Obligations shall similarly operate to defer or delay the operation of such statute of limitations applicable to Guarantor’s liability hereunder; and

 

(5)          any defense arising by reason of or deriving from (i) any claim or defense based upon an election of remedies by Agent, such as nonjudicial foreclosure; or (ii) any election by Agent under Section 1111(b) of Title 11 of the United States Code entitled “ Bankruptcy ”, as now and hereafter in effect (or any successor statute), to limit the amount of, or any collateral securing, its claim against Guarantor.

 

SECTION 7.           Notices . Notices and other communication provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy or electronic photocopy format sent by electronic mail, to the applicable party at its address set forth below its name on the signature pages of this Guaranty or such other address as shall be designated by such party in a written notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Guaranty shall be deemed to have been given on the fifth (5 th ) Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail, or upon receipt by such party, if by any electronic or facsimile communications equipment, in each case addressed to such party as provided herein or in accordance with the latest unrevoked written direction from such party.

 

SECTION 8.           Successors . Each reference herein to Agent shall be deemed to include its successors and permitted assigns (including but not by way of limitation, Purchaser or any assignee of any of the Guaranteed Obligations), in whose favor the provisions of this Guaranty shall inure. Each reference herein to Guarantor shall be deemed to include its successors and assigns, all of whom shall be bound by the provisions of this Guaranty.

 

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SECTION 9.           Stay of Acceleration . If acceleration of the time for payment of any amount payable by Seller under the Program Documents is stayed upon the insolvency, bankruptcy or reorganization of Seller, all such amounts otherwise subject to acceleration under the terms of the Program Documents shall nonetheless be payable by Guarantor hereunder forthwith on demand by Agent.

 

SECTION 10.          Setoff; No Deductions .

 

(a)           Upon the occurrence and during the continuance of an Event of Default or the failure by Seller or Guarantor to timely perform all or any part of the Guaranteed Obligations in accordance with the Program Documents or this Guaranty, Agent may, without notice to Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply in accordance with the terms of the Program Documents toward the payment of all or any part of the Guaranteed Obligations (i) any indebtedness due or to become due from Agent to Guarantor, and (ii) any moneys, credits or other property belonging to Guarantor, at any time held by or coming into the possession of Agent or any of its affiliates.

 

(b)           Guarantor represents and warrants that it is organized and resides in the United States of America. Guarantor shall make all payments hereunder without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless Guarantor is compelled by law to make such deduction or withholding

 

SECTION 11.          SERVICE OF PROCESS . GUARANTOR (I) HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY, OR THE SUBJECT MATTER HEREOF BROUGHT BY AGENT, PURCHASER OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, AND (III) HEREBY AGREES NOT TO ASSERT ANY OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH ACTION, SUIT OR PROCEEDING. GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS BY CERTIFIED MAIL AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES OF THIS GUARANTY, AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF AGENT AND PURCHASER. FINAL JUDGMENT AGAINST GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR LIABILITY OF GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED , HOWEVER , THAT AGENT OR PURCHASER MAY AT ITS OPTION BRING SUIT OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST GUARANTOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE GUARANTOR OR SUCH ASSETS MAY BE FOUND.

 

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SECTION 12.          GOVERNING LAW . THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.

 

SECTION 13.          No Waiver, etc. Neither a failure nor a delay on the part of Agent or Purchaser in exercising any right, power or privilege under this Guaranty shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of Agent or Purchaser herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which Agent or Purchaser may have under this Guaranty, at law, in equity, by statute, or otherwise.

 

SECTION 14.          Modification, etc. No modification, amendment or waiver of any provision of this Guaranty, nor the consent to any departure by Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent and Guarantor, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Guarantor in any case shall entitle Guarantor to any other or further notice or demand in the same, similar or other circumstances.

 

SECTION 15.          Severability . If any one or more of the provisions contained in this Guaranty should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall in no way be affected or impaired thereby.

 

SECTION 16.          Headings . Section headings used herein are for convenience of reference only and are not to affect the construction of, or be taken into consideration in interpreting, this Guaranty.

 

SECTION 17.          Expenses . Guarantor shall pay on demand all reasonable and documented out-of-pocket expenses (including reasonable attorneys’ fees) in any way relating to the enforcement or protection of Agent’s rights under this Guaranty or in respect of the Guaranteed Obligations, including any incurred during any “workout” or restructuring in respect of the Guaranteed Obligations and any incurred in the preservation, protection or enforcement of any rights of Purchaser in any insolvency proceeding. The obligations of Guarantor under this paragraph shall survive the payment in full of the Guaranteed Obligations and termination of this Guaranty.

 

SECTION 18.          Indemnification and Survival . Without limitation on any other obligations of Guarantor or remedies of Agent or Purchaser (each such Person being called an “ Indemnitee ”) under this Guaranty, Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless Agent and Purchaser from and against, and shall pay on demand, any and all damages, losses, liabilities and expenses (including reasonable attorneys’ fees) that may be suffered or incurred by Agent or Purchaser in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of Seller enforceable against Seller in accordance with their terms; provided that such indemnity shall not be available, as to any Indemnitee, to the extent that such damages, losses, liabilities and expenses resulted from the gross negligence or willful misconduct of such Indemnitee. The obligations of Guarantor under this paragraph shall survive the payment in full of the Guaranteed Obligations and termination of this Guaranty.

 

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SECTION 19.          WAIVER OF JURY TRIAL . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF AGENT AND GUARANTOR HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS GUARANTY OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY AGENT THAT THE PROVISIONS OF THIS SECTION 19 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH AGENT HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS GUARANTY. GUARANTOR MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 19 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF AGENT TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY. AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 19 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

 

SECTION 20.          Obligations Independent . The obligations of Guarantor hereunder are those of primary obligor, and not merely as surety, and are independent of the Guaranteed Obligations. A separate action may be brought against Guarantor to enforce this Guaranty whether or not Seller or any other person or entity is joined as a party.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the date first written above.

 

  FIVE OAKS INVESTMENT CORP. , as Guarantor
   
  By:    
  Name:    
  Title:    
   
  Address for Notices:
   
  c/o Oak Circle Capital Partners LLC
  540 Madison Avenue, 19th Floor
  New York, New York 10022
  Email: OPS@oakcirclecapital.com
  Telephone: (212) 257-5072
  Facsimile: (212) 257-5099
   
  Acknowledged and Agreed By:
   
  BARCLAYS BANK PLC , as Agent
   
  By:    
  Name:    
  Title:    
   
  Address for Notices:
   
  745 Seventh Avenue, 4th Floor
  New York, New York 10019
  Attention:  Joseph O’Doherty

 

Signature Page to Guaranty Agreement