SERVICING AND ASSET MANAGEMENT AGREEMENT Between BRT REALTY TRUST as Servicer and Asset Manager and BRTL LLC as Lender Dated as of June 2, 2011 SERVICING AND ASSET MANAGEMENT AGREEMENT

THIS SERVICING AND ASSET MANAGEMENT AGREEMENT (this “Agreement”) is made as of June 2, 2011, between BRT REALTY TRUST, a business trust formed under and pursuant to the laws of the Commonwealth of Massachusetts (the “Servicer”), and BRTL LLC a Delaware limited liability company, as Lender (the “Lender”).

WHEREAS, Lender owns and/or intends to own certain mortgage loans (individually, a “Mortgage Loan” and collectively, the “Mortgage Loans” and together with all of the instruments and agreements now evidencing, securing, guarantying, or otherwise relating to a Mortgage Loans, the “Loan Documents”);

 

WHEREAS, Servicer and Lender desire that Servicer manage and service collection and administration of the Mortgage Loans identified by Lender from time to time subject to the terms hereof and the Loan Documents.

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, Lender and Servicer agree as follows:

Section 1.7              Non-Performance of the Loans and REO Property.  A Mortgage Loan shall be considered a “Specially Serviced Loan” for purposes of this Agreement when one or more of the events set forth in the definition of “Special Servicing Event” has occurred and is continuing with respect to such Mortgage Loan.  In addition, Lender, pursuant to the terms of the Loan Documents, may acquire the collateral securing the Mortgage Loans as a result of foreclosure, or by deed in lieu of foreclosure or walk-away guaranty (at which time the Property shall be known as an “REO Property”).  At the time a Mortgage Loan becomes either a Specially Serviced Loan or converts to an REO Property, Servicer and Lender shall mutually agree upon the scope of additional services to be performed not already provided for in this Agreement.  As used herein, the term “Special Servicing Event” shall mean, with respect to a Mortgage Loan, when any one of the following has occurred:  if (a) any payment of principal due thereunder is in default by more than sixty (60) days, (b) any payment of interest or other amount (other than principal) due thereunder is in default by more than sixty (60) days, (c) the Borrower with respect to such Mortgage Loan is in default with respect to any material financial or other covenants under the Loan Documents for such Mortgage Loan for a period of more than sixty (60) days, or such other criteria as may be identified by the Lender from time to time or (d) the Servicer determines pursuant to Accepted Servicing Practices, and the TL Member agrees in writing, that a Mortgage Loan is at risk of imminent default; provided, however, that a Mortgage Loan will cease to be a Specially Serviced Loan: (i) with respect to clauses (a) and (b) above, when all past due principal and interest and all late charges, default interest and other amounts due under the Loan Documents have been paid and the applicable Mortgage Loan otherwise becomes a performing Mortgage Loan for at least sixty (60) consecutive days, in accordance with its terms;  (ii) with respect to clause (c) above, when such specified event has been remedied, cured or otherwise resolved and (iii) with respect to clause (d) above, when determined by Servicer and approved by the TL Member..

Section 3.1             Books and Records.  Servicer shall keep satisfactory books and records pertaining to a Mortgage Loan and shall make periodic reports in accordance with this Section.  All such records and all Mortgage Loan documents, whether or not developed or originated by Servicer, reasonably required to document or properly administer a Mortgage Loan shall remain at all times the property of Lender, although Servicer shall be entitled to copies thereof.  Upon termination of this Agreement, Servicer shall deliver all such records and Mortgage Loan documents to Lender or its designee.

 

Section 3.2              Periodic Reporting.  Servicer shall provide to Lender the periodic reporting set forth in Section 4.09 of Lender’s LLC Agreement.

 

Section 3.3              Intentionally Omitted.

 

Section 3.4              Inspection Rights.  Servicer shall provide Lender, the TL Member, the BRT Member and their respective accountants or other representatives with free and unlimited access during normal business hours at Servicer’s offices upon reasonable prior notice to Servicer to, and the ability to make copies of, all books and records relating to the Mortgage Loans.

 

Section 3.5             Insurance.  Servicer shall maintain and provide evidence of its maintenance of insurance on all employees or others authorized by Servicer to handle Mortgage Loan funds, money, documents and papers, which insurance shall protect Servicer against losses arising out of theft, embezzlement, fraud, misplacement and other similar acts.  The TL Member agrees that the insurance maintained by Servicer in respect of the foregoing as of the date hereof is acceptable.  Any material changes to such insurance maintained by Servicer on the date hereof shall require the prior approval of the TL Member in its reasonable discretion.  Servicer shall deliver to TL Member evidence of renewal and maintenance of such insurance on an annual basis, provided that the failure to provide the same shall not be a default hereunder unless Servicer fails to deliver such evidence to TL Member within 10 days of TL Member’s request therefor.

Section 5.1              Termination Events.  Any of the following acts or occurrences shall constitute a Termination Event under this Agreement (each, a “Termination Event”):

(a)           gross negligence, willful misconduct, bad faith or felony act on the part of Servicer; or

(b)          any failure on the part of Servicer to observe or perform in any material respect any other of the covenants or agreements thereof contained in this Agreement which continues unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to Servicer by the TL Member on behalf of Lender; provided, however, that if such covenant or agreement is capable of being cured and Servicer is diligently pursuing such cure such thirty (30) day period shall be extended for an additional forty-five (45) days; or

(c)          any breach on the part of Servicer of any representation or warranty thereof contained in this Agreement which materially and adversely affects the interests of Lender and which continues unremedied for a period of thirty (30) days after the date on which notice of such breach, requiring the same to be remedied, shall have been given to Servicer by the TL Member on behalf of Lender; provided, however, that if such breach is capable of being cured and Sub-Servicer is diligently pursuing such cure such thirty (30) day period shall be extended for an additional forty-five (45) days; or

(d)          a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator, receiver, liquidator, trustee or similar official in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of sixty (60) days; or

(e)           Servicer or Initial Servicer (if different from Servicer) shall consent to the appointment of a conservator, receiver, liquidator, trustee or similar official in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to it or of or relating to all or substantially all of its property; or

 

 

 

(f)           Servicer or Initial Servicer (if different from Servicer) shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable bankruptcy, insolvency or reorganization statute or make an assignment for the benefit of its creditors; or

(g)          a determination by the TL Member in its reasonable discretion that the Servicer is no longer capable of performing its services under this Agreement due to a material financial deterioration of the Servicer or Initial Servicer (if different from Servicer),

(h)          upon receipt from a Borrower, any failure by Servicer to deposit into, or to remit to Lender for deposit on a timely basis, any amount required to be so deposited or remitted under this Agreement; provided, however, that the failure by Servicer to deposit or remit amounts shall not constitute a Termination Event unless (i) any such failure (x) continues unremedied for one (1) Business Day following the date on which written notice of such failure is provided, (ii) any such failure occurs more than once in any period of twelve (12) consecutive months or (ii) any such late deposit is not accompanied by payment by Servicer (from its own funds without reimbursement therefor) of interest on the amount of such late deposit or remittance accrued at an annual rate equal to the Prime Rate (as defined below), as in effect from time to time, for the day on which Servicer was required to make such deposit, and the Prime Rate as in effect from time to time plus three percentage points (3%), for each day thereafter until the date on which Sub-Servicer actually makes such deposit or remittance.  For purposes of the preceding sentence, “Prime Rate” shall mean a rate equal to the “Prime Rate” published in the “Money Rates” section in the New York edition of The Wall Street Journal on or before the related date of calculation, or, if more than one such rate is set forth therein, the highest of such rates (and any change in such rate shall be effective on the date on which such rate(s) are so published); or

(i)            the BRT Member is removed as the Managing Member under Lender’s LLC Agreement.

 

Section 5.2              Termination by Lender; Removal of Servicer.

(a)          Immediately upon the occurrence of a Termination Event, the TL Member on behalf of Lender upon ten days (10) written notice (the “Termination Notice”) to Servicer, may terminate this Agreement, whereupon Servicer shall be removed from its duties and obligations as Servicer under this Agreement and the TL Member shall appoint a replacement servicer in its sole discretion to service, manage, and collect such a Mortgage Loans.

(b)          Upon the termination of Lender’s limited liability company agreement and final liquidation of all of Lender’s assets, this Agreement shall automatically terminate, whereupon Servicer shall be removed from its duties and obligations as Servicer under this Agreement.

 

 

 

Section 5.3              Effect of Termination by Lender.  Upon termination of this Agreement pursuant to Section 5.2, Servicer shall not be entitled to any Servicing Fee after the date of termination of this Agreement and/or transfer to the replacement servicer other than fees due to Servicer under this Agreement, but shall be entitled to Servicing Fees which accrued prior to the date of termination and/or transfer to a replacement servicer and any administrative fees and costs incurred by Servicer in transferring to a replacement servicer or incurred by Servicer hereunder prior to the transfer of servicing to be paid within thirty (30) days of such termination and/or transfer.  Upon termination of this Agreement and/or transfer to a replacement servicer, Servicer shall promptly deliver or cause to be delivered to the replacement servicer all books and records that Servicer has maintained with respect to the Mortgage Loans, including, without limitation, all Loan Documents then in Servicer’s possession.  Any Mortgage Loan proceeds received by Servicer with respect to a Mortgage Loan after removal of Servicer hereunder shall be remitted directly and within one (1) Business Day to the replacement servicer or Lender.  Servicer agrees to cooperate with any replacement servicer in effecting the termination of Servicer’s servicing responsibilities and rights under this Agreement and shall promptly provide such replacement servicer with all documents and records reasonably requested by it to enable it to assume Servicer’s functions hereunder.

Section 5.4             Term.   Unless terminated pursuant to Section 5, or unless otherwise agreed upon in writing by the parties, this Agreement shall continue for a Mortgage Loan until a Mortgage Loan is fully paid, liquidated, or otherwise resolved.

Section 8.5              Amendments.  This Agreement may be amended from time to time by a written instrument signed by Servicer and Lender and no waiver of any of the terms hereof by any party shall be effective unless it is in writing and signed by the other parties.

Section 8.6              Headings Descriptive.  The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

Section 8.7              General Definitional Provisions.

(a)          The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, appendix and exhibit references are to this Agreement, unless otherwise specified.

 

 

 

(b)          The meanings given to terms defined herein shall be equally applicable to the singular and plural forms of such terms.

Section 8.8              Judicial Interpretation.  Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any person by reason of the rule of construction that a document is to be construed more strictly against the person who itself or through its agent prepared the same, it being agreed that all parties hereto have participated in the preparation of this Agreement.

Section 8.9              Integration.  The Agreement comprises the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof as of the date hereof and shall constitute the entire agreement among the parties hereto with respect to such subject matter, superseding all prior oral or written understandings.

Section 8.10.             Successors and Assigns; No Third Party Beneficiary.  This Agreement and the provisions hereof shall be binding upon and enforceable against each of the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and their respective successors and permitted assigns, except that Servicer shall not be permitted to assign any of its rights or obligations under this Agreement without the prior written consent of the TL Member to be granted or withheld in its sole discretion, except that Servicer may assign its rights and obligations to a wholly-owned Affiliate subject to the TL Member’s consent not to be unreasonably withheld.  Except for the TL Member under and in accordance with this Section 8.10 and Sections 1.7, 3.5 and V, this Agreement is not intended to confer any rights or benefits on any persons other than the parties hereto and their respective successors and permitted assigns.

Section 8.11.             Lender’s LLC Agreement.  Servicer acknowledges that it has received a copy of Lender’s LLC Agreement.

Section 8.12.            Arbitration.  Any claim, dispute or controversy arising under this Agreement shall be resolved pursuant to the procedure set forth in Article XIII of Lender’s LLC Agreement and such provision is hereby incorporated herein by reference, mutatis mutandis, with such changes as may be necessary to reflect the different parties to this Agreement and to delete references to “Major Decisions”.

 “Accepted Servicing Practices” shall mean the obligation of Servicer to service and administer the Mortgage Loans solely in the best interests and for the benefit of Lender, exercising the same care, skill, prudence, diligence and practices which Servicer utilizes for loans which Servicer or its Affiliate owns for its own account, in each case, acting in accordance with applicable law, the terms of this Agreement and the Loan Documents and with a view to the maximization of timely recovery of principal and interest on the Mortgage Loans, but without regard to:

“Affiliate” means, with respect to any specified Person, (a) any other Person directly or indirectly controlling, controlled by, or under common control with such specified Person, (b) any individual who is an executive or other senior officer, general partner, manager or managing member (or Person serving in a similar capacity) of or with such specified Person or of any other Person described in clause (a) of this definition or (c) any other Person directly or indirectly controlling, controlled by, or under common control with any individual or groups of individuals described in clause (b) of this definition.