Trust Indenture and Security Agreement between Korth Direct Mortgage, LLC, and Delaware Trust Company

 

N.A. means not applicable.

 

 

 

 

     INDENTURE dated as of [      ], 2017, by and between Korth Direct Mortgage LLC, a Florida Limited Liability Company (“Company”), and  Delaware Trust Company, a state chartered trust company incorporated and existing under the laws of the Delaware, as trustee (“Trustee”).

     The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time-to- time of special limited obligations of the Company referred to as  Mortgage Secured Notes (herein called the “Notes”) to be issued in series and individually secured  by a specific mortgage CM Loan as provided  in Section 3.8 of this Indenture.

     For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Notes or each series thereof, as follows:

     Section 1.1 DEFINITIONS.

     “ACH System” means the Automated Clearing House system of the U.S. Federal Reserve Board or a successor system providing electronic funds transfers between banks.

     “Affiliate” of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, “Control” when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting Notes, by contract or otherwise; and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

     

     “Business Day” means, except as otherwise specified as contemplated by Section 2.2(c), with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Notes, each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not a day on which the ACH System is closed and (2) not a day on which banking institutions or trust companies are authorized or obligated by law or executive order to close in San Francisco, California, Wilmington, Delaware, or New York, New York.

     “Capital Stock” for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation.

     “Company” means the party named as the “Company” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

     “Company Request” or “Company Order” means a written request or order signed in the name of the Company by its  its Chief Executive Officer, , or by its Chief Financial Officer,  and delivered to the Trustee or, with respect to Sections 2.1, 2.2(c), 2.3, and 6.2, any other employee of the Company named in an Officers’ Certificate delivered to the Trustee.

 

 

“Corresponding CM Loan” or “CM Loan”means the CM Loan financed by the particular Series of Notes identified in the offering documents  as a CM Loan and on which the payments of the Series of Notes depend.

“ CM Loan Net Payments,” with respect to a  CM Loan, means all  CM Loan Payments net of all applicable Service Charges.

CM Loan Payments,” with respect to a  CM Loan, means all amounts received by the Company, and not reversed through the ACH System within four Business Days, in connection with the repayment of such  CM Loan, including without limitation, all payments or prepayments of principal and interest, any late fees and any amounts received by the Company upon collection efforts; PROVIDED, that  CM Loan Payments shall not include any Unsuccessful Payment Fees received by the Company in respect of such  CM Loan or any collection fees imposed in connection with collection efforts on a delinquent  CM Loan by the Company or by a third-party collection agency.

 “Default” means any event which is, or after notice or passage of time or both would be, an event of Default.

“Deposit Account” means a bank account of the Company where proceeds from the sale of a Series of Notes or the proceeds from the Corresponding CM Loan to a Series of Notes is deposited.

     “Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Holder” or “Noteholder,” when used with respect to any Note, means, the person in whose name a Note is registered on the Registrar’s books.

     “Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof and shall include the terms of a particular series of Notes established as contemplated in Section 2.2(c).

     “Interest Payment Date,” when used with respect to any Note, means the Stated Maturity of an installment of interest on such Note.

     “Maturity,” when used with respect to any Note, means the date on which an installment of Principal thereof or interest thereon becomes due and payable as therein or herein provided, whether at the Stated Maturity, by declaration of acceleration, or otherwise.

           “Note or Notes” has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture.

     “Officer” means the Chairman of the Board, any Vice Chairman, the Chief Executive Officer, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company.

     “Officers’ Certificate” means a written certificate containing the information specified in Sections 9.4 and 9.6, signed in the name of the Company by its Ch Chief Executive Officer, its Chief Financial Officer, and by its Treasurer, an Assistant Treasurer, , and delivered to the Trustee.

     “Opinion of Counsel” means a written opinion containing the information specified in Sections 2.3, 6.2, 8.6, 9.4 and 9.6, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee.

     “Payment Date” means any Principal Payment Date or Interest Payment Date.

 

 

     “Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, or government or any agency or political subdivision thereof.

     “Place of Payment,” when used with respect to the Notes of any series, means the place or places where, subject to the provisions of Section 3.5, the Principal of and any interest on the Notes of that series are payable as specified as contemplated by Section 2.2(c).

     “Principal” or “Principal Amount” of a Note, except as otherwise specifically provided in this Indenture, means the outstanding principal of the Note.

     “Principal Payment Date,” when used with respect to any Note, means the Stated Maturity of an installment of Principal on such Note.

     “Record Date” for the amounts payable on any Payment Date on the Notes of any series means the date specified for that purpose as contemplated by Section 2.2(c).

     “SEC” means the Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended.

       Series of Notes or Note Series means any issue of Notes issued to finance the making or purchase of a Corresponding CM Loan.

     “Noteholder” or “Holder,” when used with respect to any Note, means a person in whose name a Note is registered on the Registrar’s books.

     “Service Charge” means, with respect to any CM Loan, CM Loan Payments received by the Company as shown in the offering document for each Series of Notes.

     “Stated Maturity,” when used with respect to any installment of Principal thereof or interest thereon, means the date specified in such Note as the fixed date on which an amount equal to such installment of Principal thereof or interest thereon is due and payable.

     “Subsidiary” means, with respect to any person, a corporation of which a majority of the Capital Stock having voting power under ordinary circumstances to elect a majority of the board of directors of such corporation is owned by (i) such person, (ii) such person and one or more Subsidiaries or (iii) one or more Subsidiaries of such person.

     “TIA” means the Trust Indenture Act of 1939 as in effect on the date of this Indenture.

     “Trust Officer” means , when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

     “Trustee” means the party named as the “Trustee” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

     “United States” means the United States of America, its territories, its possessions (including the Commonwealth of Puerto Rico), and other areas subject to its jurisdiction.

     “Unsuccessful Payment Fees” means any fee imposed by the Company in respect of a  CM Loan when the Company’s payment request is denied for any reason, including but not limited to insufficient funds in the borrower ’s bank account or the closing of such bank account.

     Section 1.2 OTHER DEFINITIONS.

     Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

     “Commission” means the SEC.

     “Indenture Notes” means the Notes.

     “Indenture Note Holder” means a Holder or Noteholder.

     “Indenture to be Qualified” means this Indenture.

     “Indenture Trustee” or “Institutional Trustee” means the Trustee.

     “Obligor” on the indenture Notes means the Company.

     All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

     Section 1.4 RULES OF CONSTRUCTION. Unless the context otherwise requires:

          (i) a term has the meaning assigned to it;

          (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in the United States as in effect from time to time;

          (iii) “OR” is not exclusive;

          (iv) “including” means including, without limitation; and

          (v) words in the singular include the plural, and words in the plural include the singular.

 

 

 

Section 2.2 TITLE, TERMS  DENOMINATIONS

     (a) The aggregate Principal Amount of Notes that may be authenticated and delivered under this Indenture shall be unlimited.

     (b) To the extent provided in, and except as otherwise permitted by, this Indenture, (1) the Notes shall be special limited obligations of the Company and (2) no payments of Principal and interest on the Notes of any series shall be payable unless the Company has received  CM Loan Payments in respect of the  CM Loan corresponding to such series, and then shall be payable equally and ratably on the Notes of such series only to the extent of the  CM Loan Net Payments related to the   CM Loan corresponding to such series.

     (c)  As more specifically described in Section 3.8,each series of Notes shall constitute a valid claim of the respective owners thereof against the  CM Loan, its notes, its mortgage and all other documents which are  pledged to secure the payment of principal of, redemption premium, if any, and interest thereon  and which shall be utilized for no other purpose whatsoever.

    (d) No Holder of a Note shall have any recourse against the Company unless and then only to the extent that the Company (1) has failed to pay such Holder the CM Loan Net Payments in respect of the  CM Loan corresponding to such Holder’s Note or (2) has otherwise breached a covenant in this Indenture.

     (e) For each series of Notes there shall be established and, subject to Section 2.3, set forth, or determined in the manner provided, in a Company Order:

          (1) the title of the Notes of the series (which shall distinguish the Notes of the series from all other Notes);

          (2) the limit upon the aggregate Principal Amount of the Notes of the series which may be authenticated and delivered under this Indenture (except for Notes authenticated and delivered upon registration of transfer of Notes of the series pursuant to Sections 2.7 or 8.5);

          (3) the CM Loan that corresponds to Notes of the series and which secures the Notes in the event of a default under this indenture;

          (4) the Stated Maturity and Payment Dates of the Notes of the series and the Record Date for any amounts payable on any Payment Date;

          (5) the stated rate at which the Notes of the series shall bear interest;

          (6) the place or places where, subject to the provisions of Section 3.5, the Principal of and or interest on Notes of the series shall be payable, any Notes of the series may be surrendered for registration of transfer, and notices and demands to or upon the Company in respect of the Notes of the series and this Indenture may be served;

          (7) any restrictions on the transfer or transferability of Notes of the series;

          (8) the obligation, if any, of the Company to redeem Notes of the series at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions upon which Notes of the series shall be purchased, in whole or in part;

 

 

          (9) the denominations in which any Notes of the series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof;

          (10) any addition to or change in the Events of Default which apply to any Notes of the series and any change in the right of the Trustee or the requisite Holders of such Notes to declare the principal amount thereof due and payable pursuant to Section 5.2;

          (11) any addition to or change in the covenants set forth in Article III which apply to Notes of the series; and

          (12) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 8.1(7)).

     All Notes of a series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to a Company Order pursuant to this Section 2.2(c) or in any indenture supplemental hereto.

     (f) Prior to the issuance of the initial series of Notes under this Indenture, a copy of the Chief Executive Officer’s resolution authorizing the execution, delivery and performance of this Indenture, shall be certified by the Chief Financial Officer or an Assistant Chief Financial Officer of the Company and delivered to the Trustee at or prior to the delivery of an Officer’s Certificate setting forth the general terms of the Notes. Such Officer’s Certificate shall provide general terms for Notes and provide either that the specific terms of each series shall be specified in a Company Order or that such terms shall be determined by the Company, or one or more of the Company’s agents designated in an Officers’ Certificate, in accordance with the Company Order as contemplated by Section 2.3.

      (g) Within 5 days after closing the CM Loan for each series of Notes, the Company will provide all closing documents to the Trustee in electronic form including

     (h) Unless otherwise provided as contemplated by Section 2.2(e) with respect to any series of Notes, any Notes of a series shall be issuable in denominations of $1,000 and any integral multiple thereof.

         

Section 2.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

The Notes shall be executed on behalf of the Company its Chief Executive Officer or the Chief Financial Officer or the Assistant Chief Financial Officer. The signature of any of these officers on the Notes may be electronic, manual or facsimile.

     Notes bearing the electronic, manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.

     At any time and from time to time after the execution and delivery of this Indenture (and subject to delivery of the  Officers’ Certificate as set forth in Section 2.2 prior to the issuance of the initial series of Notes), the Company may authenticate and deliver Notes of any series and upon such authentication and delivery shall promptly provide a record of all such Notes executed and authenticated by the Company to the Trustee, together with a copy of the Company Order authorizing the authentication and delivery of such Notes;

     In addition, prior to the issuance of the initial series of Notes, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Opinion of Counsel stating:

 

 

     (a) that the forms of such Notes have been, and the terms of such Notes (when established in accordance with such procedures as may be specified from time to time in a Company Order, all as contemplated by and in accordance with a Chief Executive Officer’s Resolution pursuant to Section 2.2(d), as the case may be) will have been, duly authorized by the Company and established in conformity with the provisions of this Indenture;

     (b) that such Notes, when (1) executed by the Company, (2) completed, authenticated and delivered by the Company in accordance with this Indenture, and (3) issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to customary exceptions; and

     (c) that all laws and requirements in respect of the execution and delivery by the Company of such Notes have been complied with.

     The Trustee may conclusively rely, as to the authorization by the Company of any series of Notes, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel and other documents delivered pursuant to Sections 2.1, 2.2(c) and 2.2(d) and this Section, as applicable, at or prior to the time of the first authentication of Notes of the initial series of Notes unless and until it has received written notification that such opinion or other documents have been superseded or revoked. In connection with the authentication and delivery of Notes, the Trustee shall be entitled to assume, unless it has received written notice to the contrary or any of its Trust Officers has actual knowledge to the contrary, that the Company’s authentication and delivery such Notes do not violate any rules, regulations or orders of any governmental agency or commission having jurisdiction over the Company.

     Each Note shall be dated the date of its authentication.

     The Company may appoint an authenticating agent, including itself, acceptable to the Trustee to authenticate Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate Notes whenever the Company may do so. Each reference in this Indenture to authentication by the Company includes authentication by such agent.

     No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Company by electronic or manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. The Company’s certificate of authentication shall be in substantially the following form:

     This is one of the Notes of the series designated therein referred to in the within-mentioned Indenture.

 

 

     Section 2.4 REGISTRAR AND PAYING AGENT. The Company shall maintain, with respect to each series of Notes, an office or agency where such Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where such Notes may be presented for purchase or payment (“Paying Agent”). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term Paying Agent includes any additional paying agent.

     The Company shall enter into an appropriate agency agreement with respect to each series of Notes with any Registrar, Paying Agent or co-registrar. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar or co-registrar.

     The Company initially will serve as the Registrar and Paying Agent in connection with such Notes provided however that upon an Event of Default or a default that remains uncured or unwaived for 30 days, the Trustee may, at its discretion, become the Paying Agent, the Registrar or both. The Company shall promptly notify the Trustee in writing of any change to the Registrar or Paying Agent of the Notes.   The Company or its agent shall be solely responsible for making all payments of principal and interest hereunder and the Trustee shall be entitled to rely upon the information of outstanding balances on the Notes and any information provided by the Company on payment of principal and interest without further investigation.  Within thirty (30) days after the end of each fiscal quarter the Paying Agent shall deliver to the Trustee a written report identifying, as of the date of such report, (i) the Principal Amount and accrued interest of each Note, (ii) all CM Loan Payments received by the Paying Agent, (iii) all CM Loan Net Payments paid to the Holders, (iv) name and contact information for each of the Holders, (v) issue and maturity dated of each Note and such other information as reasonably requested by the Trustee from time to time in order for the Trustee to determine the Principal Amount and accrued interest of each Note.

     Section 2.5 PAYING AGENT TO HOLD MONEY AND NOTES IN TRUST. Except as otherwise provided herein, prior to or on each due date of payments in respect of any series of Notes, the Company shall deposit with the Paying Agent with respect to such Notes a sum of money sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by such Paying Agent for the making of payments in respect of the Notes of such series and shall notify the Trustee in writing of any default by the Company in making any such payment. At any time during the continuance of any such default, a Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money so held in trust with respect to such Notes. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent for a series of Notes, it shall segregate the money held by it as Paying Agent with respect to such Notes and hold it as a separate trust fund. The Company at any time may require a Paying Agent for a series of Notes to pay all money held by it with respect to such Notes to the Trustee and to account for any money disbursed by it. Upon doing so, such Paying Agent shall have no further liability for the money.

     Section 2.6  Securities Depository Provisions. All  Notes issued under S-1 Registration Statements  shall  be  Book  Entry Notes. All Book Entry Notes shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). The Company and/or its duly appointed agent acknowledge that they have executed and delivered a Letter of Representations to DTC. All payments of principal of, redemption premium, if any, and interest on the Book Entry Notes and all notices with respect thereto, including notices of full or partial redemption, shall be made and given at the times and in the manner set out in the Letter of Representations. The terms and provisions of the Letter of Representations shall govern in the event of any inconsistency between the provisions of this Indenture and the Letter of Representations. The Letter of Representations may be amended without Noteholder consent.

The book-entry registration system for all of the Book Entry Notes may be terminated and certificates delivered to and registered in the name of the Beneficial Owners, under either of the following circumstances:

(a)          DTC notifies the Company, the Borrower and the Trustee that it is no longer willing or able to act as Notes Depository for the Book Entry Notes and  a successor Notes Depository for the Book Entry Notes is not appointed by the Company at the direction of the Borrower prior to the effective date of such discontinuation; or

(b)          The Borrower [Company] determines that continuation of the book-entry system through DTC (or a successor Notes depository) is not in the best interest of the Borrower [Owners of the Book Entry Notes].

             

In the event a successor Notes Depository is appointed by the Company, the Book Entry Notes will be registered in the name of such successor Notes Depository or its nominee. In the event certificates are required to be issued to Beneficial Owners, the Trustee, the Borrower and the Company shall be fully protected in relying upon a certificate of DTC or any DTC participant as to the identity of and the principal amount of Book Entry Notes held by such Beneficial Owners.

The Beneficial Owners of Notes   will not receive physical delivery of certificates. For so long as there is a Securities  Depository for Notes, all of such Notes shall be registered in the name of the nominee of the Notes Depository, all transfers of beneficial ownership interests in such Notes will be made in accordance with the rules of the Notes Depository, and no investor or other party purchasing, selling or otherwise transferring beneficial ownership of such Notes is to receive, hold or deliver any certificate. The Company, and the Trustee shall have no responsibility or liability for transfers of beneficial ownership interests in such Notes.

The Company, and the Trustee will recognize the Notes Depository or its nominee as the Noteholder of Book Entry Notes for all purposes, including receipt of payments, notices and voting; provided the Trustee may recognize votes by or on behalf of Beneficial Owners as if such votes were made by Noteholders of a related portion of the Notes when such votes are received in compliance with an omnibus proxy of the Notes Depository or otherwise pursuant to the rules of the Notes Depository or the provisions of the Letter of Representations or other comparable evidence delivered to the Trustee by the Noteholders

With respect to Book Entry Notes, the Company and the Trustee shall be entitled to treat the Person in whose name such Note is registered as the absolute owner of such Note for all purposes of this Indenture, and neither the Company, the Borrower nor the Trustee shall have any responsibility or obligation to any Beneficial Owner of such Book  Entry  Note.  Without limiting the immediately preceding sentence, neither the Company nor the Trustee shall have any responsibility or obligation with respect to (a) the accuracy of the records of any Notes Depository or any other Person with respect to any ownership interest in Book Entry Notes, (b) the delivery to any Person, other than a Noteholder, of any notice with respect to Book Entry Notes, including any notice of redemption or refunding, (c) the selection of the particular Notes or portions thereof to be redeemed or refunded in the event of a partial redemption or refunding of part of the Notes Outstanding or (d) the payment to any Person, other than a Noteholder, of any amount with respect to the principal of, redemption premium, if any, or interest on Book Entry Notes.

Section 2.7 – This section is intentionally left blank.

     Section 2.8 OUTSTANDING NOTES; DETERMINATIONS OF HOLDERS’ ACTION. Notes of any series “Outstanding” at any time are, as of the date of determination, all the Notes of such series theretofore authenticated by the Company for such series except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Note does not cease to be “Outstanding” because the Company or an Affiliate thereof is the Holder of the Note; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite Principal Amount of Outstanding Notes have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in conclusively relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Company or any

Affiliate of the Company. Subject to the foregoing, only Notes outstanding at the time of such determination shall be considered in any such determination.

     If the Paying Agent (other than the Company) holds, in accordance with this Indenture, on the final Stated Maturity, money sufficient to pay Notes payable on that date in full, then on and after that date such Notes shall cease to be Outstanding.

     Section 2.9 CANCELLATION. All Notes surrendered for payment, or registration of transfer, shall, if surrendered to any person other than the Company, be delivered to the Company and all Notes so delivered shall be promptly cancelled by it. The Company may at any time cancel any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may cancel any Notes previously authenticated hereunder that the Company has not issued and sold. The Company may not reissue, or issue new Notes to replace, Notes it has cancelled.

 

 

     No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted in the form of Notes for any particular series or as permitted by this Indenture.

     Section 2.10 PAYMENTS. Payment of Principal and interest on any Note which is payable, and is punctually paid or duly provided for, on any Payment Date shall be paid to the person in whose name that Note is registered at the close of business on the Record Date for such Payment Date.

     Any payments on any Note of any series which is payable, but is not punctually paid or duly provided for, on any Payment Date (herein called “Defaulted Payment”) shall forthwith cease to be payable to the Holder on the relevant Record Date, and such Defaulted Payment may be paid by the Company to the Holder of the Note on a record date chosen by the Company and in any lawful manner, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section and Section 2.7, each Note delivered under this Indenture upon registration of transfer of any other Note shall carry the rights to payments, which were carried by such other Note.  Except as otherwise set forth herein, the Trustee shall have no duties with regards to payments of the Notes.

     Section 2.11 PERSONS DEEMED OWNERS. Prior to due presentment of a Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of Principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

     Section 2.12 CUSIP NUMBERS. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

     Section 3.2 SEC REPORTS. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA Section 314(a).

     Section 3.3 COMPLIANCE CERTIFICATE; STATEMENT BY OFFICERS AS TO DEFAULT. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year (beginning with the fiscal year ending on December 31, 2017) an Officers’ Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not the signers know of any Default that occurred during such period. If they do, such Officers’ Certificate shall describe the Default and its status.

     The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers’ Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.  Until such time as the Trustee receives in writing a report of any Event of Default the Trustee shall not be deemed to have notice of such.

     Section 3.4 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

     Section 3.5 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in each Place of Payment for such series an office or agency where Notes of that series may be presented or surrendered for payment, where Notes of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes of that series and this Indenture may be served. The office of the Company at 440 North Wolfe Road, Sunnyvale, California 94085 shall be such office or agency for all of the aforesaid purposes unless the Company shall maintain some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change in the location, of such other office or agency.

     The Company may also from time to time designate one or more other offices or agencies where the Notes of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Notes of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

     Section 3.6  CM LOAN SERVICING.

     (a) With respect to each series of Notes, the Company shall use commercially reasonable efforts to service and collect the  CM Loan corresponding to such series, in good faith, accurately and in accordance with industry standards customary for servicing mortgage loans such as the  CM Loans. Notwithstanding the generality of the foregoing, (1) referral of a delinquent CM Loan to a collection attorney on the 31^st day of its delinquency shall be deemed to constitute commercially reasonable servicing and collection efforts; and (2) the Company shall have the right, at any time and from time to time, to amend or waive any term of such  CM Loan if it deems such actions to be in the best interest of the corresponding Note holders. Should such amendment or waiver occur a letter signed by the Chief Executive Officer shall be delivered to the Trustee with a description of the reasons for taking such action.  The Trustee shall have no duty prior to an Event of Default hereunder to pursue any actions or remedies with regards to the CM Loans and payments thereon.

     (b)      (b) With respect to each series of Notes, the Company shall use commercially reasonable efforts to maintain backup servicing arrangements providing for theCM Loan corresponding to such series to be serviced and collected in good faith, accurately and in accordance with industry standards customary for servicing CM Loans such as the CM Loans.  The Company shall promptly notify the Trustee in writing of any appointment or replacement of a third-party servicer of a CM Loan not identified in a Company Order.

Section 3.7 LIMITATION ON DEBT BY COMPANY. As long as any Notes are outstanding under this Indenture, the Company may incur no debts other than the Notes, compensation owed to employees, rent for offices or equipment, obligation to electric or other utilities and informational services and any other services reasonably necessary to assist the Company in carrying out it mortgage origination and servicing and Note servicing functions. Notwithstanding the foregoing the Company may incur debt secured by mortgage CM Loans it has issued when such debt may be used as a warehouse or holding facility for the issuance of Notes.

Section 3.8 SECURITY INTEREST. Separately, for each Series of Notes, the Company hereby pledges, assigns and grants to the Trustee, as security for the due payment and performance of all the Company’s responsibilities under this Indenture for the Notes, for the benefit of the Trustee on behalf of the Holders, a security interest in and to all of its right, title and interest, whether now or hereafter existing or acquired, all its interest in each Series of Notes’ CM Loan as follows: (a) the Company’s right to payment under the Underlying CM Loans, (c) the (1) promissory note, (2) deed of trust, mortgage, security agreement, assignment of leases and rents or other similar instrument or agreement securing the obligations of the borrower with respect to the Underlying CM Loan, (3) CM Loan agreement, (4) environmental indemnity, (5) guaranty, and (6) all of the documents, instruments or agreements evidencing or otherwise securing each Underlying CM Loan (collectively, the “Underlying CM Loan Documents”); (b) the Deposit Account and all money and other property from time to time credited to the Deposit Account; (c) all money, cash, instruments, interest, income and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing held for the benefit and security of the Holders of the Notes; (d) all present and continuing right, power and authority of the Company, in the name and on behalf of the Company, as agent and attorney-in-fact, or otherwise, to make claim for and demand performance on, under or pursuant to any of the foregoing held for the benefit and security of the Holders of the Notes, to bring actions and proceedings thereunder or for the specific or other enforcement thereof, or with respect thereto, to make all waivers and agreements, to grant or refuse requests, to give or withhold notices, and to exercise all rights, remedies, powers, privileges and options, to grant or withhold consents and approvals and do any and all things and exercise all other discretionary rights, options, privileges or benefits which the Company is or may become entitled to do with respect to the foregoing held for the benefit of the Holders of the Notes without notice to, consent or approval by or joinder of the Company; and (e) all revenues, issues, products, accessions, substitutions, replacements, profits and proceeds of and from all the foregoing (collectively, the “Collateral”). At the expense of the Company, the Company agrees to execute, deliver and file such further agreements, instruments and certificates as may be necessary to preserve, perfect and protect the title and interests of the Trustee on behalf of the Holders of the Notes, including but not limited to, the execution by the Company of an instrument of assignment to the Trustee and the execution by the Company and the filing of financing statements pursuant to the UCC. The Company shall, at its expense, do any and all further acts and execute, acknowledge, deliver, file, register and record any further documents as are reasonably necessary in order to protect the Trustee’s title to and first priority perfected security interest in the Collateral, subject to no Liens or charges of any type whatsoever except for Liens pursuant to and permitted by this Indenture.

In furtherance of the grant of the security interest in the Collateral for the Notes, upon and during continuance of an Event of Default with respect to the Notes of a particular Series, the Company grants to the Trustee on behalf of the Holders the full, exclusive and irrevocable right, power and authority to exercise any and all rights of the Company with respect to the Corresponding CM Loan corresponding to such series of Notes held for the benefit of the Holders of the Notes of such series, and each contract, agreement or other document or instrument included therein. The Trustee agrees that, except upon and during the continuance of an Event of Default with respect to Notes of a particular series, it shall not exercise the power of attorney, or any rights granted to the Trustee pursuant to this Section 3.8 for any Notes of a series not subject to an Event of Default. The Trustee further agrees that, the Trustee shall only exercise power of attorney and the other rights granted to the Trustee pursuant to this Section 3.8 with respect to the CM Loan corresponding to the series of Notes in which an Event of Default occurs and shall not exercise and shall be prohibited from exercising such rights against any CM other that the CM relating to such series.  The Trustee shall have no duty to ensure that the CM Loan described herein is properly secured and has no duty to investigate whether the Company has properly vested the rights described in this Indenture to the Trustee and properly pledged to the Trustee the Security hereunder or under the Underlying Notes. In the event that any CM Loan is not properly pledged or assigned to the Trustee and the Trustee the Trustee shall have no liability to the Holders of the Notes.

     Section 4.1 WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless:

     (a) either (1) the Company shall be the continuing corporation or (2) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety (i) shall be a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (ii) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Notes and this Indenture;

     (b) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and

     (c) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been satisfied.

     The successor person formed by such consolidation or into which the Company is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease of its properties and assets substantially as an entirety, the Company shall be discharged from all obligations and covenants under this Indenture, and the Notes.

     Section 5.1 EVENTS OF DEFAULT. Unless otherwise specified as contemplated by Section 2.2(c) with respect to any series of Notes, an “Event of Default” occurs, with respect to each series of the Notes individually, if:

          (1) the Company defaults, subject in each case, to the limitations set forth in Sections 2.2(b) and 3.1 and in the Notes in the payment of any Principal of, or interest upon, any Note of such series when the same becomes due and payable and continuance of such default for a period of 30 days after receipt by the Company of a Notice of Default from the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all Series for which such Default exists;

          (2) the Company fails to comply with any of its agreements in the Notes or this Indenture (other than those referred to in clause (1) above and other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has been expressly included in this Indenture solely for the benefit of a series of Notes other than such series) and such failure continues for 90 days after receipt by the Company of a Notice of Default PROVIDED, HOWEVER, that if the Company shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within a period of 90 days then such period shall be increased to such extent as shall be necessary to enable the Company diligently to complete such curative action. A Default under this clause is not an Event of Default until the Trustee notifies the Company, or the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all Series for which such Default exists, notify the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified after receipt of such notice;

 

 

          (3) there shall have been the entry by a court of competent jurisdiction of (a) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or (b) a decree or order adjudging the Company bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the wind up or liquidation of its affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of 60 consecutive days;

          (4) (a) the Company commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (b) the Company consents to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (c) the Company files a petition or answer or consent seeking reorganization or substantially comparable relief under any applicable federal state law, (d) the Company (x) consents to the filing of such petition or the appointment of, or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, (y) makes an assignment for the benefit of creditors or (z) admits in writing its inability to pay its debts generally as they become due or (e) the Company takes any corporate action in furtherance of any such actions in this clause (4); or

          (5) any other Event of Default provided with respect to Notes of that series.

     “Bankruptcy Law” means Title 11, United States Code, or any similar federal or state law for the relief of debtors. “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

     A Default under clause (2) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all series for which such Default exists notify the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified in clause (2) above after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default.”  Notwithstanding anything herein to the contrary, the Trustee shall not be charged with knowledge of any default or Event of Default with respect to the Notes of any Series for which it is acting as Trustee unless written notice of such default or Event of Default (which shall state that such notice is a “Notice of Default” or a “Notice of an Event of Default” hereunder, as the case may be) shall have been given to a Responsible Officer of the Trustee by the Company, or by the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all Series for which such Default exists.

     Section 5.2 ACCELERATION. If an Event of Default specified in Section 5.1(3) or (4) occurs and is continuing, the Principal (or portion thereof) of all the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholders, notwithstanding the second sentence of Section 3.1 hereof and without respect to whether there are or will be  CM Loan Net Payments in respect of the CM CM Loans corresponding to the Notes. The Holders of a majority in aggregate Principal Amount of all Outstanding Notes, by notice to the Trustee (and without notice to any other Noteholder) may rescind an acceleration and its consequences if (i) the rescission would not conflict with any judgment or decree, and (ii) all Events of Default specified in Section 5.1(3) or (4) have been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. For avoidance of doubt, there shall be no acceleration of the Principal (or portion thereof) of any Notes upon the occurrence of and Event of Default other than an Event of Default specified in Section 5.1(3) or (4).

     Section 5.3 OTHER REMEDIES. If an Event of Default with respect to a series of Outstanding Notes occurs and is continuing, the Trustee may pursue any available remedy to (a) collect the payment of the whole amount then due and payable on such Notes for Principal and interest, with interest upon the overdue Principal and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest from the date such interest was due, at the rate or rates prescribed therefor in such Notes and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including amounts due the Trustee under Section 6.7 or (b) enforce the performance of any provision of the Notes or this Indenture.

     The Trustee may maintain a proceeding even if the Trustee does not possess any of the Notes or does not produce any of the Notes in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Pursuit of remedies by the Trustee shall be subject to the restrictions and protections by the Holders pursuant to this Indenture.

     Section 5.4 WAIVER OF PAST DEFAULTS. The Holders of a majority in aggregate Principal Amount of the Outstanding Notes of any series, by written notice to the Trustee (and without notice to any other Noteholder), may on behalf of the Holders of all the Notes of such series waive an existing Default with respect to such series and its consequences except (1) an Event of Default described in Section 5.1(1) with respect to such series or (2) a Default in respect of a provision that under Section 8.2 cannot be amended without the consent of the Holder of each Outstanding Note of such series affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.