EFTA00730242.pdf

MORTGAGE LOAN PURCHASE AND SALE AGREEMENT This Mortgage Loan Purchase and Sale Agreement ("Agreement") is dated as of the 8th day of September, 2010, by and between EAST WEST BANK, a California banking corporation (on its own behalf, and as assignee of the Federal Deposit Insurance Corporation ("FDIC"), as Receiver of United Commercial Bank, a California banking corporation ("UCB"), collectively, "Seller"), and NEW STANFORD REGENCY VENTURE, LLC, a Delaware limited liability company, as Buyer ("Buyer"). RECITA L& A. Seller is the current owner and holder of a seventy percent interest (70%) in that certain Mortgage Loan made by UCB to Stanford Regency Plaza, LLC, a California limited liability company ("Borrower") in the aggregate principal amount of $49,500,000 (the "Mortgage Loan"), pursuant to the terms of a certain Construction Mortgage Loan Agreement dated as of February 27, 2007, between UCB and Borrower (the "Mortgage Loan Agreement"). B. The Mortgage Loan is evidenced by those certain promissory notes more particularly described on Schedule A attached hereto and made a part hereof (collectively, the "Notes"), executed by Borrower in favor of UCB, and secured by, inter alia, a Deed of Trust dated as of February 27, 2007 (the "Deed of Trust"), executed by Borrower for the benefit of UCB, which encumbers the land and improvements described therein (collectively, the "Property"). The Deed of Trust was recorded on March 13, 2007, as Instrument No. 20070551699 in the Official Records of Los Angeles County, California (the "Public Records"). C. The Notes are further secured by, inter alia, (i) an Absolute Assignment of Leases, Lease Guaranties, Rents, Issues and Profits dated as of February 27, 2007, made by Borrower in favor of UCB (the "Assignment of Rents"), and recorded on March 13, 2007 as Instrument No. 20070551700 in the Public Records, (ii) those certain guaranties more particularly described on Schedule A attached hereto here and made a part hereof made by the guarantors described therein (each, a "Guarantor") for the benefit of UCB (collectively, the "Guaranties") and (iii) certain other collateral pledged by the Borrower, Guarantors, certain other parties and/or their respective principals (collectively, the "Collateral"). D. The Mortgage Loan Agreement, the Notes, the Deed of Trust, the Assignment of Rents, Guaranties, and the Collateral, together with any and all other instruments and documents evidencing and/or securing the Mortgage Loan, and each of the foregoing as amended, modified or supplemented from time to time, are hereinafter collectively referred to as the "Mortgage Loan Documents." The Mortgage Loan Documents are more particularly described on Schedule A attached hereto here and made a part hereof. E. Borrower has defaulted under the Mortgage Loan and Seller commenced foreclosure proceedings under the Deed of Trust including but not limited to a foreclosure action (the "Foreclosure Action"), captioned East West Bank, etc., v. Benhoor Hanasabzadeh, etc., Stanford Regency Plaza. LLC. et. al., Case No. SC106393, by filing a Summons, Complaint and Notice of Pendency in the Superior Court of Los Angeles County, State of California (the "Court"). 1 IIF 6038202v.3 #88000/0106 EFTA00730242  F. On or about August 24, 2010, Borrower filed bankruptcy under Chapter 11 of the Bankruptcy Code ("Bankruptcy Action"). G. Pursuant to the terms of a certain Construction Mortgage Loan Participation Agreement dated as of February 27, 2007 (the "Participation Agreement"), between UCB, Seller and Preferred Bank, a California banking corporation, ("PB"), PB is the current owner and holder of the remaining thirty percent (30%) interest in the Mortgage Loan (the "PB Interest"), and Buyer is presently negotiating the terms of an agreement to purchase the PB Interest from PB (the "PB Contract"). H. Buyer wishes to purchase, and Seller wishes to sell and assign, all of the Seller's right, title and interest in the Mortgage Loan, the Mortgage Loan Documents Foreclosure Action and the Bankruptcy Action, together with all claims or rights Seller may have against Borrower thereunder (collectively, the "Seller Interest"), upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises, the promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: 1. Sale of Seller Interest; Assignment of Foreclosure Action and the Bankruptcy Action. Subject to the terms, conditions, representations and warranties set forth in this Agreement, on the Closing Date (hereinafter defined), Seller shall sell, transfer and assign to Buyer, and Buyer shall purchase from Seller, the Seller Interest in the Mortgage Loan and the Mortgage Loan Documents. 2. Purchase Price. The purchase price to be paid for the Seller Interest shall be ELEVEN MILLION FIVE HUNDRED FIFTY THOUSAND and 00/100 DOLLARS ($11,550,000.00) (the "Purchase Price"), which shall be payable as follows: a. Upon mutual execution of this Agreement, Buyer shall be deliver the Deposit (hereinafter defined) to Seller as provided herein. Upon the delivery of the Confirmation Notice (hereinafter defined) to Seller, the Deposit will be retained by Seller to reimburse it for its administrative, opportunity and other costs in connection with this transaction if this transaction does not close by the Closing Date due to Buyer's failure to perform Buyer's obligations under this Agreement; and provided Seller is not in default of its obligations hereunder. The Deposit shall be paid to Seller as follows: (i) ONE MILLION ONE HUNDRED FIFTY FIVE THOUSAND and 00/100 DOLLARS ($1,155,000.00) (the "Deposit") shall be delivered in cash payment to Seller upon mutual execution hereof; or (ii) Notwithstanding anything to the contrary contained herein, Seller acknowledges and agrees that Buyer shall have the option, in lieu of delivering to Seller a cash payment in the amount of the Deposit, to pledge to Seller that certain Account at East West Bank (the "Account"), which maintains a balance in an amount equal to the Deposit, as more fully identified in that certain Pledge Agreement dated as 2 HF 6038202v.3 #88000/0106 EFTA00730243  of the date hereof in the form attached hereto as Exhibit G (the "Pledge"), in full satisfaction of its obligation to deliver to Seller the Deposit. Pursuant to the terms of the Pledge, the Account shall be immediately pledged to Seller upon mutual execution hereof for the duration of the Due Diligence Period (hereinafter defined), provided, however, that neither Buyer nor Seller shall have the right to withdraw any funds from the Account during the Due Diligence Period. In the event Buyer elects to continue with the purchase of the Seller Interest and delivers to Seller a Confirmation Notice (hereinafter defined) in accordance with Section 3(b) below, then, simultaneously with the delivery of the Confirmation Notice to Seller, Buyer shall deliver to Seller a payment in cash in the amount of the Deposit, in which event the Pledge shall automatically terminate and Seller shall have no further rights or interests in the Account. If Buyer fails to deliver a Confirmation Notice prior to the expiration of the Due Diligence Period, the Pledge shall automatically terminate together with this Agreement in accordance with Section 3(b) below and Seller shall have no further rights or interests in the Pledge or the Account. b. At Closing, the Purchase Price less the Deposit, shall be paid by Buyer to Seller by wire transfer of immediately available federal funds to one or more accounts at such bank or banks as shall be designated by Seller by notice to Buyer prior to the Closing. c. Seller agrees to sell, and Buyer agrees to purchase, the Seller Interest, without recourse and pursuant to the terms of this Agreement. The Mortgage Loan is in default and Seller makes no representation regarding any implied waivers, releases or similar defenses regarding the Mortgage Loan, nor does Seller make any representations as to assessments or real property taxes, except that Seller agrees to pay its 70% share of outstanding assessments and real property taxes with respect to the Property, together with any and all penalties and interest thereon, that shall have accrued prior to the Closing only. Buyer agrees that, except as expressly contained in this Agreement, no representations by or on behalf of Seller have been made to Buyer as to the condition of the Property, any restrictions related to the rehabilitation of the Property, the applicability of or compliance with any governmental requirements, including but not limited to environmental requirements; pertaining to the Property, or the suitability of the Mortgaged Property for any purpose whatsoever. Buyer represents to Seller that prior to the Closing Buyer will make its own independent investigation of the Property. 3. Due Diligence. a. Subject to the terms and conditions of this Section 3, during the Due Diligence Period (as hereinafter defined), Buyer shall perform, at Buyer's sole cost and expense, its due diligence review, examination and inspection of all matters relating to the Mortgage Loan, the Loan Documents, the Foreclosure Action and the Property. The "Due Diligence Period" shall mean the period commencing upon mutual execution hereof and expiring at 5:00 PM Pacific Time on the Due Diligence Expiration Date. The "Due Diligence Expiration Date" shall mean ten (10) Business Days following receipt by Buyer of a fully executed copy of this Agreement. During the Due Diligence Period, Seller shall cause the court-appointed receiver for the Property (the "Receiver"), to (1) give Buyer and its representatives, agents, consultants and contractors access to the Property upon reasonable prior notice, (2) provide to Buyer all reports prepared by the Receiver in connection with the Mortgage Loan, the Loan Documents, the Property, the 3 HF 6038202v.3 #88000/0106 EFTA00730244 Foreclosure Action and/or the Bankruptcy Action (collectively, the "Receiver Reports"), and (3) provide any other information and/or documents in the possession or control of the Receiver as requested by Buyer from time to time. b. If Buyer determines, in its sole and absolute discretion, that it is satisfied with its due diligence review, and as a result thereof, elects to continue with the purchase of the Seller Interest in accordance with the terms of this Agreement, Buyer shall send a notice to Seller on or prior to the Due Diligence Expiration Date, which notice shall confirm Buyer's decision to purchase the Seller Interest (the "Confirmation Notice"). If Buyer fails to timely deliver the Confirmation Notice prior to the Due Diligence Expiration Date, Buyer shall be deemed to have rejected the Seller Interest, in which event (i) if Buyer has delivered the Deposit to Seller in the form of a cash payment pursuant to Section 2a(i) above, Seller shall promptly return the Deposit to Buyer, and (ii) if Buyer has provided the Pledge to Seller, the Pledge and the rights of Seller thereunder shall automatically terminate, and, in either case, this Agreement shall automatically, and without any further action by or notice to any party, be deemed canceled and become void and of no further effect, and neither party shall have any obligations of any nature to the other hereunder or by reason hereof, upon the expiration of the Due Diligence Period (except for the provisions hereof that expressly survive termination of this Agreement). If Buyer timely delivers the Confirmation Notice to Seller, this Agreement shall remain in full force and effect in accordance with its express terms except that Buyer shall be deemed to have approved its due diligence review. The parties hereto shall thereafter proceed to Closing in accordance with the terms of this Agreement, and the Deposit shall become non-refundable to Buyer, except as provided in Sections 12, 14 and 16a. 4. Seller's Covenants. a. From and after the date of this Agreement, Seller shall: (1) Concurrently with the mutual execution hereof, promptly forward to Buyer copies of the Loan File (hereinafter defined); (2) take all steps as Seller determines in its sole discretion in connection with the Foreclosure Action, foreclosure proceedings, and in enforcement of the Mortgage Loan; provided, however, the parties acknowledge that Borrower is in bankruptcy and accordingly any steps that Seller determines in its sole discretion to take may include motions filed in the Borrower bankruptcy proceeding including relief from stay; as part of the Foreclosure Action, Seller has published notice of a trustee sale to sell the Property ("Trustee Sale"), and Seller shall ensure that, unless this Agreement is terminated by its own terms, the Trustee Sale does not occur prior to the Closing, and if for any reason the Trustee Sale is initially scheduled to occur on a date prior to the Closing Date, then, not less than five (5) Business Days prior to the Closing, Seller shall cause such Trustee Sale to be adjourned to a date after the Closing; (3) not take any of the following actions without the prior written consent of Buyer: (i) modify, supplement, terminate or otherwise change in any manner, any of the terms, covenants, or conditions of the Mortgage Loan or the Loan Documents, or enter into any other agreements affecting the Mortgage Loan; (ii) release Borrower, 4 HF 6038202v.3 #88000/0106 EFTA00730245  any Guarantor or indemitor, or any collateral for the Mortgage Loan from liability under the Loan Documents; (iii) enter into any agreement with Borrower agreeing to forbear from the exercise of any of Seller's rights or remedies under the Loan Documents; (iv) agree to dismiss or cause the dismissal of the Foreclosure Action or enter into a deed-in- lieu transaction; or (v) sell, assign or encumber the Mortgage Loan or the Loan Documents; (4) obtain, at Seller's sole cost and expense, the written approval of the FDIC to the terms of this Agreement and the transactions contemplated herein (the "FDIC Approval"); (5) request the Receiver to obtain, and subject to any Bankruptcy prohibitions, at Seller's sole cost and expense, extensions of the existing building permits for the construction project currently in effect at the Property and file and apply for any additional permits and/or approvals from the Buildings Department of the City of Los Angeles or any other governmental authority having jurisdiction over the Property, as Seller or Buyer shall deem reasonable or necessary; and (6) cause the Receiver to deliver to Buyer the Receiver Reports and such other information as provided in Section 3a. 5. Closing and Closing Date. a. Subject to paragraph c of this Section 5, the closing (the "Closing") of the transaction contemplated herein shall take place on the date that is five (5) Business Days after receipt by Seller of the Confirmation Notice from Buyer, or at such earlier date and time as shall be determined by Buyer. The date of the Closing is identified in this Agreement as the "Closing Date." b. Buyer and Seller agree that Seller may continue to market the Seller Interest prior to the Closing and may enter into any other agreement to sell the Seller Interest unless and until this Agreement has been terminated by its own terms, provided, however, upon the Deposit becoming non-refundable upon delivery of the Confirmation Notice prior to the expiration of the Due Diligence Period, Seller may not enter into any other agreement to sell the Seller Interest, or otherwise sell the Seller Interest to any other party, unless and until this Agreement has been terminated by its own terms. If Buyer is ready to close the Loan purchase, but Seller does not sell the Loan to Buyer, Seller shall promptly refund the Deposit to Buyer, with simple interest at the rate of five percent (5%) per annum. Buyer agrees that such refund reimburses it in full for its administrative, opportunity and other costs in connection with this transaction. c. At the election of Buyer, the Closing hereunder shall take place contemporaneously with the closing under the PB Contract. Seller does not require contemporaneous closing with the PB Contract. Notwithstanding anything to the contrary contained herein, Buyer shall have the right to adjourn the Closing from time to time as may be necessary to ensure that the Closing hereunder coincides with the closing under the PB Contract, provided that the Closing hereunder shall not be any later than the Closing Date of September 29, 2010, or at such other date and time as shall be agreed upon in writing by all parties. 5 HF 6038202v.3 #88000/0106 EFTA00730246  6. Closing Deliveries. a. Seller shall deliver or cause to be delivered to Buyer on or before the Closing Date: (1) One (1) original assignment and endorsement to each of the Notes in the form attached hereto as Exhibit A, duly executed and acknowledged by Seller; (2) Four (4) original Assignments of the Deed of Trust in the form attached hereto as Exhibit B, duly executed and acknowledged by Seller; (3) Four (4) original Assignments of Assignment of Leases and Rents in the form attached hereto as Exhibit C, duly executed and acknowledged by Seller; (4) Four (4) original Assignments of Loan Documents (the "Assignment of Loan Documents") in the form attached hereto as Exhibit D, duly executed and acknowledged by Seller; (5) UCC-3 Financing Statement Assignments completed so as to assign and convey to Buyer Seller's security interest evidenced by all existing UCC-1 Financing Statements in favor of Seller; (6) The original executed Loan Documents (unless any of the original executed Notes are being held by the Court in connection with the Foreclosure Action), and other documents and agreements relating to the Mortgage Loan, including, without limitation, Seller's original title policy and any subsequent endorsements issued by Seller's title company Stewart Title Guaranty Company ("Stewart") with respect to the Mortgage Loan (the "Loan Policy") and copies of all material correspondence and documents exchanged between Seller and Borrower, Stewart and its counsel, UCB in its capacity as Seller's predecessor in the Mortgage Loan, participants in the Mortgage Loan including Preferred Bank, the Receiver, any third parties in connection with the Mortgage Loan including without limitation the disbursement agent, and/or any Guarantor, which includes, without limitation, the default notices, demand letters, modification letters, if any, waiver letters, if any, and forbearance agreements, if any (collectively, the "Loan File"); (7) Copies of all documents and records filed or served in connection with and all correspondence relating to the Foreclosure Action and the Bankruptcy Action, to the extent that they are in the Loan File; (8) Copies of all documents and records filed or served in connection with and all correspondence relating to any other litigation relating to the Mortgage Loan, the Loan Documents, Borrower, Guarantor and/or the Property, including, without limitation, each of the mechanics' liens filed against the Property, as more particularly described on Schedule C attached hereto, to the extent that they are in the Loan File; (9) Four (4) original Assignment of Litigation Rights, which shall include, without limitation, an assignment of Seller's rights under the Foreclosure Action 6 HF 6038202v.3 #88000/0106 EFTA00730247  and any rights of Seller in and to the Bankruptcy Action (the "Assignment of Litigation") in the form attached hereto as Exhibit E, duly executed and acknowledged by Seller; (10) If requested by Buyer, a written notice to Borrower and Guarantor, duly executed and delivered by Seller, that the Loan and the Foreclosure Action have been sold to Buyer; and (11) Any other documents or instruments (including, without limitation, corporate resolutions or other evidences of approval and authority) that Buyer's counsel may reasonably require to consummate this transaction. b. Buyer shall deliver or cause to be delivered to Seller on or before the Closing Date: (1) Four (4) original countersigned Assignments of Loan Documents, duly executed and acknowledged by Buyer; (2) Four (4) original countersigned Assignments of Litigation duly executed and acknowledged by Buyer; (3) The balance of the Purchase Price; and (4) Any other documents or instruments (including, without limitation, corporate resolutions or other evidences of approval and authority) that Seller's counsel may reasonably require to consummate this transaction. Seller's delivery of the documents described in this Section are subject to PB's 30% interest in the Mortgage Loan if the PB Contract does not close contemporaneously with this the Closing. 7. Recording Fees. Buyer shall be solely responsible for all recording and/or filing fees required to be paid in connection with the recording of any of the documents executed and delivered in connection with the Closing. Each party shall be responsible for the payment of their own legal fees with respect to the transfer of the Mortgage Loan. 8. Buyer's Representations, Warranties, Covenants and Acknowledgments. Buyer hereby represents, warrants, covenants and acknowledges that, as of the date hereof, and as of the Closing Date: a. Status of Buyer. Buyer is duly organized, validly existing and in good standing under the laws of the State of its formation. b. Decision to Purchase. Buyer acknowledges that it is purchasing the Mortgage Loan in its "AS IS" condition, without any representations or warranties except as set forth in this Agreement. Buyer confirms and acknowledges that, upon expiration of the Due Diligence Period, Buyer will have been given an opportunity to make such inquiries, inspections, reviews, or other investigations as Buyer deems necessary and appropriate to value the Mortgage Loan 7 HF 6038202v.3 #88000/0106 EFTA00730248 and the underlying security of the Mortgage Loan, including, but not limited to, access to the Loan File. Buyer is relying entirely on Buyer's own inspection and evaluation of the Loan File and is not relying on any representations, warranty, assurance or statement of any kind made by Seller or any other person or entity on behalf of Seller except to the extent set forth in this Agreement. Except as expressly set forth in this Agreement to the contrary, Buyer is not relying upon the continued actions or efforts of Seller in connection with its decision to purchase the Mortgage Loan, and nothing contained in this Agreement shall create any partnership, joint venture or other similar arrangement between Seller and Buyer. Buyer acknowledges that after the Closing Date, unless otherwise specifically agreed to in writing, Seller will not retain any further interest in the Mortgage Loan, or provide any further servicing of the Mortgage Loan. In addition, Buyer acknowledges and understands that portions of the Loan File may have been prepared by parties other than Seller and neither Seller or its affiliates has made an independent investigation or verification of any such records or makes any representation or warranty, whether express or implied, of any type, kind, character or nature, whatsoever, as to the content, accuracy, or completeness of such Loan File (except as set forth in this Agreement). Buyer acknowledges and agrees that all information and records provided to Buyer have been provided for informational purposes only as an accommodation to Buyer, and except as set forth in this Agreement, any inaccuracy, incompleteness, or deficiency in any part of such information and records shall be solely the risk of Buyer. c. Authority. Buyer is duly and legally authorized to enter into this Agreement and has complied with all laws, rules, regulations, formation documents, charter provisions and bylaws to which it may be subject, and the undersigned representative or representatives of Buyer is or are authorized to act on behalf of and bind Buyer to the terms of this Agreement. d. Enforceability. This Agreement and all of Buyer's obligations hereunder are the legal, valid and binding obligations of Buyer, enforceable in accordance with the terms of this Agreement, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or in law). e. No Conflicts. The execution and delivery of this Agreement and the performance of Buyer's obligations hereunder does not and will not conflict with any provision of any law, regulation, or order to which Buyer is subject, or conflict with or result in a breach of or constitute a default under any of the terms, conditions, or provisions of any agreement or instrument to which Buyer is a party or by which it is bound, or any order or decree applicable to Buyer. f. Environmental Risks. Buyer expressly understands, acknowledges and agrees that there may be environmental issues and/or risks with respect to the Property and/or adjoining property which may or may not be visible or apparent and which may or may not be above or below the surface thereof. A written report or reports may or may not be included in the Loan File evidencing the results of an environmental assessment or assessments performed on Seller's behalf or on behalf of others for the purpose of assessing environmental issues concerning the Property (collectively, the "Environmental Assessment Report"). Buyer understands and acknowledges that any Environmental Assessment Report which may be in the Loan File or is 8 HF 6038202v.3 #88000/0106 EFTA00730249 otherwise provided or made available by Seller or its employees, agents, contractors, or representatives, is provided without any representations or warranties as to any matter, including but not limited to the qualifications or expertise of the author or authors thereof or the completeness or accuracy of the facts, presumptions and conclusions contained therein, and Buyer agrees that Seller shall not be liable for the representations set forth in the Environmental Assessment Report, if any. g. Affiliate. Buyer is not an affiliate of or a beneficial owner (whether directly or indirectly) in the Borrower or any Guarantor. 9. Seller's Representations. Seller hereby represents that as of the date hereof, and as of the Closing Date: a. Status of Seller. Seller is duly organized, validly existing and in good standing under the laws of the State of its formation. b. Authority. Seller is duly and legally authorized to enter into this Agreement and has complied with all laws, rules, regulations, formation documents, charter provisions and bylaws to which it may be subject, and the undersigned representative or representatives of Seller is or are authorized to act on behalf of and bind Seller to the terms of this Agreement. c. No Transfer/Pledge. Seller has not sold, transferred, pledged or encumbered any of its Seller Interest. d. Participation Agreement. Attached hereto as Exhibit F is a true and complete copy of the Participation Agreement, which has not been further amended, supplemented or modified. e. Balance of the Mortgage Loan. The current unpaid outstanding principal balance of the Mortgage Loan is as follows: $29,197,212.00 on Loan Number 87814473, and $10,300,000.00 on Loan Number 87814732. f. Sole Ownership of the Mortgage Loan. Other than the PB Interest, which is owned and held by PB pursuant to the terms of the Participation Agreement, Seller is the sole owner and holder of the Mortgage Loan. No person or party, other than Buyer, has any right or option to acquire the Mortgage Loan or the Property, or any part thereof or any interest therein. g. Sole Ownership of the Seller Interest and Right to Sell. Seller is the sole owner and holder of the Seller Interest and has the full right, power and authority to sell and assign the Seller Interest. h. No Conflicts. The execution and delivery of this Agreement and the performance of Seller's obligations hereunder does not and will not conflict with any provision of any law, regulation, or order to which Seller is subject, or conflict with or result in a breach of or constitute a default under any of the terms, conditions, or provisions of any agreement or instrument to which Seller is a party or by which it is bound, or any order or decree applicable to Seller. 9 HF 6038202v.3 #88000/0106 EFTA00730250  i. Loan Documents; Loan File. The list of Loan Documents attached to this Agreement as Schedule A is a true, complete, and correct list of all Loan Documents. Seller has furnished to Buyer or made available to Buyer the complete Loan File. j. No Additional Advances. As of the date hereof, Seller is not obligated to advance, and shall not advance, any additional funds to Borrower or any Guarantor in connection with the Mortgage Loan or otherwise k. Foreclosure Proceedings. Title Company that issued Lender's Loan Policy for the Deed of Trust has requested Lender not to complete its non-judicial foreclosure sale of the Property, based on the theory that foreclosure may endanger lien priority defenses to the mechanic's lien actions including defense of equitable subrogation and equitable lien. A mechanic's lien claimant also filed for injunction against the non-judicial foreclosure sale in case number BC424192 (lead case); a temporary restraining order was granted and preliminary injunction hearing is set for August 24, 2010; the preliminary injunction was denied; however, the mechanic's lien claimant obtained an order for attachment writ which is the subject of further motion proceedings in the lead case. I. Title Insurance. A number of lawsuits have been filed by mechanic's lien claimants which allege that the mechanic's liens have priority over the Deed of Trust ("Litigation"). (See, Paragraph 10(c)(3), below). Seller has tendered these lawsuits to Stewart under Seller's Loan Policy issued by Stewart which was to insure the Seller's Deed of Trust as a first lien on the Property. Stewart has accepted the Seller's tenders, with a reservation of rights, as to the mechanic's lien causes of action and has retained counsel to represent the Seller with respect those causes of action. However, Stewart has not yet reached a coverage determination as to whether the Seller's claims are covered under the Loan Policy or Seller's escrow instructions. Seller is informed that on or about August 16, 2010, Stewart filed a lawsuit, Stewart Title Guaranty Company vs. Stanford Regency Plaza, LLC, Benhoor Hanasabzadeh, Joseph Hanasabzadeh, Manoochehr Fatirian, Fereidoon Kangavari and Does 1-20, Los Angeles Superior Court Case No. BC443655, for Express Indemnity, Breach of Contract and Declaratory Relief. Seller is not named as a party in this lawsuit. Except for those so expressed in this Agreement, no warranties or representations, expressed or implied, are, or have been, made by Seller or anyone acting on the behalf of Seller, particularly, without in any way limiting the generality of the foregoing, no warranties or representations have been made regarding (i) the collectability of the Mortgage Loan; (ii) the form or sufficiency of the Loan Documents or the Loan File; (iii) the credit worthiness of the Borrower or any Guarantor of the Mortgage Loan; (iv) the value of the collateral which secures the repayment of the Mortgage Loan; (v) the enforceability of the Note or the other Loan Documents; (vi) the presence or release of any hazardous or toxic fluids, substances, or materials on or from the Property (collectively, "Environmental Conditions"); (vii) the Property; (viii) the validity of any Loan Document; or (ix) any defenses to the Mortgage Loan resulting from bankruptcy, insolvency, reorganization or moratorium. 10. Certain Obligations of Buyer. 10 LIF 6038202v.3 #88000/0106 EFTA00730251  a. Collection Practices. Buyer will not violate any laws relating to unfair credit collection practices in connection with the Mortgage Loan. Buyer hereby agrees to indemnify Seller and to hold it harmless from and against any and all claims, demands, losses, damages, penalties, fines, forfeitures, judgments, reasonable legal fees and any other out-of- pocket costs, fees, and expenses incurred by Seller as a result of (1) a breach by Buyer of the aforesaid warranty or (2) any claim, demand, or assertion that, after the Closing Date, Seller was in any way involved in or had in any way authorized any unlawful collection practices by Buyer in connection with the Loan transferred to Buyer pursuant to this Agreement. Buyer agrees to notify Seller within two (2) Business Days of notice or knowledge of any such claim or demand. b. Reporting to or for the Internal Revenue Service. Buyer agrees to submit all Internal Revenue Service Forms and Information Returns for the Loan for the period during which it owns the Mortgage Loan. c. Buyer's Duties Regarding Litigation. (1) If the Loan is the subject of pending collection litigation (the "Pending Collection Litigation") on the Closing Date brought by Seller (including bankruptcy, arbitration and other alternate dispute resolution proceedings), and including but not limited to East West Bank, as Assignee of the Federal Deposit Insurance Corp., as Receiver for United Commercial Bank, a California banking corporation, Plaintiff v. Benhoor Hanasabzadeh, Individually and as trustee for the Benhoor and Limor Hanasabzedeh Living Trust; etc., et al., Defendants, Los Angeles Superior Court Case No. SC106393; and then Buyer shall provide to the attorney representing Seller, within five (5) Business Days after Closing, the name of the attorney selected by Buyer to represent Buyer's interests in such Pending Collection Litigation. Buyer shall, within ten (10) Business Days after Closing, notify the clerk of the court, all counsel of record and all arbitrators and mediators, as applicable, that ownership of the Loan was transferred from Seller to Buyer. Buyer shall have its attorney file appropriate pleadings with the court as soon as is reasonable practicable to cause the substitution of Buyer's attorney for Seller's attorney and shall also cause the removal of Seller as a party to the litigation (except to the extent claims have been made against Seller relating to its servicing or management of the Mortgage Loan) and shall substitute Buyer as the party in interest. Seller will notify its attorney to cease participating in the litigation (except with respect to claims made against Seller relating to its servicing or management of the Mortgage Loan) upon the filing of the pleadings substituting Buyer's attorney for Seller's attorney as provided above. From and after the Closing, Buyer shall assume any and all obligations of Seller as set forth in any order of court issued in the Pending Collection Litigation. (2) Seller agrees to defend, at its sole cost and expense, any pending litigation against Seller or any of its affiliates relating to Seller's servicing or management of the Mortgage Loan, or any such litigation served on Seller after the Closing Date, including but not limited to that certain cross-action filed by Benhoor Hanasabzadeh, Individually and as trustee for the Benhoor and Limor Hanasabzedeh Living Trust; etc., et al., Defendants, Los Angeles Superior Court Case No. SC106393. 11 HF 6038202v.3 #88000/0106 EFTA00730252  (3) If the Loan is the subject of pending litigation affecting title to the Mortgaged Property (the "Pending Title Litigation") on the Closing Date, Buyer shall provide to the attorney representing Seller, within five (5) Business Days after Closing, the name of the attorney selected by Buyer to represent Buyer's interests in such Pending Title Litigation. Buyer shall, within ten (10) Business Days after Closing, notify the clerk of the court, all counsel of record and all arbitrators and mediators, as applicable, that ownership of the Loan was transferred from Seller to Buyer. Buyer shall have its attorney file appropriate pleadings with the court as soon as is reasonably practicable to cause the substitution of Buyer's attorney for Seller's attorney and shall also cause the removal of Seller as a party to the litigation (except to the extent claims have been made against Seller relating to its servicing or management of the Mortgage Loan) and shall substitute Buyer as the party in interest. Seller will notify its attorney to cease participating in the litigation upon the filing of the pleadings substituting Buyer's attorney for Seller's attorney as provided above. From and after the Closing, Buyer shall assume any and all obligations of Seller as set forth in any order of court issued in the Pending Title Litigation. The following is a list of Pending Title Litigation known to Seller to date: • A Claim of mechanic's lien, in the amount of $38,232.00, claimant Southern California Steel, Inc., Recorded August 10, 2009, Instrument No. 2009-1221786, of Official Records, affects a portion of parcel 2 with a Notice of Pending Action to Foreclose said lien in Los Angeles County, Superior Court of the State of California, Case No. BC424192, Recorded on October 27, 2009 as Instrument No. 2009-1620611, of Official Records; • A Claim of mechanic's lien, in the amount of $18,509.85, claimant Alcala ,Co., Inc., Recorded August 19, 2009, Instrument No. 2009-1279704, of Official Records which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $21,329.09, claimant Glendale Plumbing & Fire Supply, Recorded September 25, 2009, Instrument No. 2009-1463126, of Official Records which affects a portion of Parcel 2; a Notice of Pending Action to Foreclose said lien in Los Angeles county, Superior Court of the State of California, Case No. 09K20845, Recorded on November 4, 2009, Instrument No. 2009- 1663731, of Official Records; • A Claim of mechanic's lien, in the amount of $143,211.00, Claimant Sun Corporation, dba AMD Contractors, Recorded October 14, 2009, Instrument No. 2009-1557200, of Official Records which affects a portion of Parcel 2; 12 HF 6038202v.3 #88000/0106 EFTA00730253  • A Claim of mechanic's lien, in the amount of $91, 830.13, Claimant Great Western Building Materials, Recorded October 21, 2009, Instrument No. 2009-1592336 of Official Records which affects a portion of Parcel 2; a Notice of Pending Action to Foreclose said lien in Los Angeles county, Superior Court of the State of California, Case No. BC429411, Recorded on January 14, 2010, Instrument No. 2010-0058722, of Official Records; • A Claim of mechanic's lien, in the amount of $726,317.69, Claimant J T Wimsatt Contracting Company Inc, Recorded October 23, 2009, Instrument No. 2009-1605216, of Official Records which affects a portion of Parcel 2, and related proceedings for injunction of foreclosure sale of the Property; • A Claim of mechanic's lien, in the amount of $12,243.65, Claimant Patterson Pump Company, Recorded October 26, 2009, Instrument No. 2009-1613849, of Official Records which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $58,295.00, Claimant Schindler Elevator Corporation, Recorded October 27, 2009, Instrument No. 2009-1623778, of Official Records, which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $610,000.00, Claimant Compton Steel Co Inc, Recorded November 9, 2009, Instrument No. 2009-1683006, of Official Records, which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $153,512.90, Claimant Doja, Inc., Recorded November 10, 2009, Instrument No. 2009-1693852, of Official Records, which affects Parcels 1 and 2; • A Claim of mechanic's lien, in the amount of $208,069.00, Claimant Malcolm Drilling Co., Inc, Recorded November 16, 2009, Instrument No. 2009-1727805, of Official Records, which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $6,444.41, Claimant Thompson Building Materials — Orange, recorded November 24, 2009, Instrument No. 2009-1783617, of Official Records, which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $157,000.00, Claimant Sunpeak Construction, Inc., recorded December II, 13 HF 6038202v.3 #88000/0106 EFTA00730254  2009, Instrument No. 2009-1884128, of Official Records, which affects a portion of Parcel 2; Sunpeak Construction vs. Stanford Regency Plaza et al.; Los Angeles Superior Case No. BC433387; • A Claim of mechanic's lien, in the amount of $4,000.00, Claimant Parks Engineering & Construction Services, recorded December 16, 2009, Instrument No. 2009-1911676, of Official Records, which affects a portion of Parcel 2; • A Claim of mechanic's lien, in the amount of $197,604.40, Claimant Pacific Coast Street, recorded January 13, 2010, Instrument No. 2010-0053197, of Official Records, which affects a portion of Parcel 2; • ABS Technical Electric, Inc., Plaintiff v. Stanford Regency Plaza, LLC, a limited liability company; East West Bank, a corporation; John Does 1 to 100, Inclusive, Los Angeles Superior Court Case No. BC 437500, • Plaza Wholesale Electric, Plaintiff vs. Berhanu Dessie Tassew, ABS Technical Electric, Inc., Stanford Regency Plaza LLC; American Contractors Indemnity Company, and Does 1 through 100, inclusive; East West Bank served as Doe 1 on August 27, 2010; Los Angeles Superior Case No. BC434412 (served August 27, 2010), and • A Claim of mechanic's lien, in the amount of $58,295.00, Claimant Schindler Elevator Corporation, recorded January 15, 2010, Instrument No. 2010-0066990, of Official Records, which affects a portion of Parcel 2. (4) In the case of any litigation with respect to the Loan served on Seller after the Closing Date (including bankruptcy, arbitration and other alternate dispute resolution proceedings, but specifically excluding any such litigation concerning claims made against Seller relating to its servicing or management of the Loan prior to the Closing) (the "Future Litigation Service"), (i) Seller shall promptly notify Buyer of any Future Litigati