LIMITED RECOURSE
GUARANTY
This
LIMITED RECOURSE GUARANTY (this “ Guaranty ”),
dated as of March 31, 2009 (the “ Effective Date
”), is made by FRANKLIN CREDIT MANAGEMENT CORPORATION, a
Delaware corporation (the “ Guarantor ”), in
favor of THE HUNTINGTON NATIONAL BANK, a national banking
association, as Administrative Agent for the Lenders (as those
terms are defined below).
WHEREAS,
pursuant to that certain Amended and Restated Credit Agreement,
dated as of the Effective Date (as amended, supplemented or
otherwise modified from time to time in accordance with the
provisions thereof, the “ Credit Agreement ”),
among Franklin Credit Asset Corporation, Tribeca Lending Corp. and
their Subsidiaries as borrowers (collectively, “
Borrowers ” and individually, a “
Borrower ”), the financial institutions party thereto
from time to time as lenders (each, a “ Lender
”, and, collectively, the “ Lenders ”),
and The Huntington National Bank (“ Huntington
”), as administrative agent for the Lenders (in such
capacity, together with its successors and assigns in such
capacity, the “ Administrative Agent ”), the
Administrative Agent and the Lenders have agreed to make and/or
maintain Advances and other financial accommodations to and for the
benefit of the Borrowers, upon the terms and subject to the
conditions set forth in the Credit Agreement; and
WHEREAS,
it is a condition precedent to the obligations of the
Administrative Agent and the Lenders to make and/or maintain
Advances and the financial accommodations provided under the Credit
Agreement, that the Guarantor shall have executed and delivered
this Guaranty to the Administrative Agent for the benefit of the
Lenders, and contemporaneously herewith the Guarantor is being
released from its obligations under a certain Guaranty of payment
in favor of The Huntington National Bank dated as of
December 28, 2007; and
WHEREAS,
the Guarantor acknowledges that the making and/or maintaining of
the Advances and the other financial accommodations to the
Guarantor and the Borrowers under the Credit Agreement will inure
to the substantial benefit of the Guarantor.
NOW,
THEREFORE, in consideration of the premises and in order to induce
the Administrative Agent and the Lenders to enter into the Credit
Agreement and to make and/or maintain the extensions of credit
contemplated thereby, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees with the Administrative
Agent as follows:
1.
Guaranty . (a) Subject to the terms of this Guaranty,
the Guarantor hereby unconditionally and irrevocably guarantees to
the Administrative Agent, and its successors, endorsees,
transferees and assigns, the prompt and complete payment and
performance by the Borrowers of all Obligations when and as the
same shall become due (whether at stated maturity, by acceleration
or otherwise). The Guarantor further agrees to pay any and all
expenses (including, without limitation, all reasonable fees and
disbursements of counsel) that may be paid or incurred by the
Administrative Agent and each Lender in enforcing any rights with
respect to, or collecting, any or all of the Obligations and/or
enforcing any rights with respect to, or
collecting
against, the Guarantor under this Guaranty. This Guaranty shall
remain in full force and effect until the Obligations are paid in
full in cash, notwithstanding that from time to time prior thereto
the Borrowers and/or any other guarantor may be free from any
Obligations.
(b) The
Guarantor agrees that whenever, at any time or from time to time,
it shall make any payment to the Administrative Agent on account of
its liability hereunder, it will notify the Administrative Agent in
writing that such payment is made under this Guaranty for such
purpose; provided , however , that no payment made by
the Guarantor through or on behalf of any Borrower or any other
guarantor shall be applied to reduce the Obligations unless and
until the Administrative Agent shall have made a demand for payment
under this Guaranty.
2.
Pledge Agreement . As security for the performance of the
obligations of the Loan Parties under the Credit Agreement and for
the performance of the obligations of Franklin Credit Holding
Corporation (“ Holding ”) under a certain
Limited Recourse Guaranty dated of even date hereof, Holding has
granted, inter alia , to the Administrative Agent a security
interest in specified equity interests in the Guarantor and all
dividends, distributions and other payments in respect of such
equity interests, (the “ Pledged Collateral ”)
all as described in a certain Pledge Agreement dated of even date
herewith (the “ Pledge Agreement ”).
3.
Limited Recourse Liability of Guarantor . (a) Unless an
Exception to Non-Recourse has occurred, the Administrative Agent
hereby agrees that, in the event it becomes necessary to enforce
the terms of this Guaranty, (i) it will exercise any and all
remedies against the Guarantor under this Guaranty only against the
property encumbered by the Pledge Agreement and the sale and
insurance proceeds related thereto (collectively, the “
Encumbered Property ”) for the satisfaction of its
legal or equitable remedies against the Guarantor, (ii) the
Guarantor shall have no other liability for the payment of the
Obligations or any other obligation hereunder, and (iii) in
any action or proceeding brought hereunder or under the Pledge
Agreement, the Administrative Agent shall not seek any deficiency
judgment against the Guarantor.
(b) An
“ Exception to Non-Recourse ” means any of the
following events, activities, or omissions by the Guarantor, its
duly authorized designee, Responsible Officer (as defined in the
Credit Agreement), Subsidiary, or anyone acting under the authority
of any such person: (i) the commission of fraud or material
misrepresentation in respect of the Pledged Collateral;
(ii) the diversion, embezzlement or misapplication of
proceeds, funds or money and/or other property relating in any way
to the Pledged Collateral or the Obligations; (iii) the breach
of any covenant under Article IV of the Pledge Agreement; or
(iv) the conduct of any business activities to perform
diligence services, to service Mortgage Loans or REO Properties
(each as defined in the Credit Agreement) or any related
activities, directly or indirectly, other than by the Guarantor or
Franklin Loan Servicing, LLC (to the extent set forth in
Section 7.08 of the Credit Agreement). If an Exception to
Non-Recourse occurs, then the limitations set forth in Section 3(a)
above shall be of no force and effect, and the Administrative Agent
or any Lender shall not be restricted thereby.
4.
Representations, Warranties and Covenants of the Guarantor .
This Guaranty is delivered pursuant to the Credit Agreement and the
Guarantor hereby confirms to the
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Administrative
Agent and the Lenders each of its representations and warranties as
set forth in the Credit Agreement.
5.
Right of Set-off . Upon the occurrence of an Event of
Default, the Guarantor hereby irrevocably authorizes the
Administrative Agent (and its Affiliates), at any time and from
time to time and without notice to the Guarantor, any such notice
being expressly waived by the Guarantor, to set-off and appropriate
and apply any and all property and deposits (general or special,
time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each
case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Administrative Agent
(or any of its Affiliates) to or for the credit or the account of
the Guarantor, or any part thereof in such amounts as the
Administrative Agent may elect, against and on account of the
obligations and liabilities of the Guarantor to the Administrative
Agent hereunder and claims of every nature and description of the
Administrative Agent (or any of its Affiliates) against the
Guarantor, in any currency, whether arising hereunder or under any
other Loan Document, as the Administrative Agent (or any of its
Affiliates) may elect, regardless of whether the Administrative
Agent (or such Affiliate) has made any demand for payment and
although such obligations, liabilities and claims may be contingent
or unmatured. The Administrative Agent (or its Affiliate) shall
notify the Guarantor promptly of any such set-off and the
application made by the Administrative Agent or such Affiliate;
provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of
the Administrative Agent (and its Affiliates) under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that the Administrative Agent
(and such Affiliates) may have under the Credit Agreement, at law
or in equity.
6.
No Subrogation . Notwithstanding any payment or payments
made by the Guarantor hereunder or any set-off or application of
funds of the Guarantor by the Administrative Agent (or any of its
Affiliates), the Guarantor shall be not be entitled to be
subrogated to any of the rights of the Administrative Agent (or any
of its Affiliates) against the Borrowers or any other guarantor or
any Collateral or guarantee or right of offset held by the
Administrative Agent (or its Affiliates) for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrowers or any other
guarantor in respect of payments made by the Guarantor hereunder,
in each case until all amounts owing to the Administrative Agent
(or its Affiliates) and the Lenders on account of the Obligations
are paid in full and the Credit Agreement and all other Loan
Documents are terminated. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when
all of the Obligations shall not have been paid in full, such
amount shall be held by the Guarantor in trust for the
Administrative Agent (and its Affiliates), segregated from other
funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to the Administrative Agent in the exact
form received by the Guarantor (duly indorsed by the Guarantor to
the Administrative Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the
Administrative Agent may determine. To the extent permitted by
applicable Law, and without limiting anything set forth herein,
(a) the Guarantor waives all claims, damages and demands it
may acquire against the Administrative Agent arising out of the
exercise by the Administrative Agent of any rights hereunder;
(b) If any notice of a proposed sale or other disposition of
Collateral shall be required by Law, such notice shall be deemed
reasonable and proper if given at least ten (10) days before such
sale or other
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disposition;
(c) the Guarantor waives any claims or other rights which the
Guarantor might now have or hereafter acquire against any Borrower
or any other Person that is primarily or contingently liable on the
obligations that arise from the existence or performance of the
Guarantor’s obligations under this Agreement,
includi
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