Mezzanine Pledge Agreement

Section 8 also provides for a lender who accepts a security interest in the holdings as a buyer`s guarantee, when the lender provides value (the loan) and does not experience negative claims on the holdings (see Wis). Stat. Protected buyer status means that the mezzanine lender`s rights, because of its security shares, are exempt from any adverse claims of which it knows nothing when the lender acquires the property when it acquires Dener. Another important provision relates to the liability of the borrower and his related businesses. As a general rule, this provision provides, with certain exceptions, that the lender uses only collateral, i.e. interests in the owner or property. Exceptions are non-recourse cases, which allow the lender to obtain claims on the borrower and all guarantors after certain events are overst. The business concept here is that the lender can only recover against mortgaged capital security if the loan does not work for purely economic reasons. However, if there are losses due to bad actions of the borrower (for example.

B waste of assets or impaired funds), the lender should have rights against the borrower, guarantors and associated businesses to recover its losses. This is an area where mezzanine lenders may be more aggressive in the future, which will require more questions to create a retributive liability and will require additional insurance guarantees. Since the interests in the borrower offer guarantees for the mezzanine lender, ownership and control can be used to enhance an interest in securities, both of which offer a higher priority to perfection by submission. For perfection through possession or control, the borrower`s holdings must be governed by Article 8 of the Single Code of Commerce. The Mezzanine Lender-Borrower Relationship Parties to a mezzanine loan transaction will generally include the mezzanine borrower, the company that directly owns the real estate or operating transactions, the mortgage lender and the mezzanine lender. In addition, it is customary to require indirect owner controls to guarantees as an additional guarantee and to make bankruptcy less attractive. The mezzanine lender will also have specific rights to cure defaults under the mortgage. The underlying security of the mezzanine lender is the property, and it will not want to lose it in the event of forced execution of the mortgage, unless the value of the property has decreased with little probability of repossecing. The mezzanine lender will also require a ban on consensual foreclosure or closure instead of the closure of real estate security.

These parties are bound by the mortgage agreement, the mezzanine loan contract, the inter-creditor contract, the guarantee and guarantee contract and the guarantees. There will often be ancillary restrictions on cash management issues, which will give lenders the right to control the funds generated by the property as they transit through their bank accounts in certain circumstances. The agreement between the creditors and the guarantee and security agreement are discussed below. However, mezzanine lenders can obtain insurance policies from insurers that ensure the creation, perfection and priority of their safety interest in the property owner`s holdings. The lender may also be covered to ensure that the mezzanine borrower does own the subsecured interests and that the lender has protected the purchase status in accordance with UCC Section 8. Both the mortgage lender and the mezzanine lender may require tacit reciprocity pacts regarding the commercial or financial terms of their respective loans. Such agreements would prohibit, for example. B, changes to a lender`s corresponding loan documents, which would increase interest rates, increase the loan balance, lengthen or shorten maturities, cross-reference the loan with other loans and similar issues.