UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 000-22389
OCWEN ASSET INVESTMENT CORP.
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(Exact name of registrant as specified in its charter)
Virginia 65-0736120
- -------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
THE FORUM, SUITE 1000
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1675 PALM BEACH LAKES BOULEVARD, WEST PALM BEACH, FLORIDA 33401
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 682-8000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Number of shares of Common Stock, $.01 par value, outstanding at the close of
business on May 12, 1998: 18,965,000 shares.
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OCWEN ASSET INVESTMENT CORP.
FORM 10-Q
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I N D E X
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PART I - FINANCIAL INFORMATION PAGE
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Item 1. Interim Consolidated Financial Statements (Unaudited)................................ 3
Consolidated Statement of Financial Condition
at March 31, 1998 and December 31, 1997.............................................. 3
Consolidated Statement of Operations for the three months ended March 31, 1998....... 4
Consolidated Statement of Changes in Shareholders' Equity for the three months
ended March 31, 1998 and for the period from May 14, 1997 to December 31, 1997....... 5
Consolidated Statement of Cash Flows for the three months ended March 31, 1998....... 6
Notes to Consolidated Financial Statements........................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................ 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk .......................... 20
PART II - OTHER INFORMATION
Item 2. Changes in Securities................................................................ 21
Item 6. Exhibits and Reports on Form 8-K..................................................... 21
Signature..................................................................................... 23
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2
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PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS (UNAUDITED)
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
1998 1997
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ASSETS:
Cash and amounts due from depository institutions .............. $ 373,097 $ 331,047
Interest bearing deposits ...................................... 7,236,506 48,346,076
Securities held for trading .................................... 42,545,318 --
Securities available for sale, at market value ................. 157,991,828 146,026,907
Loan portfolio, net ............................................ 144,604,936 15,831,479
Discount loan portfolio, net ................................... 27,108,120 26,978,888
Investment in real estate, net ................................. 58,865,764 45,430,039
Principal and interest receivable .............................. 5,082,838 2,518,272
Deposits on pending asset acquisitions ......................... 3,003,500 1,000,000
Other assets ................................................... 913,363 1,540,633
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$ 447,725,270 $ 288,003,341
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Securities sold under agreements to repurchase ............... $ 85,274,000 $ --
Obligation outstanding under line of credit .................. 81,890,207 --
Dividends and distributions payable .......................... 4,825,000 7,458,750
Accrued expenses, payables and other liabilities ............. 5,624,848 6,344,783
------------- -------------
177,614,055 13,803,533
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Minority interest .............................................. 5,753,797 2,941,541
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COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 25,000,000 shares authorized;
0 shares issued and outstanding ........................... -- --
Common Stock, $.01 par value; 200,000,000 shares authorized;
19,125,000 shares issued; 18,965,000 shares outstanding ... 191,250 191,250
Additional paid-in capital ................................... 283,496,750 283,496,750
Distributions in excess of earnings .......................... (17,352,824) (2,107,331)
Unrealized gain (loss) on securities available for sale ...... 1,016,754 (7,327,890)
Treasury stock at cost (160,000 shares) ...................... (2,994,512) (2,994,512)
------------- -------------
Total shareholders' equity ................................ 264,357,418 271,258,267
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$ 447,725,270 $ 288,003,341
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
3
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OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Interest income:
Repurchase agreements and interest bearing deposits ......... $ 198,138
Securities held for trading ................................. (2,637,259)
Securities available for sale ............................... 4,648,582
Loans ....................................................... 1,240,807
Discount loans .............................................. 902,777
------------
4,353,045
------------
Interest expense:
Securities sold under agreements to repurchase .............. 655,001
Obligations outstanding under lines of credit ............... 28,548
Other ....................................................... 10,268
------------
693,817
------------
Net interest income before provision for loan losses ........ 3,659,228
Provision for loan losses ..................................... 105,073
------------
Net interest income after provision for loan losses ......... 3,554,155
------------
Operating income:
Real estate investments, net ................................ 796,104
Other ....................................................... 7,857
------------
803,961
------------
Operating expenses:
Management fees ............................................. 828,881
Due diligence expenses ...................................... 192,689
Foreign currency (gain) loss ................................ (116,953)
Other ....................................................... 189,655
------------
1,094,272
------------
Loss on securities held for trading ........................... (13,957,628)
------------
(Loss) income before minority interest ...................... (10,693,784)
Minority interest in net loss (income) of
operating partnership ....................................... 189,542
------------
Net (loss) income ........................................ $(10,504,242)
============
Earnings per share:
Basic .................................................... $ (0.55)
============
Diluted .................................................. $ (0.54)
============
Weighted average shares outstanding:
Basic .................................................... 18,965,000
============
Diluted .................................................. 19,280,848
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
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OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND FOR THE PERIOD MAY 14, 1997 TO DECEMBER 31, 1997
Unrealized
gain(loss)
on
Common Stock Distributions securities
----------------------- Treasury Additional in excess available
Shares Amount stock paid-in-capital of earnings for sale Total
----------- ---------- ----------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock ........... 19,125,000 $ 191,250 $ -- $ 283,496,750 $ -- $ -- $ 283,688,000
Repurchase of common stock ......... (160,000) -- (2,994,512) -- -- -- (2,994,512)
Net income ......................... -- -- -- -- 11,791,518 -- 11,791,518
Dividends .......................... -- -- -- -- (13,898,849) -- (13,898,849)
Change in unrealized gain (loss)
on securities available for sale.. -- -- -- -- -- (7,327,890) (7,327,890)
----------- ---------- ----------- ------------- ------------- ----------- -------------
Balances at December 31, 1997 ...... 18,965,000 191,250 (2,994,512) 283,496,750 (2,107,331) (7,327,890) 271,258,267
Net loss ........................... -- -- -- -- (10,504,242) -- (10,504,242)
Dividends .......................... -- -- -- -- (4,741,251) -- (4,741,251)
Change in unrealized gain (loss)
on securities available for sale.. -- -- -- -- -- 8,344,644 8,344,644
----------- ---------- ----------- ------------- ------------- ----------- -------------
Balances at March 31, 1998 ......... 18,965,000 $ 191,250 $(2,994,512) $ 283,496,750 $ (17,352,824) $ 1,016,754 $ 264,357,418
=========== ========== =========== ============= ============= =========== =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
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OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
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Cash flows from operating activities:
Net loss ....................................................... $ (10,504,242)
Adjustments to reconcile net income to net cash provided by
operating activities:
Premium amortization (discount accretion), net ............. 8,434,965
Depreciation ............................................... 304,437
Foreign exchange gain ...................................... (116,953)
Provision for loan losses .................................. 105,073
Loss on securities held for trading ........................ 13,957,628
Increase in interest receivable ............................ (2,564,566)
Decrease in other assets ................................... 627,270
Decrease in accrued expenses, payables and other liabilities (719,935)
Minority interest in net loss of operating partnership ..... (189,542)
-------------
Net cash provided by operating activities ......................... 9,334,135
-------------
Cash flows from investing activities:
Purchase of securities available for sale ...................... (72,771,240)
Maturities and principal payments received on securities
available for sale ........................................... 4,003,330
Purchase of loans .............................................. (129,054,935)
Principal payments received from discount loans ................ 6,915
Principal payments received from loans ......................... 366,932
Investment in real estate ...................................... (13,740,162)
Deposits on pending asset acquisitions ......................... (2,003,500)
-------------
Net cash used by investing activities ............................. (213,192,660)
-------------
Cash flows from financing activities:
Dividend payments on common stock .............................. (7,458,750)
Redemption of shares ........................................... (3,085,548)
Proceeds from sale of operating partnership units .............. 3,085,548
Issuance of shares ............................................. 3,085,548
Increase in securities sold under agreements to repurchase ..... 85,274,000
Increase in obligations outstanding under lines of credit ...... 81,890,207
-------------
Net cash provided by financing activities ......................... 162,791,005
-------------
Net decrease in cash and cash equivalents ......................... (41,067,520)
Cash and cash equivalents at beginning of period .................. 48,677,123
-------------
Cash and cash equivalents at end of period ........................ $ 7,609,603
=============
Reconciliation of cash and cash equivalents at end of period:
Cash and amounts due from depository institutions .............. 373,097
Interest bearing deposits ...................................... 7,236,506
-------------
Total ........................................................ $ 7,609,603
=============
Supplemental schedule of non-cash financing activities:
Common stock dividends and distributions declared but not paid.. $ 4,825,000
=============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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6
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ITEM 2. OCWEN ASSET INVESTMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in conformity with the instructions to Form 10-Q and Article 10, Rule
10-01 of Regulation S-X for interim financial statements. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles ("GAAP") for complete financial statements. The
consolidated financial statements include the accounts of Ocwen Asset Investment
Corp. ("OAC" or the "Company") and its subsidiaries. OAC directly owns two
qualified real estate investment trust ("REIT") subsidiaries, Ocwen General
Partner, Inc. ("General Partner") and Ocwen Limited, Inc. ("Limited Partner"),
among others. General Partner and Limited Partner own 1% and 97.26%,
respectively of Ocwen Partnership, L.P. ("Operating Partnership"). The minority
interest at March 31, 1998 represents a 1.74% interest (335,000 units) in the
Operating Partnership held by Investors Mortgage Insurance Holding Company
("IMI"), a wholly owned subsidiary of Ocwen Financial Corporation ("Ocwen"). IMI
also owns 1,540,000 shares, or 8.12%, of the Company's outstanding common stock.
In the opinion of management, the accompanying financial statements
contain all adjustments, consisting of normal and recurring accruals, necessary
for a fair presentation of the Company's financial condition at March 31, 1998
and December 31, 1997, the results of its operations for the three months ended
March 31, 1998, the changes in shareholders' equity for the three month period
ended March 31, 1998 and for the period May 14, 1997 to December 31, 1997 and
its cash flows for the three months ended March 31, 1998. Operating results for
the period ended March 31, 1998 are not necessarily indicative of the results
that may be expected for any other interim periods or the entire year ended
December 31, 1998.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the dates of the statements of financial condition and
revenues and expenses for the periods covered. Actual results could differ from
those estimates and assumptions.
NOTE 2 ORGANIZATION AND RELATIONSHIPS
OAC was incorporated in the Commonwealth of Virginia on January 22,
1997 and was initially capitalized on February 12, 1997 through the sale of 100
shares of common stock for $1,600. On May 14, 1997, the Company completed an
initial public offering ("IPO") with the sale of 19,125,000 shares of common
stock, par value $.01 per share, at a price of $16.00 per share (before
underwriting and offering expenses), and commenced operations thereon.
The Company has entered into a management agreement with Ocwen Capital
Corporation ("OCC"), a wholly owned subsidiary of Ocwen Financial Corporation
("Ocwen"), under which OCC advises the Company on various facets of its business
and manages its day-to-day operations, subject to the supervision of the
Company's Board of Directors. OCC has 1,912,500 options (25% of which vest each
year over the next four years) to purchase, at the election of the Company,
either shares of the Company or an equivalent number of units in the Operating
Partnership at an exercise price of $16.00 per share. For its services, OCC
receives a base management fee of 1% per annum of average invested assets, as
defined in the related agreement, payable quarterly. In addition, OCC is
entitled to receive incentive compensation in an amount equal to 25% of the
dollar amount by which Funds From Operations ("FFO"), as adjusted, exceeds
certain defined levels.
7
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ITEM 2. OCWEN ASSET INVESTMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
NOTE 3 RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 simplifies the
standards found in APB No. 15 for computing earnings per share ("EPS") and makes
them comparable to international standards. Under SFAS No. 128, OAC is required
to present both basic and diluted EPS on the face of its statements of
operations. Basic EPS, which replaces primary EPS required by APB No. 15 for
entities with complex capital structures, excludes common stock equivalents and
is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
gives effect to all dilutive potential common shares that were outstanding
during the period. SFAS No. 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997 with earlier
application not permitted. The Company adopted SFAS No. 128 effective December
31, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires the inclusion of comprehensive income, either in
a separate statement for comprehensive income, or as part of a combined
statement of income and comprehensive income in a full-set of general-purpose
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances, excluding those resulting from investments by and distributions
to owners. SFAS No. 130 requires that comprehensive income be presented
beginning with net income, adding the elements of comprehensive income not
included in the determination of net income, to arrive at comprehensive income.
SFAS No. 130 also requires that an enterprise display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position. SFAS
No. 130 is effective for the Company's fiscal year beginning January 1, 1998.
SFAS No. 130 requires the presentation of information already contained in the
Company's financial statements and therefore did not have an impact on the
Company's financial position or results of operations upon adoption.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
standards for the reporting of information about operating segments by public
business enterprises in their annual and interim financial reports issued to
shareholders. SFAS No. 131 requires that a public business enterprise report
financial and descriptive information, including profit or loss, certain
specific revenue and expense items, and segment assets, about its reportable
operating segments. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance. SFAS No. 131 is effective for
the Company's financial statements for periods beginning after December 15,
1997. SFAS No. 131 is a disclosure requirement and therefore did not have an
effect on the Company's financial position or results of operations upon
adoption.
NOTE 4 INCOME TAXES
The Company qualifies as a REIT under Sections 856 through 860 of the
Code of 1986, as amended. A REIT will generally not be subject to federal income
taxation on that portion of its income that is distributed to shareholders if it
distributes at least 95% of its taxable income by the due date of its federal
income tax return and complies with certain other requirements. Accordingly, no
provision has been made for federal income taxes for the Company and its
subsidiaries in the accompanying consolidated financial statements.
NOTE 5 COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances,
excluding those resulting from investments by and distributions to owners. SFAS
No. 130 requires that comprehensive income be presented beginning with net
income, adding the elements of comprehensive income not included in the
determination of net income,
8
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ITEM 2. OCWEN ASSET INVESTMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
to arrive at comprehensive income. Comprehensive income for the three months
ended March 31, 1998 amounts to a loss of $2.2 million.
NOTE 6 INTEREST RATE RISK MANAGEMENT INSTRUMENTS
In order to match-fund the Company's asset base with anticipated
borrowings and thereby minimize the impact from changes in net interest income
due to changes in 1-month London Interbank Offered Rate ("LIBOR"), the Company
has entered into swaps. Under swaps, the Company agrees with other parties to
exchange, at specified intervals, the difference between fixed-rate and
floating-rate interest amounts calculated by reference to an agreed notional
amount. The terms of the swaps provide for the Company to receive a floating
rate of interest equal to LIBOR and to pay fixed interest rates. The notional
amount of the outstanding swap is amortized (i.e., reduced) monthly based upon
estimated prepayment rates of the mortgages underlying the securities being
hedged. The terms of the outstanding and committed swaps at March 31, 1998
follow (Dollars in Thousands):
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Notional LIBOR Floating Rate at
Maturity Amount Index Fixed Rate End of Period Fair Value
-------- -------- ----- ---------- ---------------- ----------
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2003 $100,000 1-month 5.75% 5.68% $ 900
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The 1-month LIBOR was 5.68% on March 31, 1998. The terms of the
committed swaps at March 31, 1998 follow (Dollars in Thousands):
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<CAPTION>
Notional LIBOR
Effective Maturity Amount Index Fixed Rate Fair Value
--------- -------- -------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
4/1 2001 $ 17,000 1-month 6.00% $ (44)
4/2 2001 75,000 1-month 5.99% $ 93
4/1 2002 8,780 1-month 6.04% $ (31)
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NOTE 7 COMMITMENTS
At March 31, 1998, outstanding commitments totaled $147.8 million and
included $80.4 million related to the acquisition of two residual securities,
$34.6 million related to the origination of a commercial real estate
construction loan, and $32.8 million of subordinate interests in commercial
mortgage-backed securities.
Each of these commitments is subject to various closing conditions
including, but not limited to, completion of satisfactory due diligence efforts,
the negotiation of definitive purchase and sales agreements and/or conditions
the borrowers or sellers must satisfy prior to OAC funding the transactions.
NOTE 8 SHAREHOLDERS' EQUITY
On February 17, 1998, the Company sold 175,000 shares of common stock
for cash in an aggregate amount of approximately $3.1 million to certain
officers and directors of the Company and Ocwen Financial Corporation ("Ocwen").
In connection with this stock issuance, a subsidiary of Ocwen sold a like number
of shares of the Company's common stock to the Company and invested in a like
number of limited partnership units of the Company's operating partnership in
order to comply with the stock ownership restrictions imposed on REITs under the
code.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
GENERAL
The Company is a Virginia corporation that was formed in the first
quarter of 1997, that has elected to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), and
that specializes in opportunistic real estate investments.
As of March 31, 1998, OAC's total closed transactions since its initial
public offering, net of repayments to date, is $511.0 million. Of this amount,
$432.1 million had been funded and $78.9 million is to be funded over the
construction and renovation periods, which range from 6 to 30 months.
The following discussion of the Company's consolidated financial
condition, results from operations, and capital resources and liquidity should
be read in conjunction with the Interim Consolidated Financial Statements and
related Notes included in Item 1 hereof.
RECENT DEVELOPMENTS
On April 1, 1998, OAC purchased a $32.8 million subordinate investment
in the "BB", "B" and unrated classes of a commercial mortgage-backed security
issued in 1995. Ocwen Federal Bank FSB (the "Bank"), a wholly-owned subsidiary
of Ocwen, is the special servicer of any loans which are 60 days or more
delinquent.
On April 8, 1998, the Company acquired, an existing 536,000 square
foot, 22-story Class-A office building located at 225 Bush Street in the
financial district of San Francisco, California for $100.2 million in cash. The
building was purchased from Pacific Resources Development, Inc., an unaffiliated
third party (the "Seller"). The purchase price was determined through arms
length negotiations between the Seller and OCC, and the source of funds for this
purchase by OAC was a $75.0 million loan from Salomon Brothers Realty Corp. and
cash reserves on hand. OAC intends to continue to use the building for rentals.
On April 24, 1998, OAC acquired securitized mortgage loan residuals for
(pound)33.7 million (approximately $55.0 million), from Cityscape Financial
Corp. In addition, OAC and Ocwen entered into an agreement for the Bank to
service the securitized mortgage loan residuals.
On April 30, 1998, OAC purchased a $59.7 million investment in a
residual security supported by a pool of 6,946 subprime mortgage loans. The Bank
is the master servicer of the loans.
On May 1, 1998, OAC's common stock began trading on the New York Stock
Exchange under the symbol "OAC". OAC, which had traded on the NASDAQ National
Market System under the symbol "OAIC" since May, 1997, was delisted from trading
on NASDAQ on the same date.
On May 1, 1998, OAC purchased a $13.25 million investment in a
subordinate security supported by a pool of 7,474 single-family residential
mortgages the Bank is the master servicer of the loans.
On May 7, 1998, OAC sold its entire portfolio of interest-only and
inverse interest-only securities (together, "IOs") at amortized cost plus
accrued interest for cash in the amount of $54.6 million to William C. Erbey,
Chairman and Chief Executive Officer of OAC, and Barry N. Wish, a director of
Ocwen. The amortized cost of the IO portfolio at April 30, 1998, exceeded the
market value by approximately $14.0 million. Because the IOs are being sold to a
principal shareholder and another related party, the amount by which amortized
cost exceeds market value has been recorded as a charge to earnings for the
quarter ended March 31, 1998, in accordance with generally accepted accounting
principles. The cash received in excess of market value will be reflected on
OAC's books as a capital contribution, effectively reestablishing OAC's equity
position. The charge with respect to the IO portfolio
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
in the month of April will impact FFO by approximately $0.01 to $0.03 per share.
The sale of the IO portfolio is expected to generate a capital loss for tax
purposes that will be deductible in future periods against long-term capital
gains.
On May 7, 1998, OAC's operating partnership issued 1,495,436 additional
partnership units to IMI in exchange for a capital contribution of $24.9
million.
FUNDS FROM OPERATIONS
Most industry analysts, including the Company, consider FFO an
appropriate supplementary measure of operating performance of a REIT. However,
FFO does not represent cash provided by operating activities in accordance with
generally accepted accounting principles ("GAAP") and should not be considered
an alternative to net income as an indication of the results of the Company's
performance or to cash flows as a measure of liquidity. In 1995, the National
Association of Real Estate Investment Trusts ("NAREIT") established new
guidelines clarifying its definition of FFO and requested that REITs adopt this
new definition beginning in 1996. The following table computes FFO under the
NAREIT definition. FFO consists of net income applicable to common shareholders
(computed in accordance with generally accepted accounting principles) excluding
gains (losses) from debt restructuring and sales of property (including
furniture and equipment) plus real estate related depreciation and amortization
(excluding amortization of deferred financing costs) and after adjustments for
unconsolidated partnerships and joint ventures.
For the quarter ended March 31, 1998, the Company's FFO was $3.8
million or $0.19 per diluted weighted average common share. The following table
sets forth the calculation of the Company's FFO for the period.
For the Three Months
Ended March 31, 1998
----------------------
(Dollars in Thousands)
Net income.............................................. $ (10,504)
Add: Real estate related depreciation................... 304
Non-recurring loss on IO portfolio................. 13,958
-------------
FFO .................................................... $ 3,758
=============
Diluted weighted average shares outstanding............. 19,280,848
=============
RESULTS OF OPERATIONS
The Company completed an initial public offering on May 14, 1997 and
commenced operations thereon. The Company incurred a net loss for the quarter
ended March 31, 1998 of $10.5 million, or $0.54 per diluted weighted average
common share. The loss for the first quarter was attributable to a
mark-to-market loss of $14.0 million on OAC's portfolio of IOs held for trading,
in addition to write-downs on the IOs totaling $3.1 million for the quarter. See
also "Recent Developments" in this Item 2.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
The Company is engaged in a variety of real estate and mortgage-related
investment activities, investing primarily in mortgage-related securities,
commercial real estate, commercial discount loans and commercial and residential
loans. The following table presents the contribution by investment activity to
the Company's net income before minority interest as of March 31, 1998.
(Dollars in Thousands) Amount %
- --------------------------------------------------- -------------- -------
Mortgage-related securities and other
short-term investments........................... $ (12,864) (120)%
Commercial real estate............................. 792 7
Commercial discount loans.......................... 562 5
Commercial and residential loans................... 816 8
------------ ---
$ (10,694) 100%
============ ===
INTEREST INCOME. The following table sets forth information regarding
the total amount of income from interest-earning assets and the resultant
average yields. Information is based on daily average balances during the
reported period.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, 1998
--------------------------
Average Interest Annualized
(Dollars in Thousands) Balance Income Yield
- ------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Repurchase agreements and interest-bearing deposits... $ 14,035 $ 198 5.71%
Securities held for trading........................... 53,950 (2,637) (19.82)
Securities available for sale......................... 133,328 4,649 14.14
Loan portfolio........................................ 47,691 1,241 10.55
Discount loan portfolio............................... 26,929 902 *13.60
---------- ----------
Total.............................................. $ 275,933 $ 4,353 * 6.40%
========== ==========
</TABLE>
* As revised
The negative yield on securities held for trading was primarily
attributable to declining interest rates and resulted in increased prepayment
speeds, and permanent write-downs on the IOs totaling $3.1 million for the
quarter. The decline in value of the IO portfolio during the quarter stems from
increased prepayments of the underlying mortgages as a result of a decrease in
market interest rates. Subsequent to March 31, 1998, the Company sold its entire
IO portfolio to William C. Erbey, Chairman and Chief Executive Officer of OAC,
and Barry N. Wish, a director of Ocwen. See "Recent Developments" above.
INTEREST EXPENSE. The following table sets forth information regarding
the total amount of interest expense associated with interest-bearing
liabilities and the resultant average rates. Information is based on daily
average balances during the reported period.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, 1998
--------------------------
Average Interest Annualized
(Dollars in Thousands) Balance Expense Yield
- ------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Securities sold under agreements to
repurchase and other................................ $ 39,577 $ 665 6.81%
Obligation outstanding under line of credit........... 1,820 29 6.36
---------- ----------
Total.............................................. $ 41,397 $ 694 6.79%
========== ==========
</TABLE>
OPERATING INCOME. Operating income is comprised primarily of $796,000
in income earned on investments in real estate during the three months ended
March 31, 1998. Such income represents rental income, net of operating expenses
and depreciation, generated from the Company's investment in three office
buildings located in California and a retail shopping center located in Florida.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
OPERATING EXPENSES. Management fees totaling $829,000 for the first
quarter of 1998 were comprised solely of the base management fee (1% per annum
of average invested assets) earned by OCC pursuant to the terms of a management
agreement entered into between the Company and Ocwen. OCC advises the Company on
various facets of its business and manages its day-to-day operations, subject to
the supervision of the Company's Board of Directors. See Note 1 to the Interim
Consolidated Financial Statements included in Item 1 hereof. In addition, the
Company incurred due diligence expenses of $193,000 in connection with its asset
acquisitions. Foreign currency gain for the period of $117,000 is a result of
the declining U.S. dollar versus the Canadian dollar and relates to the
Company's investment in a Canadian commercial discount loan. See "Discount Loan
Portfolio." Other expenses of $190,000 were comprised of auditing fees,
insurance premiums and other miscellaneous expenses.
CHANGES IN FINANCIAL CONDITION
GENERAL. From December 31, 1997 to March 31, 1998, total assets
increased $159.7 million or 55% to $447.7 million. This increase was primarily
due to a $128.8 million increase in the loan portfolio, a $42.5 million increase
in securities held for trading, a $13.4 million increase in investments in real
estate, and a $12.0 million increase in securities available for sale, offset by
a $41.1 million decrease in interest-bearing deposits. Total liabilities
increased $163.8 million during the period, primarily as a result of $85.3
million of securities sold under agreements to repurchase and an $81.9 million
obligation outstanding under a line of credit.
REPURCHASE AGREEMENTS AND INTEREST-EARNING DEPOSITS. At March 31, 1998
total interest earning deposits amounted to $7.2 million or 2% of total assets
and were comprised of deposits at various banks. Interest bearing deposits
declined by $41.1 million or 85% from December 31, 1997 to March 31, 1998. The
change is due to the reinvestment of cash and cash equivalents into long term
assets.
Although the Company had no repurchase agreements at March 31, 1998 or
December 31, 1997, it enters into such agreements from time to time. In these
transactions, the Company purchases securities from a counterparty, and agrees
to sell the securities back to the counterparty at a specified future date.
Repurchase agreements are carried at the amounts at which the securities will be
subsequently resold to the counterparty plus accrued interest, as specified in
the respective agreements. The securities purchased are held in custody for the
benefit of the Company. All of the transactions are in United States agency or
investment grade securities. The Company's exposure to credit risks associated
with the non-performance of counterparties in fulfilling their contractual
obligations can be directly impacted by market fluctuations, which may impair
the counterparties' ability to satisfy their obligations. The Company monitors
the market value of the underlying securities relative to the amounts due under
the agreements and, when necessary, requires prompt additional collateral or
reduction in loan balance to ensure that the market value remains sufficient to
protect itself in the event of default by the counterparty.
The Company earned interest income of $198,000 during the three months
ended March 31, 1998, from its investment in interest bearing deposits and
repurchase agreements. Of such income, $43,000 was earned from investments in
repurchase agreements.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
SECURITIES HELD FOR TRADING. Securities held for trading purposes are
carried at market value with unrealized gains or losses included in earnings.
The Company's investment in securities held for trading were transferred from
the available for sale category on March 31, 1998 and were comprised entirely of
mortgage-related IOs as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
(Dollars in Thousands)
<S> <C> <C>
Mortgage-related securities:
Single family residential:
FHLMC interest only.......................... $ 18,797 $ --
FNMA interest only........................... 22,837 --
AAA-rated interest only...................... 911 --
------------- -------------
Total...................................... $ 42,545 $ --
============= =============
</TABLE>
Unrealized losses on the IO portfolio during the first quarter of 1998
amounted to $14.0 million, in addition to permanent write-downs on the IOs
totaling $3.1 million for the quarter. The decline in value of the IO portfolio
during the quarter stems from increased prepayments of the underlying mortgages
as a result of a decrease in market interest rates. As noted above, subsequent
to March 31, 1998 the Company sold its entire IO portfolio. See "Recent
Developments."
SECURITIES AVAILABLE FOR SALE. The Company's investment in
mortgage-related securities available for sale of $158.0 million at March 31,
1998 includes $1.0 million of net unrealized gains, which was included in
shareholders' equity. The Company's securities available for sale were comprised
of the following at the dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
(Dollars in Thousands)
<S> <C> <C>
Mortgage-related securities:
Single family residential:
FHLMC interest-only.......................... $ -- $ 21,178
FNMA interest-only........................... -- 22,573
AAA-rated interest-only...................... -- 729
Subordinates................................. 69,028 9,444
------------- -------------
69,028 53,924
------------- -------------
Multi-family residential and commercial:
AAA-rated interest-only...................... 810 866
A-rated interest-only........................ 455 480
Non-rated interest-only...................... 4,835 4,803
Subordinates................................. 82,864 85,954
------------- -------------
88,964 92,103
------------- -------------
Total...................................... $ 157,992 $ 146,027
============= =============
</TABLE>
The increase in securities available for sale of $12.0 million during
the quarter ended March 31,1998 is due to purchases of $72.8 million and a $ 8.3
million increase in unrealized gains, offset in part by the transfer of $56.5
million of IOs to the held for trading category (see above), $4.0 million of
principal payments and maturities, and $8.6 million of net premium amortization.
Purchases during the quarter include a $51.6 million investment in subordinate
IOs supported by a pool of 6,309 subprime mortgage loans and an $8.5 million
investment in residual securities issued from a securitization of subprime
mortgage loans.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
LOAN PORTFOLIO. The Company's investment in loans amounted to $144.6
million at March 31, 1998, a $128.8 million increase over the $15.8 million
investment at December 31, 1997. The following table sets forth the composition
of the Company's loan portfolio by type of loan at the dates indicated:
March 31 December 31,
1998 1997
----------- -----------
(Dollars in Thousands)
Single-family residential...................... $ 105,943 $ 6,465
Multi-family residential....................... 61,335 3,455
Commercial real estate:
Office...................................... 33,057 33,058
Hotel....................................... 20,952 20,952
----------- -----------
Total loans................................ 221,287 63,930
Deferred origination fees...................... 2,348 (459)
Undisbursed loan proceeds...................... (78,925) (47,640)
Allowance for loan losses...................... (105) --
----------- -----------
Loans, net................................... $ 144,605 $ 15,831
=========== ===========
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
The following table sets forth the activity in the Company's gross loan
portfolio during the periods indicated.
Three Months Ended March 31,
1998
--------------------------------
Balance No. of Loans
------------- --------------
(Dollars in thousands)
Balance at beginning of period............... $ 63,930 52
Originations:
Multi-family loans........................ 57,880 (1) 2
Purchases:
Single family residential loans........... 99,843 (2) 995
Principal repayments......................... (366) --
----------- ------
Net increase in loans..................... 157,357 997
----------- ------
Balance at end of period..................... $ 221,287 1,049
=========== ======
(1) Originations of multi-family residential loans during the quarter
include a $30.3 million commercial real estate construction loan to
acquire and convert a 155,000 square foot office building into 52
luxury loft-style residential condominiums with a parking garage
located in the historic Tribeca area of Manhattan, New York.
(2) Purchases of single family residential loans during the quarter were
primarily comprised of three pools (923 loans) of residential whole
loans having an unpaid principal balance of $91.8 million.
The following table sets forth certain information relating to the
payment status of loans in the Company's loan portfolio at the dates indicated.
March 31 December 31,
1998 1997
----------- -----------
(Dollars in Thousands)
Past due less than 31 days.......................... $ 219,324 $ 63,661
Past due 31 days to 89 days......................... 1,583 --
Past due 90 days or more............................ 380 269
---------- ----------
$ 221,287 $ 63,930
=========== ==========
DISCOUNT LOAN PORTFOLIO. The following table sets forth the composition
of the Company's discount loan portfolio by type of loan at the dates indicated.
March 31 December 31,
1998 1997
----------- -----------
(Dollars in Thousands)
Commercial real estate loans:
Office........................................... $ 9,202 $ 11,893
Retail........................................... 33,510 30,636
---------- ----------
Total unpaid principal balance................. 42,712 42,529
Unaccreted discount................................. (15,604) (15,550)
---------- ----------
Discount loans, net.............................. $ 27,108 $ 26,979
=========== ==========
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
The following table sets forth certain information relating to the
payment status of loans in the Company's discount loan portfolio at the dates
indicated.
March 31 December 31,
1998 1997
----------- ------------
(Dollars in Thousands)
Past due less than 31 days......................... $ 7,957 $ 7,964
Past due 31 days to 89 days........................ -- --
Past due 90 days or more........................... 34,755 34,565
---------- -----------
$ 42,712 $ 42,529
========== ===========
ALLOWANCES FOR LOAN LOSSES. The Company maintains an allowance for loan
losses at a level which management considers adequate to provide for potential
losses based upon an evaluation of known and inherent risks. At March 31, 1998,
the Company had provided an allowance for loan losses in the amount of $105,000,
on the loan portfolio. At December 31, 1997, no allowance for loan losses had
been provided.
INVESTMENT IN REAL ESTATE. The Company's net investment in real estate
increased to $58.9 million at March 31, 1998 from $45.4 million at December 31,
1998 and is comprised of the following properties:
<TABLE>
<CAPTION>
Acquisition
Date Acquired Property Location Square Feet Property Type Cost
------------- -------- -------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
09/03/97 10 U.N. Plaza San Francisco, CA 68,560 Office Bldg. $ 9,095
09/23/97 450 Sansome St. San Francisco, CA 123,099 Office Bldg. 17,251
11/10/97 Cortez Plaza Bradenton, FL 289,686 Shopping Ctr. 19,288
01/23/98 690 Market St. (1) San Francisco, CA 124,688 Office Bldg. 13,715
---------
59,349
Accumulated Depreciation (483)
---------
$ 58,866
=========
</TABLE>
(1) The building is 83% leased with 40% of the building becoming available
for re-leasing by the end of 1998.
The Company's current overall strategy with respect to these properties
is to renovate and reposition the facilities and target full floor tenants with
five to ten year lease terms. The Company estimates that over the next twelve
months it will spend approximately $8.0 million in capital improvements, tenant
improvements and leasing commissions to renovate and reposition the above
properties. Repositioning is intended to result in rents, upon re-leasing, that
are greater than the current rents at the sites.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE. Securities sold under
agreements to repurchase increased to $85.3 million at March 31, 1998 from $0 at
December 31, 1997. The Company periodically enters into sales of securities
under agreements to repurchase the same securities (reverse repurchase
agreements). Fixed coupon reverse repurchase agreements with maturities of three
months or less are treated as financings, and the obligations to repurchase
securities sold are reflected as a liability in the accompanying consolidated
statements of financial condition. All securities underlying reverse repurchase
agreements are reflected as assets in the accompanying consolidated statements
of financial condition and are held in safekeeping by broker/dealers.
Mortgage-related securities at amortized cost of $147.4 million and a market
value of $134.8 million were posted as collateral for securities sold under
agreements to repurchase at March 31, 1998.
OBLIGATION OUTSTANDING UNDER LINE OF CREDIT. Obligation outstanding
under a line of credit amounted to $81.9 million at March 31, 1998 as compared
to $0 at December 31, 1997 and represents borrowings having a one-year term and
interest rates that float in accordance with a designated prime rate. See
"Capital Resources and Liquidity."
MINORITY INTEREST. At March 31, 1998, minority interest totaled $5.8
million and represents Ocwen's ownership of 335,000 units in the Operating
Partnership. On February 17, 1998, the Company
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
sold 175,000 shares of common stock for cash in an aggregate amount of
approximately $3.1 million to certain officers and directors of the Company and
Ocwen. In connection with this stock issuance, IMI sold a like number of shares
of the Company's common stock to the Company and invested in a like number of
units in the Operating Partnership in order to comply with the stock ownership
restrictions imposed on real estate investment trusts under the Code. See Notes
1 and 8 to the Interim Consolidated Financial Statements included in Item 1
hereof.
STOCKHOLDERS' EQUITY. Stockholders' equity decreased by $6.9 million to
$264.4 million at March 31, 1998. The decrease in stockholders' equity during
this period was attributable to a net loss of $10.5 million and $4.7 million of
dividends on common stock, offset by an $8.3 million increase in unrealized
gains on securities available for sale. See the Consolidated Statement of
Changes in Stockholders' Equity in the Interim Consolidated Financial Statements
included in Item 1 hereof.
CAPITAL RESOURCES AND LIQUIDITY
Liquidity is a measurement of the Company's ability to meet potential
cash requirements, including ongoing commitments to repay borrowings, fund
investments, engage in loan acquisition and lending activities and for other
general business purposes. Additionally, to maintain its status as a REIT under
the Code, the Company must distribute annually at least 95% of its taxable
income. The primary sources of funds for liquidity during the first quarter
consisted of the proceeds from the Company's initial public offering, net cash
provided by operating activities, reverse repurchase agreements and other
secured borrowings, maturities and principal payments on loans and securities
and proceeds from loan resolutions thereof.
Cash and cash equivalents were $7.6 million at March 31, 1998. The
Company's operating activities provided cash flows of $9.3 million during the
quarter ended March 31, 1998. The Company's investing activities used cash flows
of $213.2 million during quarter ended March 31, 1998. During the foregoing
period, cash flows from investing activities were used primarily to purchase
securities available for sale, loans and commercial real estate. The Company's
financing activities provided cash flows of $162.8 million during the quarter
ended March 31, 1998 and consisted of proceeds from lines of credit and
repurchase agreements of $167.2 million, $3.1 million net proceeds from the
issuance of units, net of $7.5 million of dividends paid during the period.
The Company expects to meet its short-term liquidity requirements
generally through its working capital and net cash provided by operating and
financing activities. The Company also had $43.1 million available under its
existing line of credit with Merrill Lynch Mortgage Capital Inc. at March 31,
1998. Additionally, on April 24, 1998, the Company entered into an agreement for
a line of credit with Greenwich Capital Financial Products Inc. in the principal
amount of (pound)19.0 million ($32.1 million) to finance the Cityscape
residuals. The Company believes that its net cash provided by operating
activities will be sufficient to allow the Company to make the distributions
necessary for continued benefit from qualification as a REIT.
The Company expects to meet certain long-term liquidity requirements
such as property and security acquisitions and loan originations by obtaining
various third-party borrowings and has entered into discussions with respect to
obtaining such borrowings. Additionally, as discussed above, the Company intends
to execute a securitization of its loan portfolio and use the proceeds for
further acquisitions. Further, as the Company has previously stated, it may
consider seeking additional sources of equity. The Company believes that such
new, as well as its existing, sources of liquidity, including third-party
borrowings currently being pursued and possible additional equity infusions,
will be adequate to fund planned activities for the foreseeable future, although
there can be no assurances in this regard. In the event the Company was unable
to effect such third-party borrowings, securitization, or additional equity
infusions, its liquidity could be constrained and the impact on its results of
operations, financial condition, and FFO could be significant.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
================================================================================
REIT STATUS
The Company has qualified and intends to continue to qualify as a REIT
under Sections 856 through 860 of the Internal Revenue Code. Qualification for
treatment as a REIT requires the Company to meet certain criteria, including
certain requirements regarding the nature of its ownership, assets, income and
distributions of taxable income. A REIT will generally not be subject to federal
income taxation on that portion of its income that is distributed to its
shareholders if it distributes at least 95 percent of its taxable income and
meets certain other income and asset tests. The Company has until the filing of
its tax return to satisfy the distribution requirement. Since the Company plans
to distribute 100% of its taxable income, no provision has been made for federal
income taxes for the Company and its subsidiaries in the accompanying interim
consolidated financial statements. As taxable income is finalized and the tax
return is filed, an additional distribution may be required which may be
significant. The Company may be subject to tax at normal corporate rates on net
income or capital gains not distributed.
The Company intends to conduct its business so as not to become
regulated as an investment company under the Investment Company Act of 1940 (the
"Investment Company Act"). The Investment Company Act exempts entities that,
directly or through majority-owned subsidiaries, are "primarily engaged in the
business of purchasing or otherwise acquiring mortgages and other liens on and
interests in real estate" ("Qualifying Interests"). Under current interpretation
by the staff of the Securities and Exchange Commission ("SEC"), in order to
qualify for this exemption, the Company, among other things, must maintain at
least 55% of its assets in Qualifying Interests and also may be required to
maintain an additional 25% in Qualifying Interests or other real estate-related
assets. Therefore, the type and amount of assets the Company may acquire may be
limited by the Investment Company Act.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT, AND CERTAIN STATEMENTS
CONTAINED IN FUTURE FILINGS BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, IN THE COMPANY'S PRESS RELEASES OR IN THE COMPANY'S OTHER PUBLIC OR
SHAREHOLDER COMMUNICATIONS, MAY NOT BE BASED ON HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES ACT OF 1934, AS
AMENDED. THESE FORWARD-LOOKING STATEMENTS, WHICH ARE BASED ON VARIOUS
ASSUMPTIONS (SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL), MAY BE IDENTIFIED
BY REFERENCE TO A FUTURE PERIOD(S) OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY
SUCH AS "ANTICIPATE," "BELIEVE," "COMMITMENT," "CONSIDER," "CONTINUE," "COULD,"
"ENCOURAGE," "ESTIMATE," "EXPECT," "INTEND," "MAY," "PLAN," "PRESENT,"
"PROPOSE," "PROSPECT," "WILL," FUTURE OR CONDITIONAL VERB TENSES, SIMILAR TERMS,
VARIATIONS ON SUCH TERMS OR NEGATIVES OF SUCH TERMS. ALTHOUGH THE COMPANY
BELIEVES THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS REFLECTED IN SUCH FORWARD
LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCE
THAT THOSE RESULTS OR EXPECTATIONS WILL BE ATTAINED. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE INDICATED IN SUCH STATEMENTS DUE TO RISKS, UNCERTAINTIES
AND CHANGES WITH RESPECT TO A VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED TO,
INTERNATIONAL, NATIONAL, REGIONAL OR LOCAL ECONOMIC ENVIRONMENTS (PARTICULARLY
IN THE MARKET AREAS WHERE THE COMPANY OPERATES), GOVERNMENT FISCAL AND MONETARY
POLICIES (PARTICULARLY IN THE MARKET AREAS WHERE THE COMPANY OPERATES),
PREVAILING INTEREST OR CURRENCY EXCHANGE RATES, GOVERNMENT REGULATIONS AFFECTING
REAL ESTATE INVESTMENT TRUSTS, COMPETITIVE PRODUCTS AND PRICING, CREDIT,
PREPAYMENT, BASIS AND ASSET/LIABILITY RISKS, LOAN SERVICING EFFECTIVENESS, THE
COURSE OF NEGOTIATIONS AND THE ABILITY TO REACH AGREEMENT WITH RESPECT TO THE
MATERIAL TERMS OF ANY PARTICULAR TRANSACTION, SATISFACTORY DUE DILIGENCE
RESULTS, SATISFACTION OR FULFILLMENT OF AGREED UPON TERMS AND CONDITIONS OF
CLOSING OR PERFORMANCE, THE TIMING OF TRANSACTION CLOSINGS, ACQUISITIONS AND THE
INTEGRATION OF ACQUIRED BUSINESSES, THE FINANCIAL AND SECURITIES MARKETS, THE
AVAILABILITY OF AND COSTS ASSOCIATED WITH OBTAINING ADEQUATE AND TIMELY SOURCES
OF LIQUIDITY, DEPENDENCE ON EXISTING SOURCES OF FUNDING, AVAILABILITY OF
DISCOUNT LOANS FOR PURCHASE, SIZE AND NATURE OF THE SECONDARY MARKET FOR
MORTGAGE LOANS AND OF THE MARKET FOR SECURITIZATIONS, GEOGRAPHIC CONCENTRATIONS
OF ASSETS (TEMPORARY OR OTHERWISE), OTHER FACTORS GENERALLY UNDERSTOOD TO AFFECT
THE REAL ESTATE ACQUISITION, MORTGAGE AND LEASING MARKETS AND SECURITIES
INVESTMENTS, AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S REPORTS
AND FILINGS WITH THE SEC, INCLUDING ITS REGISTRATION STATEMENT ON FORM S-11 AND
PERIODIC REPORTS ON FORMS 10-Q, 8-K AND 10-K. THE COMPANY DOES NOT UNDERTAKE,
AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO PUBLICLY RELEASE THE RESULT(S) OF
ANY REVISIONS WHICH MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT THE
OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE
DATE OF SUCH STATEMENTS.
19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
================================================================================
Information required by this Item appears in Note 6 to the Interim
Consolidated Financial Statements included in item 1 hereof, and is incorporated
herein by reference.
20
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities
Incorporated by reference herein is Note 8 to the Interim Financial
Statements (Unaudited) included in Item 1 hereof and "Changes in Financial
Condition-Minority Interest" included in Item 2 hereof. These securities were
issued pursuant to the exemption provided by Section 4(2) of the Securities Act
of 1933, as amended, and/or Regulation D promulgated thereunder.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation (1)
3.2 By laws (1)
4.1 Form of Common Stock Certificate (1)
10.1 First Amended and Restated Management Agreement
(filed herewith)
10.2 Form of Registration Rights Agreement (1)
10.3 Third Amended and Restated Agreement of Limited
Partnership of Ocwen Partnership L.P. (filed
herewith)
10.4 Form of Stock Option Plan (1)
10.5 Purchase and Sale Agreement between Ocwen Capital
Corporation and Pacific Resources Development, Inc.
as of March 31, 1998 (2).
10.6 Assignment and Assumption Agreement, dated April 7,
1998, by and between Ocwen Capital Corporation and
OAIC Bush Street, LLC (2)
10.7 Loan Agreement between OAIC Bush Street, LLC and
Soloman Brothers Realty Corp. as of April 7, 1998 (2)
10.8 Loan Agreement between OAIC and Merrill Lynch
Mortgage Capital Inc. as of March 30,1998 (filed
herewith)
10.9 Loan Agreement between OAIC and Greenwich Financial
Products Inc. as of April 24, 1998 (filed herewith).
27.1 Financial Data Schedule - For the quarter ended March
31, 1998
(1) Incorporated by reference to the similarly
described exhibit filed in connection with the
Company's Registration Statement on Form S-11 (File
No. 333-21965), as amended, declared effective by the
Commission on May 14, 1997.
21
<PAGE>
(2) Incorporated by reference to the similarly
described exhibit filed in connection with the
Registrant's Current Report on Form 8-K, as filed
with the Commission on April 22, 1998.
(b) Reports on Form 8-K filed during the quarter ended March 31,
1998
(1) A Form 8-K was filed by the Company on January 28,
1998, which contained a news release announcing the
Company's financial results for the three months
ended December 31, 1997 and the period May 19, 1997
to December 31, 1997.
(2) A Form 8-K was filed by the Company on February 9,
1998, which contained a news release announcing the
Company's January investment activity.
(3) A Form 8-K was filed by the Company on March 23,
1998, which contained a news release announcing the
Company's first quarter 1998 dividend and February
1998 investment activity.
(4) A form 8-K was filed by the Company on May 12,1998
which contained a news release announcing the
Company's financial results for the three months
ended March 31,1998 the sale of its IO portfolio, and
additional capital investments.
22
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Ocwen Asset Investment Corp.
By: /s/ Mark S. Zeidman
-----------------------------------------------------
Mark S. Zeidman
Senior Vice President and Chief Financial Officer
(On behalf of the Registrant and as its
principal financial officer)
Date: May 15, 1998
23
FIRST AMENDED AND RESTATED
MANAGEMENT AGREEMENT
THIS AGREEMENT, dated as of May 12, 1997 by and between OCWEN ASSET
INVESTMENT CORP., a Virginia corporation (the "REIT" and together with its
subsidiaries, the "Company"), and OCWEN CAPITAL CORPORATION, a Florida
corporation (the "Manager") and amended and restated in its entirety as of May
5, 1998;
W I T N E S S E T H:
WHEREAS, the Company intends to invest in Subordinated Interests,
Distressed Real Property, MBS and other real estate related assets ("REIT
Investments") and expects to qualify for the tax benefits accorded by Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the Company desires to retain the Manager to acquire, sell and
otherwise manage the investments of the Company and to perform administrative
services for the Company in the manner and on the terms set forth herein;
NOW THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined herein
shall have the respective meanings assigned them in the Prospectus of the REIT
dated May 14, 1997. In addition, the following terms have the meanings assigned
them.
(a) "Agreement" means this Management Agreement, as amended from
time to time.
(b) "Closing Date" means the date of closing of the Company's
initial public offering of common stock.
(c) "Governing Instruments" means the articles of incorporation
and bylaws in the case of a corporation, or the partnership agreement in the
case of a partnership.
(d) "Subsidiary" means any subsidiary of the Company and any
partnership, the general partner of which is the Company or any subsidiary of
the Company.
SECTION 2. DUTIES OF THE MANAGER.
(a) The Manager at all times will be subject to the supervision of
the Company's Board of Directors and will have only such functions and authority
as the Company may delegate to it. The Manager will be responsible for the
day-to-day operations of the Company and will perform (or cause to be performed)
such services and activities relating to the assets and operations of the
Company as may be appropriate, including:
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(i) serving as the Company's consultant with respect to
formulation of investment criteria and preparation of policy Guidelines
by the Board of Directors;
(ii) representing the Company in connection with the
purchase and commitment to purchase assets, the sale and commitment to
sell assets, and the maintenance and administration of its portfolio of
assets;
(iii) furnishing reports and statistical and economic
research to the Company regarding the Company's activities and the
services performed for the Company by the Manager;
(iv) monitoring and providing to the Board of Directors on
an ongoing basis price information and other data, obtained from
certain nationally recognized dealers that maintain markets in assets
identified by the Board of Directors from time to time, and providing
data and advice to the Board of Directors in connection with the
identification of such dealers;
(v) providing the executive and administrative personnel
and office space and office services required in rendering services to
the Company;
(vi) administering the day-to-day operations of the Company
and performing and supervising the performance of such other
administrative functions necessary in the management of the Company as
may be agreed upon by the Manager and the Board of Directors, including
the collection of revenues and the payment of the Company's debts and
obligations and maintenance of appropriate computer services to perform
such administrative functions;
(vii) communicating on behalf of the Company with the holders
of any equity or debt securities of the Company as required to satisfy
the reporting and other requirements of any governmental, bodies or
agencies and to maintain effective relations with such holders;
(viii) to the extent not Otherwise subject to an agreement
executed by the Company, designating a servicer for mortgage loans sold
to the Company by originators and arranging for the monitoring and
administering of such servicers;
(ix) counseling the Company in connection with policy
decisions to be made by the Board of Directors;
(x) counseling the Company regarding the maintenance of its
status as a REIT and monitoring compliance with the various REIT
qualification tests and other rules set out in the Code and regulations
thereunder;
(xi) engaging in hedging activities on behalf of the
Company, consistent with the Company's status as a REIT and with the
Guidelines; and
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(xii) upon request by and in accordance with the directions
of the Board of Directors, investing or reinvesting any money of the
Company.
(B) REAL ESTATE ASSET PORTFOLIO MANAGEMENT. The Manager will
perform portfolio management services on behalf of OAIC and the Operating
Partnership with respect to the Company's REIT Investments. Such services will
include, but not be limited to, consulting the Company on purchase and sale
opportunities, collection of information and submission of reports pertaining to
the Company's assets, interest rates, and general economic conditions, periodic
review and evaluation of the performance of the Company's portfolio of assets,
acting as liaison between the Company and banking, mortgage banking, investment
banking and other parties with respect to the purchase, financing and
disposition of assets, and other customary functions related to portfolio
management. The Manager may enter into subcontracts with other parties,
including its Affiliates, to provide any such services to the Company.
(C) MONITORING SPECIAL SERVICING. The Manager will perform
monitoring services on behalf of the Company with respect to the Company's
portfolio of special servicing rights. Such monitoring services will include,
but not be limited to, the following activities: negotiating special servicing
agreements; serving as the Company's consultant with respect to the special
servicing of mortgage loans; collection of information and submission of reports
pertaining to the mortgage loans and to moneys remitted to the Manager or the
Company; acting as a liaison between the servicers of the mortgage loans and the
Company and working with servicers to the extent necessary to improve their
servicing performance; with respect to mortgage loans for which the Company is
special servicer, periodic review and evaluation of the performance of each
servicer to determine its compliance with the terms and conditions of the
related servicing agreement; review of and recommendations as to fire losses,
easement problems and condemnation, delinquency and foreclosure procedures with
regard to mortgage loans; review of servicers' delinquency, foreclosures and
other reports on mortgage loans; supervising claims filed under any mortgage
insurance policies; and enforcing the obligation of any servicer to repurchase
mortgage loans. The Manager may enter into subcontracts with other parties,
including its Affiliates, to provide any such services for the Manager.
(D) MONITORING SERVICING. The Manager will monitor and administer
the servicing of the Company's Mortgage Loans, other than loans pooled to back
MBS or pledged to secure MBS. Such monitoring and administrative services will
include, but not be limited to, the following activities: serving as the
Company's consultant with respect to the servicing of loans; collection of
information and submission of reports pertaining to the mortgage loans and to
moneys remitted to the Manager or the Company by servicers; periodic review and
evaluation of the performance of each servicer to determine its compliance with
the terms and conditions of the servicing agreement and, if deemed appropriate,
recommending to the Company the termination of such servicing agreement; acting
as a liaison between servicers and the Company and working with servicers to the
extent necessary to improve their servicing performance; review of and
recommendations as to fire losses, easement problems and condemnation,
delinquency and foreclosure procedures with regard to the Mortgage Loans: review
of servicers' delinquency, foreclosing and other reports on Mortgage Loam;
supervising claims filed under any mortgage
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insurance policies; and enforcing the obligation of any servicer to repurchase
Mortgage Loans from the Company.
(E) BEST EFFORTS. The Manager agrees to use its reasonable best
efforts at all times in performing services for the Company hereunder.
SECTION 3. ADDITIONAL ACTIVITIES OF MANAGER. Nothing herein shall
prevent the Manager or any of its Affiliates from engaging in other businesses
or from rendering services of any kind to any other person or entity, including
investment in, or advisory service to others investing in, any type of real
estate investment, including investments which meet the principal investment
objectives of the Company.
Except as noted below, the Manager will not invest, and will not permit
any Affiliate of the Manager to invest, in a Subordinated Interest or Distressed
Real Property unless a majority of the Independent Directors of the Company
decline, on behalf of the Company, to make the investment. To assist the
Independent Directors' review of such a potential investment, the Manager shall
make available information to assist the Independent Directors in determining
whether the investment is consistent with the Guidelines, whether the price is
fair and whether the investment otherwise is in the best interest of the
Company. For a Distressed Real Property, such information shall include an
appraisal of an MAI appraiser who is certified or licensed in the state and
whose compensation is not dependent on the transaction. For a Subordinated
Interest, such information shall include, to the extent available or reasonably
obtainable, historical information about the collateral and securities, yield
tables that assume losses on the underlying collateral and a broker's price
opinion from a third party, such as the placement agent of the Subordinated
Interest.
Notwithstanding the foregoing, if the mortgage loans collateralizing a
Subordinated Interest were owned by the Manager or an Affiliate of the Manager,
then the Manager or its affiliates may retain such Subordinated Interest without
offering the investment to the Company. Moreover, if a large pool of mortgage
loans and REO Properties are offered for sale by a third party pursuant to a
competitive bidding process, the Manager or its affiliates may bid on such pool
jointly with an unaffiliated entity, as long as the Manager or its affiliates
take title only to the loans and not to the REO Properties. In the alternative,
the Manager may, but is not required to, invite the Company to bid jointly on
such a pool. If the Manager (or its affiliates) and the Company are successful
in such a bid, the Manager will take title to the loans and the Company will
take title to the real estate, unless otherwise approved by a majority of the
Independent Directors.
If the Company and the Manager (or its affiliates) co-participate in a
loan, the terms of the participation would be structured so that Ocwen Federal
Bank FSB would service the loans and retain a market servicing fee, after which
the remaining proceeds from the loan would be shared pari passu in accordance
with the ownership interests in the loan, unless another arrangement were
approved by a majority of the Independent Directors.
Directors, officers, employees and agents of the Manager or Affiliates
of the Manager may serve as directors, officers, employees, agents, nominees or
signatories for the REIT or any
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Subsidiary, to the extent permitted by their Governing Instruments, as from time
to time amended, or by any resolutions duly adopted by the Board of Directors
pursuant to the REIT's Governing Instruments. When executing documents or
otherwise acting in such capacities for the Company, such persons shall use
their respective titles in the Company.
SECTION 4. COMMITMENTS. In order to meet the investment requirements
of the Company, as determined by the Board of Directors from time to time, the
Manager agrees at the direction of the Board of Directors to issue on behalf of
the Company commitments on such terms as are established by the Board of
Directors, including a majority of the Independent Directors, for the purchase
of REIT Investments.
SECTION 5. BANK ACCOUNTS. At the direction of the Board of Directors,
the Manager may establish and maintain one or more bank accounts in the name of
the REIT or any Subsidiary, and may collect and deposit into any such account or
accounts, and disburse funds from any such account or accounts, under such terms
and conditions as the Board of Directors may approve; and the Manager shall from
time to time render appropriate accountings of such collections and payments to
the Board of Directors and, upon request, to the auditors of the REIT or any
Subsidiary.
SECTION 6. RECORDS; CONFIDENTIALITY. The Manager shall maintain
appropriate books of accounts and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by representatives of the REIT or any Subsidiary at any time during
normal business hours. The Manager shall keep confidential any and all
information obtained in connection with the services rendered hereunder and
shall not disclose any such information to nonaffiliated third parties except
with the prior written consent of the Board of Directors.
SECTION 7. OBLIGATIONS OF MANAGER.
(a) The Manager shall require each seller or transferor of REIT
Investments to the Company to make such representations and warranties regarding
such REIT Investments as may, in the judgment of the Manager, be necessary and
appropriate. In addition, the Manager shall take such other action as it deems
necessary or appropriate with regard to the protection of the Company's
investments.
(b) The Manager shall refrain from any action that, in its sole
judgment made in good faith, would adversely affect the status of the REIT as a
REIT or that, in its sole judgment made in good faith, would violate any law,
rule or regulation of any governmental body or agency having jurisdiction over
the REIT or any Subsidiary or that would otherwise not be permitted by the
REIT's or Subsidiary's Governing Instruments. If the Manager is ordered to take
any such action by the Board of Directors, the Manager shall promptly notify the
Board of Directors of the Manager's judgment that such action would adversely
affect such status or violate any such law, rule or regulation or the Governing
Instruments. Notwithstanding the foregoing, the Manager, its directors,
officers, stockholders and employees shall not be liable to the REIT, any
Subsidiary, the Independent Directors, or the REIT's or a Subsidiary's
stockholders or partners for any act or
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<PAGE>
omission by the Manager, its directors, officers, stockholders or employees
except as provided in Section 11 of this Agreement.
SECTION 8. COMPENSATION.
(a) The REIT shall pay to the Manager, for services rendered under
this Agreement, a quarterly base management fee in an amount equal to 1/4 of 1%
of the Average Invested Assets of the Company during each fiscal quarter (pro
rata amount based on the number of days elapsed during any partial fiscal
quarter), commencing with the first fiscal quarter after the Closing Date.
(b) The Manager shall be entitled to receive incentive
compensation for each fiscal quarter in an amount equal to the product of (A)
25% of the dollar amount by which (1)(a) Funds from Operations (before the
incentive fee but after the base management fee) of the Company per share of
Common Stock (based on the weighted average number of shares) (b) plus gains (or
minus losses) from debt restructuring and sales of property per share of Common
Stock (based on the weighted average number of shares), exceed (2) an amount
equal to (a) the weighted average of the price per share at the initial offering
and the prices per share at any secondary offerings by the Company multiplied by
(b) the Ten-Year U.S. Treasury Rate plus five percent per annum multiplied by
(B) the weighted average number of shares of Common Stock outstanding during
such period. "Funds from Operations" shall be computed in accordance with the
definition thereof adopted by the National Association of Real Estate Investment
Trusts ("NAREIT") and shall mean net income (computed in accordance with GAAP)
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. As used in calculating the
Manager's compensation, the term "Ten Year U.S. Treasury Rate" means the
arithmetic average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years) published by the Federal Reserve Board during
a quarter, or, if such rate is not published by the Federal Reserve Board, any
Federal Reserve Bank or agency or department of the federal government selected
by the Company. If the Company determines in good faith that the Ten Year U.S.
Treasury Rate cannot be calculated as provided above, then the rate shall be the
arithmetic average of the per annum average yields to maturities, based upon
closing asked prices on each business day during a quarter, for each actively
traded marketable U.S. Treasury fixed interest rate security with a final
maturity date not less than eight nor more than twelve years from the date of
the closing asked prices as chosen and quoted for each business day in each such
quarter in New York City by at least three recognized dealers in U.S. government
securities selected by the Company.
(c) The Manager shall compute the compensation payable under
Sections 8(a) and 8(b) of this Agreement within 45 days after the end of each
fiscal quarter. A copy of the computations made by the Manager to calculate its
compensation shall thereafter promptly be delivered to the Board of Directors
and, upon such delivery, payment of the compensation earned under Sections 8(a)
and 8(b) of this Agreement shown therein shall be due and payable within 60 days
after the end of such fiscal quarter.
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(d) The Manager may charge the Company for any out of pocket
expenses that the Manager incurs in connection with any due diligence on assets
considered for purchase by the Company. Moreover, the Manager shall document the
time spent by the Manager's employees in performing such due diligence and shall
be entitled to reimbursement for the allocable portion of such employees'
salaries and benefits.
SECTION 9. EXPENSES OF THE COMPANY. The Company or any Subsidiary
shall pay all of its expenses and shall reimburse the Manager for documented
expenses of the Manager incurred on its behalf.
SECTION 10. CALCULATIONS OF EXPENSES. Expenses incurred by the Manager
on behalf of the Company shall be reimbursed quarterly to the Manager within 60
days after the end of each quarter. The Manager shall prepare a statement
documenting the expenses of the Company and those incurred by the Manager on
behalf of the Company during each quarter, and shall deliver such statement to
the Company within 45 days after the end of each quarter.
SECTION 11. LIMITS OF MANAGER RESPONSIBILITY. The Manager assumes no
responsibility under this Agreement other than to render the services called for
hereunder in good faith and shall not be responsible for any action of the Board
of Directors in following or declining to follow any advice or recommendations
of the Manager, including as set forth in Section 7(b) of this Agreement. The
Manager, its directors, officers, stockholders and employees will not be liable
to the Company, any Subsidiary, the Independent Directors or the Company's or
any Subsidiary's stockholders or partners for any acts or omissions by the
Manager, its directors, officers, stockholders or employees under or in
connection with this Agreement, except by reason of acts constituting bad faith,
willful misconduct, gross negligence or reckless disregard of their duties. The
Company or a Subsidiary shall reimburse, indemnify and hold harmless the
Manager, its stockholders, directors, officers and employees of and from any and
all expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever, (including attorneys' fees) in respect of or arising from any
acts or omissions of the Manager, its stockholders, directors, officers and
employees made in good faith in the performance of the Manager's duties under
this Agreement and not constituting bad faith, willful misconduct, gross
negligence or reckless disregard of its duties.
SECTION 12. NO JOINT VENTURE. The Company and the Manager are not
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
SECTION 13. TERM; TERMINATION. This Agreement shall commence on the
Closing Date and shall continue in force until the second anniversary of the
Closing Date, and thereafter, it may be extended only with the consent of the
Manager and by the affirmative vote of a majority of the Board of Directors,
including a majority of the Independent Directors.
Each extension shall be executed in writing by the parties hereto
before the expiration of this Agreement or any extension thereof. Each such
extension shall not exceed twelve months.
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Notwithstanding any other provision to the contrary, this Agreement, or
any extension hereof, may be terminated by the Company, upon 60 days' written
notice, by majority vote of the Independent Directors or by majority vote of the
Stockholders; provided that a termination fee, equal to the sum of the base
management fee and incentive management fee earned during the twelve months
preceding such termination, will be due.
If this Agreement is terminated pursuant to this Section 13, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Section 16 of this Agreement.
SECTION 14. ASSIGNMENTS.
(a) Except as set forth in Section 14(b) of this Agreement, this
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager, unless such assignment is consented to in writing by
the REIT with the consent of a majority of the Independent Directors. Any such
assignment shall bind the assignee hereunder in the same manner as the Manager
is bound. In addition, the assignee shall execute and deliver to the REIT a
counterpart of this Agreement naming such assignee as Manager. This Agreement
shall not be assigned by the REIT without the prior written consent of the
Manager, except in the case of assignment by the REIT to another REIT or other
organization which is a successor (by merger, consolidation or purchase of
assets) to the REIT, in which case such successor organization shall be bound
hereunder and by the terms of such assignment in the same manner as the REIT is
bound hereunder.
(b) Notwithstanding any provision of this Agreement, the Manager
may subcontract and assign any or all of its responsibilities under Sections
2(b), 2(c) and 2(d) of this Agreement to any of its Affiliates, and the REIT
hereby consents to any such assignment and subcontracting.
SECTION 15. TERMINATION BY REIT FOR CAUSE. At the option of the REIT,
this Agreement shall be and become terminated upon 60 days' written notice of
termination from the Board of Directors to the Manager, without payment of any
termination fee, if any of the following events shall occur:
(a) if the Manager shall violate any provision of this Agreement
and, after notice of such violation, shall not cure such violation within 30
days; or
(b) there is entered an order for relief or similar decree or
order with respect to the Manager by a court having competent jurisdiction in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or the Manager (i) ceases, or admits in writing its
inability to pay its debts as they become due and payable, or makes a general
assignment for the benefit of, or enters into any composition or arrangement
with, creditors; (ii) applies for, or consents (by admission of material
allegations of a petition or otherwise) to the appointment of a receiver,
trustee, assignee, custodian, liquidator or sequestrator (or other similar
official) of the Manager or of any substantial part of its properties or assets,
or authorizes such an application or consent, or proceedings seeking such
appointment are commenced without such authorization,
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consent or application against the Manager and continue undismissed for 30 days;
(iii) authorizes or files a voluntary petition in bankruptcy, or applies for or
consents (by admission of material allegations of a petition or otherwise) to
the application of any bankruptcy, reorganization, arrangement, readjustment of
debt, insolvency, dissolution, liquidation or other similar law of any
jurisdiction, or authorizes such application or consent, or proceedings to such
end are instituted against the Manager without such authorization, application
or consent and are approved as properly instituted and remain undismissed for 30
days or result in adjudication of bankruptcy or insolvency; or (iv) permits or
suffers all or any substantial part of its properties or assets to be
sequestered or attached by court order and the order remains undismissed for 30
days.
(c) If any of the events specified in Section 15(b) of this
Agreement shall occur, the Manager shall give prompt written notice thereof to
the Board of Directors upon the happening of such event.
SECTION 16. ACTION UPON TERMINATION. From and after the effective date
of termination of this Agreement, pursuant to Sections 13, 14, or 15 of this
Agreement, the Manager shall not be entitled to compensation for further
services hereunder, but shall be paid all compensation accruing to the date of
termination and, if terminated pursuant to Section 13, the applicable
termination fee. Upon such termination, the Manager shall forthwith:
(a) after deducting any accrued compensation and reimbursement for
its expenses to which it is then entitled, pay over to the Company or a
Subsidiary all money collected and held for the account of the Company or a
Subsidiary pursuant to this Agreement;
(b) deliver to the Board of Directors a full accounting, including
a statement showing all payments collected by it and a statement of all money
held by it, covering the period following the date of the last accounting
furnished to the Board of Directors with respect to the Company or a Subsidiary;
and
(c) deliver to the Board of Directors all property and documents
of the Company or any Subsidiary then in the custody of the Manager.
SECTION 17. RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST.
The Manager agrees that any money or other property of the Company or Subsidiary
held by the Manager under this Agreement shall be held by the Manager as
custodian for the Company or Subsidiary, and the Manager's records shall be
appropriately marked clearly to reflect the ownership of such money or other
property by the Company or such Subsidiary. Upon the receipt by the Manager of a
written request signed by a duly authorized officer of the Company requesting
the Manager to release to the Company or any Subsidiary any money or other
property then held by the Manager for the account of the Company or any
Subsidiary under this Agreement, the Manager shall release such money or other
property to the Company or any Subsidiary within a reasonable period of time,
but in no event later than 60 days following such request. The Manager shall not
be liable to the Company, any Subsidiary, the Independent Directors, or the
Company's or a Subsidiary's stockholders or partners for any acts performed or
omissions to act by the Company or any Subsidiary in connection with the money
or other
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property released to the Company or any Subsidiary in accordance with this
Section. The Company and any Subsidiary shall indemnify the Manager, its
directors, officers, stockholders and employees against any and all expenses,
losses, damages, liabilities, demands, charges and claims of any nature
whatsoever, which arise in connection with the Manager's release of such money
or other property to the Company or any Subsidiary in accordance with the terms
of this Section 17 of this Agreement. Indemnification pursuant to this provision
shall be in addition to any right of the Manager to indemnification under
Section 11 of this Agreement.
SECTION 18. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants to the Manager as
follows:
(i) The REIT is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation,
has the corporate power to own its assets and to transact the business
in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its business
requires such qualification, except for failures to be so qualified,
authorized or licensed that could not in the aggregate have a material
adverse effect on the business operations, assets or financial
condition of the REIT and its subsidiaries, taken as a whole. The REIT
does not do business under any fictitious business name.
(ii) The REIT has the corporate power and authority to
execute, deliver and perform this Agreement and all obligations
required hereunder and has taken all necessary corporate action to
authorize this Agreement on the terms and conditions hereof and the
execution, delivery and performance of this Agreement and all
obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of the REIT,
and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required by the REIT in connection with this
Agreement or the execution, delivery, performance, validity or
enforceability of this Agreement and all obligations required
hereunder. This Agreement has been, and each instrument or document
required hereunder will be, executed and delivered by a duly authorized
officer of the REIT, and this Agreement constitutes, and each
instrument or document required hereunder when executed and delivered
hereunder will constitute, the legally valid and binding obligation of
the REIT enforceable against the REIT in accordance with its terms.
(iii) The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder will not
violate any provision of any existing law or regulation binding on the
REIT, or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on the REIT, or the Governing
Instruments of, or any securities issued by the REIT or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the REIT is a party or by which the REIT or any of
its assets may be bound, the violation of which would have a material
adverse effect on the business operations, assets or financial
condition of the
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REIT and its subsidiaries, taken as a whole, and will not result in, or
require, the creation or imposition of any lien on any of its property,
assets or revenues pursuant to the provisions of any such mortgage,
indenture, lease, contract or other agreement, instrument or
undertaking.
(b) The Manager hereby represents and warrants to the REIT as
follows:
(i) the Manager is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, has
the corporate power to own its assets and to transact the business in
which it is now engaged and is duly qualified to do business and is in
good standing under the laws of each jurisdiction where its ownership
or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or
licensed that could not in the aggregate have a material adverse effect
on the business operations, assets or financial condition of the
Manager and its subsidiaries, taken as a whole. The Manager does not do
business under any fictitious business name.
(ii) The Manager has the corporate power and authority to
execute, deliver and perform this Agreement and all obligations
required hereunder and has taken all necessary partnership action to
authorize this Agreement on the terms and conditions hereof and the
execution, delivery and performance of this Agreement and all
obligations required hereunder. No consent of any other person
including, without limitation, partners and creditors of the Manager,
and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required by the Manager in connection with
this Agreement or the execution, delivery, performance, validity or
enforceability of this Agreement and all obligations required
hereunder. This Agreement has been, and each instrument or document
required hereunder will be, executed and delivered by a duly authorized
agent of the Manager, and this Agreement constitutes, and each
instrument or document required hereunder when executed and delivered
hereunder will constitute, the legally valid and binding obligation of
the Manager enforceable against the Manager in accordance with its
terms.
(iii) The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder, will not
violate any provision of any existing law or regulation binding on the
Manager, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Manager, or the
partnership agreement of, or any securities issued by the Manager or of
any mortgage, indenture, lease, contract or other agreement, instrument
or undertaking to which the Manager is a party or by which the Manager
or any of its assets may be bound, the violation of which would have a
material adverse effect on the business operations, assets or financial
condition of the Manager and its subsidiaries, taken as a whole, and
will not result in, or require, the creation or imposition of any lien
on any of its property, assets or revenues pursuant to the provisions
of any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.
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SECTION 19. NOTICES. Unless expressly provided otherwise herein, all
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) If to the REIT:
Ocwen Asset Investment Corp.
The Forum, Suite 1000
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
Attention: Secretary
with a copy given in the manner prescribed above, to:
George C. Howell, III, Esquire
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
(b) If to the Manager:
Ocwen Capital Corporation
The Forum, Suite 1000
1675 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401
Attention: Secretary
with a copy given in the manner prescribed above, to:
George C. Howell, III, Esquire
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Either party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section 19 for the giving of notice.
SECTION 20. BINDING NATURE OF AGREEMENT; SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns as
provided herein.
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<PAGE>
SECTION 21. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing.
SECTION 22. CONTROLLING LAW. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement shall be governed
by and construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Virginia, notwithstanding any Virginia or other conflict-of-law
provisions to the contrary.
SECTION 23. INDULGENCES, NOT WAIVERS. Neither the failure nor any
delay on the part of a party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
SECTION 24. COSTS AND EXPENSES. Each party hereto shall bear its own
costs and expenses (including the fees and disbursements of counsel and
accountants) incurred in connection with the negotiations and preparation of and
the closing under this Agreement, and all matters incident thereto.
SECTION 25. TITLES NOT TO AFFECT INTERPRETATION. The titles of
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.
SECTION 26. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
SECTION 27. PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
SECTION 28. GENDER. Words used herein regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.
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<PAGE>
SECTION 29. COMPUTATION OF INTEREST. Interest will be computed on the
basis of a 360-day year consisting of twelve months of thirty days each.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
OCWEN ASSET INVESTMENT CORP.
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
OCWEN CAPITAL CORPORATION
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
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THIRD AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
OCWEN PARTNERSHIP, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINED TERMS.......................................................1
ARTICLE II PARTNERSHIP CONTINUATION AND IDENTIFICATION........................8
2.01. CONTINUATION....................................................8
2.02. NAME, OFFICE AND REGISTERED AGENT...............................8
2.03. PARTNERS........................................................8
2.04. TERM AND DISSOLUTION............................................9
2.05. FILING OF CERTIFICATE AND PERFECTION OF
LIMITED PARTNERSHIP...........................................9
2.06. CERTIFICATES DESCRIBING PARTNERSHIP UNITS......................10
ARTICLE III BUSINESS OF THE PARTNERSHIP......................................10
ARTICLE IV CAPITAL CONTRIBUTIONS AND ACCOUNTS................................11
4.01. CAPITAL CONTRIBUTIONS..........................................11
4.02. ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES
OF ADDITIONAL PARTNERSHIP INTERESTS..........................11
4.03. ADDITIONAL FUNDING.............................................14
4.04. CAPITAL ACCOUNTS...............................................14
4.05. PERCENTAGE INTERESTS...........................................14
4.06. NO INTEREST ON CONTRIBUTIONS...................................15
4.07. RETURN OF CAPITAL CONTRIBUTIONS................................15
4.08. NO THIRD-PARTY BENEFICIARY.....................................15
ARTICLE V PROFITS AND LOSSES; DISTRIBUTIONS..................................15
5.01. ALLOCATION OF PROFIT AND LOSS..................................15
5.02. DISTRIBUTION OF CASH...........................................17
5.03. REIT DISTRIBUTION REQUIREMENTS.................................18
5.04. DISTRIBUTIONS IN KIND..........................................18
5.05. LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS.................19
5.06. DISTRIBUTIONS UPON LIQUIDATION.................................19
5.07. SUBSTANTIAL ECONOMIC EFFECT....................................19
ARTICLE VI RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER.............19
6.01. MANAGEMENT OF THE PARTNERSHIP..................................19
6.02. DELEGATION OF AUTHORITY........................................22
6.03. INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.................22
6.04. LIABILITY OF THE GENERAL PARTNER...............................24
6.05. REIMBURSEMENT OF GENERAL PARTNER...............................25
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<PAGE>
6.06. OUTSIDE ACTIVITIES.............................................25
6.07. EMPLOYMENT OR RETENTION OF AFFILIATES..........................25
6.08. GENERAL PARTNER PARTICIPATION..................................26
6.9. TITLE TO PARTNERSHIP ASSETS....................................26
6.10. [INTENTIONALLY OMITTED]........................................26
ARTICLE VII CHANGES IN GENERAL PARTNER.......................................26
7.01. TRANSFER OF THE GENERAL PARTNER'S
PARTNERSHIP INTEREST.........................................26
7.02. ADMISSION OF A SUBSTITUTE OR
ADDITIONAL GENERAL PARTNER...................................28
7.03. EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH
OR DISSOLUTION OF A GENERAL PARTNER..........................29
7.04. Removal of a General Partner...................................29
ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS..................31
8.01. MANAGEMENT OF THE PARTNERSHIP..................................31
8.02. POWER OF ATTORNEY..............................................31
8.03. LIMITATION ON LIABILITY OF LIMITED PARTNERS....................31
8.04. OWNERSHIP BY LIMITED PARTNER OF CORPORATE
GENERAL PARTNER OR AFFILIATE.................................31
8.05. EXCHANGE RIGHT.................................................32
8.06. REGISTRATION...................................................34
ARTICLE IX TRANSFER OF LIMITED PARTNERSHIP INTERESTS.........................34
9.01. PURCHASE FOR INVESTMENT........................................34
9.02. RESTRICTIONS ON TRANSFER OF
LIMITED PARTNERSHIP INTERESTS................................35
9.03. ADMISSION OF A SUBSTITUTE LIMITED PARTNER......................36
9.04. RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS...................37
9.05. EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR
TERMINATION OF A LIMITED PARTNER.............................37
9.06. JOINT OWNERSHIP OF INTERESTS...................................38
ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS.........................38
10.01. BOOKS AND RECORDS.............................................38
10.02. CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS...................38
10.03. FISCAL AND TAXABLE YEAR.......................................39
10.04. ANNUAL TAX INFORMATION AND REPORT.............................39
10.05. TAX MATTERS PARTNER; TAX ELECTIONS;
SPECIAL BASIS ADJUSTMENTS...................................39
10.06. REPORTS TO LIMITED PARTNERS...................................40
ARTICLE XI AMENDMENT OF AGREEMENT; MERGER....................................40
ARTICLE XII GENERAL PROVISIONS...............................................41
12.01. NOTICES.......................................................41
12.02. SURVIVAL OF RIGHTS............................................41
12.03. ADDITIONAL DOCUMENTS..........................................41
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<PAGE>
12.04. SEVERABILITY..................................................41
12.05. ENTIRE AGREEMENT..............................................41
12.06. PRONOUNS AND PLURALS..........................................41
12.07. HEADINGS......................................................42
12.08. COUNTERPARTS..................................................42
12.09. GOVERNING LAW.................................................42
EXHIBITS
EXHIBIT A -- Partners, Capital Contributions
and Percentage Interests
EXHIBIT B -- Notice of Exercise of Exchange Right
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<PAGE>
THIRD AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
OCWEN PARTNERSHIP, L.P.
RECITALS
Ocwen Partnership, L.P. (the "Partnership") was formed as a limited
partnership under the laws of the Commonwealth of Virginia pursuant to a
Certificate of Limited Partnership filed with the State Corporation Commission
of Virginia effective as of March 3, 1997. This Third Amended and Restated
Agreement of Limited Partnership is entered into as of the 5th day of May, 1998
among Ocwen General, Inc., a Virginia corporation (the "General Partner"), and
the Limited Partners set forth on Exhibit A hereto, for the purpose of amending
and restating the Amended and Restated Agreement of Limited Partnership and the
Limited Partnership Agreement (together, the "Initial Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants
between the parties hereto, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the Initial Agreement to read in its entirety as follows:
ARTICLE I
DEFINED TERMS
The following defined terms used in this Agreement shall have the
meanings specified below:
"ACT" means the Virginia Revised Uniform Limited Partnership Act, as it
may be amended from time to time.
"ADDITIONAL FUNDS" has the meaning set forth in Section 4.03 hereof.
"ADDITIONAL SECURITIES" means any additional REIT Shares (other than
REIT Shares issued in connection with an exchange pursuant to Section 8.05
hereof) or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares, as set forth in
Section 4.02(a)(ii).
"ADMINISTRATIVE EXPENSES" means (i) all administrative and operating
costs and expenses incurred by the Partnership, (ii) those administrative costs
and expenses of the General Partner, including any salaries or other payments to
directors, officers or employees of the General Partner, and any accounting and
legal expenses of the General Partner, which expenses,
<PAGE>
the Partners have agreed, are expenses of the Partnership and not the General
Partner, and (iii) to the extent not included in clause (ii) above, REIT
Expenses; PROVIDED, HOWEVER, that Administrative Expenses shall not include any
administrative costs and expenses incurred by the Company that are attributable
to Properties or partnership interests in a Subsidiary Partnership that are
owned by the Company directly.
"AFFILIATE" means, (i) any Person that, directly or indirectly,
controls or is controlled by or is under common control with such Person, (ii)
any other Person that owns, beneficially, directly or indirectly, 10% or more of
the outstanding capital stock, shares or equity interests of such Person, or
(iii) any officer, director, employee, partner or trustee of such Person or any
Person controlling, controlled by or under common control with such Person
(excluding trustees and persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities or partnership interests or otherwise.
"AGREED VALUE" means the fair market value of a Partner's non-cash
Capital Contribution as of the date of contribution as agreed to by such Partner
and the General Partner. The names and addresses of the Partners, number of
Partnership Units issued to each Partner, and the Agreed Value of non-cash
Capital Contributions as of the date of contribution is set forth on EXHIBIT A.
"AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership.
"AMENDED AND RESTATED ARTICLES OF INCORPORATION" means the amended and
restated articles of incorporation of the Company filed with the State
Corporation Commission of Virginia, as amended or restated from time to time.
"CAPITAL ACCOUNT" has the meaning provided in Section 4.04 hereof.
"CAPITAL CONTRIBUTION" means the total amount of cash, cash
equivalents, and the Agreed Value of any Property or other asset contributed or
agreed to be contributed, as the context requires, to the Partnership by each
Partner pursuant to the terms of the Agreement. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner.
"CASH AMOUNT" means an amount of cash per Partnership Unit equal to the
Value of the REIT Shares Amount on the date of receipt by the Company of a
Notice of Exchange.
"CERTIFICATE" means any instrument or document that is required under
the laws of the Commonwealth of Virginia, or any other jurisdiction in which the
Partnership conducts business, to be signed or sworn to by the Partners of the
Partnership (either by themselves or
2
<PAGE>
pursuant to the power-of-attorney granted to the General Partner in Section 8.02
hereof) and filed for recording in the appropriate public offices in the
Commonwealth of Virginia or such other jurisdiction to perfect or maintain the
Partnership as a limited partnership, to effect the admission, withdrawal, or
substitution of any Partner of the Partnership, or to protect the limited
liability of the Limited Partners as limited partners under the laws of the
Commonwealth of Virginia or such other jurisdiction.
"CODE" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
successor provision of the Code.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMPANY" means Ocwen Asset Investment Corp., a Virginia corporation
organized as a real estate investment trust.
"CONVERSION FACTOR" means 1.0, PROVIDED THAT, (a) in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Shares in
REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
(assuming for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on such date; and (b) in the event that the Company
declares or pays a dividend or other distribution on its outstanding REIT Shares
(other than (A) cash dividends payable in the ordinary course of the Company's
business or (B) dividends payable in REIT Shares that give rise to an adjustment
in the Conversion Factor under subsection (a) hereof) and the Value of the REIT
Shares on the 20th trading day following the record date ("Record Date") for
such dividend or distribution (the "Post-Distribution Value") is less than the
Value of the REIT Shares on the Business Day immediately preceding such Record
Date (the "Pre-Distribution Value"), then the Conversion Factor in effect after
the Record Date shall be adjusted by multiplying the Conversion Factor in effect
prior to the Record Date by a fraction, the numerator of which is the
Pre-Distribution Value and the denominator of which is the Post-Distribution
Value, PROVIDED, HOWEVER, that no adjustment shall be made if (x) with respect
to any cash dividend or distribution with respect to REIT shares, the
Partnership distributes with respect to each Partnership Unit an amount equal to
the amount of such dividend or distribution multiplied by the Conversion Factor
or (y) with respect to any dividend or distribution of securities or property
other than cash, the Partnership distributes with respect to each Partnership
Unit an amount of securities or other property equal to the amount distributed
with respect to each REIT share multiplied by the Conversion Ratio or a
partnership interest or other security readily convertible into such securities
or other property. Any adjustment to the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event; PROVIDED, HOWEVER, that if the Company
3
<PAGE>
receives a Notice of Exchange after the record date, but prior to the effective
date of such dividend, distribution, subdivision or combination, the Conversion
Factor shall be determined as if the Company had received the Notice of Exchange
immediately prior to the record date for such dividend, distribution,
subdivision or combination.
"EVENT OF BANKRUPTCY" as to any Person means the filing of a petition
for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of
1978 or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency or
bankruptcy of such Person as finally determined by a court proceeding; filing by
such Person of a petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such Person or a substantial part of
his assets; commencement of any proceedings relating to such Person as a debtor
under any other reorganization, arrangement, insolvency, adjustment of debt or
liquidation law of any jurisdiction, whether now in existence or hereinafter in
effect, either by such Person or by another, PROVIDED that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.
"EXCHANGE AMOUNT" means either the Cash Amount or the REIT Shares
Amount, as selected by the General Partner or the Company in its sole and
absolute discretion pursuant to Section 8.05(b) hereof.
"EXCHANGE RIGHT" has the meaning provided in Section 8.05(a) hereof.
"EXCHANGING PARTNER" has the meaning provided in Section 8.05(a)
hereof.
"GENERAL PARTNER" means Ocwen General, Inc., a Virginia corporation,
and any Person who becomes a substitute or additional General Partner as
provided herein, and any of their successors as General Partner.
"GENERAL PARTNERSHIP INTEREST" means a Partnership Interest held by the
General Partner that is a general partnership interest.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of its status as the Company, the General Partner or a director, officer
or employee of the Company, the Partnership or the General Partner, and (ii)
such other Persons (including Affiliates of the Company, General Partner or the
Partnership) as the General Partner may designate from time to time, in its sole
and absolute discretion.
"INDEPENDENT DIRECTOR" means a director of the Company who is not an
officer or employee of the Company, any Affiliate of an officer or employee or
any Affiliate of (i) any lessee of any property of the Company or any Subsidiary
of the Company, (ii) any Subsidiary of the Company, or (iii) any partnership
that is an Affiliate of the Company.
4
<PAGE>
"LIMITED PARTNER" means any Person named as a Limited Partner on
EXHIBIT A attached hereto, and any Person who becomes a Substitute or Additional
Limited Partner, in such Person's capacity as a Limited Partner in the
Partnership.
"LIMITED PARTNERSHIP INTEREST" means the ownership interest of a
Limited Partner in the Partnership at any particular time, including the right
of such Limited Partner to any and all benefits to which such Limited Partner
may be entitled as provided in this Agreement and in the Act, together with the
obligations of such Limited Partner to comply with all the provisions of this
Agreement and of such Act.
"LOSS" has the meaning provided in Section 5.01(f) hereof.
"NOTICE OF EXCHANGE" means the Notice of Exercise of Exchange Right
substantially in the form attached as EXHIBIT B hereto.
"NASDAQ" means the Nasdaq Stock Market.
"OFFER" has the meaning set forth in Section 7.01(c) hereof.
"OFFERING" means the initial offer and sale by the Company and the
purchase by the Underwriters (as defined in the Prospectus) of REIT Shares for
sale to the public.
"ORIGINAL LIMITED PARTNER" means Ocwen Limited, Inc., a Virginia
corporation.
"PARTNER" means any General Partner or Limited Partner.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
held by either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the
amount of Partnership Minimum Gain is determined by first computing, for each
Partnership nonrecourse liability, any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Partner's share of Partnership Minimum Gain shall be
determined in accordance with Regulations Section 1.704-2(g)(1).
"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of cash pursuant to Section 5.02 hereof,
which record date shall be the same as the record date established by the
Company for a distribution to its shareholders of some or all of its portion of
such distribution.
5
<PAGE>
"PARTNERSHIP UNIT" means a fractional, undivided share of the
Partnership Interests of all Partners issued hereunder. The allocation of
Partnership Units among the Partners shall be as set forth on EXHIBIT A, as may
be amended from time to time.
"PERCENTAGE INTEREST" means the percentage ownership interest in the
Partnership of each Partner, as determined by dividing the Partnership Units
owned by a Partner by the total number of Partnership Units then outstanding.
The Percentage Interest of each Partner shall be as set forth on EXHIBIT A, as
may be amended from time to time.
"PERSON" means any individual, partnership, corporation, joint venture,
trust or other entity.
"PROFIT" has the meaning provided in Section 5.01(f) hereof.
"PROPERTY" means any office or industrial property or other investment
in which the Partnership holds an ownership interest.
"PROSPECTUS" means the final prospectus delivered to purchasers of REIT
Shares in the Offering.
"REGULATIONS" means the Federal Income Tax Regulations issued under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any successor provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"REIT EXPENSES" means (i) costs and expenses relating to the formation
and continuity of existence and operation of the Company and any Subsidiaries
thereof, including Ocwen General, Inc. (which Subsidiaries shall, for purposes
hereof, be included within the definition of Company), including taxes, fees and
assessments associated therewith, any and all costs, expenses or fees payable to
any director, officer, or employee of the Company, (ii) costs and expenses
relating to any public offering and registration of securities by the Company
and all statements, reports, fees and expenses incidental thereto, including,
without limitation, underwriting discounts and selling commissions applicable to
any such offering of securities, and any costs and expenses associated with any
claims made by any holders of such securities or any underwriters or placement
agents thereof, (iii) costs and expenses associated with any repurchase of any
securities by the Company, (iv) costs and expenses associated with the
preparation and filing of any periodic or other reports and communications by
the Company under federal, state or local laws or regulations, including filings
with the Commission, (v) costs and expenses associated with compliance by the
Company with laws, rules and regulations promulgated by any regulatory body,
including the Commission and any securities exchange, (vi) costs and expenses
associated with any 401(k) plan, incentive plan, bonus plan or other plan
providing for compensation for the employees of the Company, (vii) costs and
expenses incurred by the Company relating to any issuing or redemption of
Partnership Interests, and (viii) all other
6
<PAGE>
operating or administrative costs of the Company incurred in the ordinary course
of its business on behalf of or in connection with the Partnership.
"REIT SHARE" means a common share of beneficial interest in the Company
(or successor Entity, as the case may be).
"REIT SHARES AMOUNT" means a number of REIT Shares equal to the product
of the number of Partnership Units offered for exchange by an Exchanging
Partner, multiplied by the Conversion Factor as adjusted to and including the
Specified Exchange Date; PROVIDED THAT in the event the Company issues to all
holders of REIT Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or purchase REIT Shares,
or any other securities or property (collectively, the "rights"), and the rights
have not expired at the Specified Exchange Date, then the REIT Shares Amount
shall also include the rights issuable to a holder of the REIT Shares Amount of
REIT Shares on the record date fixed for purposes of determining the holders of
REIT Shares entitled to rights.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICE" means the Internal Revenue Service.
"SPECIFIED EXCHANGE DATE" means the first business day of the month
that is at least 60 business days after the receipt by the Company of the Notice
of Exchange.
"SHARE INCENTIVE PLANS" means the Ocwen Asset Investment Corp.
non-qualified stock option plan, as amended from time to time, or any stock
incentive plan adopted in the future by the Company.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"SUBSIDIARY PARTNERSHIP" means any partnership of which the partnership
interests therein are owned by the Company or a wholly-owned subsidiary of the
Company.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the
Partnership as a Limited Partner pursuant to Section 9.03 hereof.
"SURVIVING GENERAL PARTNER" has the meaning set forth in Section
7.01(d) hereof.
"TRANSACTION" has the meaning set forth in Section 7.01(c) hereof.
"TRANSFER" has the meaning set forth in Section 9.02(a) hereof.
"VALUE" means, with respect to any security, the average of the daily
market price of such security for the ten consecutive trading days immediately
preceding the date of such valuation. The market price for each such trading day
shall be: (i) if security is listed or admitted
7
<PAGE>
to trading on any securities exchange or NASDAQ, the sale price, regular way, on
such day, or if no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, on such day, (ii) if security is not listed
or admitted to trading on any securities exchange or NASDAQ takes place on such
day, the average of the closing bid and asked prices on such day, as reported by
a reliable quotation source designated by the Company, or (iii) if security is
not listed or admitted to trading on any securities exchange or NASDAQ and no
such last reported sale price or closing bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reliable quotation source designated by the Company, or if there shall be
no bid and asked prices on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than ten days prior to
the date in question) for which prices have been so reported; PROVIDED THAT if
there are no bid and asked prices reported during the ten days prior to the date
in question, the value of the security shall be determined by the Company acting
in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the security
includes any additional rights, then the value of such rights shall be
determined by the Company acting in good faith on the basis of such quotations
and other information as it considers, in its reasonable judgment, appropriate.
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.01. CONTINUATION.
The Partners hereby agree to continue the Partnership pursuant to the
Act and upon the terms and conditions set forth in this Agreement.
2.02. NAME, OFFICE AND REGISTERED AGENT.
The name of the Partnership is Ocwen Partnership, L.P. The specified
office and place of business of the Partnership shall be 1675 Palm Beach
Boulevard, Suite 1000, West Palm Beach, Florida 33401. The General Partner may
at any time change the location of such office, provided the General Partner
gives notice to the Partners of any such change. The initial registered agent is
George C. Howell, III, who is a resident of Virginia and a member of the
Virginia State Bar, and whose business address is Riverfront Plaza, 951 East
Byrd Street in the City of Richmond. The sole duty of the registered agent as
such is to forward to the Partnership any notice that is served on him as
registered agent.
2.03. PARTNERS.
(a) The General Partner of the Partnership is Ocwen General, Inc., a
Virginia corporation. Its principal place of business is the same as that of the
Partnership.
(b) The Limited Partners are those Persons identified as Limited
Partners on Exhibit A hereto, as amended from time to time.
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2.04. TERM AND DISSOLUTION.
(a) The term of the Partnership shall continue in full force and
effect until December 31, 2050, except that the Partnership shall be dissolved
upon the first to occur of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to a General
Partner or the dissolution, death, removal or withdrawal of a General
Partner unless the business of the Partnership is continued pursuant to
Section 7.03(b) hereof; PROVIDED THAT if a General Partner is on the
date of such occurrence a partnership, the dissolution of such General
Partner as a result of the dissolution, death, withdrawal, removal or
Event of Bankruptcy of a partner in such partnership shall not be an
event of dissolution of the Partnership if the business of such General
Partner is continued by the remaining partner or partners, either alone
or with additional partners, and such General Partner and such partners
comply with any other applicable requirements of this Agreement;
(ii) The passage of 90 days after the sale or other
disposition of all or substantially all of the assets of the
Partnership (PROVIDED THAT if the Partnership receives an installment
obligation as consideration for such sale or other disposition, the
Partnership shall continue, unless sooner dissolved under the
provisions of this Agreement, until such time as such note or notes are
paid in full);
(iii) The exchange of all Limited Partnership Interests (other
than any of such interests held by the General Partner or Affiliates of
the General Partner); or
(iv) The election by the General Partner that the Partnership
should be dissolved.
(b) Upon dissolution of the Partnership (unless the business of the
Partnership is continued pursuant to Section 7.03(b) hereof), the General
Partner (or its trustee, receiver, successor or legal representative) shall
amend or cancel the Certificate and liquidate the Partnership's assets and apply
and distribute the proceeds thereof in accordance with Section 5.06 hereof.
Notwithstanding the foregoing, the liquidating General Partner may either (i)
defer liquidation of, or withhold from distribution for a reasonable time, any
assets of the Partnership (including those necessary to satisfy the
Partnership's debts and obligations), or (ii) distribute the assets to the
Partners in kind.
2.05. FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP.
The General Partner shall execute, acknowledge, record and file at the
expense of the Partnership, the Certificate and any and all amendments thereto
and all requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the
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Partnership to be treated as a limited partnership under, and otherwise to
comply with, the laws of each state or other jurisdiction in which the
Partnership conducts business.
2.06. CERTIFICATES DESCRIBING PARTNERSHIP UNITS.
At the request of a Limited Partner, the General Partner, at its
option, may issue a certificate summarizing the terms of such Limited Partner's
interest in the Partnership, including the number of Partnership Units owned and
the Percentage Interest represented by such Partnership Units as of the date of
such certificate. Any such certificate (i) shall be in form and substance as
approved by the General Partner, (ii) shall not be negotiable and (iii) shall
bear a legend to the following effect:
This certificate is not negotiable. The Partnership Units
represented by this certificate are governed by and
transferable only in accordance with the provisions of the
Agreement of Limited Partnership of Ocwen Partnership, L.P.,
as amended from time to time.
ARTICLE III
BUSINESS OF THE PARTNERSHIP
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, PROVIDED, however, that such
business shall be limited to and conducted in such a manner as to permit the
Company at all times to qualify as a REIT, unless the Company otherwise ceases
to qualify as a REIT, (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or the ownership of
interests in any entity engaged in any of the foregoing and (iii) to do anything
necessary or incidental to the foregoing. In connection with the foregoing, and
without limiting the Company's right in its sole and absolute discretion to
cease qualifying as a REIT, the Partners acknowledge that the Company's current
status as a REIT and the avoidance of income and excise taxes on the Company
inures to the benefit of all the Partners and not solely to the Company.
Notwithstanding the foregoing, the Limited Partners agree that the Company may
terminate its status as a REIT under the Code at any time to the full extent
permitted under its Amended and Restated Articles of Incorporation. The General
Partner shall also be empowered to do any and all acts and things necessary or
prudent to ensure that the Partnership will not be classified as a "publicly
traded partnership" for purposes of Section 7704 of the Code.
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ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.01. CAPITAL CONTRIBUTIONS.
The General Partner and the Limited Partners have made capital
contributions to the Partnership in exchange for the Partnership Interests set
forth opposite their names on Exhibit A, as amended from time to time.
4.02. ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL
PARTNERSHIP INTERESTS.
Except as provided in this Section 4.02 or in Section 4.03, the
Partners shall have no right or obligation to make any additional Capital
Contributions or loans to the Partnership. The General Partner may contribute
additional capital to the Partnership, from time to time, and receive additional
Partnership Interests in respect thereof, in the manner contemplated in this
Section 4.02.
(a) Issuances of Additional Partnership Interests.
(i) GENERAL. The General Partner is hereby authorized to
cause the Partnership to issue such additional Partnership Interests in
the form of Partnership Units for any Partnership purpose at any time
or from time to time, to the Partners (including the General Partner
and the Company) or to other Persons for such consideration and on such
terms and conditions as shall be established by the General Partner in
its sole and absolute discretion, all without the approval of any
Limited Partners. Any additional Partnership Interests issued thereby
may be issued in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties,
including rights, powers and duties senior to Limited Partnership
Interests, all as shall be determined by the General Partner in its
sole and absolute discretion and without the approval of any Limited
Partner, subject to Virginia law, including, without limitation, (i)
the allocations of items of Partnership income, gain, loss, deduction
and credit to each such class or series of Partnership Interests; (ii)
the right of each such class or series of Partnership Interests to
share in Partnership distributions; and (iii) the rights of each such
class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; PROVIDED, HOWEVER, that no additional
Partnership Interests shall be issued to the General Partner or the
Company unless:
(1) (A) the additional Partnership Interests are
issued in connection with an issuance of REIT Shares of or other
interests in the Company, which shares or interests have
designations, preferences and other rights, all such that the
economic interests are substantially similar to the
designations, preferences and other rights of the additional
Partnership
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Interests issued to the General Partner or the
Company by the Partnership in accordance with this Section 4.02
and (B) the General Partner or the Company shall make a Capital
Contribution to the Partnership in an amount equal to the
proceeds raised in connection with the issuance of such shares
of stock of or other interests in the Company;
(2) the additional Partnership Interests are issued in
exchange for property owned by the Company or the General
Partner with a fair market value, as determined by the General
Partner, in good faith, equal to the value of the Partnership
Interests; or
(3) the additional Partnership Interests are issued to
all Partners in proportion to their respective Percentage
Interests.
Without limiting the foregoing, the General Partner is expressly authorized to
cause the Partnership to issue Partnership Units for less than fair market
value, so long as the General Partner concludes in good faith that such issuance
is in the best interests of the General Partner and the Partnership.
(ii) UPON ISSUANCE OF ADDITIONAL SECURITIES. The Company shall
not issue any additional REIT Shares (other than REIT Shares issued in
connection with an exchange pursuant to Section 8.05 hereof) or rights,
options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase REIT Shares (collectively,
"Additional Securities") other than to all holders of REIT Shares,
unless (A) the General Partner shall cause the Partnership to issue to
the General Partner and the Company, as the Company may designate,
Partnership Interests or rights, options, warrants or convertible or
exchangeable securities of the Partnership having designations,
preferences and other rights, all such that the economic interests are
substantially similar to those of the Additional Securities, and (B)
the Company contributes the proceeds from the issuance of such
Additional Securities and from any exercise of rights contained in such
Additional Securities, directly and through the General Partner, to the
Partnership; PROVIDED, HOWEVER, that the Company is allowed to issue
Additional Securities in connection with an acquisition of a property
to be held directly by the Company, but if and only if, such direct
acquisition and issuance of Additional Securities have been approved
and determined to be in the best interests of the Company and the
Partnership by a majority of the Independent Directors. Without
limiting the foregoing, the Company is expressly authorized to issue
Additional Securities for less than fair market value, and to cause the
Partnership to issue to the General Partner and the Company
corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance is in the best interests of
the General Partner, the Company and the Partnership, including without
limitation, the issuance of REIT Shares and corresponding Partnership
Units pursuant to an employee share purchase plan providing for
employee purchases of REIT Shares at a discount from fair market value
or employee stock
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options that have an exercise price that is less than the fair market
value of the REIT Shares, either at the time of issuance or at the time
of exercise, and (y) the Company contributes all proceeds from such
issuance, directly or through the General Partner, to the Partnership.
For example, in the event the Company issues REIT Shares for a cash
purchase price and contributes all of the proceeds of such issuance,
directly and through the General Partner, to the Partnership as
required hereunder, the General Partner and the Company, as the Company
may so designate, shall be issued a number of additional Partnership
Units equal to the product of (A) the number of such REIT Shares issued
by the Company, the proceeds of which were so contributed, multiplied
by (B) a fraction, the numerator of which is 100%, and the denominator
of which is the Conversion Factor in effect on the date of such
contribution.
(b) CERTAIN DEEMED CONTRIBUTIONS OF PROCEEDS OF ISSUANCE OF REIT
SHARES. In connection with any and all issuances of REIT Shares, the Company and
the General Partner, as the Company determines, shall make Capital Contributions
to the Partnership of the proceeds therefrom, PROVIDED THAT if the proceeds
actually received and contributed by the Company, directly or through the
General Partner, are less than the gross proceeds of such issuance as a result
of any underwriter's discount or other expenses paid or incurred in connection
with such issuance, then the General Partner and the Company shall be deemed to
have made Capital Contributions to the Partnership in the aggregate amount of
the gross proceeds of such issuance and the Partnership shall be deemed
simultaneously to have paid such offering expenses in accordance with Section
6.05 hereof and in connection with the required issuance of additional
Partnership Units to the General Partner and the Company for such Capital
Contributions pursuant to Section 4.02(a) hereof.
(c) In the event the Company purchases any REIT Shares or other
shares of any class of the Company's capital stock, then the General Partner
shall cause the Partnership to purchase a number of Partnership Units held,
directly or indirectly, by the Company, as the Company may designate, equal to
the quotient of the number of such REIT Shares or such shares of the Company's
capital stock divided by the Conversion Factor and on the same terms that the
Company exchanged such REIT Shares or such shares of the Company's capital
stock. Moreover, if the Company makes a cash tender offer or other offer to
acquire REIT Shares or other shares of any class of the Company's capital stock,
then the General Partner shall cause the Partnership to make a corresponding
offer to the Company, or the direct or indirect subsidiaries through which the
Company holds Partnership Units, as the Company may designate, to acquire an
equal number of Partnership Units held, directly or indirectly, by the Company.
In the event any REIT Shares or other shares of any class of the Company's
capital stock are acquired by the Company pursuant to such tender or other
offer, the Partnership shall purchase an equivalent number of Partnership Units
held, directly or indirectly, by the Company, as the Company may designate, for
an equivalent purchase price based on the application of the Conversion Factor.
Lastly, if the Company shall repurchase any REIT Shares or any shares of any
class of the Company's capital stock pursuant to this section, all costs
incurred in connection with such repurchase shall be reimbursed to the General
Partner by the Partnership pursuant to Section 6.05 hereof.
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4.03. ADDITIONAL FUNDING.
If the General Partner determines that it is in the best interests of
the Partnership to provide for additional Partnership funds ("Additional Funds")
for any Partnership purpose, the General Partner may (i) cause the Partnership
to obtain such funds from outside borrowings, or (ii) elect to have the General
Partner or the Company provide such Additional Funds to the Partnership through
loans or otherwise.
4.04. CAPITAL ACCOUNTS.
A separate capital account (a "Capital Account") shall be established
and maintained for each Partner in accordance with Regulations Section
1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires an additional
Partnership Interest in exchange for more than a DE MINIMIS Capital
Contribution, (ii) the Partnership distributes to a Partner more than a DE
MINIMIS amount of Partnership property as consideration for a Partnership
Interest, or (iii) the Partnership is liquidated within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue the
property of the Partnership to its fair market value (as determined by the
General Partner, in its sole and absolute discretion, and taking into account
Section 7701(g) of the Code) in accordance with Regulations Section
1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the General
Partner, the Capital Accounts of the Partners shall be adjusted in accordance
with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require
such Capital Accounts to be adjusted to reflect the manner in which the
unrealized gain or loss inherent in such property (that has not been reflected
in the Capital Accounts previously) would be allocated among the Partners
pursuant to Section 5.01 if there were a taxable disposition of such property
for its fair market value (as determined by the General Partner, in its sole and
absolute discretion, and taking into account Section 7701(g) of the Code) on the
date of the revaluation.
4.05. PERCENTAGE INTERESTS.
If the number of outstanding Partnership Units increases or decreases
during a taxable year, each Partner's Percentage Interest shall be adjusted by
the General Partner effective as of the effective date of each such increase or
decrease to a percentage equal to the number of Partnership Units held by such
Partner divided by the aggregate number of Partnership Units outstanding after
giving effect to such increase or decrease. If the Partners' Percentage
Interests are adjusted pursuant to this Section 4.05, the Profits and Losses for
the taxable year in which the adjustment occurs shall be allocated between the
part of the year ending on the day when the Partnership's property is revalued
by the General Partner and the part of the year beginning on the following day
either (i) as if the taxable year had ended on the date of the adjustment or
(ii) based on the number of days in each part. The General Partner, in its sole
and absolute discretion, shall determine which method shall be used to allocate
Profits and Losses for the taxable year in which the adjustment occurs. The
allocation of Profits and Losses for the earlier part of the year shall be based
on the Percentage Interests before adjustment, and the allocation of Profits and
Losses for the later part shall be based on the adjusted Percentage Interests.
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4.06. NO INTEREST ON CONTRIBUTIONS.
No Partner shall be entitled to interest on its Capital Contribution.
4.07. RETURN OF CAPITAL CONTRIBUTIONS.
No Partner shall be entitled to withdraw any part of its Capital
Contribution or its Capital Account or to receive any distribution from the
Partnership, except as specifically provided in this Agreement. Except as
otherwise provided herein, there shall be no obligation to return to any Partner
or withdrawn Partner any part of such Partner's Capital Contribution for so long
as the Partnership continues in existence.
4.08. NO THIRD-PARTY BENEFICIARY.
No creditor or other third party having dealings with the Partnership
shall have the right to enforce the right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns. None of the
rights or obligations of the Partners herein set forth to make Capital
Contributions or loans to the Partnership shall be deemed an asset of the
Partnership for any purpose by any creditor or other third party, nor may such
rights or obligations be sold, transferred or assigned by the Partnership or
pledged or encumbered by the Partnership to secure any debt or other obligation
of the Partnership or of any of the Partners. In addition, it is the intent of
the parties hereto that no distribution to any Limited Partner shall be deemed a
return of money or other property in violation of the Act. However, if any court
of competent jurisdiction holds that, notwithstanding the provisions of this
Agreement, any Limited Partner is obligated to return such money or property,
such obligation shall be the obligation of such Limited Partner and not of the
General Partner. Without limiting the generality of the foregoing, a deficit
Capital Account of a Partner shall not be deemed to be a liability of such
Partner nor an asset or property of the Partnership.
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
5.01. ALLOCATION OF PROFIT AND LOSS.
(a) GENERAL. Profit and Loss of the Partnership for each fiscal year
of the Partnership shall be allocated among the Partners in accordance with
their respective Percentage Interests.
(b) MINIMUM GAIN CHARGEBACK. Notwithstanding any provision to the
contrary, (i) any expense of the Partnership that is a "nonrecourse deduction"
within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in
accordance with the Partners' respective Percentage Interests, (ii) any expense
of the Partnership that is a "partner nonrecourse deduction" within the meaning
of Regulations Section 1.704-2(i)(2) shall be allocated to the
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Partner that bears the "economic risk of loss" of such deduction in accordance
with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in
Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1)
for any Partnership taxable year, then, subject to the exceptions set forth in
Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income
shall be allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j),
and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership
taxable year, then, subject to the exceptions set forth in Regulations Section
1.704(2)(g), items of gain and income shall be allocated among the Partners in
accordance with Regulations Section 1.704-2(i)(4) and the ordering rules
contained in Regulations Section 1.704-2(j). A Partner's "interest in
partnership profits" for purposes of determining its share of the nonrecourse
liabilities of the Partnership within the meaning of Regulations Section
1.752-3(a)(3) shall be such Partner's Percentage Interest.
(c) QUALIFIED INCOME OFFSET. If a Partner receives in any taxable
year an adjustment, allocation, or distribution described in subparagraphs (4),
(5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases
a deficit balance in such Partner's Capital Account that exceeds the sum of such
Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g)
and 1.704-2(i), such Partner shall be allocated specially for such taxable year
(and, if necessary, later taxable years) items of income and gain in an amount
and manner sufficient to eliminate such deficit Capital Account balance as
quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).
After the occurrence of an allocation of income or gain to a Partner in
accordance with this Section 5.01(c), to the extent permitted by Regulations
Section 1.704-1(b), items of expense or loss shall be allocated to such Partner
in an amount necessary to offset the income or gain previously allocated to such
Partner under this Section 5.01(c).
(d) CAPITAL ACCOUNT DEFICITS. Loss shall not be allocated to a
Limited Partner to the extent that such allocation would cause a deficit in such
Partner's Capital Account (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of
such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain. Any Loss in excess of that limitation shall be allocated to the
General Partner. After the occurrence of an allocation of Loss to the General
Partner in accordance with this Section 5.01(d), to the extent permitted by
Regulations Section 1.704-1(b), Profit shall be allocated to such Partner in an
amount necessary to offset the Loss previously allocated to each Partner under
this Section 5.01(d).
(e) ALLOCATIONS BETWEEN TRANSFEROR AND TRANSFEREE. If a Partner
transfers any part or all of its Partnership Interest, the distributive shares
of the various items of Profit and Loss allocable among the Partners during such
fiscal year of the Partnership shall be allocated between the transferor and the
transferee Partner either (i) as if the Partnership's fiscal year had ended on
the date of the transfer, or (ii) based on the number of days of such fiscal
year that each was a Partner without regard to the results of Partnership
activities in the respective portions of such fiscal year in which the
transferor and the transferee were Partners. The General Partner, in its sole
and absolute discretion, shall determine which method shall be used to allocate
the
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distributive shares of the various items of Profit and Loss between the
transferor and the transferee Partner.
(f) DEFINITION OF PROFIT AND LOSS. "Profit" and "Loss" and any items
of income, gain, expense, or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting principles, as
modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss
shall not include items of income, gain and expense that are specially allocated
pursuant to Sections 5.01(b), 5.01(c), or 5.01(d). All allocations of income,
Profit, gain, Loss, and expense (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items set
forth in this Section 5.01, except as otherwise required by Section 704(c) of
the Code and Regulations Section 1.704-1(b)(4). The General Partner shall have
the authority to elect the method to be used by the Partnership for allocating
items of income, gain, and expense as required by Section 704(c) of the Code
including a method that may result in a Partner receiving a disproportionately
larger share of the Partnership tax depreciation deductions, and such election
shall be binding on all Partners.
5.02. DISTRIBUTION OF CASH.
(a) The Partnership shall distribute cash on a quarterly (or, at the
election of the General Partner, more frequent) basis, in an amount determined
by the General Partner in its sole and absolute discretion, to the Partners who
are Partners on the Partnership Record Date with respect to such quarter (or
other distribution period) in accordance with their respective Percentage
Interests on the Partnership Record Date; PROVIDED, HOWEVER, that if a new or
existing Partner acquires an additional Partnership Interest in exchange for a
Capital Contribution on any date other than a Partnership Record Date, the cash
distribution attributable to such additional Partnership Interest relating to
the Partnership Record Date next following the issuance of such additional
Partnership Interest shall be reduced in the proportion to (i) the number of
days that such additional Partnership Interest is held by such Partner bears to
(ii) the number of days between such Partnership Record Date and the immediately
preceding Partnership Record Date.
(b) Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to the Partner or assignee (including by reason of
Section 1446 of the Code), either (i) if the actual amount to be distributed to
the Partner equals or exceeds the amount required to be withheld by the
Partnership, the amount withheld shall be treated as a distribution of cash in
the amount of such withholding to such Partner, or (ii) if the actual amount to
be distributed to the Partner is less than the amount required to be withheld by
the Partnership, the amount required to be withheld shall be treated as a loan
(a "Partnership Loan") from the Partnership to the Partner on the day the
Partnership pays over such amount to a taxing authority. A Partnership Loan
shall be repaid through withholding by the Partnership with respect to
subsequent distributions to the applicable Partner or assignee. In the event
that a Limited Partner (a "Defaulting Limited
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Partner") fails to pay any amount owed to the Partnership with respect to the
Partnership Loan within 15 days after demand for payment thereof is made by the
Partnership on the Limited Partner, the General Partner, in its sole and
absolute discretion, may elect to make the payment to the Partnership on behalf
of such Defaulting Limited Partner. In such event, on the date of payment, the
General Partner shall be deemed to have extended a loan (a "General Partner
Loan") to the Defaulting Limited Partner in the amount of the payment made by
the General Partner and shall succeed to all rights and remedies of the
Partnership against the Defaulting Limited Partner as to that amount. Without
limitation, the General Partner shall have the right to receive any
distributions that otherwise would be made by the Partnership to the Defaulting
Limited Partner until such time as the General Partner Loan has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been received by the Defaulting Limited Partner and
immediately paid to the General Partner.
Any amounts treated as a Partnership Loan or a General Partner Loan
pursuant to this Section 5.02(b) shall bear interest at the lesser of (i) the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in THE WALL STREET JOURNAL, or (ii) the
maximum lawful rate of interest on such obligation, such interest to accrue from
the date the Partnership or the General Partner, as applicable, is deemed to
extend the loan until such loan is repaid in full.
(c) In no event may a Partner receive a distribution of cash with
respect to a Partnership Unit if such Partner is entitled to receive a cash
dividend as the holder of record of a REIT Share for which all or part of such
Partnership Unit has been or will be exchanged.
5.03. REIT DISTRIBUTION REQUIREMENTS.
The General Partner shall use its reasonable efforts to cause the
Partnership to distribute amounts sufficient to enable the Company to pay
shareholder dividends that will allow the Company to (i) meet its distribution
requirement for qualification as a REIT as set forth in Section 857 of the Code
and (ii) avoid any federal income or excise tax liability imposed by the Code.
5.04. DISTRIBUTIONS IN KIND.
(a) Subject to Subsection (b) hereof, no Partner shall be entitled
to demand property other than cash in connection with any distributions by the
Partnership.
(b) If the Company decides to securitize mortgage loans and/or
leases of real estate through the issuance of collateralized mortgage
obligations, each of the General Partner and the Original Limited Partner has
the right to redeem a portion of its Partnership Interest in exchange for the
mortgage loans and/or leases to be securitized. The portion of a Partnership
Interest redeemed pursuant to this Section will be determined based on the fair
market value of the mortgage loans and/or leases distributed to the General
Partner or Original Limited Partner. Such fair market value will be determined
by the General Partner, but will be subject to the review of the Independent
Directors.
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5.05. LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS.
Notwithstanding any of the provisions of this Article V, no Partner
shall have the right to receive and the General Partner shall not have the right
to make, a distribution that includes a return of all or part of a Partner's
Capital Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all Partnership liabilities, other than the liabilities
to a Partner for the return of his Capital Contribution, does not exceed the
fair market value of the Partnership's assets.
5.06. DISTRIBUTIONS UPON LIQUIDATION.
Upon liquidation of the Partnership, after payment of, or adequate
provision for, debts and obligations of the Partnership, including any Partner
loans, any remaining assets of the Partnership shall be distributed to all
Partners with positive Capital Accounts in accordance with their respective
positive Capital Account balances. For purposes of the preceding sentence, the
Capital Account of each Partner shall be determined after all adjustments made
in accordance with Sections 5.01 and 5.02 resulting from Partnership operations
and from all sales and dispositions of all or any part of the Partnership's
assets. To the extent deemed advisable by the General Partner, appropriate
arrangements (including the use of a liquidating trust) may be made to assure
that adequate funds are available to pay any contingent debts or obligations.
5.07. SUBSTANTIAL ECONOMIC EFFECT.
It is the intent of the Partners that the allocations of Profit and
Loss under the Agreement have substantial economic effect (or be consistent with
the Partners' interests in the Partnership in the case of the allocation of
losses attributable to nonrecourse debt) within the meaning of Section 704(b) of
the Code as interpreted by the Regulations promulgated pursuant thereto. Article
V and other relevant provisions of this Agreement shall be interpreted in a
manner consistent with such intent.
ARTICLE VI
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER
6.01. MANAGEMENT OF THE PARTNERSHIP.
(a) Except as otherwise expressly provided in this Agreement, the
General Partner shall have full, complete and exclusive discretion to manage and
control the business of the Partnership for the purposes herein stated, and
shall make all decisions affecting the business and assets of the Partnership.
Subject to the restrictions specifically contained in this Agreement, the powers
of the General Partner shall include, without limitation, the authority to take
the following actions on behalf of the Partnership:
(i) to acquire, purchase, own, operate, lease and dispose of
any real property and any other property or assets including, but not
limited to notes and
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mortgages, that the General Partner determines are necessary or
appropriate or in the best interests of the business of the
Partnership;
(ii) to construct buildings and make other improvements on the
properties owned or leased by the Partnership;
(iii) to authorize, issue, sell, redeem or otherwise purchase
any Partnership Interests or any securities (including secured and
unsecured debt obligations of the Partnership, debt obligations of the
Partnership convertible into any class or series of Partnership
Interests, or options, rights, warrants or appreciation rights relating
to any Partnership Interests) of the Partnership;
(iv) to borrow or lend money for the Partnership, issue or
receive evidences of indebtedness in connection therewith, refinance,
increase the amount of, modify, amend or change the terms of, or extend
the time for the payment of, any such indebtedness, and secure such
indebtedness by mortgage, deed of trust, pledge or other lien on the
Partnership's assets;
(v) to pay, either directly or by reimbursement, for all
operating costs and general administrative expenses of the Partnership
to third parties or to the General Partner or its Affiliates as set
forth in this Agreement,
(vi) to guarantee or become a comaker of indebtedness of the
Company or any Subsidiary thereof, refinance, increase the amount of,
modify, amend or change the terms of, or extend the time for the
payment of, any such guarantee or indebtedness, and secure such
guarantee or indebtedness by mortgage, deed of trust, pledge or other
lien on the Partnership's assets;
(vii) to use assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with this
Agreement, including, without limitation, payment, either directly or
by reimbursement, of all operating costs and general administrative
expenses of the Company, the General Partner, the Partnership or any
Subsidiary of either, to third parties or to the General Partner as set
forth in this Agreement;
(viii) to lease all or any portion of any of the Partnership's
assets, whether or not the terms of such leases extend beyond the
termination date of the Partnership and whether or not any portion of
the Partnership's assets so leased are to be occupied by the lessee,
or, in turn, subleased in whole or in part to others, for such
consideration and on such terms as the General Partner may determine;
(ix) to prosecute, defend, arbitrate, or compromise any and
all claims or liabilities in favor of or against the Partnership, on
such terms and in such manner as the General Partner may reasonably
determine, and similarly to prosecute, settle or defend litigation with
respect to the Partners, the Partnership, or the
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Partnership's assets; provided, HOWEVER, that the General Partner may
not, without the consent of all of the Partners, confess a judgment
against the Partnership that is in excess of $20,000 or is not covered
by insurance;
(x) to file applications, communicate, and otherwise deal
with any and all governmental agencies having jurisdiction over, or in
any way affecting, the Partnership's assets or any other aspect of the
Partnership business;
(xi) to make or revoke any election permitted or required of
the Partnership by any taxing authority;
(xii) to maintain such insurance coverage for public liability,
fire and casualty, and any and all other insurance for the protection
of the Partnership, for the conservation of Partnership assets, or for
any other purpose convenient or beneficial to the Partnership, in such
amounts and such types, as it shall determine from time to time;
(xiii) to determine whether or not to apply any insurance
proceeds for any property to the restoration of such property or to
distribute the same;
(xiv) to establish one or more divisions of the Partnership, to
hire and dismiss employees of the Partnership or any division of the
Partnership, and to retain legal counsel, accountants, consultants,
real estate brokers, and such other persons, as the General Partner may
deem necessary or appropriate in connection with the Partnership
business and to pay therefor such reasonable remuneration as the
General Partner may deem reasonable and proper;
(xv) to retain other services of any kind or nature in
connection with the Partnership business, and to pay therefor such
remuneration as the General Partner may deem reasonable and proper;
(xvi) to negotiate and conclude agreements on behalf of the
Partnership with respect to any of the rights, powers and authority
conferred upon the General Partner;
(xvii) to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of
the Partnership;
(xviii) to distribute Partnership cash or other Partnership
assets in accordance with this Agreement;
(xix) to form or acquire an interest in, and contribute
property to, any further limited or general partnerships, joint
ventures or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the
contributions of property to, its Subsidiaries and any other Person in
which it has an equity interest from time to time);
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(xx) to establish Partnership reserves for working capital,
capital expenditures, contingent liabilities, or any other valid
Partnership purpose; and
(xxi) to merge, consolidate or combine the Partnership with or
into another person (to the extent permitted by applicable law);
(xxii) to do any and all acts and things necessary or prudent to
ensure that the Partnership will not be classified as a "publicly
traded partnership" for purposes of Section 7704 of the Code; and
(xxiii)to take such other action, execute, acknowledge, swear to
or deliver such other documents and instruments, and perform any and
all other acts that the General Partner deems necessary or appropriate
for the formation, continuation and conduct of the business and affairs
of the Partnership (including, without limitation, all actions
consistent with allowing the Company at all times to qualify as a REIT
unless the Company voluntarily terminates its REIT status) and to
possess and enjoy all of the rights and powers of a general partner as
provided by the Act.
(b) Except as otherwise provided herein, to the extent the duties of
the General Partner require expenditures of funds to be paid to third parties,
the General Partner shall not have any obligations hereunder except to the
extent that partnership funds are reasonably available to it for the performance
of such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.
6.02. DELEGATION OF AUTHORITY.
The General Partner may delegate any or all of its powers, rights and
obligations hereunder, and may appoint, employ, contract or otherwise deal with
any Person for the transaction of the business of the Partnership, which Person
may, under supervision of the General Partner, perform any acts or services for
the Partnership as the General Partner may approve.
6.03. INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.
(a) The Partnership shall indemnify an Indemnitee from and against
any and all losses, claims, damages, liabilities, joint or several, expenses
(including reasonable legal fees and expenses), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate to
the operations of the Partnership as set forth in this Agreement in which any
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, unless it is established that: (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or
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(iii) in the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 6.03(a). The termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 6.03(a). Any indemnification
pursuant to this Section 6.03 shall be made only out of the assets of the
Partnership.
(b) The Partnership shall reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.03 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 6.03 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity.
(d) The Partnership may purchase and maintain insurance, on behalf
of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.03, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 6.03; and actions
taken or omitted by the Indemnitee with respect to an employee benefit plan in
the performance of its duties for a purpose reasonably believed by it to be in
the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the
Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 6.03 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
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(h) The provisions of this Section 6.03 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
6.04. LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith. The General Partner shall not be in breach of any duty that
the General Partner may owe to the Limited Partners or the Partnership or any
other Persons under this Agreement or of any duty stated or implied by law or
equity provided the General Partner, acting in good faith, abides by the terms
of this Agreement.
(b) The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership, the Company and the Company's
shareholders collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners or the tax consequences of
same, but not all, of the Limited Partners) in deciding whether to cause the
Partnership to take (or decline to take) any actions. In the event of a conflict
between the interests of the shareholders of the Company on one hand and the
Limited Partners on the other, the General Partner shall endeavor in good faith
to resolve the conflict in a manner not adverse to either the shareholders of
the Company or the Limited Partners; PROVIDED, HOWEVER, that for so long as the
Company, directly or the General Partner owns a controlling interest in the
Partnership, any such conflict that the General Partner, in its sole and
absolute discretion, determines cannot be resolved in a manner not adverse to
either the shareholders of the Company or the Limited Partners shall be resolved
in favor of the shareholders. The General Partner shall not be liable for
monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, PROVIDED that the
General Partner has acted in good faith.
(c) Subject to its obligations and duties as General Partner set
forth in Section 6.01 hereof, the General Partner may exercise any of the powers
granted to it under this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The General Partner shall
not be responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.
(d) Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Company to
continue to qualify as a REIT or (ii) to prevent the Company from incurring any
taxes under Section 857, Section 4981, or any other provision of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
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(e) Any amendment, modification or repeal of this Section 6.04 or
any provision hereof shall be prospective only and shall not in any way affect
the limitations on the General Partner's liability to the Partnership and the
Limited Partners under this Section 6.04 as in effect immediately prior to such
amendment, modification or repeal with respect to matters occurring, in whole or
in part, prior to such amendment, modification or repeal, regardless of when
claims relating to such matters may arise or be asserted.
6.05. REIMBURSEMENT OF GENERAL PARTNER.
(a) Except as provided in this Section 6.05 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its sole and absolute
discretion, for all REIT Expenses and Administrative Expenses.
6.06. OUTSIDE ACTIVITIES.
The Partners and any officer, director, employee, agent, trustee,
Affiliate, Subsidiary, or shareholder of any Partner shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
substantially similar or identical to those of the Partnership. Neither the
Partnership nor any of the Limited Partners shall have any rights by virtue of
this Agreement in any such business ventures, interest or activities. None of
the Limited Partners nor any other Person shall have any rights by virtue of
this Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the General Partner shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures, interests and activities to the Partnership or any Limited
Partner, even if such opportunity is of a character which, if presented to the
Partnership or any Limited Partner, could be taken by such Person.
6.07. EMPLOYMENT OR RETENTION OF AFFILIATES.
(a) Any Affiliate of the General Partner may be employed or retained
by the Partnership and may otherwise deal with the Partnership (whether as a
buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent,
lender or otherwise) and may receive from the Partnership any compensation,
price, or other payment therefor which the General Partner determines to be fair
and reasonable.
(b) The Partnership may lend or contribute to its Subsidiaries or
other Persons in which it has an equity investment, and such Persons may borrow
funds from the Partnership, on terms and conditions established in the sole and
absolute discretion of the General Partner. The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other Person.
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(c) The Partnership may transfer assets to joint ventures, other
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions as the
General Partner deems are consistent with this Agreement and applicable law.
(d) Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are on terms that are fair and
reasonable to the Partnership.
6.08. GENERAL PARTNER PARTICIPATION.
The General Partner agrees, on behalf of the Company that all business
activities of the Company shall generally be conducted through the Partnership
or one or more Subsidiary Partnerships, unless otherwise determined by the
Independent Directors.
6.9. TITLE TO PARTNERSHIP ASSETS.
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; PROVIDED,
HOWEVER, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
6.10. [INTENTIONALLY OMITTED].
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.01. TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST.
(a) The General Partner shall not transfer all or any portion of its
General Partnership Interest or withdraw as General Partner except as provided
in or in connection with a transaction contemplated by Section 7.01(c), (d) or
(e).
(b) The General Partner agree that the Percentage Interest for it
and the Company will at all times be in the aggregate, at least 1%.
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(c) Except as otherwise provided in Section 6.04(b) or Section
7.01(d) or (e) hereof, the Company shall not engage in any merger, consolidation
or other combination with or into another Person or sale of all or substantially
all of its assets, (other than in connection with a change in the Company's
state of incorporation or organizational form) in each case which results in a
change of control of the Company (a "Transaction"), unless:
(i) the consent of Limited Partners (other than the General
Partner or any Subsidiary) holding more than 50% of the Percentage
Interests of the Limited Partners (other than those held by the General
Partner or any Subsidiary) is obtained;
(ii) as a result of such Transaction all Limited Partners will
receive for each Partnership Unit an amount of cash, securities, or
other property equal to the product of the Conversion Factor and the
greatest amount of cash, securities or other property paid in the
Transaction to a holder of one REIT Share in consideration of one REIT
Share, PROVIDED THAT if, in connection with the Transaction, a
purchase, tender or exchange offer ("Offer") shall have been made to
and accepted by the holders of more than 50% of the outstanding REIT
Shares, each holder of Partnership Units shall be given the option to
exchange its Partnership Units for the greatest amount of cash,
securities, or other property which a Limited Partner would have
received had it (A) exercised its Exchange Right and (B) sold, tendered
or exchanged pursuant to the Offer the REIT Shares received upon
exercise of the Exchange Right immediately prior to the expiration of
the Offer; or
(iii) the Company is the surviving entity in the Transaction
and either (A) the holders of REIT Shares do not receive cash,
securities, or other property in the Transaction or (B) all Limited
Partners (other than the General Partner or any Subsidiary) receive an
amount of cash, securities, or other property (expressed as an amount
per REIT Share) that is no less than the product of the Conversion
Factor and the greatest amount of cash, securities, or other property
(expressed as an amount per REIT Share) received in the Transaction by
any holder of REIT Shares.
(d) Notwithstanding Section 7.01(c), the Company or the General
Partner may merge with or into or consolidate with another entity if immediately
after such merger or consolidation (i) substantially all of the assets of the
successor or surviving entity (the "Survivor"), other than Partnership Units
held by the Company or the General Partner, are contributed, directly or
indirectly, to the Partnership as a Capital Contribution in exchange for
Partnership Units with a fair market value equal to the value of the assets so
contributed as determined by the Survivor in good faith and (ii) the Survivor
expressly agrees to assume all obligations of the General Partner or the
Company, as appropriate, hereunder. Upon such contribution and assumption, the
Survivor shall have the right and duty to amend this Agreement as set forth in
this Section 7.01(d). The Survivor shall in good faith arrive at a new method
for the calculation of the Cash Amount, the REIT Shares Amount and Conversion
Factor for a
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Partnership Unit after any such merger or consolidation so as to approximate the
existing method for such calculation as closely as reasonably possible. Such
calculation shall take into account, among other things, the kind and amount of
securities, cash and other property that was receivable upon such merger or
consolidation by a holder of REIT Shares or options, warrants or other rights
relating thereto, and to which a holder of Partnership Units could have acquired
had such Partnership Units been exchanged immediately prior to such merger or
consolidation. Such amendment to this Agreement shall provide for adjustment to
such method of calculation, which shall be as nearly equivalent as may be
practicable to the adjustments provided for with respect to the Conversion
Factor. The Survivor also shall in good faith modify the definition of REIT
Shares and make such amendments to Section 8.05 hereof so as to approximate the
existing rights and obligations set forth in Section 8.05 as closely as
reasonably possible. The above provisions of this Section 7.01(d) shall
similarly apply to successive mergers or consolidations permitted hereunder.
In respect of any transaction described in the preceding Paragraph, the
Company is required to use its commercially reasonable efforts to structure such
transaction to avoid causing the Limited Partners to recognize a gain for
federal income tax purposes by virtue of the occurrence of or their
participation in such transaction, provided such efforts are consistent with the
exercise of the Board of Directors' fiduciary duties to the shareholders of the
Company under applicable law.
(e) Notwithstanding Section 7.01(c),
(i) a General Partner may transfer all or any portion of its
General Partnership Interest to (A) a wholly-owned Subsidiary of such
General Partner or (B) the owner of all of the ownership interests of
such General Partner, and following a transfer of all of its General
Partnership Interest, may withdraw as General Partner; and
(ii) the Company may engage in a transaction not required by
law or by the rules of any national securities exchange on which the
REIT Shares are listed to be submitted to the vote of the holders of
the REIT Shares.
7.02. ADMISSION OF A SUBSTITUTE OR ADDITIONAL GENERAL PARTNER.
A Person shall be admitted as a substitute or additional General
Partner of the Partnership only if the following terms and conditions are
satisfied:
(a) the Person to be admitted as a substitute or additional General
Partner shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a General Partner, and a certificate evidencing
the admission of such Person as a General Partner shall have been filed for
recordation and all other actions required by Section 2.05 hereof in connection
with such admission shall have been performed;
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(b) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of such
Person's authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel and the state or any other
jurisdiction as may be necessary) that the admission of the person to be
admitted as a substitute or additional General Partner is in conformity with the
Act, that none of the actions taken in connection with the admission of such
Person as a substitute or additional General Partner will cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited liability.
7.03. EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH OR DISSOLUTION OF A
GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to a General
Partner (and its removal pursuant to Section 7.04(a) hereof) or the death,
withdrawal, removal or dissolution of a General Partner (except that, if a
General Partner is on the date of such occurrence a partnership, the withdrawal,
death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such
partnership shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining partner or
partners), the Partnership shall be dissolved and terminated unless the
Partnership is continued pursuant to Section 7.03(b) hereof. The merger of the
General Partner with or into any entity that is admitted as a substitute or
successor General Partner pursuant to Section 7.02 hereof shall not be deemed to
be the withdrawal, dissolution or removal of the General Partner.
(b) Following the occurrence of an Event of Bankruptcy as to a
General Partner (and its removal pursuant to Section 7.04(a) hereof) or the
death, withdrawal, removal or dissolution of a General Partner (except that, if
a General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such
General Partner if the business of such General Partner is continued by the
remaining partner or partners), the Limited Partners, within 90 days after such
occurrence, may elect to continue the business of the Partnership for the
balance of the term specified in Section 2.04 hereof by selecting, subject to
Section 7.02 hereof and any other provisions of this Agreement, a substitute
General Partner by consent of a majority in interest of the Limited Partners. If
the Limited Partners elect to continue the business of the Partnership and admit
a substitute General Partner, the relationship with the Partners and of any
Person who has acquired an interest of a Partner in the Partnership shall be
governed by this Agreement.
7.04. REMOVAL OF A GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to, or the
dissolution of, a General Partner, such General Partner shall be deemed to be
removed automatically; provided, however, that if a General Partner is on the
date of such occurrence a partnership, the
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withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a
partner in such partnership shall be deemed not to be a dissolution of the
General Partner if the business of such General Partner is continued by the
remaining partner or partners. The Limited Partners may not remove the General
Partner, with or without cause.
(b) If a General Partner has been removed pursuant to this Section
7.04 and the Partnership is continued pursuant to Section 7.03 hereof, such
General Partner shall promptly transfer and assign its General Partnership
Interest in the Partnership to the substitute General Partner approved by a
majority in interest of the Limited Partners in accordance with Section 7.03(b)
hereof and otherwise admitted to the Partnership in accordance with Section 7.02
hereof. At the time of assignment, the removed General Partner shall be entitled
to receive from the substitute General Partner the fair market value of the
General Partnership Interest of such removed General Partner as reduced by any
damages caused to the Partnership by such General Partner. Such fair market
value shall be determined by an appraiser mutually agreed upon by the General
Partner and a majority in interest of the Limited Partners within 10 days
following the removal of the General Partner. In the event that the parties are
unable to agree upon an appraiser, the removed General Partner and a majority in
interest of the Limited Partners each shall select an appraiser. Each such
appraiser shall complete an appraisal of the fair market value of the removed
General Partner's General Partnership Interest within 30 days of the General
Partner's removal, and the fair market value of the removed General Partner's
General Partnership Interest shall be the average of the two appraisals;
PROVIDED, HOWEVER, that if the higher appraisal exceeds the lower appraisal by
more than 20% of the amount of the lower appraisal, the two appraisers, no later
than 40 days after the removal of the General Partner, shall select a third
appraiser who shall complete an appraisal of the fair market value of the
removed General Partner's General Partnership Interest no later than 60 days
after the removal of the General Partner. In such case, the fair market value of
the removed General Partner's General Partnership Interest shall be the average
of the two appraisals closest in value.
(c) The General Partnership Interest of a removed General Partner,
during the time after default until transfer under Section 7.04(b), shall be
converted to that of a special Limited Partner; PROVIDED, HOWEVER, such removed
General Partner shall not have any rights to participate in the management and
affairs of the Partnership, and shall not be entitled to any portion of the
income, expense, profit, gain or loss allocations or cash distributions
allocable or payable, as the case may be, to the Limited Partners. Instead, such
removed General Partner shall receive and be entitled only to retain
distributions or allocations of such items that it would have been entitled to
receive in its capacity as General Partner, until the transfer is effective
pursuant to Section 7.04(b).
(d) All Partners shall have given and hereby do give such consents,
shall take such actions and shall execute such documents as shall be legally
necessary and sufficient to effect all the foregoing provisions of this Section.
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ARTICLE VIII
RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS
8.01. MANAGEMENT OF THE PARTNERSHIP.
The Limited Partners shall not participate in the management or control
of Partnership business nor shall they transact any business for the
Partnership, nor shall they have the power to sign for or bind the Partnership,
such powers being vested solely and exclusively in the General Partner.
8.02. POWER OF ATTORNEY.
Each Limited Partner hereby irrevocably appoints the General Partner
its true and lawful attorney-in-fact, who may act for each Limited Partner and
in its name, place and stead, and for its use and benefit, to sign, acknowledge,
swear to, deliver, file or record, at the appropriate public offices, any and
all documents, certificates, and instruments as may be deemed necessary or
desirable by the General Partner to carry out fully the provisions of this
Agreement and the Act in accordance with their terms, which power of attorney is
coupled with an interest and shall survive the death, dissolution or legal
incapacity of the Limited Partner, or the transfer by the Limited Partner of any
part or all of its Partnership Interest.
8.03. LIMITATION ON LIABILITY OF LIMITED PARTNERS.
No Limited Partner shall be liable for any debts, liabilities,
contracts or obligations of the Partnership. A Limited Partner shall be liable
to the Partnership only to make payments of its Capital Contribution, if any, as
and when due hereunder. After its Capital Contribution is fully paid, no Limited
Partner shall, except as otherwise required by the Act, be required to make any
further Capital Contributions or other payments or lend any funds to the
Partnership.
8.04. OWNERSHIP BY LIMITED PARTNER OF CORPORATE GENERAL PARTNER OR
AFFILIATE.
No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General Partner or in any Affiliate
thereof, if such ownership by itself or in conjunction with other stock or other
interests owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. The General Partner shall be
entitled to make such reasonable inquiry of the Limited Partners as is required
to establish compliance by the Limited Partners with the provisions of this
Section.
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8.05. EXCHANGE RIGHT.
(a) Subject to Sections 8.05(b), 8.05(c), 8.05(d), 8.05(e) and
8.05(f) and the provisions of any agreements between the Partnership and one or
more Limited Partners with respect to Partnership Units held by them, each
Limited Partner, other than the Company, shall have the right (the "Exchange
Right") to require the Partnership to redeem on a Specified Exchange Date all or
a portion of the Partnership Units held by such Limited Partner at an exchange
price equal to and in the form of the Cash Amount to be paid by the Partnership,
PROVIDED that such Partnership Units shall have been outstanding for at least
one year. The Exchange Right shall be exercised pursuant to a Notice of Exchange
delivered to the Partnership (with a copy to the General Partner) by the Limited
Partner who is exercising the Exchange Right (the "Exchanging Partner");
PROVIDED, HOWEVER, that the Partnership shall not be obligated to satisfy such
Exchange Right if the Company and/or the General Partner elects to purchase the
Partnership Units subject to the Notice of Exchange pursuant to Section 8.05(b);
and PROVIDED, FURTHER, that no Limited Partner may deliver more than two Notices
of Exchange during each calendar year. A Limited Partner may not exercise the
Exchange Right for less than 1,000 Partnership Units or, if such Limited Partner
holds less than 1,000 Partnership Units, all of the Partnership Units held by
such Partner. The Exchanging Partner shall have no right, with respect to any
Partnership Units so exchanged, to receive any distribution paid with respect to
Partnership Units if the record date for such distribution is on or after the
Specified Exchange Date.
(b) Notwithstanding the provisions of Section 8.05(a), a Limited
Partner that exercises the Exchange Right shall be deemed to have offered to
sell the Partnership Units described in the Notice of Exchange to the General
Partner and the Company, and either of the General Partner or the Company (or
both) may, in its sole and absolute discretion, elect to purchase directly and
acquire such Partnership Units by paying to the Exchanging Partner either the
Cash Amount or the REIT Shares Amount, as elected by the General Partner or the
Company (in its sole and absolute discretion), on the Specified Exchange Date,
whereupon the General Partner or the Company shall acquire the Partnership Units
offered for exchange by the exchanging Partner and shall be treated for all
purposes of this Agreement as the owner of such Partnership Units. If the
General Partner and/or the Company shall elect to exercise its right to purchase
Partnership Units under this Section 8.05(b) with respect to a Notice of
Exchange, they shall so notify the Exchanging Partner within five Business Days
after the receipt by the General Partner of such Notice of Exchange. Unless the
General Partner and/or the Company (in its sole and absolute discretion) shall
exercise its right to purchase Partnership Units from the Exchanging Partner
pursuant to this Section 8.05(b), neither the General Partner nor the Company
shall have any obligation to the Exchanging Partner or the Partnership with
respect to the Exchanging Partner's exercise of the Exchange Right. In the event
the General Partner or the Company shall exercise its right to purchase
Partnership Units with respect to the exercise of a Exchange Right in the manner
described in the first sentence of this Section 8.05(b), the Partnership shall
have no obligation to pay any amount to the Exchanging Partner with respect to
such Exchanging Partner's exercise of such Exchange Right, and each of the
Exchanging Partner, the Partnership, and the General Partner or the Company, as
the case may be, shall treat the transaction between the General Partner or the
Company, as the case may be, and the Exchanging
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Partner for federal income tax purposes as a sale of the Exchanging Partner's
Partnership Units to the General Partner or the Company, as the case may be.
Each Exchanging Partner agrees to execute such documents as the General Partner
may reasonably require in connection with the issuance of REIT Shares upon
exercise of the Exchange Right.
(c) Notwithstanding the provisions of Section 8.05(a) and 8.05(b), a
Limited Partner shall not be entitled to exercise the Exchange Right if the
delivery of REIT Shares to such Partner on the Specified Exchange Date by the
General Partner or the Company pursuant to Section 8.05(b) (regardless of
whether or not the General Partner or the Company would in fact exercise its
rights under Section 8.05(b)) would (i) result in such Partner or any other
person owning, directly or indirectly, REIT Shares in excess of the Ownership
Limitation (as defined in the Amended and Restated Articles of Incorporation)
and calculated in accordance therewith, except as provided in the Amended and
Restated Articles of Incorporation, (ii) result in REIT Shares being owned by
fewer than 100 persons (determined without reference to any rules of
attribution), except as provided in the Amended and Restated Articles of
Incorporation, (iii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, (iv) cause the Company to own, directly
or constructively, 10% or more of the ownership interests in a tenant of the
General Partner's, the Partnership's, or a Subsidiary Partnership's, real
property, within the meaning of Section 856(d)(2)(B) of the Code, or (v) cause
the acquisition of REIT Shares by such Partner to be "integrated" with any other
distribution of REIT Shares for purposes of complying with the registration
provisions of the Securities Act of 1933, as amended (the "Securities Act"). The
General Partner or the Company, in their sole and absolute discretion, may waive
the restriction on exchange set forth in this Section 8.05(c); PROVIDED,
HOWEVER, that in the event such restriction is waived, the Exchanging Partner
shall be paid the Cash Amount.
(d) Any Cash Amount to be paid to an Exchanging Partner pursuant to
this Section 8.05 shall be paid on the Specified Exchange Date; PROVIDED,
HOWEVER, that the Company or the General Partner may elect to cause the
Specified Exchange Date to be delayed for up to an additional 180 days to the
extent required for the Company to cause additional REIT Shares to be issued to
provide financing to be used to make such payment of the Cash Amount.
Notwithstanding the foregoing, the Company and the General Partner agree to use
their best efforts to cause the closing of the acquisition of exchanged
Partnership Units hereunder to occur as quickly as reasonably possible.
(e) Notwithstanding any other provision of this Agreement, the
General Partner shall place appropriate restrictions on the ability of the
Limited Partners to exercise their Exchange Rights as and if deemed necessary to
ensure that the Partnership does not constitute a "publicly traded partnership"
under section 7704 of the Code. If and when the General Partner determines that
imposing such restrictions is necessary, the General Partner shall give prompt
written notice thereof (a "Restriction Notice") to each of the Limited Partners,
which notice shall be accompanied by a copy of an opinion of counsel to the
Partnership which states that, in the opinion of such counsel, restrictions are
necessary in order to avoid the Partnership being treated as a "publicly traded
partnership" under section 7704 of the Code.
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8.06. REGISTRATION.
Subject to the terms of any agreement between the Company or the
General Partner and one or more Limited Partners with respect to Partnership
Units held by them:
(a) SHELF REGISTRATION OF THE COMMON STOCK. Within two weeks prior
or subsequent to the first date upon which the Partnership Units owned by any
Limited Partner may be exchanged (or such later date as may be required under
applicable provisions of the Securities Act), the Company agrees to file with
the Securities and Exchange Commission (the "Commission"), a shelf registration
statement on Form S-3 under Rule 415 of the Securities Act (a "Registration
Statement"), or any similar rule that may be adopted by the Commission, with
respect to all of the shares of Common Stock that may be issued upon exchange of
such Partnership Units pursuant to Section 8.05 hereof ("Exchange Shares"). The
Company will use its best efforts to have the Registration Statement declared
effective under the Securities Act. The Company need not file a separate
Registration Statement, but may file one Registration Statement covering
Exchange Shares issuable to more than one Limited Partner. The Company further
agrees to supplement or make amendments to each Registration Statement, if
required by the rules, regulations or instructions applicable to the
registration form utilized by the Company or by the Securities Act or rules and
regulations thereunder for such Registration Statement.
(b) LISTING ON SECURITIES EXCHANGE. If the Company shall list or
maintain the listing of any shares of Common Stock on any securities exchange or
national market system, it will at its expense and as necessary to permit the
registration and sale of the Exchange Shares hereunder, list thereon, maintain
and, when necessary, increase such listing to include such Exchange Shares.
(c) REGISTRATION NOT REQUIRED. Notwithstanding the foregoing, the
Company shall not be required to file or maintain the effectiveness of a
registration statement relating to Exchange Shares after the first date upon
which, in the opinion of counsel to the Company, all of the Exchange Shares
covered thereby could be sold by the holders thereof in any period of three
months pursuant to Rule 144 under the Securities Act, or any successor rule
thereto.
ARTICLE IX
TRANSFER OF LIMITED PARTNERSHIP INTERESTS
9.01. PURCHASE FOR INVESTMENT.
(a) Each Limited Partner hereby represents and warrants to the
General Partner, to the Company and to the Partnership that the acquisition of
his Partnership Interests is made as a principal for his account for investment
purposes only and not with a view to the resale or distribution of such
Partnership Interest.
(b) Each Limited Partner agrees that he will not sell, assign or
otherwise transfer his Partnership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not make the representations and
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warranties to the General Partner set forth in Section 9.01(a) above and
similarly agree not to sell, assign or transfer such Partnership Interest or
fraction thereof to any Person who does not similarly represent, warrant and
agree.
9.02. RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP INTERESTS.
(a) Subject to the provisions of 9.02(b), (c) and (d), no Limited
Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all
or any portion of his Limited Partnership Interest, or any of such Limited
Partner's economic rights as a Limited Partner, whether voluntarily or by
operation of law or at judicial sale or otherwise (collectively, a "Transfer")
without the consent of the General Partner, which consent may be granted or
withheld in its sole and absolute discretion. Any such purported transfer
undertaken without such consent shall be considered to be null and void ab
initio and shall not be given effect. The General Partner may require, as a
condition of any Transfer to which it consents, that the transferor assume all
costs incurred by the Partnership in connection therewith.
(b) No Limited Partner may withdraw from the Partnership other than
as a result of a permitted Transfer (I.E., a Transfer consented to as
contemplated by clause (a) above or clause (c) below or a Transfer pursuant to
9.05 below) of all of his Partnership Units pursuant to this Article IX or
pursuant to an exchange of all of his Partnership Units pursuant to 8.05. Upon
the permitted Transfer or redemption of all of a Limited Partner's Partnership
Units, such Limited Partner shall cease to be a Limited Partner.
(c) Subject to 9.02(d), (e) and (f) below, a Limited Partner may
Transfer, with the consent of the General Partner, all or a portion of his
Partnership Units to (i) a parent or parent's spouse, natural or adopted
descendant or descendants, spouse of such descendant, or brother or sister, or a
trust created by such Limited Partner for the benefit of such Limited Partner
and/or any such person(s), of which trust such Limited Partner or any such
person(s) is a trustee, (ii) a corporation controlled by a Person or Persons
named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial
owners.
(d) No Limited Partner may effect a Transfer of its Limited
Partnership Interest, in whole or in part, if, in the opinion of legal counsel
for the Partnership, such proposed Transfer would require the registration of
the Limited Partnership Interest under the Securities Act of 1933, as amended,
or would otherwise violate any applicable federal or state securities or blue
sky law (including investment suitability standards).
(e) No Transfer by a Limited Partner of its Partnership Units, in
whole or in part, may be made to any Person if (i) in the opinion of legal
counsel for the Partnership, the transfer would result in the Partnership's
being treated as an association taxable as a corporation (other than a qualified
REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the
opinion of legal counsel for the Partnership, it would adversely affect the
ability of the Company to continue to qualify as a REIT or subject the Company
to any additional taxes under Section 857 or Section 4981 of the Code, or (iii)
such transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code.
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(f) No transfer of any Partnership Units may be made to a lender to
the Partnership or any Person who is related (within the meaning of Regulations
Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a
nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)),
without the consent of the General Partner, which may be withheld in its sole
and absolute discretion, PROVIDED THAT as a condition to such consent the lender
will be required to enter into an arrangement with the Partnership and the
General Partner to exchange or redeem for the Cash Amount any Partnership Units
in which a security interest is held simultaneously with the time at which such
lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
(g) Any Transfer in contravention of any of the provisions of this
Article IX shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
(h) Prior to the consummation of any Transfer under this Article IX,
the transferor and/or the transferee shall deliver to the General Partner such
opinions, certificates and other documents as the General Partner shall request
in connection with such Transfer.
9.03. ADMISSION OF A SUBSTITUTE LIMITED PARTNER.
(a) Subject to the other provisions of this Article IX, an assignee
of the Limited Partnership Interest of a Limited Partner (which shall be
understood to include any purchaser, transferee, donee, or other recipient of
any disposition of such Limited Partnership Interest) shall be deemed admitted
as a Limited Partner of the Partnership only with the consent of the General
Partner and upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound
by the terms and provisions of this Agreement by executing a
counterpart or an amendment thereof, including a revised EXHIBIT A, and
such other documents or instruments as the General Partner may require
in order to effect the admission of such Person as a Limited Partner.
(ii) To the extent required, an amended Certificate evidencing
the admission of such Person as a Limited Partner shall have been
signed, acknowledged and filed for record in accordance with the Act.
(iii) The assignee shall have delivered a letter containing the
representation set forth in Section 9.01(a) hereof and the agreement
set forth in Section 9.01(b) hereof.
(iv) If the assignee is a corporation, partnership or trust,
the assignee shall have provided the General Partner with evidence
satisfactory to counsel for the Partnership of the assignee's authority
to become a Limited Partner under the terms and provisions of this
Agreement.
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(v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in Section 8.02 hereof.
(vi) The assignee shall have paid all legal fees and other
expenses of the Partnership and the General Partner and filing and
publication costs in connection with its substitution as a Limited
Partner.
(vii) The assignee has obtained the prior written consent of
the General Partner to its admission as a Substitute Limited Partner,
which consent may be given or denied in the exercise of the General
Partner's sole and absolute discretion.
(b) For the purpose of allocating Profits and Losses and
distributing cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in
Section 9.03(a)(ii) hereof or, if no such filing is required, the later of the
date specified in the transfer documents or the date on which the General
Partner has received all necessary instruments of transfer and substitution.
(c) The General Partner shall cooperate with the Person seeking to
become a Substitute Limited Partner by preparing the documentation required by
this Section and making all official filings and publications. The Partnership
shall take all such action as promptly as practicable after the satisfaction of
the conditions in this Article IX to the admission of such Person as a Limited
Partner of the Partnership.
9.04. RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS.
(a) Subject to the provisions of Sections 9.01 and 9.02 hereof,
except as required by operation of law, the Partnership shall not be obligated
for any purposes whatsoever to recognize the assignment by any Limited Partner
of its Partnership Interest until the Partnership has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a
Limited Partner's Limited Partnership Interest, but does not become a Substitute
Limited Partner and desires to make a further assignment of such Limited
Partnership Interest, shall be subject to all the provisions of this Article IX
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of its Limited Partnership Interest.
9.05. EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION
OF A LIMITED PARTNER.
The occurrence of an Event of Bankruptcy as to a Limited Partner, the
death of a Limited Partner or a final adjudication that a Limited Partner is
incompetent (which term shall include, but not be limited to, insanity) shall
not cause the termination or dissolution of the Partnership, and the business of
the Partnership shall continue if an order for relief in a bankruptcy proceeding
is entered against a Limited Partner, the trustee or receiver of his estate
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or, if he dies, his executor, administrator or trustee, or, if he is finally
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of such Limited Partner for the purpose of settling or managing his
estate property and such power as the bankrupt, deceased or incompetent Limited
Partner possessed to assign all or any part of his Partnership Interest and to
join with the assignee in satisfying conditions precedent to the admission of
the assignee as a Substitute Limited Partner.
9.06. JOINT OWNERSHIP OF INTERESTS.
A Partnership Interest may be acquired by two individuals as joint
tenants with right of survivorship, provided that such individuals either are
married or are related and share the same home as tenants in common. The written
consent or vote of both owners of any such jointly held Partnership Interest
shall be required to constitute the action of the owners of such Partnership
Interest; provided, however, that the written consent of only one joint owner
will be required if the Partnership has been provided with evidence satisfactory
to the counsel for the Partnership that the actions of a single joint owner can
bind both owners under the applicable laws of the state of residence of such
joint owners. Upon the death of one owner of a Partnership Interest held in a
joint tenancy with a right of survivorship, the Partnership Interest shall
become owned solely by the survivor as a Limited Partner and not as an assignee.
The Partnership need not recognize the death of one of the owners of a
jointly-held Partnership Interest until it shall have received notice of such
death. Upon notice to the General Partner from either owner, the General Partner
shall cause the Partnership Interest to be divided into two equal Partnership
Interests, which shall thereafter be owned separately by each of the former
owners.
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.01. BOOKS AND RECORDS.
At all times during the continuance of the Partnership, the Partners
shall keep or cause to be kept at the Partnership's specified office true and
complete books of account in accordance with generally accepted accounting
principles, including: (a) a current list of the full name and last known
business address of each Partner, (b) a copy of the Certificate of Limited
Partnership and all certificates of amendment thereto, (c) copies of the
Partnership's federal, state and local income tax returns and reports, (d)
copies of the Agreement and any financial statements of the Partnership for the
three most recent years and (e) all documents and information required under the
Act. Any Partner or its duly authorized representative, upon paying the costs of
collection, duplication and mailing, shall be entitled to inspect or copy such
records during ordinary business hours.
10.02. CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested shall be
deposited in one or more accounts maintained in such banking or brokerage
institutions as the General Partner
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shall determine, and withdrawals shall be made only on such signature or
signatures as the General Partner may, from time to time, determine.
(b) All deposits and other funds not needed in the operation of the
business of the Partnership may be invested by the General Partner in investment
grade instruments (or investment companies whose portfolio consists primarily
thereof), government obligations, certificates of deposit, bankers' acceptances
and municipal notes and bonds. The funds of the Partnership shall not be
commingled with the funds of any other Person except for such commingling as may
necessarily result from an investment in those investment companies permitted by
this Section 10.02(b).
10.03. FISCAL AND TAXABLE YEAR.
The fiscal and taxable year of the Partnership shall be the calendar
year.
10.04. ANNUAL TAX INFORMATION AND REPORT.
Within 75 days after the end of each fiscal year of the Partnership,
the General Partner shall furnish to each person who was a Limited Partner at
any time during such year the tax information necessary to file such Limited
Partner's individual tax returns as shall be reasonably required by law.
10.05. TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.
(a) The General Partner shall be the Tax Matters Partner of the
Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax Matters
Partner, the General Partner shall have the right and obligation to take all
actions authorized and required, respectively, by the Code for the Tax Matters
Partner. The General Partner shall have the right to retain professional
assistance in respect of any audit of the Partnership by the Service and all
out-of-pocket expenses and fees incurred by the General Partner on behalf of the
Partnership as Tax Matters Partner shall constitute Partnership expenses. In the
event the General Partner receives notice of a final Partnership adjustment
under Section 6223(a)(2) of the Code, the General Partner shall either (i) file
a court petition for judicial review of such final adjustment within the period
provided under Section 6226(a) of the Code, a copy of which petition shall be
mailed to all Limited Partners on the date such petition is filed, or (ii) mail
a written notice to all Limited Partners, within such period, that describes the
General Partner's reasons for determining not to file such a petition.
(b) All elections required or permitted to be made by the
Partnership under the Code or any applicable state or local tax law shall be
made by the General Partner in its sole and absolute discretion.
(c) In the event of a transfer of all or any part of the Partnership
Interest of any Partner, the Partnership, at the option of the General Partner,
may elect pursuant to Section 754 of the Code to adjust the basis of the
Properties. Notwithstanding anything contained in Article V of this Agreement,
any adjustments made pursuant to Section 754 shall
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affect only the successor in interest to the transferring Partner and in no
event shall be taken into account in establishing, maintaining or computing
Capital Accounts for the other Partners for any purpose under this Agreement.
Each Partner will furnish the Partnership with all information necessary to give
effect to such election.
10.06. REPORTS TO LIMITED PARTNERS.
(a) As soon as practicable after the close of each fiscal quarter
(other than the last quarter of the fiscal year), the General Partner shall
cause to be mailed to each Limited Partner a quarterly report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such fiscal
quarter, presented in accordance with generally accepted accounting principles.
As soon as practicable after the close of each fiscal year, the General Partner
shall cause to be mailed to each Limited Partner an annual report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such fiscal
year, presented in accordance with generally accepted accounting principles. The
annual financial statements shall be audited by accountants selected by the
General Partner.
(b) Any Partner shall further have the right to a private audit of
the books and records of the Partnership, provided such audit is made for
Partnership purposes, at the expense of the Partner desiring it and is made
during normal business hours.
ARTICLE XI
AMENDMENT OF AGREEMENT; MERGER
The General Partner's consent shall be required for any amendment to
this Agreement. The General Partner, without the consent of the Limited
Partners, may amend this Agreement in any respect or merge or consolidate the
Partnership with or into any other partnership or business entity (as defined in
ss. 17-211 of the Act) in a transaction pursuant to Section 7.01(c), (d) or (e)
hereof; PROVIDED, HOWEVER, that the following amendments and any other merger or
consolidation of the Partnership shall require the consent of Limited Partners
(other than the Company) holding more than 50% of the Percentage Interests of
the Limited Partners (other than the Company):
(a) any amendment affecting the operation of the Conversion Factor
or the Exchange Right (except as provided in Section 8.05(d) or 7.01(d) hereof)
in a manner adverse to the Limited Partners;
(b) any amendment that would adversely affect the rights of the
Limited Partners to receive the distributions payable to them hereunder, other
than with respect to the issuance of additional Partnership Units pursuant to
Section 4.02 hereof;
(c) any amendment that would alter the Partnership's allocations of
Profit and Loss to the Limited Partners, other than with respect to the issuance
of additional Partnership Units pursuant to Section 4.02 hereof; or
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(d) any amendment that would impose on the Limited Partners any
obligation to make additional Capital Contributions to the Partnership.
ARTICLE XII
GENERAL PROVISIONS
12.01. NOTICES.
All communications required or permitted under this Agreement shall be
in writing and shall be deemed to have been given when delivered personally or
upon deposit in the United States mail, registered, postage prepaid return
receipt requested, to the Partners at the addresses set forth in EXHIBIT A
attached hereto; PROVIDED, HOWEVER, that any Partner may specify a different
address by notifying the General Partner in writing of such different address.
Notices to the Partnership shall be delivered at or mailed to its specified
office.
12.02. SURVIVAL OF RIGHTS.
Subject to the provisions hereof limiting transfers, this Agreement
shall be binding upon and inure to the benefit of the Partners and the
Partnership and their respective legal representatives, successors, transferees
and assigns.
12.03. ADDITIONAL DOCUMENTS.
Each Partner agrees to perform all further acts and execute, swear to,
acknowledge and deliver all further documents which may be reasonable,
necessary, appropriate or desirable to carry out the provisions of this
Agreement or the Act.
12.04. SEVERABILITY.
If any provision of this Agreement shall be declared illegal, invalid,
or unenforceable in any jurisdiction, then such provision shall be deemed to be
severable from this Agreement (to the extent permitted by law) and in any event
such illegality, invalidity or unenforceability shall not affect the remainder
hereof.
12.05. ENTIRE AGREEMENT.
This Agreement and exhibits attached hereto constitute the entire
Agreement of the Partners and supersede all prior written agreements and prior
and contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
12.06. PRONOUNS AND PLURALS.
When the context in which words are used in the Agreement indicates
that such is the intent, words in the singular number shall include the plural
and the masculine gender shall include the neuter or female gender as the
context may require.
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12.07. HEADINGS.
The Article headings or sections in this Agreement are for convenience
only and shall not be used in construing the scope of this Agreement or any
particular Article.
12.08. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto,
notwithstanding that all parties shall not have signed the same counterpart.
12.09. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Third Amended and Restated Agreement of Limited Partnership,
all as of the date first above written.
OCWEN GENERAL, INC.
By: /s/ WILLIAM C. ERBEY
---------------------------
Name: William C. Erbey
Title: Chief Executive Officer
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<TABLE>
<CAPTION>
EXHIBIT A
Agreed
Value Of
Cash Capital Partnership Percentage
Partner Contribution Contribution Units Interest
- ------- ------------ ------------ ----- --------
GENERAL PARTNER:
<S> <C> <C> <C> <C>
Ocwen General, Inc. $ 3,005,191 189,650 .9120%
1675 Palm Beach Lakes Blvd.
Suite 1000
West Palm Beach, FL 33401
LIMITED PARTNERS:
Ocwen Limited, Inc. $297,513,897 18,775,350 90.2859%
1675 Palm Beach Lakes Blvd.
Suite 1000
West Palm Beach, FL 33401
Investors Mortgage Insurance Holding $ 30,948,693 1,830,436 8.8021%
Company
1675 Palm Beach Lakes Blvd.
Suite 1000
West Palm Beach, FL 33401
TOTAL: $331,467,781 20,795,436 100.00%
</TABLE>
<PAGE>
EXHIBIT B
NOTICE OF EXERCISE OF EXCHANGE RIGHT
In accordance with Section 8.05 of the Amended and Restated Agreement
of Limited Partnership (the "Agreement") of Ocwen Partnership, L.P., the
undersigned hereby irrevocably (i) presents for exchange ________ Partnership
Units in Ocwen Partnership, L.P. in accordance with the terms of the Agreement
and the Exchange Right referred to in Section 8.05 thereof, (ii) surrenders such
Partnership Units and all right, title and interest therein, and (iii) directs
that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as
determined by the General Partner deliverable upon exercise of the Exchange
Right be delivered to the address specified below, and if REIT Shares (as
defined in the Agreement) are to be delivered, such REIT Shares be registered or
placed in the name(s) and at the address(es) specified below.
Dated:___________, _____
Name of Limited Partner:
------------------------------
(Signature of Limited Partner)
------------------------------
(Mailing Address)
------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------
If REIT Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
Exhibit 10.8
================================================================================
PSA THE BOND MARKET
TRADE ASSOCIATION
FORM OF
MASTER REPURCHASE AGREEMENT
SEPTEMBER 1996 VERSION
================================================================================
Dated as of March 30, 1998
By and Among:
OCWEN PARTNERSHIP L.P.,
MERRILL LYNCH MORTGAGE CAPITAL INC.
AND
MERRILL LYNCH CREDIT CORPORATION
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in which
one party ("Seller") agrees to transfer to the other ("Buyer") securities or
other assets ("Securities") against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Securities at a
date certain or on demand, against the transfer of funds by Seller. Each
such transaction shall be referred to herein as a "Transaction" and, unless
otherwise agreed in writing, shall be governed by this Agreement, including
any supplemental terms or conditions contained in Annex I hereto and in any
other annexes identified herein or therein as applicable hereunder.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to any party, (i) the commencement by
such party as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, moratorium, dissolution,
delinquency or similar law, or such party seeking the appointment or
election of a receiver, conservator, trustee, custodian or similar
official for such party or any substantial part of its property, or the
convening of any meeting of creditors for purposes of commencing any
such case or proceeding or seeking such an appointment or election,
(ii) the commencement of any such case or proceeding against such
party, or another seeking such an appointment or election, or the
filing against a party of an application for a protective decree under
the provisions of the Securities Investor Protection Act of 1970, which
(A) is consented to or not timely contested by such party, (B) results
in the entry of an order for relief, such an appointment or election,
the issuance of such a protective decree or the entry of an order
having a similar effect, or (C) is not dismissed within 15 days, (iii)
the making by such party of a general assignment for the benefit of
creditors, or (iv) the admission in writing by such party of such
party's inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of the Buyer's Margin
Percentage to the Repurchase Price for such Transaction as of such
date:
<PAGE>
(d) "Buyer's Margin Percentage", with respect to any Transaction as of any
date, a percentage (which may be equal to the Seller's Margin
Percentage) agreed to by Buyer and Seller or, in the absence of any
such agreement, the percentage obtained by dividing the Market Value of
the Purchased Securities on the Purchase Date by the Purchase Price on
the Purchase Date for such Transaction;
(e) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(f) "Income", with respect to any Security at any time, any principal
thereof and all interest, dividends or other distributions thereon;
(g) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(h) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(i) "Margin Notice Deadline", the time agreed to by the parties in the
relevant Confirmation, Annex I hereto or otherwise as the deadline for
giving notice requiring same-day satisfaction of margin maintenance
obligations as provided in Paragraph 4 hereof (or, in the absence of
any such agreement, the deadline for such purposes established in
accordance with market practice);
(j) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally
recognized source agreed to by the parties or the most recent closing
bid quotation from such a source, plus accrued Income to the extent not
included therein(other than any Income credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof)
as of such date (unless contrary to market practice for such
Securities);
(k) "Price Differential", with respect to any Transaction as of any date,
the aggregate amount obtained by daily application of the Pricing Rate
for such Transaction to the Purchase Price for such Transaction on a
360-day-per-year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction
and ending on (but excluding) the date of determination (reduced by any
amount of such Price Differential previously paid by Seller to Buyer
with respect to such Transaction);
(l) "Pricing Rate", the per annum percentage rate for determination of the
Price Differential;
(m) "Prime Rate", the prime rate of U.S. commercial banks as published in
THE WALL STREET JOURNAL (or, if more than one such rate is published,
the average of such rates);
(n) "Purchase Date", the date on which Purchased Securities are to be
transferred by Seller to Buyer;
(o) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii)
thereafter, except where Buyer and Seller agree otherwise, such price
increased by the amount of any cash transferred by Buyer to Seller
pursuant to Paragraph 4(b) hereof and decreased by the amount of any
cash transferred by Seller and Buyer pursuant to Paragraph 4(a) hereof
or applied to reduce Seller's obligations under clause (ii) of
Paragraph 5 hereof;
(p) "Purchased Securities", the Securities transferred by Seller to Buyer
in a Transaction hereunder, and any Securiti4es substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities"
with respect to any Transaction at any time also shall include Addition
Purchased Securities delivered pursuant to Paragraph 4(a) hereof and
shall exclude Securities returned pursuant to Paragraph 4(b) hereof;
(q) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by
application of the provisions of Paragraph 3(C) or 11 hereof;
(r) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction,
which will be determined in each case (including Transactions
terminable upon demand) as the sum of the Purchased Price and the Price
Differential as of the date of such determination.
2
<PAGE>
(s) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application the Seller's Margin Percentage
to the Repurchase Price for such Transaction as of such date;
(t) "Seller's Margin Percentage", with respect to any Transaction as of any
date, a percentage (which may be equal to the Buyer's Margin
Percentage) agreed to by Buyer and Seller or, in the absence of any
such agreement, the percentage obtained by dividing the Market Value of
the Purchased Securities on the Purchase Date by the Purchase Price on
the Purchase Date for such Transaction.
3. INITIATION; CONFIRMATION; TERMINATION
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller. On the Purchase
Date for the Transaction, the Purchased Securities shall be transferred
to Buyer or its agent against the transfer of the Purchase Price to an
account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller(or
both), as shall be agreed, shall promptly deliver to the other party a
written confirmation of each Transaction (a "Confirmation"). The
Confirmation shall describe the Purchased Securities (including CUSIP
number, if any), identify Buyer and Seller and set forth (i) the
Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date,
unless the Transaction is to be terminable on demand, (iv) the Pricing
Rate or Repurchase Price applicable to the Transaction, and(v) any
additional terms or conditions of the Transaction not inconsistent with
this Agreement. The Confirmation, together with the Agreement, shall
constitute conclusive evidence of the terms agreed between Buyer and
Seller with respect to the Transaction to which the Confirmation
relates, unless with respect to the Confirmation specific objection is
made promptly after receipt thereof. In the event of any conflict
between the terms of such Confirmation and this Agreement, this
Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall
be made by Buyer or Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior
to the business day on which such termination will be effective. On the
date specified in such demand, or on the date fixed for termination in
the case of Transactions having a fixed term, termination of the
Transaction will be effected by transfer to Seller or its agent of the
Purchased Securities and any Income in respect thereof received by
Buyer (and not previously credited or transferred to, or applied to the
obligations of, Seller pursuant to Paragraph 5 hereof) against the
transfer of the Repurchase Price to an account of Buyer.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all transactions which a particular party hereto is acting
as Buyer is less than the aggregate Buyer's margin Amount for all such
Transactions (a "Margin Deficit"), then Buyer may by notice to Seller
require Seller in such Transactions, at Seller's option, to transfer to
Buyer cash or additional Securities reasonably acceptable to Buyer
("Additional Purchased Securities"), so that the cash and aggregate
Market Value of the Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed such aggregate
Buyer's margin Amount (decreased by the amount of any Margin Deficit as
of such date arising from any Transactions in which such Buyer is
acting as the Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is
acting as Seller exceed the aggregate Seller's margin Amount for all
such Transactions at such time (a "Margin Excess"), then Seller may be
notice to Buyer require Buyer in such Transactions, at Buyer's option,
to transfer cash or Purchased Securities to Seller, so that the
aggregate Market Value of the Purchased Securities, after deduction of
any such
3
<PAGE>
cash or any Purchased Securities so transferred, will thereupon not
exceed such aggregate Seller's Margin Amount (increased by the amount
of any Margin Excess as of such date arising from any Transactions in
which such Seller is acting as Buyer).
(c) If any notice is given by Buyer or Seller under subparagraph (a) or (b)
of this Paragraph at or before the Margin Notice Deadline on any
business day, the party receiving such notice shall transfer cash or
Additional Purchased Securities as provided in such subparagraph no
later than the close of business in the relevant market on such day. If
any such notice is given after the Margin Notice Deadline, the party
receiving such notice shall transfer such cash or Securities no later
than the close of business in the relevant market on the next business
day following such notice.
(d) Any cash transferred pursuant to this Paragraph shall be attributed to
such Transactions as shall be agreed upon by Buyer and Seller.
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both)
under subparagraphs (a) and (b) of this Paragraph may be exercised only
where a Margin Deficit or a Margin Excess, as the case may be, exceeds
a specified dollar amount or a specified percentage of the Repurchase
Prices for such Transactions (which amount or percentage shall be
agreed to by Buyer and Seller prior to entering into any such
Transactions).
(f) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under
subparagraphs (a) and (b) of this Paragraph to require the elimination
of a Margin Deficit or a Margin Excess, as the case may be, may be
exercised whenever such a Margin Deficit or a Margin Excess exists with
respect to any single Transaction hereunder (calculated without regard
to any other Transaction outstanding under this Agreement).
5. INCOME PAYMENTS
Seller shall be entitled to receive an amount equal to all Income paid or
distributed on or in respect of the Securities that is not otherwise
received by Seller, to the full extent it would be so entitled if the
Securities had not been sold to Buyer. Buyer shall, as the parties may agree
with respect to any Transaction (or, in the absence of any such agreement,
as Buyer shall reasonably determine in its discretion), on the date such
Income is paid or distributed either (i) transfer to or credit to the
account of Seller such Income with respect to any Purchased Securities
subject to such Transaction or (ii) with respect to Income paid in cash,
apply the Income payment or payments to reduce the amount, if any, to be
transferred to Buyer by Seller upon termination of such Transaction. Buyer
shall not be obligated to take any action pursuant to the preceding sentence
(A) to the extent that such action would result in the creation of a Margin
Deficit, unless prior thereto or simultaneously therewith Seller transfers
to Buyer cash or Additional Purchased Securities sufficient to eliminate
such Margin Deficit, or (B) if an Event of Default with respect to Seller
has occurred and is then continuing at the time such Income is paid or
distributed.
6. SECURITY INTEREST
Although the parties intend that all Transactions hereunder by sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and
shall be deemed to have granted to Buyer a security interest in, all of the
Purchased Securities with respect to all Transactions hereunder and all
Income thereon and other proceeds thereof.
7. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder shall be
in immediately available funds. All Securities transferred by one party
hereto to the other party (i) shall be in suitable form for transfer or
shall be accompanied by duly executed instruments of transfer or assignment
in blank and
4
<PAGE>
such other documentation as the party receiving possession may reasonably
request, (ii) shall be transferred on the book-entry system of a Federal
Reserve Bank, or (iii) shall be transferred by any other method mutually
acceptable to Seller and Buyer.
8. SEGREGATION OF PURCHASED SECURITIES
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its
possession and shall be identified as subject to this Agreement. Segregation
may be accomplished by appropriate identification on the books and records
of the holder, including a financial or securities intermediary or a
clearing corporation. All of Seller's interest in the Purchased Securities
shall pass to Buyer on the Purchase Date and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from
engaging in repurchase transactions with the Purchased Securities or
otherwise selling, transferring, pledging or hypothecating the Purchased
Securities, but no such transaction shall relieve Buyer of its obligations
to transfer Purchased Securities to Seller pursuant to Paragraph 3, 4 or 11
hereof, or of Buyer's obligation to credit or pay Income to, or apply Income
to the obligations of, Seller pursuant to Paragraph 5 hereof.
----------------------------------------------------------------------------
REQUIRED DISCLOSURE FOR TRANSACTIONS IN WHICH THE SELLER RETAINS CUSTODY
OF THE PURCHASED SECURITIES
Seller is not permitted to substitute other securities for those
subjects to this Agreement and therefore must keep Buyer's securities
segregated at all times, unless in this Agreement Buyer grants Seller
the right to substitute other securities. If Buyer grants the right to
substitute, this means that Buyer's securities will likely be commingled
with Seller's own securities during the trading day. Buyer is advised
that, during any trading day that Buyer's securities are commingled with
Seller's securities, the[will]* [may]** be subject to liens granted by
Seller to [its clearing bank]* [third parties]** and may be used by
Seller for deliveries on other securities transactions. Whenever the
securities are commingled, Seller's ability to resegregate substitute
securities for Buyer will be subject to Seller's ability to satisfy [the
clearing]* [any]** lien or to obtain substitute securities.
----------------------------------------------------------------------------
*Language to be used under 17 C.F.R. SS403.4(e) if Seller is a government
securities broker or dealer other than a financial institution.
**Language to be used under 17 C.F.R. SS403.5(d) if Seller is a financial
institution.
9. SUBSTITUTION
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such
substitution shall be made by transfer to Buyer of such other
Securities and transfer to Seller of such Purchased Securities. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities.
(b) In Transactions in which Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed, for
purposes of subparagraph (a) of this Paragraph, to have agreed to and
accepted in this Agreement substitution by Seller of other Securities
for Purchased Securities; PROVIDED, HOWEVER, that such other Securities
shall have a Market Value at least equal to the Market Value of the
Purchased Securities for which they are substituted.
10. REPRESENTATIONS
Each of Buyer and Seller represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into
Transactions contemplated hereunder and to perform its obligations hereunder
and has taken all necessary action to authorize such execution, delivery and
per-
5
<PAGE>
formance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing, in the form of an annex hereto or otherwise, in advance
of any Transaction by the other party hereto, as agent for a disclosed
principal), (iii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf (or on behalf of any such disclosed
principal), (iv) it has obtained all authorizations of any governmental body
required in connection with this Agreement and the transactions hereunder
and such authorizations are in full force and effect and (v) the execution,
delivery and performance of this Agreement and the Transactions hereunder
will not violate any law, ordinance, charter, by-law or rule applicable to
it or any agreement by which it is bound or by which any of its assets are
affected. On the Purchase Date for any Transaction Buyer and Seller shall
each be deemed to repeat all the foregoing representations made by it.
11. EVENTS OF DEFAULT
In the event that (i) Seller fails to transfer or Buyer fails to purchase
Purchased Securities upon the applicable Purchase Date, (ii) Seller fails to
repurchase or Buyer fails to transfer Purchased Securities upon the
applicable Repurchase Date, (iii) Seller or Buyer fails to comply with
Paragraph 4 hereof, (iv) Buyer fails, after one business day's notice, to
comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect
to Seller or Buyer, (vi) any representation made by Seller or Buyer shall
have been incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated, or (vii) Seller or Buyer shall
admit to the other its inability to, or its intention not to perform any of
its obligations hereunder (each an "Event of Default"):
(a) The nondefaulting party may, at its option (which option shall be
deemed to have been exercised immediately upon the occurrence of an Act
of Insolvency), declare and Event of Default to have occurred hereunder
and, upon the exercise or deemed exercise of such option, the
Repurchase Date for each Transaction hereunder shall, if it has not
already occurred, be deemed immediately to occur (except that, in the
event that the Purchase Date for any Transaction has not yet occurred
as of the date of such exercise or deemed exercise, such Transaction
shall be deemed immediately canceled). The nondefaulting party shall
(except upon the occurrence of an Act of Insolvency) give notice to the
defaulting party of the exercise of such option as promptly as
practicable.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the
option referred to in subparagraph (a) of this Paragraph, (i) the
defaulting party's obligations in such Transactions to repurchase all
Purchased Securities, at the Repurchase Price therefor on the
Repurchase Date determined in accordance with subparagraph (a) of the
Paragraph, shall thereupon become immediately due and payable, (ii) all
Income paid after such exercise or deemed exercise shall be retained by
the nondefaulting party and applied to the aggregate unpaid Repurchase
Prices and any other amounts owing by the defaulting party hereunder,
and (iii) the defaulting party shall immediately deliver to the
nondefaulting party any Purchased Securities subject to such
Transactions then in the defaulting party's possession or control.
(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate
Repurchase Prices for all such Transactions, all right, title and
interest in and entitlement to all Purchased Securities subject to such
Transactions shall be deemed transferred to the nondefaulting party,
and the defaulting party shall deliver all such Purchased Securities to
the nondefaulting party.
6
<PAGE>
(d) If the nondefaulting party exercises or is deemed to have exercised the
option referred to in subparagraph (a) of this Paragraph, the
nondefaulting party, without prior notice to the defaulting party, may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in an recognized market (or
otherwise in a commercially reasonable manner) at such price or
prices as the nondefaulting party may reasonably deem
satisfactory, any or all Purchased Securities subject to such
Transactions and apply the proceeds thereof to the aggregate
unpaid Repurchase Prices and any other amounts owing by the
defaulting party hereunder or (B) in its sole discretion elect, in
lieu of selling all or a portion of such Purchased Securities, to
give the defaulting party credit for such Purchased Securities in
an amount equal to the price therefor on such date, obtained from
a generally recognized source or the most recent closing bid
quotation from such a source, against the aggregate unpaid
Repurchase Prices and any other amounts owing by the defaulting
party hereunder; and
(ii) as to Transactions in which the defaulting party is acting as
Buyer, (A) immediately purchase, in a recognized market (or
otherwise in a commercially reasonable manner) at such price or
prices as the nondefaulting party may reasonably deem
satisfactory, securities ("Replacement Securities") of the same
class and amount as any Purchased Securities that are not
delivered by the defaulting party to the nondefaulting party as
required hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent
closing offer quotation from such a source.
Unless otherwise provided in Annex I, the parties acknowledge and agree
that (1) the Securities subject to any Transaction hereunder are
instruments traded in a recognized market, (2) in the absence of a
generally recognized source for prices or bid or offer quotations for
any Security, the nondefaulting party may establish the source therefor
in its sole discretion and (3) all prices, bids and offers shall be
determined together with accrued Income (except to the extent contrary
to market practice with respect to the relevant Securities).
(e) As to Transactions in which the defaulting party is acting as Buyer,
the defaulting party shall be liable to the nondefaulting party for any
excess of the price paid (or deemed paid) by the nondefaulting party
for Replacement Securities over the Repurchase Price for the Purchased
Securities replaced thereby and for any amounts payable by the
defaulting party under Paragraph 5 hereof or otherwise hereunder.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is
acting as Buyer shall not increase above the amount of such Repurchase
Price for such Transaction determined as of the date of the exercise or
deemed exercise by the nondefaulting party of the option referred to in
subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for (i)
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a result of an Event of
Default, (ii) damages in an amount equal to the cost (including all
fees, expenses and commissions) of entering into replacement
transactions and entering into or terminating hedge transactions in
connection with or as a result of an Event of Default, and (iii) any
other loss, damage, cost or expense directly arising or resulting from
the occurrence of an Event of Default in respect of a Transaction.
(h) To the extent permitted by applicable law, the defaulting party shall
be liable to the nondefaulting party for interest on any amounts owing
by the defaulting party hereunder, from the date the defaulting party
becomes liable for such amounts hereunder until such amounts are (i)
paid in full
7
<PAGE>
by the defaulting party or (ii) satisfied in full by the exercise of
the nondefaulting party's rights hereunder. Interest on any sum payable
by the defaulting party to the nondefaulting party under this Paragraph
11(h) shall be at a rate equal to the greater of the Pricing Rate for
the relevant Transaction or the Prime Rate.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other
agreement or applicable law.
12. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon the
fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be
entitled to set off claims and apply property held by them in respect of any
Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other
transfers made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries and other
transfers in respect of any other Transactions hereunder, and the
obligations to make any such payments, deliveries and other transfers may be
applied against each other and netted.
13. NOTICES AND OTHER COMMUNICATIONS
Any and all notices, statements, demands or other communications hereunder
may be given by a party to the other by mail, facsimile, telegraph,
messenger or otherwise to the address specified in Annex II hereto, or so
sent to such party at any other place specified in a notice of change of
addess hereafter received by the other. All notices, demands and requests
hereunder may be made orally, to be confirmed promptly in writing, or by
other communication as specified in the preceding sentence.
14. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or
agreement.
15. NON-ASSIGNABILITY; TERMINATION
(a) The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by either party without the
prior written consent of the other party, and any such assignment
without the prior written consent of the other party shall be null and
void. Subject to the foregoing, this Agreement and any Transactions
shall be binding upon and shall inure to the benefit of the parties and
their respective successors and assigns. This Agreement may be
terminated by either party upon giving written notice to the other,
except that this Agreement shall, notwithstanding such notice, remain
applicable to any Transactions then outstanding.
(b) Subparagraph (a) of this Paragraph 15 shall not preclude a party from
assigning, charging or otherwise dealing with all or any part of its
interest in any sum payable to it under Paragraph 11 hereof.
16. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
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<PAGE>
17. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any
provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and
duly executed by both of the parties hereto. Without limitation on any of
the foregoing, the failure to give a notice pursuant to Paragraph 4(a) or
4(b) hereof will not constitute a waiver of any right to do so at a later
date.
18. USE OF EMPLOYEE PLAN ASSETS
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended
to be used by either party hereto (the "Plan Party") in a Transaction,
the Plan Party shall so notify the other party prior to the
Transaction. The Plan Party shall represent in writing to the other
party that the Transaction does not constitute a prohibited transaction
under ERISA or is otherwise exempt therefrom, and the other party may
proceed in reliance thereon but shall not be required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph, any
such Transaction shall proceed only if Seller furnishes or has
furnished to Buyer its most recent available audited statement of its
financial condition and its most recent subsequent unaudited statement
of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller shall
be deemed (i) to represent to Buyer that since the date of Seller's
latest such financial statements, there has been no material adverse
change in Seller's financial condition which Seller has not disclosed
to Buyer, and (ii) to agree to provide Buyer with future audited and
unaudited statements of its financial condition as they are issued, so
long as it is a Seller in any outstanding Transaction involving a Plan
Party.
19. INTENT.
(a) The parties recognize that each Transaction is a "repurchase agreement"
as that term is defined in Section 101 of Title 11 of the United States
Code, as amended (except insofar as the type of Securities subject to
such Transaction or the term of such Transaction would render such
definition inapplicable), and a "securities contract" as that term is
defined in Section 741 of Title 11 of the United States Code, as
amended (except insofar as the type of assets subject to such
Transaction would render such definition inapplicable).
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Paragraph 11 hereof is a
contractual right to liquidate such Transaction as described in
Section 555 and 559 of Title 11 of the United States Code, as amended.
(c) The parties agree and acknowledge that if a party hereto is an "insured
depository institution," as such term is defined in the Federal Deposit
Insurance Act, as amended ("FDIA"), then each Transaction hereunder is
a "qualified financial contract," as that term is defined in FDIA and
any rules, orders or policy statements thereunder (except insofar as
the type of assets subject to such Transaction would render such
definition inapplicable).
(d) It is understood that this Agreement constitutes a "netting contract"
as defined in and subject to Title IV of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") and each payment
entitlement and payment obligation under any Transaction hereunder
shall constitute a "covered contractual payment entitlement" or
"covered contractual payment obligation",
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respectively, as defined in and subject to FCIDIA (except insofar as
one or both of the parties is not a "financial institution" as that
term is defined in FDICIA).
20. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or
dealer registered with the Securities and Exchange Commission ("SEC")
under Section 15 of the Securities Exchange Act of 1934 ("1934 Act"),
the Securities Investor Protection Corporation has taken the position
that the provisions of the Securities Investor Protection Act of 1970
("SIPA") do not protect the other party with respect to any Transaction
hereunder.
(b) in the case of Transactions in which one of the parties is a government
securities broker or a government securities dealer registered with the
SEC under Section 15C of the 1934 Act, SIPA will not provide protection
to the other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured
by the Federal Deposit Insurance Corporation or the National Credit
Union Share Insurance Fund, as applicable.
OCWEN PARTNERSHIP L.P. MERRILL LYNCH MORTGAGE CAPITAL INC.
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
Date: Date:
------------------------- -----------------------
MERRILL LYNCH CREDIT CORPORATION
By:
-------------------------
Title:
----------------------
Date:
-----------------------
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<PAGE>
ANNEX I
SUPPLEMENTAL TERMS TO
MASTER REPURCHASE AGREEMENT,
DATED AS OF MARCH 30, 1998, AMONG
MERRILL LYNCH MORTGAGE CAPITAL INC.
AND
MERRILL LYNCH CREDIT CORPORATION
AND
OCWEN PARTNERSHIP L.P.
1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to Master
Repurchase Agreement (the "Repurchase Agreement") modify the terms and
conditions of the Repurchase Agreement and the terms under which the parties
hereto may, from time to time, enter into Transactions (the Repurchase
"Agreement"). This Agreement shall be read, taken and construed as one and
the same instrument. Capitalized terms used in these Supplemental Terms and
not otherwise defined herein shall have the meanings set forth in the
Repurchase Agreement.
2. ADDITIONAL DEFINITIONS.
(a) Notwithstanding the definition set forth in Paragraph 2(j) of the
Repurchase Agreement, with respect to any Eligible Asset, the "Market
Value" shall be the price determined, as of any date of determination,
to be the fair market value thereof as determined solely by Buyer;
PROVIDED, HOWEVER, that (i) a Market Value of zero shall be assigned to
each Eligible Asset that does not at any time comply with the
representation and warranty of Seller set forth in Paragraph 6(b)(xii)
of these Supplemental Terms, (ii) the Market Value of Eligible Assets
shall not in any event exceed the outstanding principal amount thereof,
(iii) any Eligible Asset that has been subject to this Agreement for
more than 180 consecutive calendar days in the aggregate shall have a
Market Value of zero and (iv) any Eligible Asset with respect to which
there is a material breach of a representation or warranty that is not
cured within any applicable cure period shall have a market Value of
zero until such time as such breach of representation or until such
time as such breach of representation or warranty is cured and
thereafter shall not be subject to clause (iv) of this proviso for
determination of Market
<PAGE>
Value until such time as another breach of representation or warranty
relating thereto occurs.
(b) "A Quality Non-Conforming Mortgage Loans" shall mean single family
residential mortgage loans that qualify under the "A First Lien
Standard Program Parameters" set forth in Seller's Guide.
(c) "B Quality Non-Conforming Mortgage Loans" shall mean single family
residential mortgage loans that qualify under the "B First Lien
Standard Program Parameters" as set forth in Seller's Guide.
(d) "Book Net Worth" shall refer to the equity of Seller as determined in
accordance with GAAP.
(e) "Borrower" shall refer to the obligor of any Eligible Asset.
(f) "Buyer" shall mean MLCC, in the case of Eligible Assets secured by
second or third liens, and MLMCI in all other cases.
(g) "Buyer's Margin Percentage" shall refer to the percentage used to
calculate Buyer's margin Amount, which shall, for each Eligible Asset,
equal 95%.
(h) "C Quality Non-Conforming Mortgage Loans" shall mean single family
residential mortgage loans that qualify under the "C First Lien
Standard Program Parameters" as set forth in Seller's Guide.
(i) "Code" shall refer to the Internal Revenue Code of 1986, as amended.
(j) "Computer Tape" shall have the meaning set forth in the Custodial
Agreement.
(k) "Custodial Agreement" shall refer to the Tri-Party Custodial Agreement,
dated as of March 30, 1998, by and among Seller, Buyer and the
Custodian, providing for the custody of records relating to Eligible
Assets, as the same may be amended, supplemented or otherwise modified
from time to time with the written consent of the parties thereto.
(l) "Custodial Confirmation Statement" shall refer to the confirmation
statement issued by the party named as custodian in the Custodial
Agreement that evidences ownership of the Eligible Assets indicated
thereon.
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(m) "Custodian" shall refer to Texas Commerce Bank National Association and
its permitted successors as custodian under the Custodial Agreement.
(n) "D Quality Non-Conforming Mortgage Loans" shall mean single family
residential mortgage loans that qualify under the "D First Lien
Standard Program Parameters" as set forth in Seller's Guide.
(o) "Delivery Date" shall have the meaning set forth in the Custodial
Agreement.
(p) "Eligible Assets" shall mean Home Equity Loans, Mortgage Loans and
Jumbo Mortgage Loans subject to this Agreement.
(q) "GAAP" shall mean generally accepted accounting principles consistently
applied.
(r) "Home Equity Loans" shall refer to the mortgage loans secured by first
or second liens on single family residential real property (including,
without limitation, condominiums and planned unit developments) certain
documents relating to which have been delivered to the Custodian
pursuant to the Custodial Agreement.
(s) "Jumbo Mortgage Loans" shall refer to any Mortgage Loan in excess of
$500,000 and otherwise so designated by Seller and acceptable to Buyer,
in its sole discretion, and which except with respect to the original
principal balance thereof, have been underwritten in accordance with
the standards of the Seller.
(t) "LIBOR" shall mean the London Interbank Offered Rate for United States
Dollar deposits as set forth on page 8695 of Knight-Ridder as of 8:00
a.m., New York City time, on the date of determination for the period
most closely corresponding to the term of the related Transaction.
(u) "List of Eligible Assets" shall refer to the List of Home Equity Loans,
the List of Mortgage Loans or the List of Jumbo Mortgage Loans, as
applicable.
(v) "List of Home Equity Loans" shall be defined in Paragraph 3 of these
Supplemental Terms.
(w) "List of Jumbo Mortgage Loans" shall be as defined in Paragraph 3 of
these Supplemental Terms.
(x) "List of Mortgage Loans" shall be as defined in Paragraph 3 of these
Supplemental Terms.
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<PAGE>
(y) "Margin Notice Deadline" shall mean 10:00 a.m., New York City time.
(z) "MLMCI" shall refer to Merrill Lynch Mortgage Capital Inc.
(aa) "Monthly Report" shall mean the monthly report, substantially in the
form attached hereto as Exhibit C, submitted by Seller to Buyer.
(ab) "Mortgage" shall mean the mortgage or other instrument creating a lien
on the property securing a Note.
(ac) "Mortgage Loan" shall mean an A Quality Non-Conforming Mortgage Loan, a
B Quality Non-Conforming Mortgage Loan, a C Quality Non-Conforming
Mortgage Loan or a D Quality Non-Conforming Mortgage Loan.
(ad) "Note" shall mean the note or other evidence of indebtedness of a
Borrower secured by a Mortgage.
(ae) "Ocwen" shall mean Ocwen Asset Investment Corp., the parent of Seller.
(af) "Pricing Rate" shall mean the per annum percentage rate for the
determination of the Price Differential, which rate shall be (i) 90
basis points in excess of LIBOR for the period from and including the
related Purchase Date to but excluding the related Delivery Date and
(ii) 65 basis points in excess of LIBOR thereafter.
(ag) "Qualified Insurer" shall refer to a pool insurer customarily used by
Seller and mutually agreeable to Seller and Buyer.
(ah) "Securities" shall be deemed to mean Eligible Assets and,
notwithstanding the use of the term "Securities" in the Master
Repurchase Agreement, in no event shall such Eligible Assets be deemed
to be securities for the purposes of any securities or blue sky laws.
(ai) "Seller" shall refer to Ocwen Partnership L.P.
(aj) "Seller's Guide" shall refer to the underwriting guide of Seller for
Mortgage Loans, Jumbo Mortgage Loans or Home Equity Loans, as
applicable, as such guide may be amended from time to time and in the
form most recently accepted in writing by Buyer in its reasonable
business judgment.
(ak) "Tangible Net Worth" shall refer to the sum of equity and subordinated
debt of Seller determined in accordance with GAAP less the sum of (i)
intercompany receivables, (ii)
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<PAGE>
loans to officers or employees of Seller, (iii) good will and (iv)
deferred taxes.
(al) "Transaction" shall, in addition to the definition set forth in the
Repurchase Agreement, refer to substitutions pursuant to Paragraph 8 of
the Repurchase Agreement.
3. CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto
unless written notice of objection is given by the objecting party to the
other party within two (2) business days after the objecting party's receipt
of such Confirmation. In the case of Transactions involving Jumbo Mortgage
Loans, Home Equity Loans or Mortgage Loans the Eligible Assets shall be
identified on a detailed listing to be provided by Seller to Buyer (a "List
of Jumbo Mortgage Loans" for Jumbo Mortgage Loan, a "List of Home Equity
Loans' for Home Equity Loans and a "List of Mortgage Loans" for Mortgage
Loans) and may be identified in the related Confirmation by reference to
such lists.
4. MARGIN MAINTENANCE.
(a) Paragraphs 4(a) and 4(b) of the Repurchase Agreement are hereby
modified to provide that if the notice to be given by Buyer or Seller,
as the case may be, is given at or prior to the Margin Notice deadline,
the transfer of the Additional Purchased Securities from Seller to
Buyer pursuant to Paragraph 4(a) of these Supplemental Terms or the
transfer of cash or Purchased Securities from Buyer to Seller pursuant
to Paragraph 4(b) of these Supplemental Terms shall be made prior to
the close of business in New York City on the date of such notice, and
if such notice is given after the Margin Notice Deadline, Seller shall
transfer the Additional Eligible Assets prior to the close of business
in New York City on the business day immediately following the date of
such notice. The Custodial Agreement shall set forth further terms and
provisions relating to Buyer's and Seller's rights and obligations
under Paragraph 4 of the Repurchase Agreement.
(b) Paragraph 4 of the Repurchase Agreement is hereby modified by adding
the following at the end thereof:
"(f) In the event that Seller fails to comply with
the provisions of this Paragraph 4 and such failure
is not due to the acts or omissions of Buyer, Buyer
shall not be obligated to enter into any additional
Transactions hereunder after the
5
<PAGE>
date of such failure unless such failure is cured
or waived.
5. INCOME PAYMENTS. Paragraph 5 of the Repurchase Agreement is hereby modified
to provide that, so long as no Event of Default shall have occurred and be
continuing, Seller shall be entitled to all payments of principal and
interest and principal prepayments payable to the holder of the Eligible
Assets. Upon the occurrence of an Event of Default, payment of principal and
interest and principal prepayments (without deducting any amount for the
Servicing Fee) shall be paid directly to Buyer in accordance with the terms
of this Agreement.
6. INTENT OF THE PARTIES; SECURITY INTEREST.
(a) In the event, for any reason, any Transaction is construed by any court
as a secured loan rather than a purchase and sale, the parties intend
that Seller shall have granted to Buyer a perfected first priority
security interest in all of the Eligible Assets.
(b) Seller shall pay all fees and expenses associated with perfecting such
security interest including, without limitation, the cost of filing
financing statements under the Uniform Commercial Code and recording
assignment of mortgage as and when reasonably requested by Buyer.
(c) Notwithstanding any election by buyer to engage in repurchase
transactions with the Eligible Assets or if Buyer otherwise elects to
pledge or hypothecate such Eligible Assets, upon demand by Seller and
upon the satisfaction of the conditions hereunder for the release of
Eligible Assets, Buyer shall redeliver to seller those Eligible Assets
specifically identified to Buyer by Seller free and clear of any liens
or encumbrances created by Buyer.
(d) Notwithstanding Paragraph 8(b) of the Repurchase Agreement, it is the
intention of the parties that the Custodian, rather than Seller, shall
maintain custody of the Purchased Securities pursuant to the Custodial
Agreement.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each party represents and warrants, and shall on and as of the Purchase
Date of any Transaction be deemed to represent and warrant, as follows:
(i) The execution, delivery and performance of this Agreement and
the performance of each Transaction
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<PAGE>
Do not and will not result in or require the creation of any
lien, security interest or other charge or encumbrance (other
than pursuant to this Agreement) upon or with respect to any of
its properties: and
(ii) This Agreement is, and each Transaction when entered into under
this Agreement will be, a legal, valid and binding obligation of
it enforceable against it in accordance with the terms of this
Agreement, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditor's rights and
to the general principles of equity (regardless of whether
considered in proceeding in equity or at law).
(b) Seller represents and warrants to Buyer, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant, as
follows:
(i) The documents disclosed by Seller to Buyer pursuant to this
Agreement are either original documents or genuine and true
copies thereof;
(ii) Seller is a separate and independent entity from the Custodian
named in the Custodial Agreement, Seller does not own a
controlling interest in such Custodian either directly or
through affiliates and no director or officer of Seller is also
a director or officer of such Custodian.
(iii) None of the Purchase Price for any Eligible Assets will be used
either directly or indirectly to acquire any security, as that
term is defined in Regulation T of the Regulations of the Board
of Governors of the Federal Reserve System, and Seller has not
taken any action that might cause any Transaction to violate any
regulation of the Federal Reserve Board;
(iv) Each Eligible Asset conforms to the underwriting standards set
forth in Seller's Guide; all Eligible Assets will comply with
the applicable representations and warranties attached as
Exhibit B hereto;
(v) Each Eligible Asset was originated by Seller or purchased by
Seller from Seller's list of approved originators except as
disclosed to Buyer in writing;
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<PAGE>
(vi) Each Eligible Asset was underwritten in accordance with Seller's
Guide furnished by Seller to Buyer and accepted by Buyer in
writing, and no change to such underwriting standards has
occurred since the date of the last written revision to such
standards was furnished to Buyer by Seller or on behalf of
Seller and accepted by Buyer in writing;
(vii) Since the date of the most recent financial statement of Seller,
delivered by it pursuant to Paragraph 10 of these Supplemental
Terms, there has been no material adverse change in the
financial condition or results of operations of Seller;
(viii) Seller shall be at the time it delivers any Eligible Assets for
any Transaction, and shall continue to be, through the Purchase
Date relating to each such Transaction, the legal and beneficial
owner of such Eligible Assets, free of any lien, security
interest, option or encumbrance except for the security interest
created by or pursuant to this Agreement and except for liens
disclosed in writing to Buyer prior to the Purchase Date for the
related Transaction and with respect to which Buyer has not
objected;
(ix) Seller has taken all action with respect to this Agreement, the
Custodial Agreement and the transactions contemplated hereby and
thereby in order to comply with the provisions of all applicable
law; and
(x) No eligible Assets are more than thirty (30) days delinquent as
of the related reporting period.
(c) Seller covenants with Buyer, from and after the date of this Agreement,
as follows:
(i) Seller will take all actions necessary with respect to this
Agreement, the Custodial Agreement and the transactions
contemplated hereby and thereby in order to maintain compliance
with the provisions of all applicable law;
(ii) Seller shall immediately notify Buyer in writing if an Event of
Default or an event contemplated by Paragraph 8 of these
Supplemental Terms shall have occurred;
(iii) Seller shall deliver a Computer Tape relating to the Custodial
Agreement to Buyer with such
8
<PAGE>
frequency as Buyer may require but in no event less frequently
than monthly;
(iv) No Eligible Asset shall be subject to this Agreement for more
than 180 consecutive calendar days in aggregate;
(v) Seller shall deliver to Buyer a Monthly Report on the first
business day of each month during the term of this Agreement;
(vi) Seller shall comply with the provisions of Paragraph 6(b) of
these Supplemental Terms;
(vii) Seller shall promptly notify Buyer upon Seller's becoming aware
that any of Seller's credit facilities shall terminate or debt
become due prior to its stated maturity;
(viii) Unless Seller shall be in compliance with all credit covenants
made by it hereunder, Seller shall not repay any of its
subordinated debt during the term of this Agreement or while any
amounts are payable to Buyer hereunder; and
(ix) This Agreement and the terms hereof are intended to be
confidential and the Seller shall no disclose this Agreement or
its terms (including any public filings with any regulatory
body) without the express written consent of the Buyer.
8. EVENTS OF DEFAULT.
(a) The term "Event of Default" shall, in addition to the definition set
forth in the Repurchase Agreement and with respect to the applicable
party, include the following events:
(i) Any governmental or self-regulatory authority shall take
possession of Buyer or Seller or their property or appoint any
receiver, conservator or other official, or such party shall
take any action to authorize any of the actions set forth in
this clause (i).
(ii) Either Buyer or Seller shall have reasonably determined that the
other party is or will be unable to meet its commitments under
this Agreement, shall have notified the other party of such
determination and such party shall not have responded with
appropriate information to the
9
<PAGE>
contrary to the reasonable satisfaction of the inquiring party
within 36 hours after notice.
(iii) This Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Eligible Assets
purported to be covered thereby.
(iv) A final, non-appealable judgment by any competent court in the
United States of America for the payment of money in an amount
of a least $100,000 is rendered against Buyer or Seller, and the
same remains undischarged by the applicable party for a period
of sixty (60) days during which execution of such judgment is
not effectively stayed.
(v) Any representations or warranty made by Buyer or Seller in this
Agreement or the Custodial Agreement shall have been incorrect
or untrue in any material respect when made or repeated or when
deemed to have been made or repeated and the non-defaulting
party shall have been materially and adversely affected thereby.
(vi) Any covenant made by Buyer or Seller in this Agreement or the
Custodial Agreement shall have been breached in any material
respect and the non-defaulting party shall have been materially
and adversely affected thereby.
(vii) Any event of default or any event which with notice, the passage
of time or both shall constitute an event of default shall occur
and be continuing under any repurchase or other financing
agreement for borrowed funds or indenture for borrowed funds by
which Buyer or Seller is bound or affected shall occur and be
continuing including, without limitation, any such agreement of
one party to which the other party is a party.
(viii) Seller shall experience losses or changes in its financial
condition (exclusive of amounts withdrawn for payment of taxes
due and payable by the shareholders of Seller) that cause its
Book Net Worth for any calendar quarter to be less than or equal
to 80% of its Tangible Net Worth as of six calendar months prior
to such period.
(ix) The ratio of Seller's total assets to Seller's Tangible Net
Worth shall at any time exceed 12:1.
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<PAGE>
(x) Seller's ratio of total liabilities to Book Net Worth shall at
any time exceed 8:1.
(b) Upon the occurrence and during the continuance of an Event of Default;
(i) All rights of the defaulting party to receive payments which it
would otherwise be authorized to receive pursuant to Paragraph 5
of these Supplemental Terms shall be suspended, and all such
rights shall thereupon become vested in the non-defaulting
party, which shall thereupon have the sole right to receive such
payments and apply them to the aggregate unpaid amounts owed to
the non-defaulting party by the defaulting party.
(ii) All payments which are received by the defaulting party contrary
to the provisions of the preceding clause (i) shall be received
in trust for the benefit of the non-defaulting party and shall
be segregated from other funds of the defaulting party.
(iii) The non-defaulting party may exercise any self-help remedies
permitted by applicable law.
(iv) The non-defaulting party shall be entitled to the right of set
off with respect to any amounts owed by the defaulting party to
the non-defaulting party under any contract, margin account or
other arrangement.
9. EVENTS OF TERMINATION.
(a) At the option of Buyer, exercised by thirty-six (36) hours advance
written notice to Seller, the Repurchase Date for each Transaction
under this Agreement shall be deemed to immediately occur in the event
that:
(i) In the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Seller;
(ii) Buyer shall request written assurances as to the Financial
well-being of Seller an such assurances shall not have been
provided within thirty-six (36) hours of such request;
(iii) Seller shall be in default with respect to any normal and
customary covenants under any debt contract or agreement, any
servicing agreement or
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<PAGE>
any lease to which it is a party, which default could materially
adversely affect the financial condition of Seller (which
covenants include, but are not limited to, an Act of Insolvency
of Seller or the failure of Seller to make required payments
under such contract or agreement as they become due);
(iv) The senior debt obligations or short-term debt obligations of
Merrill Lynch & Co., Inc. shall be rated below the four highest
generic grades (without regard to any pluses or minuses
reflecting gradations within such generic grades) by any
nationally recognized statistical rating organization;
(v) Any representation or warranty made by Seller in this Agreement
or any Custodial Agreement shall have been materially incorrect
or untrue when made or repeated or when deemed to have been made
or repeated and such circumstance shall not have been cured
within twenty-four (24) hours of Seller having received notice;
(vi) Seller shall fail to promptly notify Buyer or (i) the
acceleration of any debt obligation or the termination of any
credit facility of Seller; (ii) the amount and maturity of any
such debt assumed after the date hereof; (iii) any adverse
developments with respect to pending or future litigation
involving Seller; and (iv) any other developments which might
materially and adversely affect the financial condition of
Seller; or
(vii) Seller shall have failed to comply in any material respect with
its obligations under the Custodial Agreement.
(b) The events specified in Paragraph 9(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for a Transaction shall be in addition to any other
rights of Buyer to cause such an acceleration under this Agreement.
10. FINANCIAL STATEMENTS. Seller shall have provided Buyer:
(a) as soon as available and in any event within sixty (60) days after the
close of each of the first three (3) quarters of each fiscal year of
Seller, Seller's unaudited balance sheet and statement of income,
subject to normal recurring year-end audit adjustments, and as
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prepared in accordance with generally accepted accounting principles
consistently applied;
(b) as soon as available and in any event within one hundred and twenty
(120) days after the close of each fiscal year of Seller, a balance
sheet of Seller, a statement of income of Seller and a statement of
changes in financial position of Seller as at the end of and for the
fiscal year just closed, setting forth the corresponding figures of the
previous fiscal year, if applicable, in comparative form, all in
reasonable detail and certified in writing (without any qualification
or exception deemed material by Buyer) by an authorized officer of
Seller;
(c) as soon as available and in any event within sixty(60) days after the
close of each of the first three (3) quarters of each fiscal year of
Ocwen, the applicable quarterly Form 10-Q as filed with the Securities
and Exchange Commission, including the consolidated statements for
Ocwen, subject to normal recurring year-end audit adjustments, and as
prepared in accordance with generally accepted accounting principles
consistently applied; and
(d) as soon as available and in any event within one hundred and twenty
(120) days after the close of each fiscal year of Ocwen, a
consolidating balance sheet of Ocwen, a consolidating statement of
income of Ocwen and a consolidating statement of changes in financial
position of Ocwen as at the end of and for the fiscal year just closed,
setting forth the corresponding figures of the previous fiscal year, if
applicable, in comparative form, all in reasonable detail and certified
(without any qualification or exception deemed material by Buyer) by
independent public accountants selected by Ocwen and reasonably
satisfactory to Buyer (which requirement Buyer hereby agrees may be
satisfied by Ocwen's audited financial statement included in an Annual
Report on Form 10-K and filed with the Securities and Exchange
Commission).
Each delivery of Eligible Assets by Seller to Buyer hereunder will
constitute a representation by Seller that there has been no material
adverse change in Seller's financial condition not disclosed to Buyer
since the date of Ocwen's most recent financial statement. Seller shall
provide Buyer, from time to time at Seller's expense, with such
information of a financial or operational nature respecting Seller as
Buyer may reasonably request promptly upon receipt of such request.
Buyer shall maintain the confidentiality of all financial information
provided by Seller to Buyer and shall not make such
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information available to any other person or entity (except as
otherwise required by a court of competent jurisdiction) without the
prior written consent of Seller, which consent shall not be
unreasonably withheld.
11. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. With respect to all
Transactions hereunder:
(a) The minimum amount of any Transaction under this Agreement shall have
an aggregate Repurchase Price of $1,000,000;
(b) The aggregate outstanding Repurchase Price for the Eligible Assets
subject to this Agreement at any one time shall not exceed
$125,000,000;
(c) The amount of the outstanding Repurchase Price attributable to C
Quality Non-Conforming Mortgage Loans and D Quality Non-Conforming
Mortgage Loans shall not, in the aggregate, exceed $20,000,000;
(d) Buyer's Margin Percentage with respect to each category of Eligible
Assets shall be as stated in Paragraph 2(f) of these Supplemental
Terms; and
(e) The amount of the outstanding Repurchase Price attributable to Jumbo
Mortgage Loans, as of any date of determination, shall not, in the
aggregate, exceed $20,000,000.
12. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date
shall include that portion of the Price Differential that has accrued but
has not been paid. The Price Differential shall accrue, be calculated and be
compounded on a daily basis for each Purchased Security (such calculation to
be made on the basis of a 360-day year and the actual number of days
elapsed). Any provision of this Agreement to the contrary notwithstanding,
the Price Differential shall be payable monthly in arrears to Buyer with
respect to each Transaction. Any provisions of this Agreement to the
contrary notwithstanding, the Price Differential for any Transaction shall,
unless otherwise agreed by the parties, be equal to the product of (i) the
Repurchase Price (which shall be the Purchase Price increased by the accrued
and unpaid Price Differential) and (ii) the Pricing Rate (based upon a 360
day year and the actual number of days). Payment of the Price Differential
to Buyer shall be made by wire transfer in immediately available funds.
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13. ADDITIONAL INFORMATION; CONFIDENTIALITY.
(a) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in their
possession pertaining to each Security that is the subject of such
Transaction. Such inspection shall occur upon the request of Buyer at a
mutually agreeable location during regular business hours and on a date
not more than two (2) business days after the date of such request.
(b) Seller agrees to provide Buyer from time to time with such information
concerning Seller of a financial or operational nature as Buyer may
reasonably request.
(c) Each of the parties acknowledges and agrees that this Agreement, the
Custodial Agreement and all information provided by one party to
another in connection with said agreements and the Transactions
contemplated thereby are confidential in nature and each party agrees
that it shall limit the distribution of such documents and information
to its officers, employees, attorneys, accountants and agents as
required in order to conduct its business with the other party;
PROVIDED, HOWEVER, that the restriction set forth in this subparagraph
(c) shall not apply to documents and information that (i) a party has
been directed to disclose by a court or regulatory authority of
competent jurisdiction, (ii) are required to be disclosed pursuant to
applicable federal or state law (including the regulations of the
Securities and Exchange Commission), (iii) has entered the public
domain through means other than a breach of the foregoing covenant by
the party seeking to distribute such documents and information, (iv)
was known by the receiving party prior to its receipt thereof from the
other part and (v) the other party has given written permission to
disclose.
14. UNCOMMITTED FACILITY. The entering into any Transaction hereunder is
discretionary on the part of both parties and each Eligible Asset must be
acceptable to Buyer for Purchaser hereunder, which determination shall be
made by Buyer in its sole discretion.
Buy may, in its sole discretion, reject any Security from inclusion in a
Transaction hereunder for any reason.
15. TRANSACTION PROCEDURES.
Unless mutually agreed to the contrary by Buyer and Seller, no Purchase Date
or Repurchase Date shall occur on a date other
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than a Friday (or the next preceding business day in the event Friday is not
a business day).
16. OPINION OF COUNSEL. Seller shall, on the date of the first Transaction
hereunder and, upon the reasonable request of Buyer based on Buyer's good
faith belief that there may have been a material change in law or fact, on
the date of any subsequent Transaction, cause to be delivered to Buyer, with
reliance thereon permitted as to any person or entity that purchases the
Eligible Assets from Buyer in a repurchase transaction, a favorable opinion
of counsel to Seller with respect to the matters set forth in Exhibit A-1
and Exhibit A-2 hereto, in form and substance reasonably acceptable to
Buyer.
17. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction under
this Agreement, Seller shall cause each of the following conditions to
occur:
(a) A Custodial Agreement in a form satisfactory to Buyer shall have been
executed and delivered by the parties thereto;
(b) Seller shall have disclosed information satisfactory to Buyer with
respect to the scheduled maturities of all outstanding credit
facilities and debt of Seller;
(c) Seller shall make available to Buyer and its agents all printouts and
all computer software pertaining to the Eligible Assets as Buyer may
reasonably request;
(d) The Custodian shall have delivered to Buyer a Custodial Confirmation
Statement relating to the Eligible Assets subject to the Transaction;
and
(e) Seller shall have delivered a balance sheet and income statement
(prepared in accordance with GAAP) to Buyer with an officer's
certificate certifying the truth and accuracy of the information
therein.
18. REPURCHASE TRANSACTIONS. Buyer may in its sole election engage in repurchase
transactions with the Eligible Assets or otherwise pledge or hypothecate the
Eligible Assets with a counterparty of Buyer's choice; PROVIDED, HOWEVER,
that no such transaction by Buyer shall relieve Buyer of its obligations to
Seller in connection with the repurchase by Seller of any Eligible Assets in
accordance with the terms of this Agreement and that, upon demand by Seller,
Buyer shall redeliver to Seller such repurchased Eligible Assets as are
specifically identified by Seller free and clear of any liens or
encumbrances created by Buyer.
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19. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Seller agrees to submit to
personal jurisdiction in the State of New York in any action or proceeding
arising out of this Agreement. Buyer and Seller each hereby waives the right
of trial by jury in any litigation arising hereunder.
20. SERVICING ARRANGEMENTS.
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the Eligible Assets contemplated hereby, Seller
shall cause the Eligible Assets to continue to be serviced for the
benefit of Buyer and, if Buyer shall exercise its right to sell the
Eligible Assets pursuant to this Agreement prior to the related
Repurchase Date, Buyer's assigns; PROVIDED, HOWEVER, that, so long as
an Event of Default shall not have occurred and be continuing, Seller
shall be entitle to receive the Servicing Fee relating to the Eligible
Assets serviced by it until such time as Buyer elects to terminate
Seller as servicer of the Eligible Assets as contemplated by
subparagraph (d) below: PROVIDED, FURTHER, HOWEVER, that if an Event of
Default shall have occurred and be continuing, Seller shall not be
entitled to receive the Servicing Fee during the occurrence of such
Event of Default and after the expiration of such thirty (30) day
period shall be entitled to receive the Servicing Fee until servicing
is terminated as herein provided; and PROVIDED, FURTHER, HOWEVER, that
the obligation of Seller to cause Eligible Assets to be serviced for
the benefit of Buyer as aforesaid shall cease upon the payment to Buyer
of the Repurchase Price therefor.
(b) Seller shall cause the Eligible Assets to be serviced in accordance
with the servicing standards for similar assets generally employed by
prudent servicers in the Mortgage Loan, Jumbo Mortgage Loan, Home
Equity Loan and manufactured housing industry.
(c) Seller shall cause the servicer to enforce the rights of the owner of
the Eligible Assets in accordance with the standards of a prudent
lender in the manufactured housing, Mortgage Loan, Jumbo Mortgage Loan
and Home Equity Loan industry.
(d) Buyer may, in its sole discretion is any Event of Default shall have
occurred and be continuing, without payment of any termination fee,
Servicing Fee (except as otherwise provided in subparagraph (a) above)
or any other amount to Seller or any servicer, (i) sell its right to
the Eligible Assets on a servicing released basis or (ii)
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terminate the servicer of the Eligible Assets with or without cause.
(e) Each servicer of Eligible Assets must be approved by Buyer.
21. FURTHER ASSURANCES. Seller shall promptly provide such further assurances or
agreements as Buyer may request in order to effect the purposes of this
Agreement.
22. BUYER AS ATTORNEY-IN-FACT. Buyer is hereby appointed to act after the
occurrence and during the continuation of an Event of Default as the
attorney-in-fact of Seller for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instruments that
Buyer may deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, Buyer shall have
the right and power after the occurrence and during the continuation of any
Event of Default to receive, endorse and collect all checks made payable to
the order of Seller representing any payment on account of the principal of
or interest on any of the Purchased Securities and to give full discharge
for the same.
23. TERMINATION. Notwithstanding any provisions of Paragraph 15 of the Master
Repurchase Agreement to the contrary, this Agreement and all Transactions
outstanding hereunder shall terminate automatically without any requirement
for notice on the date occurring eleven calendar months and twenty-nine days
after the date as of which this Agreement is entered into; PROVIDED,
HOWEVER, that this Agreement and any Transaction outstanding hereunder may
be extended by written agreement of Buyer and Seller; and PROVIDED, FURTHER,
HOWEVER, that no such party shall be obligated to agree to such an
extension.
24. APPOINTMENT OF AGENT. MLCC hereby appoints MLMCI as its agent for purposes
of reviewing and executing Confirmation/Funding Requests, determining Market
Value, exercising any termination option provided for in Paragraph 9 of
these Supplemental Terms, exercising MLCC" rights under any margin
maintenance provision of this Agreement, exercising MLCC" rights under the
default provisions of this Agreement and such other purposes as MLCC may
direct. The appointment of such agent shall not relieve MLCC of its
obligations as Buyer hereunder.
25. BINDING TERMS. All of the covenants, stipulations, promises and agreements
in this Agreement shall bind the successors and assigns of the parties
hereto, whether expressed or not.
26. NOTICES AND OTHER COMMUNICATIONS. Any provision of Paragraph 13 of the
Repurchase Agreement to the contrary
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notwithstanding, any notice required or permitted by this Agreement shall be
in writing (including telegraphic, facsimile or telex communication) and
shall be effective and deemed delivered only when received by the party to
which it is sent. Any such notice shall be sent to a party at the address or
facsimile transmission number set forth in Annex II attached hereto.
27. INCORPORATION OF TERMS. The Repurchase Agreement as supplemented hereby
shall be read, taken and construed as one and the same instrument.
28. EXPENSES. Seller shall pay its own expenses and all reasonable out-of-pocket
costs and expenses (including fees and disbursements of counsel): (1) of
Buyer incident to the preparation and negotiation of this Agreement, the
Custodial Agreement, any documents relating thereto, any amendment or
waivers thereto, and the protection of the rights of Buyer thereunder and
(2) of Buyer incident to the enforcement of payment of amounts due under
this Agreement or the Custodial Agreement, whether by judicial proceedings
or otherwise, including, without limitation, in connection with bankruptcy,
insolvency, liquidation, reorganization, moratorium or other similar
proceedings involving Seller. Buyer shall not, from and after the date of
this Agreement and so long as an Event of Default shall not have occurred
and be continuing, expend amounts reimbursable by Seller in excess oF $5,000
without having notified Seller. Notwithstanding any provision hereof to the
contrary, the obligations of Seller under this Paragraph 27 shall be
effective and enforceable whether or not any Transaction remains outstanding
and shall survive payment of all other obligations owed by Seller to Buyer.
29. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which counterparts, shall be deemed to be an original, and such
counterparts shall constitute but one and the same instrument.
The following exhibits have been omitted herefrom and are available upon the
request of the Commission:
A-1 Opinion of Internal Counsel to Seller
A-2 Opinion of Independent Counsel to Seller
C Monthly Activity Report
Annex II
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES
PART I. ELIGIBLE ASSET
As to each Eligible Asset on a Purchase Date (and the related Mortgage,
mortgage Note, assignment of Mortgage and mortgaged property), the Seller shall
be deemed to make the following representations and warranties to the Buyer as
of such date and as of each date Market Value is determined. With respect to any
representations and warranties made to the best of the Seller's knowledge, in
the event that it is discovered that the circumstances with respect to the
related Mortgage Loan are not accurately reflected in such representation and
warranty notwithstanding the knowledge or lack of knowledge of the Seller, then,
notwithstanding that such representation and warranty is made to the best of the
Seller's knowledge, such Mortgage Loan shall be assigned a Collateral Value of
zero.
The Seller has good title to and is the sole owner and holder of the
Mortgage Loan;
1. Immediately prior to the pledge and grant of security interest to the
Buyer, the Note and the Mortgage Loan were not subject to an assignment or
pledge, and the Seller has full right and authority to pledge and assign the
Mortgage Loan to the Buyer.
2. The Seller is transferring such Mortgage Loan to the Buyer free and
clear of any and all liens, pledges, charges or security interests of any nature
encumbering the Mortgage Loans.
3. The information set forth on the List of Eligible Assets is true and
correct in all material respects.
4. Seller has acquired, serviced, collected and otherwise dealt with each
Mortgage Loan in compliance with all applicable federal, state and local laws
and regulations and the terms of the related Note and Mortgage.
5. The related Note and Mortgage are genuine and each is the legal, valid
and binding obligation of the maker thereof, enforceable in accordance with its
terms except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and be generally equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
6. The related Mortgage is a valid and enforceable first lien or second
lien on the related mortgaged property, which
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mortgaged property is free and clear of all encumbrances and liens (including
mechanics liens) having priority over the first lien of the Mortgage except for:
(i) liens for real estate taxes and assessments not yet due and payable; (ii)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected or considered in the lender's title
insurance policy delivered to the origination of the Mortgage Loan and referred
to in the appraisal made in connection with the origination of the related
Mortgage Loan and (iii) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by such Mortgage.
7. Any security agreement, chattel mortgage or equivalent document related
to such Mortgage Loan establishes and creates a valid and enforceable lien on
the property described.
8. The Seller has not advanced funds, or induced, solicited or knowingly
received any advance of funds by a party other than the Borrower, directly or
indirectly, for the payment of any amount required under the Mortgage Loan under
the Mortgage Loan.
9. Except as otherwise disclosed by written instruments included in the
related documents required to be held by the Custodian pursuant to the Custodial
Agreement with respect to such Mortgage Loan (the "Mortgage File"), Seller has
not impaired, waived, altered or modified the related Mortgage or Note in any
material respect, or satisfied, canceled, rescinded or subordinated such
Mortgage or Note in whole or in part or released all or any material portion of
the mortgaged property from the lien of the Mortgage, or executed any instrument
of release, cancellation, rescission or satisfaction of the Note or Mortgage.
10. The Mortgage has not been satisfied, canceled or subordinated, in
whole, or rescinded, and the mortgaged property has not been released from the
lien of the Mortgage, in whole or in part (except for a release that does not
materially impair the security of the Mortgage Loan or a release the effect of
which is reflected in the loan-to-value ration for the Mortgage Loan as set
forth in the List of Eligible Assets, nor to the best of the Seller's knowledge
has any instrument been executed that would effect any such release,
cancellation, subordination or rescission;
11. No condition exists which could give rise to any right of rescission,
set off, counterclaim , or defense including, without limitation, the defense of
usury, and no such right has been asserted.
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12. There is no proceeding pending for the total or partial condemnation
and no eminent domain proceedings pending affecting any mortgaged property.
13. Each Mortgage loan is covered by either (i) a mortgage title insurance
policy or other generally acceptable form of insurance policy customary in the
jurisdiction where the mortgaged property is located or (ii) if generally
acceptable in the jurisdiction where the mortgaged property is located, an
attorney's opinion of title given by an attorney licensed to practice law in the
jurisdiction where the mortgaged property is located. All of Seller's rights
under such policies, opinions or other instruments shall be deemed to be
transferred and assigned to Buyer upon transfer and pledge of the Mortgage Loans
hereunder. The tile insurance policy has been issued by a title insurer licensed
to do business in the jurisdiction where the mortgaged property is located,
insuring the original lender, its successor and assigns, as to the first or
second priority lien, as applicable, of the Mortgage in the original principal
amount of the Mortgage Loan, subject to the exceptions contained in such policy.
Seller is the sole insured of such mortgagee title insurance policy, and such
mortgagee title insurance policy is in full force and effect and will be in
force and effect upon the consummation of the transactions contemplated by this
Agreement. Seller has not made and has no knowledge of any claims made under
such mortgagee title insurance policy. Seller is not aware of any action by a
prior holder and Seller has not done, by act or omission, anything which could
impair the coverage or enforceability of such mortgagee title insurance policy
or the accuracy of such attorney's opinion of title.
14. Except for delinquent monthly payments, there exists no material
default, breach, violation or event of acceleration existing under the related
Mortgage or the related Note and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration. The Seller has not
waived any default, breach, violation or event of acceleration.
15. With respect to any Mortgage Loan which provides for an adjustable
interest rate, all rate adjustments made by Seller have been performed in
accordance with the terms of the related Note or subsequent modifications, if
any.
16. As of the time of origination, there are no delinquent taxes, ground
rents, water charges, sewer rents, assessments, insurance premiums, leasehold
payments, including assessments payable in future installments or other
outstanding charges, affecting the related mortgaged property.
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17. (i) No foreclosure proceedings are pending against the mortgaged
property, and to the Seller's best knowledge, (ii) no material litigation or
lawsuit relating to the Mortgage Loan is pending and (iii) the Mortgage Loan is
not subject to any pending bankruptcy or insolvency proceeding.
18. The Mortgage Loan obligates the Borrower thereunder to maintain a
hazard insurance policy ("Hazard Insurance") in an amount at least equal to the
lesser of (i) the amount necessary to fully compensate for any damage or loss to
the improvements which are part of such mortgaged property on a replacement
costs basis and (ii) the outstanding principal balance of the Mortgage Loan, in
either case in an amount sufficient to avoid the application of any
"co-insurance provisions", and, if it was in place at origination of the
Mortgage Loan, flood insurance, at the Borrower's cost and expense. If the
mortgaged property is in an area identified in the Federal Register by the
Federal Emergency Management Agency ("FEMA") as having special flood hazards, a
flood insurance policy is in effect which met the requirements of FEMA at the
time such policy was issued. The Mortgage obligates the Borrower's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such insurance
at the Borrower's cost and expense, and to seek reimbursement therefor form the
Borrower. The mortgaged property is covered by Hazard Insurance.
19. The Note is not and has not been secured by any collateral except the
lien on the corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage.
20. Subject to any applicable laws, the Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event that the mortgaged property is sold or
transferred without the prior written consent of the Mortgagee thereunder. The
Mortgage contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for the realization against
the mortgaged property of the benefits of the security provided thereby,
including (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale or judicial foreclosure and (ii) otherwise by judicial
foreclosure. To the best of Seller's knowledge, since the date of origination of
the Mortgage Loan, the mortgaged property has not been subject to any bankruptcy
proceeding or foreclosure proceeding and the Borrower has not filed for
protection under applicable bankruptcy laws. There is no homestead or other
exemption available to the Borrower that would interfere with the right to sell
the mortgaged property at a trustee's sale or the right to foreclose the
Mortgage. In the event the Mortgage constitutes a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has been properly
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designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by Buyer to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the related
Borrower. The Borrower has not notified the Seller and the Seller has no
knowledge of any relief requested or allowed to the Borrower under the Soldiers
and Sailors Civil Relief Act of 1940.
21. Except as set forth in the appraisal which forms part of the related
Mortgage File, the mortgaged property, normal wear and tear excepted, is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect materially and adversely the value of
the mortgaged property as security for the Mortgage Loan or the use for which
the premises were intended and the Seller has no knowledge of any proceeding
pending for the total or partial condemnation of such Mortgage Property.
22. There was no fraud involved in the origination of the Mortgage Loan by
the mortgagee or, to the Seller's knowledge, by the Borrower, any appraiser or
any other party involved in the origination of the Mortgage Loan.
23. Each Mortgage File contains an appraisal of the mortgaged property
indicating an appraised value equal to the appraised value identified for such
mortgaged property on the List of Eligible Assets. Each appraisal has been
performed in accordance with the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989.
24. All parties which have had any interest in the Mortgage Loan, whether
as mortagee, assignee, pledgee or othwerwise, are (or, during the period in
which they held and disposed of such interest, were) in compliance with any and
all applicable "doing business" and licensing requirements of the laws of the
state wherein the mortaged property is located.
25. No improvements on the related mortgaged property encroach on adjoining
properties (and in the case of a condominium unit, such improvements are within
the project with respect to that unit), and no improvements on adjoining
properties encroach upon the mortgaged property unless there exists in the
Mortgage File a title policy with endorsements which insure against losses
sustained by the insured as a result of such encroachments.
26. Principal payments on the Mortgage Loan commenced no more than sixty
days after the proceeds of the Mortgage Loan were disbursed and the Note is
payable on the first day of each month.
27. The Mortgage Loan bears interest at the mortgage interest rate and the
Note does not permit negative amortization.
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28. With respect to escrow deposits, if any, all such payments are in the
possession of, or under the control of, the Seller and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or escrow advances or
other charges or payments due the Seller have been capitalized under any
Mortgage or the related Noted.
29. No Mortgage Loan contains provisions pursuant to which monthly payments
are: (i) paid or partially paid with fund deposited in any separate account
established by the Seller, the Borrower, or anyone on behalf of the Borrower;
(ii) paid by any source other than the Borrower or (iii) contains any other
similar provisions which may constitute a "buydown" provision. The Mortgage Loan
is not a graduated payment mortgage loan and the Mortgage Loan does not have a
shared appreciation or other contingent interest feature.
30. To the Seller's best knowledge, the mortgaged property is lawfully
occupied under applicable law.
31. Each Mortgage Loan has been underwritten in accordance with the
underwriting guidelines applicable to such Mortgage Loan (on the basis of its
classification of an A Quality Non-Conforming Mortgage Loan, B Quality
Non-Conforming Mortgage Loan, C Quality Non-Conforming Mortgage Loan, as
applicable) of the Seller in effect at the time the Mortgage Loan was originated
or purchased by the Seller.
32. No law relating to servicing, collection or notification practices and
no law relating to origination practices, has been violated in connection with
any Mortgage Loan transferred to the Buyer pursuant to this Agreement,
including, without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws. The Mortgage Loan has been serviced by the Seller and any predecessor
servicer in accordance with the terms of the Note.
33. No Mortgage Loan was made in connection with (a) the construction or
rehabilitation of a mortgaged property or (b) facilitating the trade-in or
exchange of a mortgage property.
34. The Seller hereby covenants that it will no directly solicit any
Borrower hereunder to refinance the related Mortgage Loan.
35. The proceeds of the Mortgage Loan have been fully disbursed to or for
the account of the Borrower and there is no obligation for the Mortgagee to
advance additional funds thereunder, and any and all requirements as to
completion of any on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been compiled with. All costs, fees and
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expenses incurred in making or closing the Mortgage Loan and the recording of
the Mortgage have been paid, and the Borrower is not entitled to any refund of
any amounts paid or due to the Mortgagee pursuant to the Note or Mortgage.
36. There are no mechanics' or similar liens or claims that have been filed
for work, labor or material (and no rights are outstanding that under law could
give rise to such lien) affecting the related mortgaged property that are or may
be liens prior to or equal or coordinate with, the lien of the related Mortgage.
37. As to each fixed rate Mortgage Loan, interest is calculated on the Note
on the basis of twelve 30 day months and a 360 day year, and, as to each
adjustable rate Mortgage Loan, interest is calculated on the Note on the basis
of the number of days in the related interest accrual period.
38. The mortgaged property consists of either (i) a single parcel of real
property or (ii) more than one parcel of real property (as determined for tax
purposes only) which parcels are contiguous and are subject to a single deed or
title, in each case with a detached single family residence erected thereon, or
a two-to four-family dwelling, or an individual condominium unit in a low-rise
or high-rise condominium project, or a manufactured dwelling attached to a
permanent foundation, or an individual unit in a planned unit development or a
townhouse. No residence or dwelling is a mobile home. No Mortgage Loan is
secured by a leasehold estate.
B-7
THIS AGREEMENT is made on 24 April 1998 between:
(1) OCWEN ASSET INVESTMENT-UK, LLC, a Delaware limited liability company,
and whose principal place of business is at The Forum, 1675 Palm Beach
Lakes Boulevard, West Palm Beach, FL 33401 (the "BORROWER"); and
(2) GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. a company incorporated under
the laws of the State of Delaware (the "LENDER"); and
WHEREAS:
(1) Ocwen Financial Corporation ("OFC") and City Mortgage Corporation
Limited ("CMC") together with other parties referred to therein have
entered into an agreement for the sale and purchase of the business of
CMC and its subsidiaries dated 31 March 1998 (the "SALE AGREEMENT")
pursuant to which OFC has agreed to buy or procure another Buyer Group
Company (as therein defined) or any OAIC Group Company (as therein
defined) to buy the assets specified therein and the entire issued
share capital of City Mortgage Receivables 7 Plc.
(2) The Lender has agreed to provide a facility to the Borrower to finance
the acquisition by the Borrower of the Securitisation Residuals under
the Sale Agreement on the terms and subject to the conditions contained
herein.
(3) The Borrower is a wholly owned subsidiary and Ocwen Partnership L.P.
(the "GUARANTOR") is a 98 per cent. owned subsidiary of Ocwen Asset
Investment Corporation.
(4) The Guarantor has agreed to provide a loan to the Borrower (the
"INTERCOMPANY LOAN") to finance the balance of the purchase price of
the Securitisation Residuals and in consideration for the economic
benefit to be received by the Guarantor under the Intercompany Loan and
in order to protect its return under the Intercompany Loan the
Guarantor has agreed to guarantee the obligations of the Borrower under
this Agreement on and subject to the terms of the Guarantee.
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement (including the recitals hereto) the following terms
shall have the respective meanings set forth below:
"ACCELERATION" means any acceleration of the Advance hereunder
following the occurrence of an Event of Default.
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"ACCOUNT BANK" means National Westminster Bank Plc or such other bank
or financial institution as may be substituted as account bank with the
prior written consent of the Lender.
"ADDITIONAL PRINCIPAL REPAYMENT AMOUNT" means, on any Principal
Repayment Date in respect of which the provisions of clause 6.4 and 6.5
apply, the amount necessary such that after application of such amount
to Outstanding Advances (and after application of the Principal
Repayment Amount to Outstanding Advances on such date) the Collateral
Percentage is equal to 65 per cent.
"ADVANCE" means, save as otherwise provided herein, the advance (as
from time to time reduced by repayment and prepayment) in an amount of
,19,000,000 (nineteen million pounds) to be made by the Lender to the
Borrower in one instalment on the Advance Date to be applied by the
Borrower, together with the advance made to it under the Intercompany
Loan on or prior to the Advance Date, to finance the purchase by the
Borrower of the Securitisation Residuals.
"ADVANCE DATE" means the date hereof or such later date as agreed by
the Lender.
"AGREEMENT" means this Residuals Loan Facility Agreement, including all
schedules and annexures hereto, which expression shall include the same
as varied, supplemented, re-stated, extended or replaced, in each case
in writing, from time to time.
"AVAILABLE CASH" means, for each Principal Repayment Date, an amount
equal to the aggregate of:-
(a) the Permitted Percentage (at the relevant time) of
Securitisation Residual Receipts received or recovered during
the related Collection Period; and
(b) 100 per cent of all Securitisation Residual Proceeds received
or recovered during the related Collection Period.
"BORROWER PROCEEDS ACCOUNT" means the account in the name of the
Borrower with the Account Bank number 36156930 assigned to the Lender
pursuant to the Borrower Proceeds Account Assignment.
"BORROWER PROCEEDS ACCOUNT ASSIGNMENT" means the assignment of the
Borrower Proceeds Account in favour of the Lender dated on or about the
date hereof in form and substance satisfactory to the Lender.
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
banks are generally open for business in London and New York.
"COLLATERAL PERCENTAGE" means, on any day by reference to which the
same falls to be calculated, Outstanding Advances expressed as a
percentage of Residuals Market Value plus Eligible Collateral Value,
calculated and agreed in accordance with Clause 16.
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"COLLECTION PERIOD" means the calendar month immediately prior to the
calendar month in which the relevant Interest Payment Date or Principal
Repayment Date falls.
"CONSOLIDATED INDEBTEDNESS" means for any period, the aggregate
Indebtedness of the relevant entity determined on a consolidated basis
in accordance with GAAP less any non-specific balance sheet reserves
maintained in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" means all amounts included as capital
on the relevant entity's consolidated balance sheet determined in
accordance with GAAP less amounts owing to affiliates and less any
intangible assets including, without limitation, goodwill and deferred
tax assets.
"DEFERRED INTEREST PERIOD" means each period which would, but for the
deferral of the first Interest Payment Date, have been an Interest
Period prior to the First Interest Payment Date.
"DETERMINATION DATE" means the last day of each Collection Period.
"DISPOSAL" means in the case of the Securitisation Residuals financed
hereunder the sale or other disposition thereof, by the Borrower or the
Lender as assignee.
"ELIGIBLE COLLATERAL" means any form of collateral which is mutually
acceptable to both the Lender and the Borrower charged (by way of first
fixed charge) or otherwise pledged so as to give the Lender a first
priority, perfected security interest pursuant to security documents in
form and substance satisfactory to the Lender;
"ELIGIBLE COLLATERAL VALUE" means the market value of the Eligible
Collateral determined at the sole discretion of the Lender, acting in
good faith which in the absence of manifest error shall be conclusive.
"ENFORCEMENT" means any enforcement by the Lender of any of its
Security under the Security Documents irrespective of whether, at that
time, an Acceleration shall have occurred;
"EVENT OF DEFAULT" means any one of the conditions or circumstances
referred to in clause 14.
"FACILITY" means the facility granted to the Borrower by the Lender
under this Agreement.
"FACILITY OFFICE" means the office of the Lender through which it makes
the Advance to the Borrower.
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"FINAL MATURITY DATE" means the day falling on the third anniversary
from the date hereof unless that day is not a Business Day in which
case the Final Maturity Date shall be the immediately preceding day
which is a Business Day.
"GAAP" means accounting principles generally accepted and adopted in
the United States of America as at the relevant date and applied on a
consistent basis.
"GUARANTEE" means the guarantee to be given by the Guarantor on or
about the date hereof in form and substance satisfactory to the Lender
guaranteeing, inter alia, the obligations of the Borrower under this
Agreement.
"HOLDING COMPANY" of a company or corporation means any company or
corporation of which the first-mentioned company or corporation is a
subsidiary, and references to a company or corporation shall be deemed
to include a company or corporation which is not formed and registered
under the Companies Act 1985.
"INDEBTEDNESS" means any obligation (whether incurred as principal or
surety) for the payment or repayment of money in respect of:
(a) monies borrowed and debit balances at banks;
(b) any loan note, bond, note, loan stock, commercial paper,
debenture or other security;
(c) any acceptance or letters of credit;
(d) the deferred purchase price of property or services, except
accounts payable and accrued expenses arising in the ordinary
course of business;
(e) any receivable sold or discounted (otherwise than on a
non-recourse basis);
(f) the capital value of any lease (whether in respect of land,
machinery, equipment or otherwise) entered into primarily as a
method of raising finance or financing the acquisition of the
asset leased;
(g) any currency or interest swap, cap, collar, floor or corridor
transaction, any repurchase or reverse repurchase transaction,
any foreign exchange, spot or forward transaction, any stock
lending transaction, any financial option, or any combination
of any of the foregoing; or
(h) without double counting, any guarantee, indemnity or
contingent liability in respect of any borrowings of any
person of a type referred to in (a) to (g) above but only to
the extent the borrowings thereby guaranteed or indemnified
against are outstanding.
"INITIAL COLLATERAL DEFICIENCY PERIOD" means the period commencing on
the date hereof and continuing until the Collateral Percentage is 60
per cent or less for three
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successive Principal Repayment Dates unless on the date hereof the
Collateral Percentage is 60 per cent or less in which case there shall
be no Initial Collateral Deficiency Period.
"INTEREST CALCULATION AMOUNT" means in respect of each Deferred
Interest Period falling within (or part within) the period from the
date hereof to the First Interest Payment Date (as defined in the
definition of "Interest Payment Date"), the amount of interest which
would, but for the extended First Interest Period, have been payable on
each Principal Repayment Date falling within (and on the final day of)
such period, calculated on the basis that:-
(1) all interest on each such Principal Repayment Date is paid on
its due date;
(2) LIBOR is re-set on each Principal Repayment Date; and
(3) interest is calculated on the actual reducing principal
balance of the Advance.
"INTEREST PAYMENT DATE" means in the case of the First Interest Payment
Date the earlier of the Principal Repayment Date immediately following
the date on which the Borrower receives a direction from the Inland
Revenue pursuant to the United States/United Kingdom double taxation
treaty to pay interest under this Agreement free of UK withholding tax
or the Principal Repayment Date immediately following notice by the
Lender to the Borrower that interest payments are to be paid subject to
UK withholding tax (such date, the "FIRST INTEREST PAYMENT DATE"), and
in the case of each subsequent interest payment date, each Principal
Repayment Date.
"Interest Period" means each of the following periods:
(a) the period commencing on (and including) the day the Advance
is made and ending on (but excluding) the next following
Interest Payment Date; and
(b) thereafter, each period commencing on (and including) an
Interest Payment Date and ending on (but excluding) the next
following Interest Payment Date,
provided that any Interest Period which would otherwise overrun the
Final Maturity Date shall end upon of the Final Maturity Date.
"ISSUERS" means each of City Mortgage Receivables 1 Plc (Company No.
3126751), City Mortgage Receivables 2 Plc (Company No. 3245450), City
Mortgage Receivables 3 Plc (Company No. 3245445), City Mortgage
Receivables 4 Plc (Company No. 3246090), City Mortgage Receivables 5
Plc (Company No. 3304205) and City Mortgage Receivables 6 Plc (Company
No. 3328209).
"LIBOR" in respect of a particular period and in relation to the
Advance or other amount in respect of which an interest rate is to be
determined pursuant to this Agreement, means the percentage interest
rate per annum for the time being offered
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in the London Interbank Market to prime banks for sterling deposits for
the relevant period at or about 11.00 a.m. (London time) on the first
day of such period as published on the relevant page of The Bloomberg
(Bloomberg L.P.) under the heading "Money Market - Money Market Rates"
save that LIBOR for the First Interest Period shall be one month LIBOR.
"MARGIN" means 2.5 per cent per annum.
"NOVATION AGREEMENTS" means the six novation agreements to be entered
into on or about the date hereof each in form and substance
satisfactory to the Lender relating to, inter alia, Securitisation
Residuals in respect of Securitisations and the Novation agreement to
be entered into on or about the date hereof in form and substance
satisfactory to the Lender relating to, inter alia, certain bank
accounts.
"OUTSTANDING ADVANCE" means, on any day by reference to which the same
falls to be determined, the aggregate amount of the Advance outstanding
under the Facility.
"PERMITTED PERCENTAGE" means:
(i) during the Initial Collateral Deficiency Period:
(a) 75 per cent. for so long as the Collateral Percentage
does not exceed 65 per cent; or
(b) 94 per cent. for so long as the Collateral Percentage
exceeds 65 per cent; or
(ii) during the Subsequent Collateral Deficiency Period:
(a) 50 per cent. for so long as the Collateral Percentage
does not exceed 65 per cent; or
(b) 94 per cent. for so long as the Collateral Percentage
exceeds 65 per cent.
"POTENTIAL EVENT OF DEFAULT" means any event which with the giving of
notice or the passing of time or both or the occurrence of any other
event will become an Event of Default.
"PRINCIPAL REPAYMENT AMOUNT" for any Principal Repayment Date means an
amount equal to Available Cash (calculated for the relevant Principal
Repayment Date) less the aggregate of:-
(a) interest due hereunder on the relevant Principal Repayment
Date; and
(b) all reasonable fees, expenses and other amounts due to the
Lender under any Transaction Document on such Principal
Repayment Date.
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<PAGE>
"PRINCIPAL REPAYMENT DATE" means, the 25th day of May 1998, unless that
day is not a Business Day in which case the first Principal Repayment
Date shall be the immediately preceding day which is a Business Day and
thereafter the 25th day of each month unless that day is not a Business
Day is which case the Principal Repayment Date
shall be the immediately preceding day which is a Business Day.
"PURCHASE PRICE" means such part of the purchase price payable under
the Sale Agreement as is attributed to the Securitisation Residuals.
"PURCHASE PRICE BALANCE" means the amount by which the Purchase Price
exceeds the Advance.
"RESIDUALS ASSIGNMENT" means the assignment agreement to be entered
into on or about the date hereof in form and substance satisfactory to
the Lender by the Borrower assigning in favour of the Lender the Assets
(as therein defined).
"RESIDUALS MARKET VALUE" means the market value of the Securitisation
Residuals financed under the Facility determined at the sole discretion
of the Lender, acting in good faith which in the absence of manifest
error shall be conclusive.
"SECURED LIABILITIES" means all liabilities and obligations of whatever
nature of the Borrower, the Guarantor or any other person secured under
any Security Document.
"SECURITISATION DOCUMENTATION" means all documentation executed in
connection with each Securitisation as the same shall have been novated
and amended pursuant to, inter alia, the Novation Agreements.
"SECURITISATION RESIDUALS" has the meaning attributed to it in the
Residuals Assignment.
"SECURITISATION RESIDUALS PROCEEDS" means, in respect of Securitisation
Residuals financed hereunder, the aggregate amount of:-
(a) all cash consideration received by or on behalf of the
Borrower or the Lender as assignee upon or as a result of the
Disposal of some or all of such Securitisation Residuals; and
(b) any non-refundable deposit or other advance payment paid to or
for the account of the Borrower or the Lender as assignee by
any person acquiring or proposing to acquire all or any of
such Securitisation Residuals under a contract or offer to
purchase or otherwise acquire the same which has been
withdrawn, terminated, cancelled or has lapsed,
irrespective of whether the same shall be payable upon or at any time
after the relevant Disposal.
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<PAGE>
"SECURITISATION RESIDUALS RECEIPTS" means all amounts received or
recovered by or on behalf of the Borrower or the Lender as assignee in
respect of their respective rights, title and interest in and to any
Securitisation Residual, whether received or recovered under or in
accordance with the Securitisation Documentation or otherwise but
excluding all Securitisation Residuals Proceeds.
"SECURITISATIONS" means each of the six securitisations of Mortgage
Loans originated by CMC and certain of its subsidiaries, effected
through sales of the Mortgage Loans to the Issuers on 21 March, 1996,
18 October, 1996, 31 October, 1996, 31 January, 1997 and 30 April,
1997.
"SECURITY" includes any mortgage, sub mortgage, fixed or floating
charge, sub charge, encumbrance, lien, pledge, hypothecation, absolute
assignment, assignment by way of security, or title retention
arrangement, and any agreement or arrangement having substantially the
same economic or financial effect as any of the foregoing (including
any "hold back" or "flawed asset" arrangement).
"SECURITY DOCUMENTS" means the Residuals Assignment, (and each further
security document executed pursuant thereto), the Borrower Proceeds
Account Assignment and any other security document executed pursuant to
this Agreement.
"SERVICE DOCUMENT" means a writ, summons, order judgment or other
process issued in connection with any Proceedings;
"SUBSEQUENT COLLATERAL DEFICIENCY PERIOD" means the period commencing
on the day immediately following the last day of the Initial Collateral
Deficiency Period and continuing until the Final Maturity Date or, if
earlier the repayment in full of the Advance.
"SUBSIDIARY" of a person means (i) any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned or controlled by such person, one or more of the other
subsidiaries of such person or any combination thereof or (ii) any
partnership in which such person is a general partner.
"TRANSACTION DOCUMENTS" means this Agreement, the Security Documents
and the Guarantee and each other document at any time entered into
between all or any of the Borrower, the Guarantor, the Lender and any
third party pursuant to or in connection with any document which is a
Transaction Document.
the "LENDER" shall be construed so as to include its and any subsequent
successors and assigns in accordance with their respective interests.
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<PAGE>
a "MONTH" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
following calendar month; PROVIDED that, where any such period would
otherwise end on a day which is not a Business Day, it shall end on the
following succeeding Business Day, unless that day falls in the
calendar month next following that in which it would otherwise have
ended, in which case it shall end on the immediately preceding Business
Day; and provided further that, if there is no numerically
corresponding day in the next following calendar month, that period
shall end on the last Business Day in that next following calendar
month (and references to "MONTHS" shall be construed accordingly).
a "PERSON" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing.
"REPAY" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include "PREPAY" (or, as the case may be,
the corresponding derivative form thereof).
"TAX" shall be construed so as to include any present or future tax,
levy, impost, duty or other charge of a similar nature (including any
penalty or interest payable in connection with any failure to pay or
any delay in paying any of the same).
"VAT" shall be construed as a reference to value added tax including
any similar tax which may be imposed in place thereof from time to
time.
the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the jurisdiction in which such
company or corporation is incorporated or any jurisdiction in which
such company or corporation carries on business including the seeking
of liquidation, winding-up, reorganisation, dissolution,
administration, arrangement, adjustment, protection or relief of
debtors.
1.2 INTERPRETATION
For the purposes of this Agreement except as otherwise expressly
provided or unless the context otherwise requires:-
(1) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally
accepted accounting principles;
(2) references herein to "clauses", "sub-clauses", "paragraphs",
and other subdivisions without reference to a document are to
designated clauses, sub-clauses paragraphs and other
subdivisions of this Agreement;
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(3) reference to a sub-clause without further reference to a
clause is a reference to such sub-clause as contained in the
same clause in which the reference appears, and this rule
shall also apply to paragraphs and other subdivisions;
(4) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to
any particular provision;
(5) headings to clauses and Schedules are for convenience only and
do not affect the interpretation of this Agreement;
(1)
(6) references to a "company" shall be construed so as to include
any company, corporation or other body corporate, wherever and
however incorporated or established;
(7) references to times of the day are to London time;
(8) references to any agreement (including without limitation to
each Transaction Document), shall be construed as a reference
to such agreement as the same may be, or may from time to time
have been, amended, modified, supplemented, novated or
restated in accordance with the terms of the Transaction
Documents;
(1) "(POUND STERLING)", "POUNDS" and "STERLING" denote the lawful
currency of the United Kingdom and "$" and "DOLLAR" denote the
lawful currency of the United States of America;
(10) any reference in this Agreement to a statute shall be
construed as a reference to such statute as the same may have
been, or may from time to time be, amended, modified or
re-enacted;
(11) any reference to Security shall include not only interests
which constitute Security as a matter of English law but also
(and separately) those which constitute Security as a matter
of U.S. law.
2. THE FACILITY AND PURPOSEFACILITY AND PURPOSE
2.1 The Lender hereby grants to the Borrower a credit facility comprising
the Advance on and subject to the terms of this Agreement.
2.2 The Advance will be used by the Borrower for the sole purpose of
purchasing the Securitisation Residuals (as novated and amended
pursuant to the Novation Agreements) from CMC and Mortgage Management
Limited on the terms of the Sale Agreement.
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2.3 The Lender shall not be obliged to concern itself with the application
of amounts borrowed by the Borrower under this Agreement and
application by the Borrower of funds so borrowed contrary to the
provisions of clause 2.2 shall not prejudice the Lender's rights
hereunder or under any other Transaction Document.
3. AVAILABILITY
3.1 The Facility will not become available to the Borrower and the Lender
shall be under no obligation to make the Advance hereunder until each
of the following conditions precedent shall have been fulfilled to the
satisfaction of the Lender:
(1) the Lender shall have received each of the following
documents, each in form and substance satisfactory to it:-
(1) a true and complete copy of the Certificate of
Formation of the Borrower, certified by the Secretary
of State of the State of Delaware, together with a
certified true and complete copy of the limited
liability company agreement of the Borrower certified
by the Secretary or Assistant Secretary of the
Borrower and a true and complete copy of the
Certificate of Limited Partnership of the Guarantor,
certified by the Secretary of Commonwealth of the
Commonwealth of Virginia, together with a certified
true and complete copy of the limited partnership
agreement of the Guarantor certified by the Secretary
or Assistant Secretary of the Guarantor;
(2) a certificate of the Secretary or an Assistant
Secretary of each of the Borrower and the Guarantor
certifying, among other things (a) the names and true
signatures of the officers of such person authorised
to sign the Transaction Documents to which it is a
party; (b) that the limited liability company
agreement or limited partnership agreement of such
person delivered to the Lender on the date of the
drawing of the Advance are true and complete, and
have not been amended, rescinded or otherwise
modified; (c) that the resolutions of the Board of
Directors (or equivalent governing body) of each of
such person attached thereto, which authorise, among
other things the execution and delivery of the
Transaction Documents, are true and complete, and
have not been amended, rescinded or otherwise
modified; (d) that the Sale Agreement and Novation
Agreements delivered to the Lender on the date of the
drawing of the Advance are true and complete copies
of such documents and contain all amendments or
modifications thereto as of such date; and (e) that
there have been no changes in the Certificate of
Formation or Certificate of Limited Partnership, as
the case may be, of such person since the date of the
most recent certification thereof by the Secretary of
State of Delaware or Secretary of Commonwealth of the
Commonwealth of Virginia, as the case may be.
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(3) originals (or, where the Lender is not party to the
relevant document, certified copies) of each of the
following documents, duly executed by each party
thereto other than the Lender:-
(1) the Guarantee;
(2) the Security Documents and all notices and
acknowledgements thereof to be given and
received thereunder and all consents to any
such security being granted;
(3) the Sale Agreement including all schedules
thereto and the disclosure letter relating
thereto;
(4) the Novation Agreements together with all
notices relating thereto;
(5) the Intercompany Loan.
(4) in respect of each of the Borrower and the Guarantor
a copy (certified by the secretary or a director or
equivalent officer of the relevant company to be
true, complete and up to date as at the date of
advance of the Advance) of all consents, approvals,
authorisations or orders of any court or governmental
agency or body required for the execution, delivery
and performance by it of, or compliance by it with,
the terms of any Transaction Document or the
consummation of the transactions contemplated
thereby;
(5) duly executed account mandates in relation to the
Borrower Proceeds Account, specifying the authorised
signatories for the Borrower and the Lender;
(6) UCC-1 Financing Statements executed by the Borrower
against the Securitisation Residuals with respect to
the jurisdictions requested by the Lender;
(2) all conditions precedent under each other Transaction Document
(other than any requirement that the Facility shall have
become available hereunder) shall have been fulfilled;
(3) the Lender shall have received legal opinions, each in form
and substance satisfactory to it, from each of the following:
(1) Edge and Ellison;
(2) Akin, Gump, Strauss, Hauer & Feld LLP;
(3) in house counsel to Ocwen Financial
Corporation
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(4) the articles of incorporation and By-Laws of the Borrower
shall be in form and substance satisfactory to the Lender.
(5) the representations and warranties made in Section 12 shall be
true and correct on and as of the Advance Date, immediately
preceding and after giving effect to such Advance and to the
application of the proceeds therefrom;
(6) the Lender shall be satisfied that the loan, in an amount at
least equal to the Purchase Price Balance, shall have been
made by the Guarantor to the Borrower under the Intercompany
Loan.
4. DRAWINGS
4.1 Subject to:-
(1) the conditions precedent in Clause 3 having been fulfilled to
the satisfaction of the Lender or waived by the Lender; and
(2) no Event of Default or Potential Event of Default having
occurred and subsisting unremedied (to the satisfaction of the
Lender) and unwaived,
in each case by no later than 12, noon London time on the Advance Date
the Lender will make the Advance to the Borrower on the Advance Date.
4.2 Subject to the foregoing provisions of this Clause 4 the Lender shall,
not later than 2 pm London time on the date on which the Advance is to
be made (or such later time as maybe agreed between the Borrower and
the Lender), make the Advance requested, the Advance to be credited to
an account specified by the Borrower.
4.3 If the Borrower fails for any reason whatsoever (other than as a
consequence of a breach of the Lender's obligations) to draw down the
Advance on the Advance Date (whether such failure be the result of the
occurrence of an Event of Default or otherwise), the Borrower will pay
to the Lender on demand such amount as the Lender certifies to be
necessary to compensate for all losses excluding loss of Margin
incurred or to be incurred on account of deposits acquired or arranged
in order to fund the Advance. Any such certificate by the Lender shall
be prima facie evidence of such losses.
5. INTEREST ON ADVANCESON ADVANCES
5.1 The Borrower will pay interest on the Advance on each Interest Payment
Date in respect of each Interest Period referable thereto at the rate
per annum equal to the aggregate of (i) the Margin and (ii) LIBOR for
the relevant Interest Period.
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5.2 On the First Interest Payment Date, the Borrower shall pay an
additional amount of interest at the rate equal to LIBOR on the
Interest Calculation Amount for each Deferred Interest Period falling
prior to the First Interest Payment Date such interest to accrue from
and including the first day of each respective Deferred Interest Period
to but not including the last day of such Deferred Interest Period.
5.3 The Lender will, as soon as practicable after commencement of each
Interest Period advise the Borrower of LIBOR for that Interest Period.
Any certificate of the Lender as to the rate and amount of interest
determined by it under this Agreement in respect of any Interest Period
shall, save for manifest error, be conclusive and binding on the
Borrower and the Guarantor.
5.4 Interest at the rate determined as aforesaid shall be calculated on
each Advance and each part thereof on the basis of actual days elapsed
and a 365 day year, shall accrue from day to day from and including the
first day of each Interest Period to but excluding the date of
repayment of the Advance.
5.5 If LIBOR cannot be determined for any reason the rate of interest
applicable to the Advance shall be the sum of the Margin and the rate,
expressed as a percentage rate per annum, which is the actual cost to
the Lender of funding the Advance from whatever sources it may select
during such Interest Period (as applicable) and, if the Lender so
requires, within five days of such notification the Lender and the
Borrower shall enter into negotiations with a view to agreeing a
substitute basis for determining the rates of interest which may be
applicable to the Advance in the future.
5.6 If the Borrower is required to repay principal on the Advance on any
day other than an Interest Payment Date or Principal Repayment Date,
the Borrower shall be obliged to pay such amount together with interest
accrued thereon to the date of such repayment.
6. REPAYMENT AND APPLICATION OF RECEIPTSAND APPLICATION OF RECEIPTS
6.1 The Borrower shall repay the amount of the Outstanding Advance in full
(together with all other amounts then due hereunder) on the Final
Maturity Date.
6.2 The Borrower shall, on each Principal Repayment Date repay the
Principal Repayment Amount for such Principal Repayment Date.
6.3 Securitisation Residuals Receipts and Securitisation Residuals Proceeds
received by any party hereto other than the Lender shall be paid by
such party, forthwith upon receipt of the same, to the Borrower
Proceeds Account and shall be held by the relevant party on trust for
the Lender pending payment of the same into the Borrower Proceeds
Account.
6.4 On each Principal Repayment Date the Permitted Percentage of all
Securitisation Residual Receipts and 100 per cent of all Securitisation
Residuals Proceeds shall be
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applied in or towards satisfaction of the obligations of the Borrower
hereunder in the following order of priority:
(1) first, in or towards payment of all interest falling due to
the Lender hereunder on the relevant Interest Payment Date
together with any overdue interest accrued thereon up to and
including the relevant distribution date;
(2) second, in or towards payment of the Principal Repayment
Amount due on such Principal Repayment Date;
(3) third, in or towards payment of all reasonable fees and
expenses or other amounts due and owing to the Lender under
all Transaction Documents (other than amounts referred to in
(a) or (b)); and
(4) prior to an Event of Default which is continuing, the balance,
if any, to be released to the Borrower,
(1)
provided that at all times following the earlier of an Acceleration or
an Enforcement the whole of the provisions of this clause 6 shall cease
to apply and all amounts received or recovered in respect of the assets
subject to the Security Documents may be applied by the Lender in or
towards satisfaction of the Secured Liabilities in such order as the
Lender in its absolute discretion shall determine.
6.5 If:-
(a) (i) on the third consecutive Principal Repayment Date on
which the applicable Permitted Percentage is 94 per
cent; and
(ii) on each of such three (3) consecutive Principal
Repayment Dates the Collateral Percentage (calculated
on the basis of Outstanding Advances as reduced by
the Principal Repayment Amount repaid on such date)
exceeds 65 per cent,
OR
(b) on any Principal Repayment Date the provisions of clauses
6.5(a)(i) and (ii) or this clause 6.5(b) have been applicable
to any of the six immediately preceding Principal Repayment
Dates and on such Principal Repayment Date the Collateral
Percentage, after application of the provisions of clause 6.4,
exceeds 65 per cent,
then the Borrower shall, at its option, on such Principal Repayment
Date either:
(A) prepay an amount equal to the Additional Principal
Repayment Amount; or
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(B) provide additional Eligible Collateral of a value as
would result in a Collateral Percentage (calculated
on the basis of Outstanding Advances as reduced by
the Principal Repayment Amount repaid on the relevant
Principal Repayment Date) of 65 per cent,
6.6 Following application of funds under and in accordance with clause 6.4,
and provided that no Event of Default has occurred and is continuing if
the aggregate of:-
(a) Securitisation Residual Receipts received or recovered during
the related Collection Period; plus
(b) Securitisation Residual Proceeds received or recovered during
the related Collection Period,
exceeds Available Cash, then such excess shall be released to the
Borrower, to such account as the Borrower shall from time to time
direct.
6.7 Without prejudice to the Security Documents, the Lender shall consent
to the Disposal of some or all of the Securitisation Residuals financed
hereunder provided that the Collateral Percentage calculated
immediately following such Disposal is no greater than the Collateral
Percentage calculated on the Principal Repayment Date immediately prior
to such Disposal.
6.8 If all or any part of the Advance is repaid under this clause other
than on an Principal Repayment Date, the Borrower will pay to the
Lender on demand such amount as the Lender certifies to be necessary to
compensate it for all losses excluding loss of Margin incurred or to be
incurred by it on account of deposits acquired or arranged in order to
fund the Advance. Any such certificate by the Lender shall, in the
absence of manifest error, be prima facie evidence of such losses.
6.9 Subject to Clause 6.8, the Borrower may on any Business Day, upon five
Business Days prior written notice to the Lender, prepay in whole or in
part the Outstanding Advance hereunder together with all accrued
interest thereon.
7. EVIDENCE OF DEBTOF DEBT
The Lender shall maintain in accordance with its usual practice,
accounts evidencing the amounts from time to time lent by and owing to
it hereunder, and in any legal action or proceeding arising out of or
in connection with this Agreement, the entries made in such accounts
shall in the absence of manifest error be prima facie evidence of the
existence and amounts of the specified obligations of the Borrower.
8. TAXES
8.1 If the Borrower:-
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(1) whether before or after receipt by the Borrower of a direction
from the Inland Revenue pursuant to the United States/United
Kingdom double taxation treaty to pay interest under this
Agreement free of UK withholding tax is required as a result
of any change in law or in its interpretation or
administration to make any payment to the Lender hereunder
subject to any deduction or withholding on account of tax; or
(2) is unable to obtain a direction from the Inland Revenue
pursuant to the United States/United Kingdom double taxation
treaty to pay interest under this Agreement free of UK
withholding tax (other than as a result of an act or omission
of the Lender);
it shall notify the Lender of such event and, provided that as a result
of (a) or (b) above payments hereunder are required to be made subject
to a deduction or withholding on account of tax, the sum payable by the
Borrower in respect of which such deduction or withholding is required
to be made shall, subject to clause 8.2, be increased (the amount of
such increase being referred to hereafter as the "GROSS-UP AMOUNT") to
the extent necessary to ensure that, after the making of the required
deduction or withholding, the Lender receives and retains (free from
any liability in respect of such deduction or withholding) a net sum
equal to the sum which it would have received and so retained had no
such deduction or withholding been made or required to be made.
8.2 If, at any time, the circumstances in clause 8.1 apply, the Borrower
shall be entitled to prepay the whole (but not part) of the Outstanding
Advance within 60 days of the change in law or unavailability of a
direction pursuant to the treaty, as the case may be, in accordance
with Clause 6.9 and in such circumstances the Lender agrees that the
provisions of Clause 6.8 hereof shall not apply and, if during such 60
day period any Gross-up Amount would otherwise fall due for payment
hereunder, the Borrower shall be entitled to defer the obligation to
pay the same until the last day of the 60 day period, on which day it
shall fall due.
8.3 If the Borrower makes any payment hereunder in respect of which it is
required by law to make any deduction or withholding on account of tax,
it shall pay the full amount required to be deducted or withheld to the
relevant taxation or other authority within the time allowed for such
payment under applicable law and shall deliver to the Lender, within
thirty days after it has made such payment to the applicable authority,
an original receipt (or a certified copy thereof) issued by such
authority evidencing the payment to such authority of all amounts so
required to be deducted or withheld in respect of such payment or any
other written evidence acceptable to the Lender.
8.4 If the Borrower pays any increased amount under clause 8.1 ( a "TAX
PAYMENT") and the Lender, acting reasonably, determines that it has
received and retained a refund of, or a credit against, the tax paid or
payable by it and that the refund or credit is in respect of, or
calculated with reference to, the deduction or withholding giving rise
to
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<PAGE>
the Tax Payment (such refund or credit being referred to hereafter as a
"TAX CREDIT"), then the Lender shall, to the extent that it can do so
without prejudice to the retention of the Tax Credit, reimburse to the
Borrower in the manner described in the following sentence such amount
as the Lender shall reasonably determine to be the proportion of the
Tax Credit as will leave the Lender after reimbursement in no better or
worse position than it would have been in if the Tax Payment had not
been required. The manner in which such reimbursement is to be made
shall first be by way of set off against such of the amount(s) which
the Borrower is then liable to pay to the Lender (for whatever reason
and regardless of whether the payment of such amount(s) has fallen due)
as the Lender shall, in its sole opinion, specify and notify to the
Borrower.
8.5 Nothing in this clause 8 shall interfere with the Lender's right to
arrange its tax affairs in whatever manner it thinks fit and, without
limiting the foregoing, the Lender shall not be under any obligation to
claim any Tax Credit in priority to any other claims, reliefs, credits
or deductions available to it. The Lender shall not in any event be
obliged to disclose any information relating to its tax affairs or any
computations in respect thereof to the Borrower or any other person.
8.6 All amounts payable under this Agreement are expressed to be exclusive
of any VAT chargeable in respect thereof. If any VAT is chargeable in
respect of such amounts, the Borrower shall, in addition, pay to the
Lender an amount equal to such VAT, and the Lender shall provide the
Borrower with a proper VAT invoice in respect thereof.
9. INCREASED COSTSCOSTS
9.1 If, by reason of:-
(1) the introduction of, or any change in any applicable law,
regulation or regulatory requirement or any change in the
interpretation or application of any thereof in each case
after the date hereof and/or
(2) compliance by the Lender or any holding company of the Lender
with any applicable directive, request or requirement whether
or not having the force of law but, if not having the force of
law being of general application and of a type with which the
Lender or a holding company of the Lender is accustomed to
comply of any central bank or any self regulating organisation
or any governmental, fiscal, monetary or other authority
(including, but not limited to, a directive, request or
requirement which affects the manner in which any bank
allocates capital in support of its assets or liabilities or
contingent liabilities or deposits with it or for its account
or advances or commitments made by it) which is brought into
effect after the date hereof,
and if, to the extent of compliance with either or both of paragraphs
(a) and (b):-
(1) the Lender or any holding company of the Lender is
unable to obtain the rate of return on its capital
which it would have been able to obtain
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but for the Lender's entering into or assuming or
maintaining a commitment or performing its
obligations (including its obligation to make
Advances) under this Agreement;
(2) the Lender or any holding company of the Lender
incurs a cost as a result of the Lender's entering
into or assuming or maintaining a commitment or
performing its obligations (including its obligation
to make Advances) under this Agreement;
(3) there is any increase in the cost to the Lender or
any holding company of the Lender of funding or
maintaining all or any of the Advances;
(4) the Lender or any holding company of the Lender
becomes liable to make any payment on account of tax
or otherwise (except on account of any tax imposed on
and calculated by reference to the net income of the
Facility Office by the jurisdiction in which the
Lender (or its holding company) is incorporated or in
which the Facility Office is located), or foregoes
any interest or other return, on or calculated by
reference to the amount of any Advance or the amount
of any sum received or receivable by it (or its
subsidiary) under this Agreement,
then the Borrower shall, from time to time on demand of the Lender,
promptly pay to the Lender amounts sufficient to indemnify the Lender
or its holding company as appropriate against, as the case may be, (1)
such reduction in the rate of return of capital, (2) such cost, (3)
such increased cost (or such proportion of such increased cost as is,
in the opinion of the Lender, attributable to its or its holding
company funding or maintaining the Advance), or (4) such liability.
9.2 If the Lender intends to make a claim pursuant to this clause 9 it
shall notify the Borrower of the event by reason of which it is
entitled to do so PROVIDED that nothing herein shall require the Lender
to disclose any confidential information relating to the organisation
of its affairs and shall consult with the Borrower as to possible steps
that could be taken to reduce any such increased costs provided that
the Lender shall be under no obligation to take any such steps
considered.
9.3 If notwithstanding the consultation referred to in Clause 9.2, the
provisions of Clause 9.1 would apply then the Borrower shall, at its
option, be entitled to prepay the whole (but not part) of the
Outstanding Advance in accordance with Clause 6.9 and in such
circumstances the Lender agrees that the provisions of Clause 6.8
hereof shall not apply.
10. ILLEGALITY
If, at any time, it is or becomes unlawful for the Lender to make, fund
or allow to remain outstanding all or part of the Advance, then the
Lender shall, promptly after becoming aware of the same, deliver to the
Borrower a notice to that effect, the
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<PAGE>
Lender shall not thereafter be obliged to make the Advance hereunder
and, if the Lender has made the Advance, the Borrower shall on the
earlier of:
(a) the date falling 90 days after the date of notification of the
illegality; and
(b) the Business Day immediately preceding the day on which it
will become unlawful for the Lender to do as aforesaid,
repay any Outstanding Advance together with accrued interest thereon
and all other amounts owing to the Lender hereunder.
11. PAYMENTS
Any payment to be paid by the Borrower to the Lender pursuant to this
Agreement shall be made in sterling, in immediately available, freely
transferrable and cleared funds for value same day, to such account of
the Lender as the Lender shall, from time to time, have specified in
writing for such purpose.
12. REPRESENTATIONS AND WARRANTIESAND WARRANTIES
12.1 The Borrower hereby represent, warrant, covenant and undertake to the
Lender that:-
(1) it is a limited liability company duly organised, validly
existing and in good standing under the laws of the state of
its organisation and is duly authorised and qualified to
transact any and all business contemplated by this Agreement
and the other Transaction Documents to be conducted by it.
(2) it has the full limited liability company power and authority
to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement and
the other Transaction Documents to which it is a party and has
been duly authorised by all necessary limited liability
company action on its part the execution, delivery and
performance of this Agreement and the other Transaction
Documents to which it is a party; and this Agreement and each
Transaction Document to which it is a party, assuming the due
authorisation, execution and delivery thereof by the Lender,
constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its respective
terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors'
rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be
subject to the equitable defences and to the discretion of the
court before which any proceeding therefor may be brought;
(3) its execution and delivery of this Agreement and each
Transaction Document to which it is a party, the consummation
of any other of the transactions herein or therein
contemplated on its part and the fulfilment of or compliance
with
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<PAGE>
the terms hereof or thereof will not (i) result in a material
breach of any term or provision of its Certificate of
Formation, limited liability company agreement and/or other
constituent documents or (ii) materially conflict with, result
in a material breach, violation or acceleration of, or result
in a material default under, the terms of any other material
agreement or instrument to which it is a party or by which it
may be bound, or any statute, order or regulation applicable
to it of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it;
(4) it is not party to, bound by, or in breach or violation of any
material indenture or other material agreement or instrument,
or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to its knowledge, would
in the future materially and adversely affect, (i) its ability
to perform its obligations under this Agreement or the
Transaction Documents to which it is a party or (ii) its
business, operations, financial condition, properties or
assets taken as a whole;
(1)
(5) no litigation is pending or, to the best of its knowledge,
threatened against it that would materially and adversely
affect the execution, delivery or enforceability of this
Agreement or the Transaction Documents to which it is a party
or its ability to perform any of its obligations hereunder or
thereunder in accordance with the terms hereof or thereof;
(6) no consent, approval, authorisation or order of any court or
governmental agency or body is required for the execution,
delivery and performance by it of, or compliance by it with,
this Agreement or any Transaction Document to which it is a
party or the consummation of the transactions contemplated
hereby or thereby, or if any such consent, approval,
authorisation or order is required, it has obtained or it is
in the process of obtaining the same;
(7) it has not, at any time since its formation, had any employee,
entered into any contracts, carried on any business or
incurred any liabilities;
(8) it has filed or caused to be filed, all tax returns (federal,
state and local) (or requests for extension which are
routinely granted) which are required to be filed and has paid
all taxes including those which have become due pursuant to
such returns or pursuant to any assessments made against it or
any of its properties, as the case may be, and all other
material taxes or other charges imposed on it or any of its
properties by any Governmental Authority; and no tax liens
have been filed;
(9) no proceeds of the Advance will be used, directly or
indirectly, by it for the purpose of "purchasing" or
"carrying" any "margin stock" or for the purpose of reducing
or retiring any Indebtedness which was originally incurred to
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<PAGE>
purchase or carry margin stock or for any other purpose which
might cause the Advance to be a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the
Federal Reserve System;
(10) all financial statements of the Borrower delivered to the
Lender fully and accurately present the financial position of
the Borrower as of the respective dates thereof in accordance
with GAAP. Since 31 December, 1997, there has been no material
adverse change in the business, operations, properties,
condition (financial or otherwise) or prospects of the
Borrower;
(11) it is, not directly or indirectly, controlled by any Person
which is, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; the Borrower and
Guarantor are not subject to any regulation under any federal
or state statute or regulation which limits its ability to
incur Indebtedness.
The representations and warranties under clause 14.1(a)-(k) inclusive
shall be given on the date of this Agreement and shall be repeated on
each date on which the Advance is outstanding hereunder by reference to
the facts and circumstances existing at the relevant time.
12.2 The Lender represents and warrants to the Borrower in terms of clauses
12.1(a) to (f) (inclusive), mutatis mutandis, save that the reference
in Clause 12.1 (a) to a limited liability company shall be construed as
a reference to a corporation.
12.3 lt is understood and agreed that the representations and warranties set
forth in clause 12.1 shall survive the pledging and charging of the
Securitisation Residuals to the Lender and shall enure to the benefit
of the Lender.
12.4 With respect to the representations and warranties contained in clause
12.1 which are made to the best of the Borrower's knowledge, after
reasonable inquiry and investigation, if it is discovered by either the
Borrower, or the Lender that the substance of such representation and
warranty is inaccurate then, notwithstanding the Borrower's lack of
knowledge with respect to the inaccuracy at the time the representation
or warranty was made, the Lender shall have the same rights in respect
of the breach thereof as it would have if the applicable representation
or warranty was breached.
12.5 Upon discovery by either the Borrower or the Lender of a breach of any
of the foregoing representations and warranties given under clause 12.1
the party discovering such breach shall give prompt written notice to
the other.
13. UNERTAKINGS AND COVENANTS
13.1 The Borrower hereby undertakes with the Lender that from and after the
date hereof and until all sums due and to become due hereunder have
been paid or repaid in full and the Facility shall no longer exist:
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<PAGE>
(1) it shall obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all
authorisations, approvals, licences and consents required in
or by the laws and regulations of all applicable jurisdictions
to enable it lawfully to enter into and perform its
obligations under this Agreement and each Transaction Document
and to ensure the legality, validity, enforceability or
admissibility in evidence in England of this Agreement and
each Transaction Document and shall ensure that none of the
foregoing are revoked or modified;
(2) it shall promptly inform the Lender of the occurrence of any
Event of Default or Potential Event of Default and, upon
receipt of a written request to that effect from the Lender,
confirm to the Lender that, save as previously notified to the
Lender or as notified in such confirmation, no such event has
occurred;
(3) it shall ensure that at all times the claims of the Lender
against it under this Agreement and the Transaction Documents
are secured as provided in the Security Documents and that the
security thereunder will be of the nature and will rank in the
priority it is expressed to have in the Security Documents;
(4) it shall not, without the prior written consent of the Lender,
create or permit to subsist any Security over all or any of
its present or future revenues or assets save for security
created (or permitted) under the Security Documents;
(5) it shall not, without the prior written consent of the Lender,
incur any Indebtedness (whether actual or contingent,
subordinated or otherwise whatsoever) make any loans, grant
any credit or give any guarantee or indemnity (except as
contemplated in the Transaction Documents) to or for the
benefit of any person or otherwise voluntarily assume any
liability, whether actual or contingent, in respect of any
obligation of any other person;
(6) it shall not, without the prior written consent of the Lender,
issue any further membership interests or alter any rights
attaching to its issued membership interests in existence at
the date hereof;
(7) it shall not, without the prior written consent of the Lender,
sell, lease, transfer or otherwise dispose of, by one or more
transactions or series of transactions (whether related or
not), the whole or any part of its revenues or its assets
except as permitted under the Transaction Documents;
(8) it shall ensure that the Residual Assignment remains at all
times its valid obligation and that the Security created
thereunder remains valid and perfected security.
(9) it shall apply all monies released to it pursuant to this
Agreement first in discharge of amounts due to the Guarantor
under the Intercompany Loan.
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<PAGE>
(10) it shall not, unless and until it has satisfied on such a date
any amounts which have fallen due to the Guarantor under the
Intercompany Loan make or declare any dividend or other
distribution;
(11) it shall not, without the prior written consent of the Lender,
open or permit to be opened any bank accounts in its name or
on its behalf other than the Borrower Proceeds Account;
(12) it shall not engage in any business other than that
contemplated in the Transaction Documents and shall not have
any employees;
(13) it shall not make or permit any amendments to be made to the
Certificate of Formation, limited liability company agreement
and/or its other constituent documents without prior written
consent of the Lender, such consent not to be unreasonably
withheld;
(14) it shall deliver to the Lender as soon as the same are
available, and in any event within one hundred and twenty
(120) days after the end of each of its financial years a copy
of its audited annual financial statements;
(15) it shall provide the Lender promptly upon request with any
information relating to it and/or its financial condition as
the Lender may from time to time reasonably require in
connection with this Agreement;
(16) it shall ensure that each set of audited annual financial
statements delivered pursuant to sub-clause (l) are prepared
in accordance with generally accepted accounting principles
and on the same basis every year and half year (save as may be
required from time to time as a result of changes in law or
regulation or generally accepted accounting principles);
(17) it shall, promptly upon receipt of the same, deliver to the
Lender a copy of any independent accountants' management
letters received by it relating to it or any member of its
group;
14. DEFAULT
14.1 In the event of:-
(1) any default by the Borrower in the payment of any amount due
for payment hereunder, including without limitation under
clause 6.2 (if applicable) or under any Transaction Document
within two Business Days after written notice from the Lender
demanding payment of the same has been received; or
(2) the Borrower failing to observe or perform any other
covenants, obligations or agreements of the Borrower under
this Agreement or any Transaction
24
<PAGE>
Document which, if (in the good faith opinion of the Lender)
capable of remedy shall not have been remedied (to the
satisfaction of the Lender) within thirty Business Days of
written notice from the Lender requiring remedy of the same;
or
(3) any representation or warranty made or repeated by the
Borrower or the Guarantor under this Agreement or under any
other Transaction Document being or proving to be or have been
untrue or incorrect or misleading in any material respect as
at the date at which it was made or repeated, and in the case
of any such breach which is (in the good faith opinion of the
Lender) capable of remedy, the relevant breach not having been
remedied within thirty Business Days of the Lender requiring
the Borrower or, as the case may be, the Guarantor to do so;
or
(4) any default by the Guarantor in the payment of any amount due
for payment under the Guarantee or under any other Transaction
Document on the due date therefor; or
(5) the Guarantor failing to observe or perform any other
covenant, obligation or agreement contained in the Guarantee
or under any other Transaction Document which, if (in the good
faith opinion of the Lender) is capable of remedy has not been
remedied (to the satisfaction of the Lender) within thirty
Business Days of the Lender requiring the Guarantor to do so;
or
(6) the Residual Assignment ceasing to be a binding obligation
upon the Borrower Security thereunder; or
(7) the Borrower or the Guarantor shall: (i) become insolvent;
(ii) be dissolved; (iii) fail generally to pay its debts as
such debts become due; (iv) commence a voluntary case under
federal bankruptcy, insolvency or other similar law; (v)
consent to the appointment of or taking of possession by a
receiver, liquidator, assignee, trustee, custodian, or
sequestrator (or other similar official) of the Borrower or
the Guarantor or of any substantial part of its property; (vi)
make an assignment for the benefit of creditors; or (vii) take
any action intended or likely to result in any event described
in the foregoing clauses (i) through (vi); or
(8) there shall be filed or entered in respect of the Borrower or
the Guarantor a petition, decree or order for relief by a
court having jurisdiction in the premises in an involuntary
case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal, state or foreign
bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee or
sequestrator (or other similar official) of the Borrower or
the Guarantor or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any
such petition, decree or order shall continue undismissed,
unstayed and in effect for a period
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<PAGE>
of 60 days; or
(9) any material adverse change in the condition (financial,
business, prospects or otherwise) of any of the Borrower or
the Guarantor occurring, which, in the reasonable judgment of
the Lender is reasonably likely to prevent the Borrower or the
Guarantor, as the case may be, from performing its respective
material obligations under any Transaction Document or is
likely to adversely affect the value (to the Lender) of its
security whether by adversely affecting the value of such
security, the prospects of a sale thereof or otherwise; or
(10) the Borrower ceasing to be a wholly owned subsidiary of Ocwen
Asset Investment Corporation ("OAIC"); or
(11) OAIC ceasing to own a majority of the issued and outstanding
common shares of Ocwen General, Inc.
(12) the Borrower or the Guarantor shall default in respect of: (i)
any payment obligation under any loan from the Lender or any
subsidiary or affiliate of the Lender or any obligation to pay
for securities delivered to the Borrower or the Guarantor by
the Lender or a subsidiary; (ii) the Borrower or the Guarantor
shall fail to pay any money due under any other agreement,
note, indenture or instrument evidencing, securing,
guaranteeing or otherwise relating to Indebtedness of the
Borrower or the Guarantor for borrowed money in the aggregate
of $10,000,000, which failure to pay constitutes an event of
default under any such agreement or instrument or constitutes
a default and such default shall continue beyond any
applicable grace periods therein specified or the Borrower or
the Guarantor shall default in the observance or performance
of any other covenant or condition in any such agreement or
instrument, which default constitutes an event of default and
has not been waived by the creditor or other applicable party
thereunder, and such default shall continue beyond any
applicable grace periods therein specified; (iii) any other
event shall occur or condition shall exist if the effect of
such event or condition is to accelerate the maturity of such
Indebtedness; or (iv) any such Indebtedness shall be declared
due and payable prior to the stated maturity thereof; other
than, in the case of items (ii) thereof (iv), Indebtedness
with respect to which the failure to pay would not,
individually or in the aggregate, be expected to have a
material adverse effect on the financial condition,
operations, business or prospects of the Borrower or the
Guarantor,
(each of the foregoing an "EVENT OF DEFAULT"), the Lender may, (save
that in relation to clause 14.1 (g) and (h) upon the occurrence of
which the Outstanding Advance together with all interest accrued
thereon and all other sums then due and outstanding from the Borrower
hereunder shall automatically become immediately due and payable), for
so long as such event is continuing unwaived by the Lender do each or
any of the following:
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<PAGE>
(1) declare, by written notice to the Borrower, the
Outstanding Advance together with all interest
accrued thereon and all other sums then due and
outstanding hereunder from the Borrower to be
immediately due and payable, whereupon the same shall
become immediately due and payable; and/or
(2) enforce all or any of its security under the Security
Documents; and
(3) terminate this Agreement,.
whereupon the Lender shall cease to be obliged to make, if not already
made, the Advance hereunder.
14.2 If the Advance shall be declared immediately due and payable as
aforesaid, the Borrower shall pay to the Lender such amount as the
Lender certifies to be necessary to compensate it for any loss incurred
(excluding loss of Margin) or to be incurred on account of deposits
acquired or arranged in order to fund such Advance as a consequence of
such Event of Default.
14.3 The rights conferred on the Lender pursuant to this clause 14 shall be
in addition to whatever rights the Lender may have both at law and in
equity.
14.4 The Lender may waive any default by the Borrower in the performance of
its obligations hereunder and its consequences. Upon any such waiver of
a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.
14.5 The Borrower agrees to indemnify and keep indemnified the Lender from
and against any loss, cost (including any cost of enforcement),
liability (including any tax liability), claim or damage which the
Lender incurs or suffers as a consequence of the occurrence of any
Event of Default and the indemnity may, without limiting the Lender's
rights, be claimed as a debt or liquidated demand.
27
<PAGE>
15. DEFAULT INTERESTINTEREST
15.1 If any sum due and payable by the Borrower hereunder is not paid on the
due date therefor or if any sum due and payable by the Borrower under
any judgement or decree of any court in connection herewith is not paid
on the date of such judgement or decree, the period beginning on such
due date or, as the case may be, the date of such judgement or decree
and ending on the date upon which the obligation of the Borrower to pay
such sum (the balance thereof for the time being unpaid being herein
referred to as an "UNPAID SUM") is discharged shall be divided into
successive periods, each of which (other than the first) shall start on
the last day of the preceding such period and the duration of each of
which shall (except as otherwise provided in this clause 15) be
selected by the Lender.
15.2 During each such period relating thereto as is mentioned in clause 15.1
an unpaid sum shall bear interest at the rate per annum which is the
sum from time to time of two per cent and the Margin in respect thereof
at such time and LIBOR on the first day of the relevant period provided
that:
(1) if, for any such period, LIBOR cannot be determined, the rate
of interest applicable to such unpaid sum shall be the rate
per annum which is the sum of two per cent and the Margin in
respect thereof at such time and the rate per annum determined
by the Lender to be equal to the rate which express as a
percentage rate per annum equals the cost to it of funding
such unpaid sum for such period from whatever sources it may
select; and
(2) if such unpaid sum is all or part of the Advance which became
due and payable on a day other than an Interest Payment Date
therefor, the first such period applicable thereto shall be of
a duration equal to the unexpired portion of that Interest
Period and the rate of interest applicable thereto from time
to time during such period shall be that which exceeds by two
per cent the rate which would have been applicable to it had
it not so fallen due.
15.3 Any interest which shall have accrued under this clause 15 in respect
of an unpaid sum shall be due and payable and shall be paid by the
Borrower at the end of the period by reference to which it is
calculated or on such other dates as the Lender may specify by written
notice to the Borrower.
1.1
16. CALCULATIONS
16.1 The Borrower shall, for each Interest Payment Date, calculate the
Collateral Percentage for that date, such calculation to be done as
soon as possible after the applicable Determination Date and in any
event no later than the third Business Day prior to the Interest
Payment Date in question and shall notify the same to the Lender,
immediately upon calculation of the same.
16.2 The Lender shall, for the purposes of the calculation under clause 16.1
notify the Borrower of the fair market value of the Securitisation
Residuals financed under this
28
<PAGE>
Agreement which have not, at the relevant time, been sold or otherwise
disposed of by the Borrower, as determined by the Lender, in good
faith.
16.3 The Lender's determination of the matters to be notified to the
Borrower under this clause shall, in the absence of manifest error or
bad faith, be final and binding on the parties hereto.
16.4 The Borrower's determination of the Collateral Percentage once agreed
by the Lender under clause 16.5 shall, in the absence of manifest error
or bad faith (on the part of either party), be final and binding on the
parties hereto.
16.5 The Lender shall use reasonable endeavours to agree the Borrower's
determinations of the Collateral Percentage within three Business Days
of notification of the same to the Lender.
17. CURRENCY OF ACCOUNTOF ACCOUNT
17.1 Sterling is the currency of account and payment for each and every sum
at any time due from the Borrower hereunder provided that each payment
in respect of costs and expenses shall be made in the currency in which
the same were incurred.
17.2 If any sum due from the Borrower under this Agreement or any order or
judgement given or made in relation hereto has to be converted from the
currency (the "FIRST CURRENCY") in which the same is payable hereunder
or under such order, decree or judgement into another currency (the
"SECOND CURRENCY") for the purpose of (a) making or filing a claim or
proof against the Borrower, (b) obtaining an order, decree or judgement
in any court or other tribunal or (c) enforcing any order, decree or
judgement given or made in relation hereto, the Borrower shall
indemnify and hold harmless each of the persons to whom such sum is due
from and against any loss suffered as a result of any discrepancy
between (i) the rate of exchange used for such purpose to convert the
sum in question from the first currency into the second currency and
(ii) the rate or rates of exchange at which such person may in the
ordinary course of business purchase the first currency with the second
currency upon receipt of a sum paid to it in satisfaction, in whole or
in part, of any such order, judgement, decree, claim or proof.
18. SET-OFF-OFF
18.1 The Borrower authorises the Lender to apply any credit balance to which
the Borrower is entitled on any account of the Borrower with the Lender
in satisfaction of any sum due and payable from the Borrower to the
Lender hereunder but unpaid.
18.2 All payments required to be made by the Borrower hereunder shall be
calculated without reference to any set-off, deduction or counterclaim
and shall be made free and clear of and without any deduction for or on
account of any set-off, deduction or counterclaim.
29
<PAGE>
19. CALCULATION OF INTERESTOF INTEREST
Interest shall accrue from day to day and shall be calculated on the
basis of a year of 365 days and the actual number of days elapsed.
20. COSTS AND EXPENSESAND EXPENSES
20.1 The Borrower shall, save where expressed to the contrary in any other
Transaction Document, from time to time on demand of the Lender,
reimburse the Lender for all reasonable costs and expenses (including
legal fees) together with any VAT thereon incurred by it in connection
with the negotiation, preparation and execution of this Agreement, the
Transaction Documents and the completion of the transactions pursuant
to this Agreement or the Transaction Documents or in connection with
the preservation and/or enforcement of any of the rights of the Lender
under this Agreement and the Transaction Documents.
20.2 The Borrower shall pay all stamp, registration and similar taxes to
which this Agreement or any judgement or decree given in connection
herewith is or at any time may be subject (including in relation to the
perfection of security granted by the Security Documents) and shall,
from time to time on demand of the Lender, indemnify the Lender against
any liabilities, costs, claims and expenses resulting from any failure
to pay or any delay in paying any such tax.
20.3 The Borrower shall, from time to time on demand of the Lender
compensate the Lender at such daily and/or hourly rates as the Lender
shall from time to time reasonably determine for the time and
expenditure, all costs and expenses (including telephone, fax, copying,
travel and personnel costs) incurred by the Lender in connection with
its taking such action as it may deem appropriate or in complying with
any request by the Borrower in connection with (a) the granting or
proposed granting of any waiver or consent requested hereunder by the
Borrower; (b) any actual, potential or reasonably suspected breach by
the Borrower of its obligations hereunder; (c) the occurrence of any
event which is an Event of Default or a Potential Event of Default; or
(d) any amendment or proposed amendment hereto requested by the
Borrower.
20.4 The Borrower, agrees to indemnify the Lender and its immediate parent
company (collectively, "INDEMNITEES") from and against any and all
liabilities, obligations, losses or damages, arising from suits, claims
or actions brought by third parties against the Indemnitees (including,
without limitation, any reasonable, costs, expenses or disbursements
relating to the forgoing) arising out of this Agreement, or any action
taken or omitted by the Lender under or pursuant to this Agreement,
provided that the Borrower shall not be liable for any portion of such
liabilities, obligations, losses (excluding consequential losses) or
damages resulting from the gross negligence or wilful misconduct of
such Indemnitee as finally determined by a court of competent
jurisdiction. The foregoing agreements shall survive termination or
expiration of this Agreement for a period of three years.
30
<PAGE>
21. REMEDIES AND WAIVERSAND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of the
Lender, any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or
remedy prevent any further or other exercise thereof or the exercise of
any other right or remedy. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
22. CONFIDENTIALITY
The Parties shall not, without the prior written consent of the other
parties hereto, disclose to any person the existence or any details
concerning the Transaction Documents except to the extent such
disclosure is contemplated in any Transaction Document, or is required
pursuant to the application of any applicable law or an order of a
court of competent jurisdiction, or is made to the that party's
auditors or other professional advisors who are subject to
confidentiality restrictions imposed by a professional body which are
substantially similar to those set forth above.
23. NOTICES
23.1 ADDRESSES
Any notice or other communication or document to be made or delivered
under this Agreement shall be made or delivered by fax or otherwise in
writing. Each notice, communication or other document to be delivered
to any party to this Agreement shall (unless that other person has by
fifteen days' written notice to the other party specified another
address or fax number) be made or delivered to that person at the
address(es) or fax number (if any) set out below:-
(1) in the case of the Lender to 203 629 8363, attention John C.
Anderson with a simultaneous copy to 203 629 4571, attention
General Counsel;
(2) in the case of the Borrower to:
c/o Ocwen Capital Corporation
The Forum
1675 Palm Beach Lakes Boulevard
Suite 1002
West Palm Beach
Florida 33401
USA
for the attention of: John Erbey, Corporate Secretary
Tel: + (561) 682 8000
Fax: + (561) 682 8177
With a copy to:
31
<PAGE>
Joseph A Dlutowski
Senior Vice President
Ocwen Capital Corporation
The Forum
1675 Palm Beach Lakes Boulevard
Suite 1002
West Palm Beach
Florida 33401
USA
for the attention of: Corporate Secretary
Tel: + (561) 682 8661
Fax: + (561) 682 8163
23.2 DEEMED DELIVERY
Any notice, communication or document to be delivered to any person
shall be deemed to have been delivered:-
(1) in the case of personal delivery, at the time of such
delivery;
(2) in the case of delivery by post, on the business day following
the day on which it was posted and in proving such delivery it
shall be sufficient to prove that the relevant notice,
communication or document was properly addressed, stamped and
posted (by airmail, if to another country) in the United
Kingdom or, in the case of service to or from an address
outside the United Kingdom at 9.00 a.m. on the fourth day
following the day on which it was posted;
(3) in the case of any notice or other communication by fax, (a)
on the business day the same was transmitted so long as there
is evidence that such fax message was received prior to 5.00
p.m. local time of the recipient on such day and such day is a
business day for the recipient, otherwise (b) on the business
day following the day on which it was transmitted and, in
either case, in proving such delivery it shall be sufficient
to prove that the whole of the fax message was received on any
fax machine of the recipient and that there was no evidence
that such transmission had been interrupted.
24. SEVERABILITY
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:-
(1) the legality, validity or enforceability in that jurisdiction
of any other provision of this Agreement; or
32
<PAGE>
(2) the legality, validity or enforceability under the law of any
other jurisdiction of that or any other provision of this
Agreement.
25. ASSIGNMENT
25.1 The Lender may at any time:-
(1) sub-participate part (but not the whole) of its rights or
benefits under this Agreement provided that at any time, no
more than 51% of its rights and benefits hereunder may be
sub-participated; and
(2) assign or transfer part (but not the whole) of its rights or
benefits under this Agreement provided that at any time, no
more than 51% of its rights and benefits hereunder may be
assigned or transferred and provided further that:-
(1) if such assignment or transfer is to any person other
than a subsidiary, holding company of or other member
of the Lender's group such assignment or transfer
shall require the prior consent of the Borrower (such
consent not to be unreasonably withheld); and
(2) if, at the time and as a result of any proposed
transfer or assignment, the Borrower would incur any
increased cost or be liable to make payments in
excess of those required to be made hereunder
immediately prior thereto (other than any minimum
liquid asset costs) such assignment or transfer is on
terms that the Borrower is not and will not be liable
for any such increased cost or liability.
25.2 The Borrower shall not be entitled to assign, transfer or otherwise
dispose of all or any of its rights or benefits under this Agreement
without the prior written consent of the Lender.
25.3 The Lender may disclose to a proposed assignee, transferee or
sub-participant information in its possession relating to the
provisions of this Agreement and the Transaction Documents which it
considers necessary or desirable to disclose for the purposes of the
proposed assignment, transfer or sub-participation, notwithstanding the
provisions of clause 22 (Confidentiality), provided that the Lender
obtains from such assignee, transferee, or sub-participant a
confidentiality undertaking on the same terms as Clause 22 or such
other terms as may be agreed between the Borrower and the Lender.
25.4 This Agreement shall bind and inure to the benefit of and be
enforceable by the Lender and its respective successors, transferees
and assigns and references to the Lender shall be deemed to include
references to each of the foregoing.
33
<PAGE>
26. NO MARSHALLING
The Borrower consents and agrees that neither the Lender nor any Person
acting for or on behalf of the Lender shall be under any obligation to
marshal any assets in favor of the Borrower or against or in payment of
any or all of the obligations hereunder or under any Transaction
Document.
27. FURTHER ASSURANCE
The Borrower shall, from time to time on being required to do so by the
Lender, now or at any time in the future, do or procure the doing of
all such acts and/or execute or procure the execution of all such
documents in a form satisfactory to the Lender as the Lender may
consider necessary for giving full effect to this Agreement and the
Transaction Documents and securing to the Lender the full benefit of
the rights, powers and remedies conferred upon the Lender in this
Agreement or any Transaction Documents.
28. AGENT FOR SERVICE
28.1 The Borrower irrevocably agrees that any Service Document may be
sufficiently and effectively served on it in connection with
Proceedings, whether pursuant to this Agreement or any other
Transaction Document, in England and Wales by service on its agent
Ocwen Limited, Ref: Keith Ainsworth, if no replacement agent has been
appointed and notified to the Lender pursuant to sub-clause 28.4, or on
the replacement agent if one has been appointed and notified to the
Lender.
28.2 Any Service Document served pursuant to this clause shall be marked for
the attention of:
(1) Ocwen Limited, c/o Edge & Ellison at 18 Southampton Place,
London, WC1A 2AJ (Reference: Keith Ainsworth) or such other
address within England and Wales as may be notified to the
Lender by the Borrower and the Guarantor; or
(2) such other person as is appointed as agent for service
pursuant to sub-clause 28.4 at the address notified pursuant
to sub-clause 28.4.
28.3 Any document addressed in accordance with sub-clause 28.2 shall be
deemed to have been duly served if:-
(1) left at the specified address, when it is left; or
(2) sent by first class post, two clear Business Days after the
date of posting.
1.4 If the agent referred to in sub-clause 28.1 (or any replacement agent
appointed pursuant to this sub-clause) at any time ceases for any
reason to act as such, the Borrower shall appoint a replacement agent
to accept service having an address for service in England or Wales and
shall notify the Lender of the name and address of the replacement
agent; failing such appointment and notification, the Lender shall be
34
<PAGE>
entitled by notice to the Borrower to appoint such a replacement agent
to act on the Borrowers' behalf.
1.5 A copy of any Service Document served on an agent pursuant to this
clause shall be sent by post to the Borrower at its address for the
time being for the service of notices and other communications under
clause 23 (Notices), but no failure or delay in so doing shall
prejudice the effectiveness of service of the Service Document in
accordance with the provisions of sub-clause 28.1
1.6 Each party irrevocably consents to the service of process of any of the
courts in Submitted States in any such action or Proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid to the party's notice address specified above, such service to
become effective upon receipt of evidence of the receipt thereof.
29. ENTIRE AGREEMENT
This Agreement (together with the Transaction Document, entered into on
or after the date hereof) constitutes the whole and only agreement
between the parties relating to the secured, guaranteed residuals
facility relating to CMR1 to CMR6 (as described in the commitment
letter between Greenwich Capital Markets, Inc and Ocwen Financial
Corporation dated 31 March, 1998) and supersedes and extinguishes any
prior drafts, agreements, undertakings, representations, warranties and
arrangements of any nature whatsoever, including without limitation the
said commitment letter provided that the provisions of said commitment
letter under the heading "The Residual Financing Facilities" and
"Miscellaneous" (insofar as they relate to the foregoing) relating to
the Subsequent Residual Facility shall remain and be effective for the
purposes of OFC having available in accordance with the terms
thereunder the Subsequent Residual Facility.
35
<PAGE>
30. GOVERNING LAW
30.1 This Agreement shall be governed by and construed in accordance with
the laws of England.
30.2 The parties to this Agreement irrevocably agree that the courts of
England are to have jurisdiction to settle any dispute which may arise
out of or in connection with this Agreement and any other Transaction
Document and that accordingly any proceeding, suit, or action arising
out of or in connection with this Agreement or any other Transaction
Document ("Proceedings") may be brought in such courts.
30.3 Without prejudice to sub-Clause 30.2, all the parties further
irrevocably agree that any Proceedings may be brought in any court of
the State of New York, or the State of Florida or any other state of
the United States, where any party has its chief executive office (all
of such states being the "Submitted States") or federal court sitting
in the Submitted States and any court having jurisdiction over appeals
of matters heard in such courts and each of the parties hereto
irrevocably submits to the non-exclusive jurisdiction of such courts.
30.4 Each of the parties hereto irrevocably waives any objection it may have
now or hereafter to the laying of the venue of any Proceedings in any
such court as is referred to in this clause and any claim of forum non
conveniens and further irrevocably agrees that a judgment in any
Proceedings brought in any court referred to in this clause shall be
conclusive and binding upon it and may be enforced in the courts of any
other jurisdiction.
IN WITNESS WHEREOF, this Agreement is duly executed the date and year first
above written.
for and on behalf of
OCWEN ASSET INVESTMENT - UK, LLC
a Delaware limited liability company
By: /s/ J. A. Dlutowski
----------------------
Name: J. A. Dlutowski
Title: Authorised Officer
36
<PAGE>
for and on behalf of GREENWICH
CAPITAL FINANCIAL PRODUCTS, INC.
By: /s/ John C Anderson
-------------------
Name: John C Anderson
Title: Senior Vice President
37
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OCWEN ASSET
INVESTMENT CORP'S CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AND STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001033643
<NAME> OCWEN ASSET INVESTMENT CORP.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998 <F1>
<EXCHANGE-RATE> 1
<CASH> 7,609,603 <F2>
<SECURITIES> 200,537,146
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 447,725,270
<CURRENT-LIABILITIES> 177,614,055
<BONDS> 0
0
0
<COMMON> 191,250
<OTHER-SE> 264,166,168
<TOTAL-LIABILITY-AND-EQUITY> 447,725,270
<SALES> 0
<TOTAL-REVENUES> (8,800,622)<F3>
<CGS> 0
<TOTAL-COSTS> 1,009,690 <F4>
<OTHER-EXPENSES> 189,655
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 693,817
<INCOME-PRETAX> (10,504,242)<F5>
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,504,242)<F5>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,504,242)<F5>
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.54)
<FN>
<F1> Tag 10 includes Cash and amounts due from depository institutions of
$373,097 and Interest bearing deposits of $7,236,506.
<F2> Tag 11 includes securities held for trading of $42,545,318 and securites
available for sale of $157,991,828.
<F3> Tag 28 includes Interest income on Repurchase agreements and interest
bearing deposits of $198,138, on Securities held for trading of
$(2,637,259), on Securities available for sale of $4,648,582, on Loans of
$1,240,807, and on Discount loans of $902,777, operating income of
$803,961 and loss on securities held for trading of $(13,957,628).
<F4> Tag 30 includes Provision for loan losses of $105,073, Management fess of
$828,881, Due diligence expenses of $192,689, and Foreign currency gains
of $(116,953).
<F5> Tags 34, 36 and 40 exclude minority interest in net loss of operating
partnership of $189,542.
</FN>
</TABLE>
