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 June 30, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 001-14043
OCWEN ASSET INVESTMENT CORP.
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(Exact name of registrant as specified in its charter)
Virginia 65-0736120
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(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
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(Address of principal executive offices) (Zip Code)
(561) 682-8000
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(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 August 11, 1998: 18,965,000 shares.
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OCWEN ASSET INVESTMENT CORP.
FORM 10-Q
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 Statements of Financial Condition
at June 30, 1998 and December 31, 1997............................................... 3
Consolidated Statements of Operations for the three and six months ended
June 30, 1998 and for the period May 14, 1997 to June 30, 1997....................... 4
Consolidated Statements of Changes in Shareholders' Equity for the six months
ended June 30, 1998 and for the period from May 14, 1997 to December 31, 1997........ 5
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
and for the period May 14, 1997 to June 30, 1997..................................... 6
Notes to Consolidated Financial Statements........................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................ 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 35
PART II - OTHER INFORMATION
Item 2. Changes in Securities................................................................ 36
Item 4. Submission of Matters to a Vote of Security Holders.................................. 36
Item 6. Exhibits and Reports on Form 8-K..................................................... 37
Signature..................................................................................... 39
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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
June 30, December 31,
1998 1997
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ASSETS:
Cash and amounts due from depository institutions ................... $ 11,764,015 $ 331,047
Interest-bearing deposits ........................................... 1,336,511 48,346,076
Securities available for sale, at market value ...................... 415,933,375 146,026,907
Commercial and multi-family loan portfolio, net ..................... 44,866,458 9,481,436
Residential loan portfolio, net ..................................... 138,668,931 6,350,043
Discount loan portfolio, net ........................................ 8,511,730 26,978,888
Investment in real estate, net ...................................... 176,925,349 45,430,039
Principal and interest receivable ................................... 13,157,828 2,518,272
Deposits on pending asset acquisitions .............................. 503,500 1,000,000
Other assets ........................................................ 10,382,508 1,540,633
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$ 822,050,205 $ 288,003,341
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Securities sold under agreements to repurchase .................... $ 223,819,860 $ --
Obligation outstanding under lines of credit ...................... 154,179,487 --
Obligation outstanding under lines of credit secured by real estate 115,235,500 --
Dividends and distributions payable ............................... 10,179,129 7,458,750
Accrued expenses, payables and other liabilities .................. 15,069,491 6,344,783
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518,483,467 13,803,533
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Minority interest ................................................... 29,885,939 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, $.01 par value; 200,000,000 shares authorized;
18,965,000 shares issued and outstanding ....................... 189,650 189,650
Additional paid-in capital ........................................ 294,461,432 280,503,838
Distributions in excess of earnings ............................... (19,999,538) (2,107,331)
Unrealized gain (loss) on securities available for sale ........... 81,221 (7,327,890)
Cumulative translation adjustments ................................ (1,051,966) --
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Total shareholders' equity ..................................... 273,680,799 271,258,267
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$ 822,050,205 $ 288,003,341
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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3
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OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the For the For the Period
Three Months Six Months May 14, 1997
Ended Ended to
June 30, 1998 June 30, 1998 June 30, 1997
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<S> <C> <C> <C>
Interest income:
Repurchase agreements and interest bearing deposits ........... $ 97,510 $ 295,648 $ 1,397,128
Securities held for trading ................................... (375,300) (3,012,559) --
Securities available for sale ................................. 11,534,635 16,183,217 1,005,184
Commercial and multi-family loans ............................. 1,467,916 2,273,702 --
Residential loans ............................................. 2,178,010 2,613,031 --
Discount loans ................................................ 423,421 1,326,198 80,495
------------ ------------ ------------
15,326,192 19,679,237 2,482,807
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Interest expense:
Securities sold under agreements to repurchase ................ 3,302,044 3,966,815 --
Obligations outstanding under lines of credit ................. 2,244,723 2,273,769 --
------------ ------------ ------------
5,546,767 6,240,584 --
------------ ------------ ------------
Net interest income before provision for loan losses .......... 9,779,425 13,438,653 2,482,807
Provision for loan losses ..................................... 100,976 206,049 --
------------ ------------ ------------
Net interest income after provision for loan losses ........... 9,678,449 13,232,604 2,482,807
------------ ------------ ------------
Real estate-Operating income:
Rental income ................................................. 4,515,204 6,549,491 --
Other ......................................................... 18,978 26,835 --
------------ ------------ ------------
4,534,182 6,576,326 --
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Real estate-Operating expenses:
Rental operation .............................................. 2,342,105 3,275,851 --
Depreciation and amortization ................................. 758,484 1,062,921 --
Obligations outstanding under lines of credit secured by real
estate ...................................................... 1,689,103 1,689,103 --
------------ ------------ ------------
4,789,692 6,027,875 --
------------ ------------ ------------
Real estate-Net operating income ................................ (255,510) 548,451 --
------------ ------------ ------------
Other expenses:
Management fees ............................................... 1,704,751 2,533,632 341,000
Due diligence expenses ........................................ 174,955 367,644 --
Foreign currency (gain) loss .................................. -- (116,953) --
Other ......................................................... 386,439 576,094 81,583
------------ ------------ ------------
2,266,145 3,360,417 422,583
------------ ------------ ------------
Gain (loss) on securities held for trading ...................... 34 (13,957,594) --
------------ ------------ ------------
Income (loss) before minority interest ........................ 7,156,828 (3,536,956) 2,060,224
Minority interest in net income (loss) of operating partnership (510,696) (321,154) --
------------ ------------ ------------
Net (loss) income .......................................... $ 6,646,132 $ (3,858,110) $ 2,060,224
============ ============ ============
Earnings per share:
Basic ...................................................... $ 0.35 $ (0.20) $ 0.11
============ ============ ============
Diluted .................................................... $ 0.35 $ (0.20) $ 0.11
============ ============ ============
Weighted average shares outstanding:
Basic ...................................................... 18,965,000 18,965,000 19,390,194
============ ============ ============
Diluted .................................................... 19,088,026 19,184,437 19,390,194
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
4
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OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND FOR THE PERIOD MAY 14, 1997 TO DECEMBER 31, 1997
Unrealized
gain (loss) on
Common Stock Distributions securities Cumulative
---------------------- Additional in excess available Translation
Shares Amount Paid-in-capital of earnings for sale Adjustment Total
----------- --------- --------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock ....... 19,125,000 $ 191,250 $ 283,496,750 $ -- $ -- $ -- $ 283,688,000
Retirement of common stock ..... (160,000) (1,600) (2,992,912) -- -- -- (2,994,512)
Net income ..................... -- -- -- 11,791,518 -- -- 11,791,518
Dividends ...................... -- -- -- (13,898,849) -- -- (13,898,849)
Change in unrealized gain (loss) -- -- -- -- (7,327,890) -- (7,327,890)
----------- --------- ------------- ------------ ----------- ----------- -------------
Balances at December 31, 1997 .. 18,965,000 189,650 280,503,838 (2,107,331) (7,327,890) -- 271,258,267
Capital Contribution ........... -- -- 13,957,594 -- -- -- 13,957,594
Net loss ....................... -- -- -- (3,858,110) -- -- (3,858,110)
Dividends ...................... -- -- -- (14,034,097) -- -- (14,034,097)
Change in unrealized gain (loss) -- -- -- -- 7,409,111 -- 7,409,111
Change in cumulative
translation adjustment ....... -- -- -- -- -- (1,051,966) (1,051,966)
----------- --------- ------------- ------------ ----------- ----------- -------------
Balances at June 30, 1998 ...... 18,965,000 $ 189,650 $ 294,461,432 $(19,999,538) $ 81,221 $(1,051,966) $ 273,680,799
=========== ========= ============= ============ =========== =========== =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
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OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the For the Period
Six Months May 14, 1997
ended to
June 30, 1998 June 30, 1997
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Cash flows from operating activities:
Net (loss) income ......................................................... $ (3,858,110) $ 2,060,224
Adjustments to reconcile net income to net cash provided by
operating activities:
Premium amortization (discount accretion), net ........................ 10,969,400 (6,002)
Depreciation .......................................................... 1,062,921 --
Foreign exchange (gain) ............................................... (116,953) --
Cumulative translation adjustment ..................................... (1,051,966) --
Provision for loan losses ............................................. 206,049 --
Proceeds received on sale of securities held for trading .............. 53,365,882 --
Loss on securities held for trading ................................... 13,957,594 --
Increase in interest receivable ....................................... (10,639,556) (962,299)
Increase in other assets .............................................. (8,841,875) (233,839)
Increase in accrued expenses, payables and other liabilities .......... 1,917,010 776,846
Minority interest in net loss of operating partnership ................ 321,154 --
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Net cash provided by operating activities .................................... 57,291,550 1,634,930
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Cash flows from investing activities:
Purchases of securities available for sale ................................ (336,676,078) (56,825,182)
Maturities and principal payments received on securities available for sale 16,268,838 69,495
Purchase of loans ......................................................... (175,968,169) --
Purchase of discount loans ................................................ -- (8,552,255)
Principal payments received from discount loans ........................... 973,325 6,915
Principal payments received from loans .................................... 8,425,556 --
Investment in real estate ................................................. (114,932,518) --
Deposits on pending asset acquisitions .................................... 496,500 --
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Net cash (used) by investing activities ...................................... (601,412,546) (65,301,027)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs ............. -- 283,688,000
Dividend payments on common stock ......................................... (12,283,750) --
Proceeds from sale of operating partnership units ......................... 27,593,302 --
Increase in securities sold under agreements to repurchase ................ 223,819,860 --
Increase in obligations outstanding under lines of credit ................. 269,414,987 --
------------- -------------
Net cash provided by financing activities .................................... 508,544,399 283,688,000
------------- -------------
Net (decrease) increase in cash and cash equivalents ......................... (35,576,597) 220,021,903
Cash and cash equivalents at beginning of period ............................. 48,677,123 --
------------- -------------
Cash and cash equivalents at end of period ................................... $ 13,100,526 $ 220,021,903
============= =============
Reconciliation of cash and cash equivalents at end of period:
Cash and amounts due from depository institutions ......................... 11,764,015 $ 503,606
Interest bearing deposits ................................................. 1,336,511 19,518,297
Repurchase agreements ..................................................... -- 200,000,000
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Total ................................................................... $ 13,100,526 $ 220,021,903
============= =============
Supplemental schedule of non-cash financing activities:
Common stock dividends and distributions declared but not paid ............ $ 10,179,129 $ --
============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
6
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OCWEN ASSET INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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. At June 30, 1998, General Partner and Limited Partner owned 0.9%
and 90.4%, respectively of Ocwen Partnership, L.P. ("Operating Partnership").
The minority interest at June 30, 1998 represents an 8.7% interest (1,808,733
units) in the Operating Partnership held by Investors Mortgage Insurance Holding
Company ("IMI"), a wholly-owned subsidiary of Ocwen Financial Corporation
("OCN"). 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 June 30, 1998
and December 31, 1997, the results of its operations for the three and six
months ended June 30, 1998 and for the period May 14, 1997 to June 30, 1997, the
changes in shareholders' equity for the six month period ended June 30, 1998 and
for the period May 14, 1997 to December 31, 1997 and its cash flows for the six
months ended June 30, 1998 and for the period May 14, 1997 to June 30, 1997.
Operating results for the period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for any other interim period or
the entire year ending 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" or the "Manager"), a wholly-owned subsidiary of OCN, 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. For its services, OCC receives a base management fee of 0.25% per
quarter (1% per annum) of average invested assets, as defined in the management
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, as adjusted ("FFO"), exceeds certain defined levels.
OCC has 1,912,500 options (478,125 of which vested in May 1998 and an
additional 25% of which vest each year over the next three years) to purchase,
at the election of the Company, either shares of
7
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OCWEN ASSET INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
the Company or an equivalent number of units in the Operating Partnership at an
exercise price of $16.00 per share.
The Company also has entered into servicing agreements pursuant to
which Ocwen Federal Bank FSB ("OFB" or the "Bank"), a wholly-owned subsidiary of
OCN, services for specified fees all of the Company's mortgage loans, subject to
the Company's right to direct foreclosure upon any defaulted loan and to take
all other actions that a servicer generally may take in connection with a
defaulted loan. In addition, the Bank receives fees from the Company in its
capacity as special servicer (which generally involves asset management and
resolution services with respect to defaulted mortgage loans within a pool of
mortgage loans and with respect to the management and disposal of foreclosed
properties) for the loans underlying most of the mortgage-related securities
owned by the Company, subject to the Company's right to direct the foreclosure
upon any such defaulted loan and to take all other actions that a servicer
generally may take in connection with a defaulted loan.
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 and adding the elements of comprehensive income not
included in the determination of net income in order 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 became 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-
8
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OCWEN ASSET INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
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.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.
The accounting for changes in the fair value of a derivative (that is,
gains and losses) depends on the intended use of the derivative and the
resulting designation. For a derivative designated as hedging the exposure to
changes in the fair value of a recognized asset or liability or a firm
commitment (referred to as a fair value hedge), the gain or loss is recognized
in earnings in the period of change together with the offsetting loss or gain on
the hedged item attributable to the risk being hedged. The effect of that
accounting is to reflect in earnings the extent to which the hedge is not
effective in achieving offsetting changes in fair value. For a derivative
designated as hedging the exposure to variable cash flows of a forecasted
transaction (referred to as a cash flow hedge), the effective portion of the
derivative's gain or loss is initially reported as a component of other
comprehensive income (outside earnings) and subsequently reclassified into
earnings when the forecasted transaction affects earnings. The ineffective
portion of the gain or loss is reported in earnings immediately. For a
derivative designated as hedging the foreign currency exposure of a net
investment in a foreign operation, the gain or loss is reported in other
comprehensive income (outside earnings) as part of the cumulative translation
adjustment. The accounting for a fair value hedge described above applies to a
derivative designated as a hedge of the foreign currency exposure of an
unrecognized firm commitment or an available-for-sale security. Similarly, the
accounting for a cash flow hedge described above applies to a derivative
designated as a hedge of the foreign currency exposure of a
foreign-currency-denominated forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in earnings
in the period of change.
Under SFAS No. 133, an entity that elects to apply hedge accounting is
required to establish at the inception of the hedge the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. Those methods must
be consistent with the entity's approach to managing risk.
SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Initial application of SFAS No. 133 should be as
of the beginning of an entity's fiscal quarter; on that date, hedging
relationships must be designated anew and documented pursuant to the provisions
of SFAS No. 133. Earlier application of SFAS No. 133 is encouraged but is
permitted only as of the beginning of any fiscal quarter that begins after
issuance of SFAS No. 133. The Company has not yet determined the impact on the
results of operations, financial position or cash flows as a result of
implementing SFAS No. 133.
9
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OCWEN ASSET INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
NOTE 4 INCOME TAXES
The Company qualifies as a REIT under Sections 856 through 860 of the
Internal Revenue 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 for the year
by the due date of its corresponding 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 and adding the elements of comprehensive income not included in the
determination of net income in order to arrive at comprehensive income.
Comprehensive income amounted to $4.7 million and $2.5 million for the three and
six months ended June 30, 1998, respectively, and $3.8 million for the period
May 14, 1997 to December 31, 1997.
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 certain swaps. Under these 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 these swaps provide for the Company to receive a floating
rate of interest equal to LIBOR and to pay fixed interest rates. The following
table sets forth information regarding the swaps which were outstanding at June
30, 1998:
<TABLE>
<CAPTION>
Notional LIBOR Floating Rate at
Maturity Amount Index Fixed Rate End of Period Fair Value
-------- ------ ----- ---------- ------------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
2003 $ 100,000 1-month 5.75% 5.66% $ 333
2001 17,000 1-month 6.00 5.66 (94)
2001 75,000 1-month 6.00 5.66 (406)
2002 8,780 1-month 6.04 5.66 (68)
</TABLE>
On May 18, 1998, the Company entered into a foreign currency swap with
a AAA-rated counterparty to hedge currency exposure in connection with its
investment in residual interests originated in the United Kingdom ("U.K.").
Under the terms of the agreement, the Company will swap (British pound)14,731
million for $23,548 million on January 29, 1999 based on the exchange rate on
the date the contract became effective.
10
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OCWEN ASSET INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
================================================================================
NOTE 7 COMMITMENTS
At June 30, 1998, outstanding commitments totaled $79.7 million and
included $36.0 million related to the acquisition of an office building and
$43.7 million related to the origination of a commercial real estate
construction loan.
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 May 7, 1998, the Operating Partnership issued 1,473,733 additional
limited partnership units to IMI in exchange for a capital contribution of $24.5
million. This transaction increased IMI's minority interest in the Operating
Partnership to 8.7%.
11
<PAGE>
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 generally specializes in investments in (i) subordinate and residual
interests in collateralized mortgage obligations and other mortgage-related
securities (collectively, "mortgage-related securities") and (ii)
underperforming or otherwise distressed commercial and multi-family real
property, including properties acquired by mortgage lenders at foreclosure or
through deed-in-lieu thereof.
As of June 30, 1998, OAC's total closed transactions since its initial
public offering on May 14, 1997, net of repayments to date, amounted to $845.9
million. Of this amount, $779.6 million had been funded and $66.3 million will
be funded over the construction and renovation periods, which range from six 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.
HIGHLIGHTS FOR THE QUARTER ENDED JUNE 30, 1998
On April 1, 1998, the Company purchased the "BB,", "B" and unrated
classes of a commercial mortgage-related security, and on May 15, 1998, the
Company purchased an additional unrated class of this mortgage-related security.
The aggregate purchase price for these subordinated investments was $43.9
million and the aggregate par amount of these interests amounted to $50.9
million. The original securitization contained 132 commercial real-estate loans
totaling $287.7 million. As of June 30, 1998, 85 loans remain outstanding with
an aggregate par amount of $166.2 million. The Company funded the purchase of
the foregoing securities in part with proceeds of a $23.1 million reverse
repurchase agreement which is secured by the purchased securities. OFB is the
special servicer of the loans which secure this securitization.
On April 8, 1998, the Company acquired the Bush Street Property, an
existing 536,382 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 purchase was funded by a $75.0 million loan from Salomon
Brothers Realty Corp. and cash reserves on hand. During the three months ended
June 30, 1998, the Company also acquired title to two real estate properties
which previously had secured discount loans acquired by the Company, consisting
of a shopping center located in Halifax, Nova Scotia and an office building
located in Dayton, Ohio.
On April 24, 1998, the Company acquired securitized mortgage loan
residuals for approximately (British pound)33.7 million (approximately $56.3
million) from the United Kingdom subsidiary of Cityscape Financial Corp.
("CFC"). (The dollar equivalent amounts sets forth herein are based on an
exchange rate on April 24, 1998 of $1.667 per British pound.) This purchase was
made in connection with OCN's acquisition of substantially all of the assets,
and certain liabilities, of the United Kingdom operations of CFC. The Company
funded this acquisition with a loan from Greenwich Capital Financial Products in
the principal amount of approximately (British pound)19.0 million ($31.8
million), which was collateralized by the residuals, and a loan from IMI in the
principal amount of approximately (British pound)14.7 million ($24.5 million),
which was collateralized by unrelated assets and subsequently converted to
equity via the purchase of limited partnership interests in the Operating
Partnership. See Note 8 to the Interim Consolidated Financial Statements. The
mortgage loan residuals acquired by the Company were previously issued as a part
of six prior securitizations effected by CFC's U.K. operations. In connection
with the foregoing acquisition, the Company and OCN entered into an agreement
for the Bank to service the securitized mortgage loan residuals.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
On April 30, 1998, the Company purchased for $59.3 million an unrated
residual security backed by a pool of 6,946 subprime single-family residential
loans. The notional amount of the residual security amounted to $769.7 million
at the date of acquisition. The acquisition of this security was funded in part
with the proceeds from a $45.0 million certificate financing agreement with
Lehman Brothers. The Bank is the master servicer of the loans which back this
securitization.
On May 1, 1998, the Company purchased for $13.4 million a subordinate
security backed by a pool of 7,474 single-family residential loans which
previously were in default or under a forbearance plan but generally now are
performing in accordance with their terms. The seller, an unaffiliated third
party, had retained the subordinate interest after it and the Bank had effected
the securitization of the underlying loans, which had been purchased by the Bank
and such third party from the Department of Housing and Urban Development
("HUD"). The security purchased by the Company had a current par amount of $32.6
million at the date of acquisition. The subordinate interest purchased by the
Company has a blended BB-NR rating. The Bank is the servicer of the loans which
back this securitization.
On May 1, 1998, OAC's Common Stock began trading on the New York Stock
Exchange under the symbol "OAC." From May 14, 1997 to April 30, 1998, the Common
Stock had been traded under the symbol "OAIC" on the Nasdaq Stock Market's
National Market.
On May 7, 1998, the Operating Partnership issued 1,473,733 additional
limited partnership units to IMI, a wholly-owned subsidiary of Ocwen Financial,
in exchange for forgiveness of debt (accounted for as a capital contribution) of
$24.5 million. This transaction increased IMI's minority interest in the
Operating Partnership to 8.7%.
On May 7, 1998, the Company sold its entire portfolio of AAA-rated
interest only ("IO") and inverse floating rate interest only ("Inverse IO")
classes of mortgage-related securities backed by single-family residential loans
(the "IO Portfolio") to William C. Erbey, Chairman and Chief Executive Officer
of the Company, the Manager and OCN, and Barry N. Wish, a director of OCN, for a
cash price of $54.6 million, which represented the IO Portfolio's amortized cost
plus accrued interest and exceeded the IO Portfolio's market value by
approximately $14.0 million. Because the IOs were being sold to a principal
shareholder and another related party, the $14.0 million by which amortized cost
exceeded market value was recorded as a charge to earnings for the quarter ended
March 31, 1998 in accordance with generally accepted accounting principles. The
$14.0 million received in excess of market value upon sale of the IO Portfolio
has been reflected on the Company's books as a capital contribution, effectively
reestablishing the Company's equity position. Management believes that the sale
of the IO Portfolio will reduce the volatility of the Company's revenues.
On May 18, 1998, the Company purchased for $66.9 million 25 residual
interests from ten different issuances of mortgage-related securities backed by
subprime single-family residential loans which were sponsored by the same
company or its predecessor. In addition, on June 18, 1998, the Company purchased
residual interests in another mortgage-related security sponsored by same
company after amendments to the related pooling and servicing agreement were
made to permit the Company to acquire the right to control the foreclosure
process and appoint the Bank as special servicer of the loans which back this
securitization, as it has with respect to the loans which back the other 25
securitizations in which the Company acquired interests. As of the date of
original issuance, approximately $1.84 billion of fixed-rate and adjustable-rate
subprime single-family residential loans backed the foregoing securities. The
Company funded the purchase of the foregoing securities in part with the
proceeds of a $41.7 million reverse repurchase agreement which is secured by the
purchased securities.
On June 10, 1998, the Company modified for the purpose of enhancing the
types of collateral eligible for inclusion under the $200 million loan agreement
with Salomon Brothers Realty Corp. to include the origination of commercial real
estate loans. See "Capital Resources and Liquidity."
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
On June 11, 1998, the Company purchased for $13.1 million, a non-rated
subordinate interest collaterized by a pool of 1,414 first lien subprime
mortgage loans. The Bank is the master servicer and servicer for these loans.
On June 15, 1998, the Company closed a $7.6 million commercial real
estate loan, which has not yet been funded, to construct a six-story, 183,000
square foot, 136-suite hotel, located in a Chicago suburb of Schaumburg,
Illinois.
On June 18, 1998, the Company purchased for $13.9 million, a non-rated
subordinate interest collaterized by a pool of 2,432 subprime multi-family
residential loans consisting of closed-end adjustable rate and fixed rate, fully
amortizing and balloon loans. The Bank is the special servicer of any loans
which are 60 days or more delinquent.
RECENT DEVELOPMENTS
On July 15, 1998, the Company completed the issuance of $150 million of
11.5% Senior Notes due 2005 under Rule 144A of the Securities Act of 1933, as
amended (the "Securities Act"). The Company intends to effect an exchange offer
for the Senior Notes whereby the holders of the Senior Notes will receive new
Senior Notes which have been registered under the Securities Act.
On July 22, 1998, the Company purchased the Prudential Building, a
488,080 square foot, 22 story office building in the central business district
of Jacksonville, Florida for an aggregate purchase price of $36.0 million, plus
closing costs. The purchase price was funded with cash on hand and advances from
OAC's line of credit with Salomon Brothers Realty Corp. Simultaneously with this
closing, OAC also leased 97% of the building back to the Prudential Insurance
Co. of America, and sold two adjacent parking areas to a neighboring hospital
for approximately $4.1 million. The Prudential lease has a term of four years
with options to vacate the premises during the term of the lease, as well as
three subsequent extension options. OAC also entered into an agreement with the
hospital pursuant to which the hospital is to lease up to 150,000 square feet in
the Prudential Building for a nine-year period should Prudential exercise its
termination option.
On August 7, 1998, the Company entered into an agreement with another
party which is subject to confidentiality provisions and which gives the Company
the exclusive right to evaluate and negotiate a potential transaction involving
the acquisition of a certain number of commercial properties that have an
estimated gross value in excess of $185 million and secure mortgage loans of
approximately $110 million. It is contemplated that the Company would obtain
financing and purchase certain of these properties for cash and that the Company
and the other party would thereafter each contribute all of the properties to a
newly-formed, jointly-owned limited liability entity (the "Joint Venture"). The
parties' respective interests in the Joint Venture would be based on the
relative net equity value of the properties contributed by each of them
(generally, the gross value less mortgage indebtedness secured by the
properties). The Joint Venture would be managed by the Company, subject to
specified major decisions which would require the unanimous approval of its
members. The foregoing transaction is contingent on (i) the negotiation and
execution of a definitive agreement or agreements, (ii) the receipt of requisite
financing for the properties to be acquired and contributed by the Company,
(iii) the satisfactory results of the Company's due diligence evaluation of the
properties and (iv) approval by the Boards of Directors of the Company and the
other party. There can be no assurance that these and other requirements for
consummation of the transaction will be satisfied in the timeframe contemplated
by the parties or at all.
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.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
The following table sets forth the calculation of the Company's FFO for
the periods indicated.
<TABLE>
<CAPTION>
For the For the For the Period
Three Months Six Months May 14, 1997
Ended Ended to
June 30, 1998 June 30, 1998 June 30, 1997
------------- ------------- -------------
(In Thousands, except per share data)
<S> <C> <C> <C>
Net income ............................... $ 6,646 $ (3,858) $ 2,060
Add: Depreciation and Amortization ....... 759 1,063 --
Loss on IO portfolio ............... -- 13,957 --
----------- ------------ -----------
FFO ...................................... $ 7,405 $ 11,162 $ 2,060
----------- ------------ -----------
FFO per diluted weighted average shares
outstanding .............................. $ 0.39 $ 0.58 $ 0.11
=========== ============ ===========
Diluted weighed average shares outstanding 19,088,026 19,184,437 19,390,194
=========== ============ ===========
</TABLE>
RESULTS OF OPERATIONS
The Company completed an initial public offering on May 14, 1997 and
commenced operations thereon. The Company earned net income for the quarter
ended June 30, 1998 of $6.6 million, or $0.35 per diluted weighted average
common share, and incurred a net loss for the six months ended June 30, 1998 of
$3.9 million, or $0.20 per diluted weighted average common share. The loss for
the six months ended June 30, 1998 was attributable to a mark-to-market loss
during the first quarter of 1998 of $14.0 million on the IO Portfolio, which was
classified as held for trading as of March 31, 1998 in anticipation of the sale
of the IO Portfolio to related parties, in addition to write-downs on the IO
Portfolio taken during the first quarter totaling $3.1 million.
INTEREST INCOME. The following tables set 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 periods.
<TABLE>
<CAPTION>
For the Three Months
Ended June 30, 1998
----------------------------------
Average Interest Annualized
Balance Income Yield
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Repurchase agreements and interest-bearing deposits $ 9,781 $ 97 4.00%
Securities held for trading ....................... 20,106 (375) (7.49)
Securities available for sale ..................... 319,909 11,535 14.46
Commercial and multi-family loan portfolio ........ 40,563 1,468 14.52
Residential loan portfolio ........................ 118,348 2,178 7.38
Discount loan portfolio ........................... 9,282 423 18.30
-------- --------
Total .......................................... $517,989 $ 15,326 11.87%
======== ========
</TABLE>
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, 1998
---------------------------------
Average Interest Annualized
Balance Income Yield
-------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Repurchase agreements and interest-bearing deposits $ 11,896 $ 296 5.01%
Securities held for trading ....................... 36,929 (3,013) (16.45)
Securities available for sale ..................... 227,304 16,183 14.36
Commercial and multi-family loan portfolio ........ 32,964 2,274 13.91
Residential loan portfolio ........................ 70,644 2,613 7.46
Discount loan portfolio ........................... 18,057 1,326 14.81
-------- --------
Total .......................................... $397,794 $ 19,679 9.98%
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the Period
May 14, 1997 to
June 30, 1997
---------------------------------
Average Interest Annualized
Balance Income Yield
-------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Repurchase agreements and interest-bearing deposits $104,239 $1,397 5.36%
Securities held for trading ....................... -- -- --
Securities available for sale ..................... 24,546 1,005 16.38
Commercial and multi-family loan portfolio ........ -- -- --
Residential loan portfolio ........................ -- -- --
Discount loan portfolio ........................... 2,606 81 6.18
-------- ------
Total .......................................... $131,391 $2,483 7.56%
======== ======
</TABLE>
The negative yield on securities held for trading for the six months
ended June 30, 1998 was attributable to declining interest rates resulting in
increased prepayment speeds, and $3.1 million in permanent write-downs on the IO
Portfolio during the first quarter of 1998. The decline in value of the IO
Portfolio during the first quarter was attributable to projected increases in
prepayment speeds during the quarter as a result of a decrease in market
interest rates and a resulting shortening of the weighted average lives of
certain individual securities in the IO Portfolio. During the quarter ended June
30, 1998, the Company sold the IO Portfolio to William C. Erbey, Chairman and
Chief Executive Officer of OAC, and Barry N. Wish, a director of OAC, as
discussed above.
INTEREST EXPENSE. The following tables set forth information regarding
the total amount of interest expense associated with interest-bearing
liabilities and the resultant average yields. For purposes of the tables,
interest-bearing liabilities do not include outstanding balances under mortgage
loans to acquire real estate and a $200 million real estate-secured loan
agreement with Salomon Brothers Realty Corp., the expense associated with which
is included in determining the operations of the Company's real estate. See
"Real Estate - Net Income" below. Information is based on daily average balances
during reported periods in which interest-bearing liabilities were outstanding.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
<TABLE>
<CAPTION>
For the Three Months
Ended June 30, 1998
---------------------------------
Average Interest Annualized
Balance Income Yield
-------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Securities sold under agreements to repurchase...... $ 174,024 $ 3,302 7.61%
Obligation outstanding under lines of credit........ 132,246 2,245 6.81
--------- ---------
Total............................................ $ 306,270 $ 5,547 7.26%
========= =========
</TABLE>
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, 1998
---------------------------------
Average Interest Annualized
Balance Income Yield
-------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Securities sold under agreements to repurchase .......$107,172 $ 3,967 7.46%
Obligation outstanding under lines of credit.......... 67,393 2,274 6.80
-------- --------
Total..............................................$174,565 $ 6,241 7.21%
======== ========
</TABLE>
For additional information see "Capital Resources and Liquidity".
REAL ESTATE - NET INCOME. The Company incurred a net loss of $256,000
for the three months ended June 30, 1998 and earned net income of $548,000
during the six months ended June 30, 1998 on investments in real estate. Such
income generally represents aggregate rental income, net of operating expenses
and depreciation, generated from the Company's investment in four office
buildings located in California, an office building located in Ohio, a retail
shopping center located in Florida, and a retail shopping center located in Nova
Scotia, net of depreciation and amortization and operating expenses associated
with the Company's investments in real estate, which include the expense
associated with mortgage loans to acquire real estate and the outstanding
balances under a $200 million real estate-secured loan agreement with Salomon
Brothers Realty Corp.
OPERATING EXPENSES. Management fees totaling $1.7 million and $2.5
million for the three and six months ended June 30, 1998, respectively, were
comprised solely of the base management fee (0.25% per quarter, or 1% per annum,
of average invested assets) earned by OCC pursuant to the terms of a management
agreement entered into between the Company and OCC. 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 2 to the Interim
Consolidated Financial Statements included in Item 1 hereof. In addition,
pursuant to the management agreement the Company reimbursed OCC for due
diligence expenses of $175,000 and $368,000 in connection with its asset
acquisitions during the three and six months ended June 30, 1998, respectively.
Foreign currency gain for the six months ended June 30, 1998 was $117,000. This
gain was a result of the declining U.S. dollar versus the Canadian dollar and
related to the Company's investment in a Canadian commercial discount loan upon
which the Company foreclosed in April 1998. See "Investments in Real Estate."
Other expenses of $386,000 and $576,000 during the three and six months ended
June 30, 1998, respectively, were comprised of auditing fees, insurance premiums
and other miscellaneous expenses, were incurred by OCC on OAC's behalf and were
reimbursed to OCC.
CHANGES IN FINANCIAL CONDITION
GENERAL. From December 31, 1997 to June 30, 1998, total assets
increased $534.0 million or 185.4% to $822.1 million. This increase was
primarily due to a $35.4 million increase in the commercial and multi-family
loan portfolio, a $132.3 million increase in the residential loan portfolio, an
$11.4 million increase in cash and amounts due from depository institutions, a
$131.5 million increase in investments in real estate, and a $269.9 million
increase in securities available for sale, which were offset in part by a $47.0
million decrease in interest-bearing deposits. Total liabilities increased
$504.7 million during the period, primarily as
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
a result of $223.8 million of securities sold under agreements to repurchase, a
$154.2 million obligation outstanding under a line of credit and a $115.2
million obligation outstanding under a line of credit secured by real estate.
REPURCHASE AGREEMENTS AND INTEREST-EARNING DEPOSITS. At June 30, 1998
total interest-earning deposits amounted to $1.3 million or 0.2% of total assets
and were comprised of deposits at various banks. Interest-bearing deposits
declined by $47.0 million or 97.2% from December 31, 1997 to June 30, 1998 due
to the reinvestment of cash and cash equivalents into long-term assets.
Although the Company had no repurchase agreements at June 30, 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 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 $98,000 and $296,000 during the
three and six months ended June 30, 1998, respectively, from its investment in
interest-bearing deposits and repurchase agreements. Of such income, $43,000 was
earned from investments in repurchase agreements.
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 consisted solely of the
IO Portfolio and was transferred from the available for sale category on March
31, 1998. There were no securities held for trading as of December 31, 1997 or
June 30, 1998.
Losses on the IO Portfolio during the six months ended June 30, 1998
amounted to $14.0 million, in addition to permanent write-downs on the IO
Portfolio totaling $3.1 million during the first quarter. As noted above, the
Company sold the IO Portfolio in May 1998.
SECURITIES AVAILABLE FOR SALE. The Company's investment in
mortgage-related securities available for sale of $415.9 million at June 30,
1998 included $81,000 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.
June 30, December 31,
1998 1997
-------- -----------
(In Thousands)
Mortgage-related securities:
Single family residential:
FHLMC interest-only ................ $ -- $ 21,178
FNMA interest-only ................. -- 22,573
AAA-rated interest-only ............ -- 729
Subordinates and residuals.......... 289,827 9,444
-------- --------
$289,827 53,924
-------- --------
Multi-family residential and commercial:
AAA-rated interest-only ............ 780 866
A-rated interest-only .............. 400 480
Non-rated interest-only ............ 5,030 4,803
Subordinates ....................... 119,896 85,954
-------- --------
126,106 92,103
-------- --------
Total ............................ $415,933 $146,027
======== ========
18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
The increase in securities available for sale of $269.9 million during
the six months ended June 30, 1998 was due to purchases of $343.5 million (See
"Highlights for the Quarter Ended June 30, 1998") and an increase in unrealized
gains of $7.4 million, which were offset in part by the transfer of the $56.5
million IO Portfolio to the held for trading category during the first quarter,
$16.3 million of principal payments and maturities and $8.2 million of net
premium amortization.
The Company's strategy regarding mortgage-related securities currently
emphasizes subordinate interests in mortgage-related securities backed by
multi-family and commercial real estate loans and subordinate and residual
interests in mortgage-related securities backed by single-family residential
loans, particularly loans which have experienced payment problems in the past
but are currently performing (such as loans acquired from HUD) and subprime
loans. The Company generally emphasizes securities backed by these loans because
of their potential for above-average yields, which the Company believes can be
enhanced in circumstances where it acquires the right to control the foreclosure
process and assigns to the Bank servicing rights to the loans which back the
mortgage-related securities purchased by the Company.
Subordinates are the non-investment grade and unrated classes of
mortgage-related securities that provide credit enhancement to more senior
classes of such securities by having a lower payment priority in the cash flow
from the underlying mortgage loans and by absorbing any losses on the underlying
mortgage loans prior to the senior classes. On "senior/subordinate"
transactions, each subordinate class has a principal face amount equal to the
subordination level required for the classes, if any, which are senior to the
respective subordinate class and the subordination level required at the
respective rating (i.e., BB, B, UR).
Residuals are the unrated classes of mortgage-related securities that
receive the excess payments of interest from the underlying mortgage loans that
exist beyond that which is needed to pay interest to the holders of the other
classes of the mortgage-related security, pay transaction fees and satisfy
overcollateralization requirements. Overcollateralization is the predominant
form of credit enhancement on securitizations of subprime single-family
residential loans, which is made possible by use of the excess spread (the
amount by which the weighted average yield on the underlying mortgage loans
exceeds the weighted average yield on the classes of securities backed by such
loans) to fast pay the senior classes of the mortgage-related security until a
level of subordination predetermined by the rating agencies is reached.
Residuals have a notional amount equal to the unpaid principal balance of the
underlying mortgage loans.
The following table summarizes information relating to the Company's
mortgage-related securities available for sale at June 30, 1998.
Aggregate Notional
Amount or Aggregate Aggregate Aggregate
Unpaid Principal Book Market
Rating/Description Balance(1) Value Value(2)
------------------------- -------- -------- --------
(In Thousands)
Single-family Residential:
Unrated residuals ....... $469,498 $270,535 $268,454
B-rated subordinates .... 9,572 5,486 5,265
Unrated subordinates .... 48,472 16,888 16,108
-------- -------- --------
527,542 292,909 289,827
-------- -------- --------
Multi-family and Commercial:
BB-rated subordinates ... 68,732 66,005 67,379
B-rated subordinates .... 17,460 13,697 14,209
Unrated subordinates .... 57,442 36,012 37,076
AAA-Rated IOs ........... 78,014 849 780
A-Rated IOs ............. 19,700 476 400
Unrated IOs(3) .......... 12,797 4,833 5,030
Unrated POs(3) .......... 12,797 1,073 1,232
-------- -------- --------
266,942 122,945 126,106
-------- -------- --------
Total ........... $794,484 $415,854 $415,933
======== ======== ========
19
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
(1) Notional amounts are based on the aggregate principal amount of the
underlying collateral.
(2) Estimated fair values are based on dealer-quoted market prices or the
average of dealer-quoted market prices for the Company's other comparable
securities.
(3) These securities relate to the same mortgage-related security, thus giving
the Company both the principal and interest components to the particular
class.
The following tables set forth information regarding the mortgage loans
underlying the Company's multi-family and commercial mortgage-related securities
portfolio at June 30, 1998.
Current Aggregate
Unpaid Principal
Property Type Balance Percentage(1)
- ------------- --------- ----------
(In Thousands)
Multi-family ..................... $464,754 46%
Retail ........................... 223,197 22
Office ........................... 119,933 12
Industrial ....................... 46,995 5
Hotel ............................ 39,018 4
Other ............................ 105,812 11
-------- ---
$999,709 100%
======== ===
- ---------------
(1) Based on a percentage of the total unpaid principal balance of the
underlying loans.
20
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
Current Aggregate
Unpaid Principal
Geographic Location Balance Percentage(1)
- ------------------- --------- ----------
(In Thousands)
California ................... $241,115 24%
Texas ........................ 166,669 17
Florida ...................... 80,027 8
Ohio ......................... 53,310 5
New York ..................... 47,732 5
Other ........................ 410,856 41
-------- ---
$999,709 100%
======== ===
- -----------------
(1) Based on a percentage of the total unpaid principal balance of the
underlying loans.
COMMERCIAL AND MULTI-FAMILY LOAN PORTFOLIO. The Company's investment in
commercial and multi-family loans amounted to $44.9 million at June 30, 1998, a
$35.4 million increase over the $9.5 million investment at December 31, 1997.
The Company's commercial lending activities currently focus on real estate
lending opportunities in selected major metropolitan markets throughout the
United States where the Company believes there are significant supply
constraints and where employment and/or population growth and other demand
generators are expected to remain strong. The Company's general approach to
commercial lending is to capitalize on the core capabilities of the Manager and
its affiliates, which include an ability to assess the value creation potential
of underutilized real estate and to oversee and manage the conversion,
rehabilitation and/or construction process. The Company seeks to make loans to
borrowers who have a proven ability to acquire such assets and enhance value
through a process of repositioning or development. Loans are usually structured
to provide current income along with either exit fees or gross revenue
participation features. Loans may be originated as first mortgage loans or
structured as subordinated debt or mezzanine financing.
The following table sets forth the composition of the Company's
commercial and multi-family loan portfolio by type of loan at the dates
indicated:
June 30, December 31,
1998 1997
--------- --------
(In Thousands)
Multi-family .......................... $ 45,285 $ 3,455
Commercial real estate:
Office ............................. 33,058 33,058
Hotel .............................. 28,581 20,952
--------- --------
Total loans ....................... 106,924 57,465
Deferred origination fees ............. (844) (344)
Undisbursed loan proceeds ............. (61,008) (47,640)
Allowance for loan losses ............. (206) --
--------- --------
Commercial and multi-family loans, net $ 44,866 $ 9,481
========= ========
21
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
The following table sets forth certain information regarding loans in
the Company's commercial and multi-family loan portfolio at June 30, 1998.
<TABLE>
<CAPTION>
Loan per Stabilized
Loan Amount Ratio of Unit/ Debt
Loan Outstanding Type of Loan to Square Coverage Coupon
Loan Location Amount At June 30, 1998 Loan Cost Foot Ratio Rate Size
- ---- -------- ------ ---------------- ---- ---- ---- ----- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multi-family Residential:
Fourth and Harrison... San Francisco,
CA $11,550 $ 1,625 Construction 85% $ 201 1.22 9.630% 160 units
241 Church Street..... New York, NY 30,280 13,684 Conversion 88 582 N/A 9.000 52 units
459 Washington Street. New York, NY 3,455 1,760 Conversion 61 314 N/A 10.500 11 units
Commercial:
Doubletree Hotel ..... Lowell, MA 7,652 7,278 Renovation 85 31 1.90 10.000 249 rooms
Hawthorn Suites Hotel. Schaumburg, IL 7,629 - Construction 65 56 1.59 8.750 136 suites
Wyndham Garden
Hotel ............... Wilmington, DE 13,300 6,079 Renovation 67 61 2.20 8.650 219 rooms
Landmark III-GTE...... Burlington, MA 33,058 15,490 Renovation 85 -- 1.18 9.250 291,077 sq.ft.
--------- --------
$ 106,924 $ 45,916
========= ========
</TABLE>
The following tables set forth the activity in the Company's gross
commercial and multi-family loan portfolio during the periods indicated.
Three Months Ended June 30,
1998
--------------------------
Balance No. of Loans
-------- ------------
(In Thousands)
Balance at beginning of period ................. $ 99,295 6
Originations:
Hotel loan .................................. 7,629 1
Principal repayments ........................... -- --
-------- -------
Net increase in loans ....................... 7,629 1
-------- -------
Balance at end of period ....................... $106,924 7
======== =======
Six Months Ended June 30,
1998
----------------------
Balance No. of Loans
-------- ------------
(In Thousands)
Balance at beginning of period ................. $ 57,465 4
Originations:
Multi-family loans .......................... 41,830 2
Hotel loan .................................. 7,629 1
Principal repayments ........................... -- --
-------- -------
Net increase in loans ....................... 49,459 3
-------- -------
Balance at end of period ....................... $106,924 7
======== =======
22
<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 commercial and multi-family loan
portfolio at the dates indicated.
June 30, December 31,
1998 1997
----------- -----------
(In Thousands)
Past due less than 31 days.................. $ 99,272 $ 57,465
Past due 31 days to 89 days................. 7,652 --
Past due 90 days or more.................... -- --
----------- -----------
$ 106,924 $ 57,465
=========== ===========
RESIDENTIAL LOAN PORTFOLIO. The Company's investment in residential
loans amounted to $138.7 million at June 30, 1998, a $132.3 million increase
over the $6.4 million investment at December 31, 1997.
The following table sets forth the composition of the Company's
residential loan portfolio at the dates indicated:
June 30, December 31,
1998 1997
----------- -----------
(In Thousands)
Single-family residential................. $ 137,462 $ 6,465
Deferred origination fees................. 808 (115)
Deferred hedge............................ 399 --
----------- -----------
Residential loans, net.................. $ 138,669 $ 6,350
=========== ===========
Of the $137.5 million of single-family residential loans held by the
Company at June 30, 1998, $31.6 million, $16.0 million, $7.9 million, $6.4
million and $6.0 million were secured by properties located in Michigan,
California, Texas, Ohio, and Massachusetts, respectively.
The Company intends to pool its single-family residential loans in a
special purpose entity which will issue mortgage-related securities backed by
such loans. The senior classes in this securitization will be acquired by third
parties, and the Company will retain the subordinate and residual interests in
such securitization. The securitization also will provide the Company with
additional funds for investment purposes.
The following tables set forth the activity in the Company's gross
residential loan portfolio during the periods indicated.
Three Months Ended
June 30, 1998
----------------------------
Balance No. of Loans
----------- ------------
(In Thousands)
Balance at beginning of period.............. $ 105,949 1,077
Purchases:
Single family residential loans.......... 40,030 341
Principal repayments........................ (8,517) (26)
----------- -----------
Net increase in loans.................... 31,513 315
----------- -----------
Balance at end of period.................... $ 137,462 1,392
=========== ===========
23
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
Six Months Ended
June 30, 1998
----------------------------
Balance No. of Loans
----------- ------------
(In Thousands)
Balance at beginning of period............... $ 6,465 50
Purchases:
Single family residential loans........... 139,880 1,368
Principal repayments......................... (8,883) (26)
----------- -----------
Net increase in loans..................... 130,997 1,342
----------- -----------
Balance at end of period..................... $ 137,462 1,392
=========== ===========
The following table sets forth certain information relating to the
payment status of loans in the Company's residential loan portfolio at the dates
indicated.
June 30, December 31,
1998 1997
----------- -----------
(In Thousands)
Past due less than 31 days.................. $ 129,006 $ 6,196
Past due 31 days to 89 days................. 5,534 --
Past due 90 days or more.................... 2,922 269
----------- -----------
$ 137,462 $ 6,465
=========== ===========
24
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
DISCOUNT LOAN PORTFOLIO. The discount loan portfolio consists of
nonperforming and subperforming mortgage loans that are in default or for which
default is likely or imminent or for which the borrower is currently making
monthly payments in accordance with a forbearance plan, which generally are
purchased at a discount to both the unpaid principal amount of the loan and the
estimated value of the security property. At June 30, 1998, the Company's gross
discount loan portfolio amounted to $12.1 million, exclusive of $3.6 million of
unaccreted discount.
The following table sets forth the composition of the Company's
discount loan portfolio by type of loan at the dates indicated.
June 30, December 31,
1998 1997
---------- -----------
(In Thousands)
Commercial real estate loans:
Office.................................... $ 8,236 $ 11,893
Retail.................................... 3,873 30,636
----------- -----------
Total unpaid principal balance.......... 12,109 42,529
Unaccreted discount.......................... (3,597) (15,550)
----------- -----------
Discount loans, net....................... $ 8,512 $ 26,979
=========== ===========
During the six months ended June 30, 1998, the Company acquired through
foreclosures a shopping center located in Halifax, Nova Scotia and an office
building located in Dayton, Ohio, which secured discount loans with a balance of
$15.4 million and $1.5 million, respectively. These foreclosures were the
primary reason for the decrease in the discount loan portfolio during the six
months ended June 30, 1998.
At June 30, 1998, the Company's discount loans included a 13.83% PARI
PASSU interest in a loan pool purchased from a large commercial bank, which
interest had an aggregate outstanding principal balance of $9.2 million. The
collateral for the loans currently consists of three office buildings located in
midtown Manhattan, New York. As of June 30, 1998, all of the loans in this pool
were performing in accordance with their terms. The loans are serviced for the
Company by the Bank, which was the other successful joint bidder on the loan
pool.
At June 30, 1998, the discount loan portfolio also included a loan
secured by a shopping center located in Havre, Montana with an unpaid principal
amount of $3.9 million. The shopping center has 195,445 gross rentable square
feet. As of June 30, 1998, the loan was nonperforming and foreclosure
proceedings were in process.
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.
June 30, December 31,
1998 1997
----------- -----------
(In Thousands)
Past due less than 31 days................... $ 2,622 $ 7,964
Past due 31 days to 89 days.................. 5,614 --
Past due 90 days or more..................... 3,873 34,565
----------- -----------
$ 12,109 $ 42,529
=========== ===========
25
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
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 June 30, 1998,
the Company had provided an allowance for loan losses in the amount of $206,049
on the loan portfolio. At December 31, 1997, no allowance for loan losses had
been provided.
INVESTMENTS IN REAL ESTATE. The Company employs an opportunistic real
estate investment approach that seeks value creation opportunities that can be
realized through increased management focus and capital investment. The Company
generally looks to acquire underperforming properties that can be acquired and
renovated at discounts to replacement cost. In evaluating opportunities, the
Company focuses on a series of key investment criteria. These include analyses
of the level of proposed new supply and development constraints in the markets
where it is considering investing. An underlying premise of the Company's real
estate investment philosophy is that, while demand for real estate has remained
relatively constant over time, sudden and dramatic increases in supply have
driven boom and bust real estate cycles.
At June 30, 1998, the Company's investments in real estate consisted of
seven properties which had an aggregate carrying value of $176.9 million. For
information related to an acquisition of real estate by the Company subsequent
to June 30, 1998, see "Recent Developments".
A total of four of the properties currently owned by the Company with
an aggregate carrying value of approximately $142 million are located in San
Francisco, California. Three of these properties are located in the financial
district of San Francisco, and one property is located in the adjacent civic
center district of San Francisco. The Company believes that the office market in
San Francisco, particularly the financial district, satisfies its general real
estate investment philosophy because it is characterized by limited new supply
and significant barriers to entry. Low vacancy rates, coupled with lack of new
construction, currently are boosting rental rates to record highs. Government
regulation of development in conjunction with local construction costs and a
lack of developable land provide significant barriers to entry to this area. The
Company believes that its investments in real estate in San Francisco are all
well located and benefit from their proximity to the majority of the city's
office, retail and hotel accommodations.
The Company's net investment in real estate increased to $176.9 million
at June 30, 1998 from $45.4 million at December 31, 1997 and is comprised of the
following properties:
<TABLE>
<CAPTION>
Book Value at
Date Acquired Property Location Square Feet Property Type June 30, 1998
------------- -------- -------- ----------- ------------- -------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
09/03/97 10 U.N. Plaza San Francisco, CA 71,636 Office Bldg. $ 9,149
09/23/97 450 Sansome St. San Francisco, CA 130,437 Office Bldg. 17,366
11/10/97 Cortez Plaza Bradenton, FL 289,686 Shopping Ctr. 19,288
01/23/98 690 Market St. San Francisco, CA 124,692 Office Bldg. 13,724
04/03/98 Park Center I Dayton, OH 44,000 Office Bldg. 1,534
04/09/98 7075 Bayers Rd. Halifax, Nova Scotia 402,529 Shopping Ctr. 15,360
04/08/98 225 Bush Street San Francisco, CA 536,382 Office Bldg. 101,746
----------
Accumulated depreciation (1,242)
----------
$ 176,925
==========
</TABLE>
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 $45 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.
26
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
Set forth below is a brief description of each of the Company's
investments in real estate at June 30, 1998.
CORTEZ PLAZA. In November 1997, the Company purchased Cortez Plaza, a
289,686 square foot shopping center located in Bradenton, Florida, a suburb of
Tampa Bay. The Company purchased this property, which was built in 1956 and
renovated in 1988, for $18.4 million. In a separate transaction, the fee simple
title to a large portion of the shopping center that had been subject to a
ground lease was purchased simultaneously for $650,000, which resulted in a
total investment in this property of $19.1 million. By simultaneously acquiring
fee simple title to a ground lease that encumbered a large part of the shopping
center's parking lot, the Company believes that it immediately improved the
value and marketability of the project. As of June 30, 1998, the shopping center
was 97% leased, and national and regional tenants, including Publix, PetSmart,
Circuit City and Montgomery Ward, which currently is in bankruptcy, comprised a
majority of the complex. Below market leases covering approximately 14% of the
center expire during 1998, 1999 and 2000.
450 SANSOME STREET. In September 1997, the Company acquired a 130,437
square foot, 16-story, Class B office building located at 450 Sansome Street in
the financial district of San Francisco, California. The Company purchased this
property for $17.2 million. The building was 80% leased as of June 30, 1998. The
property was built in 1967 and upgraded in certain respects in 1989 and 1990.
The property was acquired from a lender who had taken title through foreclosure.
Subsequent to the foreclosure, the property was suboptimally managed by the
institutional owner. As a result, average rent per square foot amounted to
approximately $18.00 at the date of acquisition. During the next five years, 86%
of the leased space in the property expires. The Company is investing
approximately $6.7 million in this property to renovate the entrance lobby,
elevator cabs, bathrooms and hallways, install a sprinkler system, install
various upgrades to enhance compliance with the Americans with Disabilities Act
of 1990 (the "ADA"), fund deferred maintenance and various tenant improvements
and pay leasing commissions. Since acquiring the property, the Company has
commenced its repositioning strategy. In this regard, the Company recently
entered into a lease with a tenant for ground floor retail space at an effective
rate which exceeded the Company's projection by over 50%. The Company also
currently is leasing office space at rents that exceed $30 per square foot.
10 UNITED NATIONS PLAZA. In September 1997, the Company acquired a
71,636 square foot, six-story, Class B office building located at 10 United
Nations Plaza in the civic center district of San Francisco. The Company
purchased this property, which was built in 1982, for $9.1 million. At the date
of acquisition, the property was substantially leased and the average rent per
square foot was $13.76, which the Company believes is below current market
levels. The building was 45% leased as of June 30, 1998, and over 93% of total
rentable space will become available by September 1998. Short-term holdover
agreements were negotiated with two of the building's largest tenants to allow
them time to relocate from the building, with rental rates during the holdover
terms ranging from $25.00 to $38.00 per square foot. The property is currently
being marketed for lease to tenants with full floor or full building space
requirements, and the Company is under active negotiation with several companies
for rents in the upper $20 per square foot range. The Company is investing
approximately $3.5 million in this property to fund cosmetic improvements to
enhance the lobby and hallways, install ADA upgrades, fund deferred maintenance
and tenant improvements and pay leasing commissions.
690 MARKET STREET. In January 1998, the Company acquired a 124,692
square foot, 16-story, Class C office building located at 690 Market Street in
the financial district of San Francisco, California. The property was purchased
for $13.7 million. The property was originally constructed in 1888 and has
undergone numerous renovations. At the date of acquisition, approximately 41% of
the building was available for re-leasing by the end of 1998 and existing rents
for this occupied space averaged $14.06 per square foot, which the Company
believes is below current market levels. The building was 72% leased as of June
30, 1998. The Company is investing approximately $4.3 million to install
structural upgrades, a sprinkler system and ADA upgrades, fund deferred
maintenance and tenant improvements and pay leasing
27
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
commissions. The Company is currently implementing a new leasing program at the
property to coincide with the renovation schedule and has renewed existing
leases in the mid $20 per square foot range, which represents an approximately
30% increase.
BUSH STREET PROPERTY. In April 1998, the Company acquired an existing
536,382 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. The purchase price for this property was funded primarily by a $75.0
million loan from Salomon Brothers Realty Corp. The Bush Street Property was
originally constructed in 1923, expanded in 1994 and brought up to 1992 building
code seismic standards during 1992-94. Originally built as the world
headquarters of Chevron of USA, Inc. ("Chevron"), it was sold in 1994 as Chevron
sought to relocate its executive offices. The Company expects to make an
additional investment of approximately $11.1 million to pay tenants improvements
and leasing commissions and to install a sprinkler system, life/safety systems
and ADA upgrades. As of June 30, 1998, the Bush Street Property was 94% leased
and the average rent per square foot amounted to approximately $18.30. The
Company estimates that the current average market rate for office buildings in
this area of San Francisco approximates $32 to $35 per square foot. For
additional information relating to the Bush Street Property, see "--Significant
Properties" below.
BAYERS ROAD SHOPPING CENTRE. In April 1998, the Company acquired the
Bayers Road Shopping Centre, which is located at 7075 Bayers Road in Halifax,
Nova Scotia. The property was acquired by foreclosure on the loans secured by
the property, which were acquired by the Company at a discount in September
1997. The property contains 402,529 square feet of space, which consists
primarily of retail space but also includes some office space and storage space.
The original buildings were built in 1956 and were enclosed and expanded in
several phases between 1971 and 1987. Major tenants of the property currently
consist of Zellers, Lawton's and Mark's Work Wearhouse. The property was
approximately 80% leased at June 30, 1998. The Company currently is implementing
an operating plan for this investment that will include the relocation of
existing major tenants to higher visibility areas in order to improve pedestrian
traffic flow.
PARK CENTER I. In April 1998, the Company acquired Park Center I, a
suburban office building located on a frontage road to Interstate 75 in Dayton,
Ohio. The building was constructed in 1981 and has four stories and
approximately 44,000 square feet of rentable space. The property was acquired by
foreclosure on the loan secured by the property, which was acquired by the
Company at a discount in September 1997. The building is currently vacant and
configured for single tenant use, but may be converted to multi-tenant use. The
Company currently is preparing an operating plan for this investment.
LEASE EXPIRATIONS -- ALL PROPERTIES
The following table sets forth a summary schedule of the total lease
expirations for the Company's investments in real estate for leases in place as
of June 30, 1998, assuming that none of the tenants exercise renewal options or
termination rights, if any, at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
Percentage of Average Base Percentage of
Aggregate Annualized Rent per Aggregate
Number of Square Footage Portfolio Base Rent of Square Foot of Portfolio
Year of Lease Leases of Expiring Leased Square Expiring Expiring Annualized Base
Expiration(1) Expiring Leases Feet Leases(2) Leases(3) Rent
- ---------------- ---------- -------------- -------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1998............ 40 114,109 8.91% $ 922,877 $ 19.54 7.46%
1999............ 45 166,888 13.03 1,996,059 17.71 16.14
2000............ 35 107,378 8.38 1,606,374 17.19 12.99
2001............ 43 157,243 12.28 1,997,179 19.29 16.15
2002............ 42 110,724 8.65 862,696 15.80 6.98
2003............ 8 36,889 2.88 728,926 25.62 5.90
2004............ 5 48,770 3.81 640,189 24.97 5.18
2005............ 5 32,960 2.57 128,563 9.68 1.04
2006............ 5 127,804 9.98 677,470 7.13 5.48
2007............ 5 113,492 8.86 1,359,321 20.56 10.99
2008 and beyond. 12 264,496 20.65 1,445,298 11.97 11.69
----- --------- ------ ----------- ------
245 1,280,753 100.00% $12,364,952 100.00%
===== ========= ====== =========== ======
</TABLE>
28
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
- ----------
(1) Lease year runs from January 1 to December 31 for all years except for 1998,
in which the lease year is July 1 to December 31, 1998.
(2) Annualized base rent is calculated based on the amount of rent scheduled
from January 1 of the listed year to the lease expiration, except for 1998
in which the amount is based on the amount of rent scheduled from July 1 to
lease expiration.
(3) Annualized base rent per square feet is calculated using the annualized base
rent divided by a weighted average square footage.
As part of its initial repositioning of a property after an
acquisition, the Company generally pursues a policy of replacing some existing
tenants with tenants which have higher lease payments and/or a higher
probability of expansion and renewal. This policy, which is in accordance with
the Company's philosophy of investing in distressed real estate, may affect a
number of existing tenants at acquired properties. Although the Company's
repositioning strategy may adversely affect tenant retention rates in the early
years of ownership of a property, management believes that the strategy will be
beneficial to the Company in the long term. There can be no assurance, however,
that the Company's tenant retention rate will increase as each property is
repositioned or stabilized or that the net present value of new or renewed
leases will substantially exceed the net present value of leases with existing
tenants.
The Company maintains comprehensive insurance on each of its real
properties, including liability and fire and extended coverage, in amounts
sufficient to permit the replacement of the properties in the event of a total
loss, subject to applicable deductibles, or in the case of a property acquired
by foreclosure or by deed-in-lieu thereof in an amount equal to the lesser of
the unpaid principal balance of the loan and actual cash value of the property,
dependent upon the status of the property. There are certain types of losses,
however, generally of a catastrophic nature, such as earthquakes, floods and
hurricanes, that may be uninsurable or not economically insurable. Inflation,
changes in building codes and ordinances, environmental considerations and other
factors also might make it not feasible to use insurance proceeds to replace a
property if it is damaged or destroyed. Under such circumstances, the insurance
proceeds received by the Company might not be adequate to restore its economic
position with respect to the affected distressed real property. The Company's
policy is to secure earthquake insurance equal to the probable maximum loss in
areas where appropriate and available. To date, the Company has purchased
earthquake insurance in amounts equal to the "probable maximum loss" for all of
the properties it has acquired in San Francisco, California. There can be no
assurance, however, that such coverage is sufficient or that it will continue to
be available upon expiration of the current terms.
SIGNIFICANT PROPERTIES
Set forth below is additional information with respect to the Bush
Street Property, which is deemed "significant" under requirements of the
Securities and Exchange Commission (the "Commission").
DEPRECIATION. For federal income tax purposes, the basis, net of
accumulated depreciation, of the Bush Street Property aggregated approximately
$101.4 million at June 30, 1998. A land only valuation of this property has been
ordered, which may modify the tax basis of this property. The real property
associated with the Bush Street Property (other than land) generally will be
depreciated for federal income tax purposes over 39 years using the straight
line method. For financial reporting purposes, the Bush Street Property is
recorded at its historical cost and is depreciated using the straight line
method over its estimated useful life, which is estimated to be 39 years.
REAL ESTATE TAXES. The 1997 annual real estate taxes paid on the Bush
Street Property were approximately $343,701. The city of San Francisco real
estate tax is 1.19% of assessed value.
29
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
OCCUPANCY. At June 30, 1998, the Bush Street Property was leased to 36
tenants which are engaged in a variety of businesses, including oil, law,
technology, engineering, publication, consulting and philanthropy. The following
table sets forth information relating to occupancy of and net effective rent for
the Bush Street Property for the periods indicated.
Average Occupancy*
------------------------------
Property 1997 1996 1995
------------------- ------- ------- ------
Bush Street Property .......... 94% 78% 82%
Net Effective Rent
Per Square Foot*
------------------------------
1997 1996 1995
-------- -------- ------
Bush Street Property .......... $ 16.35 $ 16.17 $ *
- ------------
* Data is not available for periods prior to 1995 or as indicated.
LEASE EXPIRATIONS. The following table sets forth a summary schedule of
the total lease expirations for the Bush Street Property for leases in place as
of June 30, 1998, assuming that none of the tenants exercise renewal options or
termination rights, if any, at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
YEAR OF 2008
LEASE AND
EXPIRATION 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 BEYOND
- ----------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. of Leases
Expiring .......... 3 6 4 10 7 3 1 1 1 4 3
Square Footage
of Expiring Leases. 5,681 83,411 38,152 66,415 28,504 26,174 22,714 3,784 22,742 85,992 76,306
Percent of Total
Leased Square Feet. 1.2% 18.1% 8.3% 14.4% 6.2% 5.7% 4.9% 0.8% 5.0% 18.7% 16.6%
Annualized rent of
Expiring Leases ... $ 88,416 $1,713,439 $642,897 $1,405,220 $451,181 $ 787,035 $454,280 $91,972 $454,836 $ 45,500 $29,845
Percent of Total
Annualized Rent ... 0.9% 16.6% 6.2% 13.6% 4.4% 7.6% 4.4% 0.9% 4.4% 19.8% 21.3%
Annualized rent per
Square ft. of
Expiring Leases ... $ 15.56 $ 20.5 $ 16.85 $ 21.16 $ 15.83 $ 30.07 $ 20.00 $ 24.31 $ 20.00 $ 23.78 $ 28.80
</TABLE>
At June 30, 1998, the only tenant of the Bush Street Property which
occupied 10% or more of the rentable square footage in the building was Chevron,
which is engaged in the oil business. Chevron leases 207,529 rentable square
feet on nine floors. Chevron has subleased all of its space except for three
floors totaling 63,521 square feet. Of the 63,030 square feet that Chevron
occupies, 43,683 square feet expires in June 1999. Management is in negotiations
with Chevron to extend its term. The remaining space comprising 17,347 square
feet on the 22nd floor expires in June 2000. Space sub-leased by Chevron totals
144,499 square feet. These sub-leases extend beyond Chevron's term (at the end
of which they will become direct leases with the Company), and have varying
terms, as reflected in the lease expiration schedule.
30
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE. Securities sold under
agreements to repurchase increased to $223.8 million at June 30, 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 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 $324.4 million and a market
value of $323.8 million were pledged as collateral for securities sold under
agreements to repurchase at June 30, 1998.
OBLIGATIONS OUTSTANDING UNDER LINES OF CREDIT. Obligations outstanding
under lines of credit amounted to $154.2 million at June 30, 1998 as compared to
$0 at December 31, 1997 and represents borrowings having a one-year term and an
interest rate that floats in accordance with a designated prime rate. See
"Capital Resources and Liquidity."
OBLIGATIONS OUTSTANDING UNDER LINES OF CREDIT - REAL ESTATE.
Obligations outstanding under lines of credit secured by real estate amounted to
$115.2 million at June 30, 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."
The Company's general strategy is to leverage its investments in
distressed real estate by incurring borrowings secured by such investments.
Set forth below is information regarding the Company's mortgage
indebtedness relating to the Company's investment in real estate at June 30,
1998.
<TABLE>
<CAPTION>
Principal Interest Maturity Annual
Property Amount Rate Amortization Date Payments
------------------------------- ------- ------------------- ------------- ------------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Bush Street Property........... $75,000 (1)LIBOR plus 1.75% None April 2001(3) $ 5,550(4)
Other ......................... $40,235 (2)LIBOR plus 1.75% None May 2001(3) $ 2,985(4)
</TABLE>
- ----------------
(1) Plus up to $5.0 million of additional advances for capital improvements to
the Bush Street Property.
(2) Represents the outstanding balance under the $200 million loan agreement
with Salomon Brothers Reality Corp. As of June 30, 1998, the Company's
investments in Cortez Plaza, 450 Sansome Street, 10 U.N. Plaza and 690
Market Street secured this loan.
(3) Subject to certain conditions, the borrower under this loan may extend the
maturity date by one year.
(4) Based on the interest rate in effect as of June 30, 1998.
MINORITY INTEREST. At June 30, 1998, minority interest totaled $29.9
million and represented OCN's ownership through IMI of 1,808,733 units in the
Operating Partnership. On May 7, 1998, the Company sold 1,473,733 units in the
Operating Partnership to IMI for $24.5 million. 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
OCN. 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 REITs under the Code. See Notes 1 and 8 to the Interim
Consolidated Financial Statements included in Item 1 hereof.
SHAREHOLDERS' EQUITY. Shareholders' equity increased by $2.4 million
from December 31, 1997 to June 30, 1998. The increase in shareholders' equity
during this period was attributable to a $7.4 million
31
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
increase in unrealized gains on securities available for sale, which was offset
in part by a net loss of $3.9 million and a cumulative currency translation
adjustment of $1.1 million. See the Consolidated Statement of Changes in
Shareholders' 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 half of 1998
consisted of net cash provided by operating activities, reverse repurchase
agreements and other secured borrowings, maturities and principal payments on
loans and securities; proceeds from the sale of Operating Partnership units to
IMI.
Cash and cash equivalents were $13.1 million at June 30, 1998. The
Company's operating activities provided cash flows of $57.3 million during the
six months ended June 30, 1998. The Company's investing activities used cash
flows of $601.4 million during the six months ended June 30, 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 $508.5 million during the
six months ended June 30, 1998 and consisted of proceeds from lines of credit
and repurchase agreements of $493.2 million, and $27.6 million net proceeds from
the issuance of Operating Partnership units, net of $12.3 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. On July 15, 1998, the Company issued $150 million of 11.5%
Senior Notes due 2005 pursuant to Rule 144A and, to a lesser extent, Regulation
S under the Securities Act. The Company had $99.2 million and $159.8 million
available under its existing lines of credit with Merrill Lynch Mortgage Capital
Inc. and Salomon Brothers Realty Corp. at June 30, 1998, respectively.
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 (British pound)19.0 million ($32.1 million) to finance the Company's
acquisition of residual interests originated in the U.K. operations of CFC. The
Company believes that the net cash provided by its operating and financing
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 or equity infusions and has entered into
discussions with respect to obtaining such borrowings or equity infusions.
Additionally, as discussed above, the Company intends to execute a
securitization of its single-family residential loan portfolio and use the
proceeds for further acquisitions. The Company believes that its existing
sources of liquidity, including third-party borrowings and or equity infusions
currently being pursued, 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 or
securitizations, its liquidity could be constrained and the impact on its
results of operations, financial condition, and FFO could be significant.
32
<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 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.
RISK OF LOSS OF INVESTMENT COMPANY ACT EXEMPTION
The Company believes that it is not, and intends to conduct its
operations so as not to become, regulated as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). Under
the Investment Company Act, an investment company is required to register with
the Commission and is subject to extensive, restrictive and potentially adverse
regulations. The Investment Company Act exempts entities, however, that 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 interpretations by the staff of the Commission,
qualifying for this exemption requires the Company, among other things, to
maintain at least 55% of its assets in Qualifying Interests and to maintain an
additional 25% in Qualifying Interests or other real estate-related assets. The
Company's investments in real estate and mortgage loans generally constitute
Qualifying Interests, and the Company believes that subordinate and residual
interests in mortgage-related securities constitute Qualifying Interests when
the Company acquires the right to (i) direct the foreclosure upon any defaulted
loan which backs such securities and to take all other actions that a servicer
generally may take in connection with a defaulted loan and/or (ii) designate the
Bank (or another party) as special servicer with respect to any defaulted
mortgage loan, subject to the Company's right to exercise the rights set forth
in clause (i). At June 30, 1998, the Company believes that its Qualifying
Interests, including subordinate and residual interests, comprised over 75% of
the Company's total assets and over 95% when combined with other real-estate
related assets. As a result, the Company believes that it was and is not
required to register as an investment company under the Investment Company Act.
The Company does not intend, however, to seek an exemptive order, no-action
letter or other form of interpretive guidance from the Commission on this
position, and if the Commission were to take a different position, the Company
could be required either (a) to change the manner in which it conducts its
operations in order to avoid investment company registration or (b) to register
as an investment company, either of which could have a material adverse effect
on the Company and its securities, could subject the Company to monetary
penalties and injunctive relief in an action brought by the Commission, could
cause the Company to be unable to enforce contracts with third parties and could
cause third parties to seek recission of relevant transactions.
33
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
================================================================================
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT, AND CERTAIN STATEMENTS
CONTAINED IN FUTURE FILINGS BY THE COMPANY WITH THE COMMISSION (THE "SEC"), 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 EXCHANGE 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, THE SIZE AND NATURE OF THE
SECONDARY MARKET FOR MORTGAGE LOANS AND OF THE MARKET FOR SECURITIZATIONS,
GEOGRAPHIC CONCENTRATIONS OF ASSETS, 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.
34
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
================================================================================
Information required by this Item is not applicable under the
circumstances.
35
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities
On July 14, 1998 the Company issued $150,000,000 principal amount of 11
1/2% Senior Notes due 2005 (the "Notes") under Rule 144A of the
Securities Act of 1933. Interest on the Notes is payable in cash
semi-annually in arrears on each January 1 and July 1 commencing on
January 1, 1999. The Notes will mature on July 1, 2005 and are
redeemable, at the option of the Company, in whole or part, on or after
July 1, 2002. In addition, during the first 36 months, the Company may,
on any one or more occasions, use the net proceeds of one or more
offerings of its Common Stock to redeem up to 25% of the aggregate
principal amount of the Notes, provided that, after any such
redemption, the aggregate principal amount of the Notes outstanding
must equal at least $112.5 million. Upon the occurrence of a change of
control, the Company is required, subject to certain conditions, to
offer to purchase all of the Notes. The Indenture relating to the Notes
contains certain covenants of the Company, including a covenant which
restricts its ability to declare or pay dividends or make payments or
distributions on its outstanding Common Stock unless certain
requirements are met. This covenant does not affect the ability of the
Company to make distributions which are necessary to preserve its
status as a REIT under the Code.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on Wednesday, May
14, 1998, the following individuals were elected to the Board of
Directors:
Votes for Votes Withheld
----------------------- --------------------
William C. Erbey 17,144,880 38,435
Benjamin W. Navarro 17,142,962 40,353
Christine A. Reich 17,143,971 39,344
Timothy J. Riddiough 17,141,271 42,044
Peter M. Small 17,141,380 41,935
<TABLE>
<CAPTION>
The following proposals were approved at the Company's Annual Meeting:
Broker
Votes for Votes Against Abstentions Non-Votes
--------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Ratification of the appointment by the 17,144,958 13,209 29,148 -
Board of Directors of Price Waterhouse,
LLP as independent auditor for the
Company for the fiscal year ending
December 31, 1998.
Amendment of Article VIII of the 17,091,958 17,539 52,248 21,570
Company's Articles of Incorporation in
order to provide, in effect, that
nothing contained therein will prohibit
the settlement of any transaction
entered into through the facilities of
any national securities exchange
registered under the Securities Exchange
Act of 1934, as amended (the "Exchange
Act"), or on the national market system
of a national securities association
registered under the Exchange Act.
</TABLE>
36
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Amendment to Amended and Restated Articles of
Incorporation (2)
3.3 By laws (1)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Indenture for the 11 1/2% Senior Notes due
2005 between the Company and Norwest Bank Minnesota,
National Association, as Trustee thereunder (3)
4.3 Form of 11 1/2% Senior Notes due 2005 (attached as
Exhibit A to the Indenture included as Exhibit 4.2)
(3)
4.4 Registration Rights Agreement, dated July 14, 1998,
among the Company and the Initial Purchasers of the
11 1/2% Senior Notes due 2005 (3)
10.1 First Amended and Restated Management Agreement (4)
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.
dated as of March 3, 1998 (5)
10.6 Assignment and Assumption Agreement, dated April 7,
1998, by and between Ocwen Capital Corporation and
OAIC Bush Street, LLC (5)
10.7 Loan Agreement between OAIC Bush Street, LLC and
Salomon Brothers Realty Corp. as of April 7, 1998 (5)
10.8 Purchase and Sale Agreement between Prudential
Insurance Company of America and Ocwen Capital
Corporation, dated June 9, 1998 (6)
10.9 Loan Agreement between the Company and Merrill Lynch
Mortgage Capital Inc. as of March 30, 1998 (filed
herewith)
10.10 Loan Agreement between the Company and Greenwich
Financial Products Inc. as of April 24, 1998 (4)
37
<PAGE>
10.11 Amended and Restated Loan Agreement by and among,
inter alia, OAIC California Partnership, L.P., OAIC
California Partnership II, L.P., Salomon Brothers
Realty Corp. and LaSalle National Bank, dated as of
June 10, 1998 (filed herewith)
27.1 Financial Data Schedule - For the quarter ended June
30, 1998 (filed herewith)
99.1 Investment Guidelines (filed herewith)
----------------
(1) Incorporated by reference to the Company's
Registration Statement on Form S-11 (File No.
333-21965), as amended, declared effective by the
Commission on May 14, 1997.
(2) Incorporated by reference to the text thereof set
forth on page 5 of the Company's definitive Proxy
Statement with respect to the Company's 1998 annual
meeting of shareholders as filed with the Commission
on April 15, 1998.
(3) Incorporated by reference to the Current Report
on Form 8-K filed by the Company with the Commission
on July 16, 1998.
(4) Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998.
(5) Incorporated by reference to the Current Report
on Form 8-K filed by the Company with the Commission
on April 23, 1998.
(6) Incorporated by reference to the Current Report
on Form 8-K filed by the Company with the Commission
on August 6, 1998.
(b) Reports on Form 8-K filed during the quarter ended June 30,
1998
(1) A Form 8-K dated as of April 8, 1998, which contained
a news release announcing the Company's purchase of
the Bush Street property.
(2) A Form 8-K dated as of May 7, 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 an additional
capital investment.
(3) A Form 8-K/A dated as of April 8, 1998, and filed on
June 12, 1998, which contained financial information
relating to OAIC Bush Street, LLC.
(4) A Form 8-K dated as of June 18, 1998, which contained
a news release announcing the Company's recent
investment activity.
38
<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: August 14, 1998
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 Second Amended and Restated Agreement of Limited Partnership,
the Amended and Restated Agreement of Limited Partnership and the Limited
Partnership Agreement (collectively, 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,
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
<PAGE>
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 Third Amended and Restated Agreement of
Limited Partnership, as amended or restated from time to time.
"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 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
2
<PAGE>
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
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.
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"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.
"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.
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"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 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.
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"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 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.
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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.
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 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:
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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.
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
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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 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 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,
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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.
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.
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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.
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
PARTNER THAT BEARS THE "ECONOMIC RISK OF LOSS" OF SUCH DEDUCTION IN ACCORDANCE
WITH REGULATIONS SECTION 1.704-2(i)(i), (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
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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 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
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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 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
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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.
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 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
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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 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,
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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);
(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.
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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 (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.
(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.
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(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.
(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,
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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.
(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%.
(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;
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(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 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
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(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;
(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 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
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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.
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.
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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.
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,
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AND THE EXCHANGING 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.
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:
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(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 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
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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.
(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.
(v) The assignee shall have executed a power of
attorney containing the terms and provisions set forth in
Section 8.02 hereof.
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(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 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.
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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 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 AFFECT ONLY THE
SUCCESSOR IN INTEREST TO THE TRANSFERRING PARTNER AND IN NO EVENT
28
<PAGE>
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
(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.
29
<PAGE>
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.
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
30
<PAGE>
<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 .9129%
1675 Palm Beach Lakes Blvd
Suite 1000
West Palm Beach, FL 33401
LIMITED PARTNERS:
Ocwen Limited, Inc. $297,513,897 18,775,350 90.3802%
1675 Palm Beach Lakes Blvd
Suite 1000
West Palm Beach, FL 33401
Investors Mortgage Insurance $ 30,587,787 1,808,733 8.7068%
Holding Company
1675 Palm Beach Lakes Blvd
Suite 1000
West Palm Beach, FL 33401
TOTAL: $331,106,875 20,773,733 100.00%
</TABLE>
31
<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:
32
Exhibit 10.9
================================================================================
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
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<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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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: /s/ JOHN BARNES By: /s/ JAMES B. CARSON
------------------------- -------------------------
Title: Senior Vice President Title: Vice President
---------------------- ----------------------
Date: March 30, 1998 Date:
------------------------- -----------------------
MERRILL LYNCH CREDIT CORPORATION
By: /s/ WILLIAM C. SCHAUB
-------------------------
Title: Vice President
----------------------
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
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<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
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<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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(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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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
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, made as of June 10,
1998, is entered into by and among OAIC CALIFORNIA PARTNERSHIP, L.P. and OAIC
CALIFORNIA PARTNERSHIP II, L.P., each a California limited partnership, and each
other entity that from time to time joins this Agreement as an additional
borrower, each having an address at c/o Ocwen Partnership, L.P., The Forum, 1675
Palm Beach Lakes Boulevard, West Palm Beach, Florida 33601 (collectively, the
"BORROWER"); each of the financial institutions signatory hereto that is
identified as a "LENDER" on the signature pages hereto or that, pursuant to
SECTION 8.9 hereof, shall become a "Lender" hereunder (individually, a "LENDER",
and collectively, the "LENDERS"); SALOMON BROTHERS REALTY CORP., a New York
corporation, having an address at Seven World Trade Center, New York, New York
10048 as agent for the Lenders (in such capacity together with its successors in
such capacity, the "Agent"); and LASALLE NATIONAL, BANK, a nationally chartered
bank, having an address at 135 South LaSalle Street, Suite 1740, Chicago,
Illinois 60603, as collateral agent for Lenders ("Collateral Agent").
RECITALS
WHEREAS, on April 30, 1998, OAIC California Partnership, L.P.
and OAIC California Partnership II, L.P. received an advance under the Loan
Agreement, dated as of April 30, 1998, by and among such Persons as initial
Borrower, the Agent and the Collateral Agent (the "Initial Loan Agreement") in
an amount equal to $15,081,909.55 secured by, among other things, the three real
properties in San Francisco, California owned by such Persons, the Guaranty of
Payment and a pledge of a commercial mortgage loan held by the Guarantor with
respect to the mortgaged property commonly referred to as "Cortez Plaza" in
Bradenton, Florida;
WHEREAS, a condition precedent to the making of any future
advances under the Initial Loan Agreement is the execution of an amendment and
restatement to the Initial Loan Agreement adding to such agreement provisions
permitting the Borrower to pledge as collateral for the advances commercial
mortgage loans secured by commercial mortgaged properties which properties would
have qualified for inclusion under such agreement had such properties been owned
by Borrower and directly pledged to secure the advances;
WHEREAS, this Agreement is the agreement amending and
restating the Initial Loan Agreement to add such provisions;
WHEREAS, it is understood and agreed between the parties
hereto that commercial mortgage loans shall not be pledged as collateral for the
advances unless and until further modifications have been made to this Agreement
describing additional terms and conditions with respect to such commercial
mortgage loans;
WHEREAS, Borrower desires to obtain a series of loan advances
(each, an "Advance" and collectively, the "Loan") from Agent and the Lenders in
an aggregate amount at any time outstanding of up to $200,000,000 (the "Loan
Amount") to provide funding for a portion of (1) the purchase price of and
Capital Improvement Costs with respect to the multi-family, office, retail,
industrial, hotel and other commercial real properties that Borrower acquires
and (2) the principal amount of the commercial mortgage loans secured by such
types of commercial real properties that Borrower acquires or originates or
makes additional disbursements under and to pay certain other fees and expenses;
WHEREAS, the Lenders are unwilling to make Advances unless
Borrower joins in the execution and delivery of this Agreement, the Note and the
Loan Documents (each as hereinafter defined), which shall establish the terms
and conditions of the Loan and Guarantor executes and delivers the Guaranty of
Payment;
WHEREAS, Borrower has agreed to establish certain accounts and
to grant to Collateral Agent on behalf of, and for the benefit of the Lenders, a
security interest therein upon the terms and conditions of the security
agreement set forth in SECTION 2.14; and
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WHEREAS, LaSalle National Bank, in its capacity as Collateral
Agent, is willing to join in the security agreement set forth in SECTION 2.14 by
execution and delivery of this Agreement in that capacity;
NOW, THEREFORE, in consideration of the making of the Loan by
Lenders and for other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, the parties hereby covenant,
agree, represent and warrant as follows:
ARTICLE I.
CERTAIN DEFINITIONS
SECTION 1.1. DEFINITIONS.For all purposes of this Agreement: (1) the
capitalized terms defined in this ARTICLE I have the meanings assigned to them
in this ARTICLE I, and include the plural as well as the singular; (2) all
accounting terms have the meanings assigned to them in accordance with GAAP; (3)
the words "herein", "hereof", and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section,
or other subdivision; and (4) the following terms have the following meanings:
"ACCEPTED PRACTICES" means such customary practices as
commercial mortgage collateral agents or banks would follow in the normal course
of their business in performing administrative and custodial duties with respect
to collateral which is generally similar to the Account Collateral; PROVIDED,
HOWEVER, that "ACCEPTED PRACTICES" shall not be deemed to include any custodial
practices now followed by Collateral Agent for any such collateral held for its
own account to the extent that such practices are more stringent than the
practices followed by commercial collateral agents or banks generally.
"ACCOUNT COLLATERAL" has the meaning set forth in SECTION
2.14(a) hereof.
"ACCOUNTS" means all accounts (as defined in the UCC), now
owned or hereafter acquired by the Borrower, and arising out of or in connection
with, the operation of any REO Property and all other accounts described in the
Management Agreement and all present and future accounts receivable, inventory
accounts, contract rights, chattel paper, notes, acceptances, insurance
policies, Instruments, Documents or other rights to payment and all forms of
obligations owing at any time to the Borrower thereunder, whether now existing
or hereafter created or otherwise acquired by or on behalf of the Borrower, and
all Proceeds thereof and all liens, security interests, guaranties, remedies,
privileges and other rights pertaining thereto, and all rights and remedies of
any kind forming the subject matter of any of the foregoing.
"ACTIVITY STATEMENT" has the meaning set forth in SECTION
2.12(d).
"ACTIVITY STATEMENT DATE" had the meaning set forth in SECTION
2.12(d).
"ACTUAL KNOWLEDGE" means, as to any REO Property or Mortgage
Loan, the actual knowledge of those individuals performing and responsible for
due diligence on such REO Property or Mortgage Loan on the Borrower's behalf
after due inquiry and investigation as and to the extent reasonably practiced or
carried out by a purchaser of similar real property.
"ADVANCE" has the meaning provided in the Recitals hereto.
"ADVANCE CLOSING DATE" means each date on which an Advance is
made hereunder to provide Borrower with funds either (x) to acquire
multi-family, office, retail, industrial, hotel and other commercial real
properties or to originate or acquire or make additional disbursements under
commercial mortgage loans secured by such types of commercial real properties
pursuant to SECTION 3.3(c) or (y) to pay Capital Improvement Costs with respect
to such commercial real properties owned by Borrower pursuant to SECTION 2.1(c)
or (z) to increase the outstanding Principal Indebtedness by the amount
permitted by the last sentence of SECTION 2.1(a) in connection with the
satisfaction of the Property Diversification Test pursuant to SECTION 2.1(c).
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"AFFILIATE" of any specified Person means any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controlling" and "controlled" have the meanings correlative to the
foregoing.
"AGENT" has the meaning provided in the first paragraph of
this Agreement.
"AGREEMENT" means this Loan Agreement, together with the
Schedules and Exhibits hereto, as the same may from time to time hereafter be
modified, supplemented or amended.
"ALLOCATED LOAN AMOUNT" means the portion of the Loan Amount
allocated to each REO Property or Mortgage Loan, as such amounts may be adjusted
by the Agent on behalf of the Lenders from time to time as hereinafter set
forth:
(i) The Allocated Loan Amount for each REO
Property or Mortgage Loan being added to the
Collateral on an Advance Closing Date shall equal the
amount of the related Advance being applied to the
purchase price of such REO Property or principal
amount of such Mortgage Loan plus reasonable expenses
related to the acquisition or origination or making
of an additional disbursement as approved by Agent;
(ii) The Allocated Loan Amount for each REO
Property or Mortgage Loan regarding which an Advance
is being made on an Advance Closing Date to pay
required Capital Improvement Costs or pursuant to the
last sentence of SECTION 2.1(a) shall be increased by
the applicable portion of such Advance;
(iii) In the event that in connection with a
sale following foreclosure or a 100% Taking of an REO
Property or Mortgaged Property, the Net Proceeds or
Loss Proceeds, as the case may be, are less than the
Allocated Loan Amount of the affected REO Property or
Mortgage Loan, the Allocated Loan Amount for the
remaining REO Properties and Mortgage Loans shall be
increased by the amount of the shortfall, such
increase being allocated to each remaining REO
Property and Mortgage Loan on a pro rata basis;
(iv) Upon each payment of the Principal
Indebtedness pursuant to SECTION 2.6 OR 2.7(c), the
aggregate Allocated Loan Amount for the REO
Properties and Mortgage Loans shall be decreased by
the amount of such principal payment, such decrease
being allocated to each remaining REO Property and
Mortgage Loan on a pro rata basis;
(v) Upon each payment of the Principal
Payment Amount pursuant to SECTION 2.12(b), the
aggregate Allocated Loan Amount for the REO
Properties shall be decreased by the amount of such
principal payment attributable to REO Properties,
such decrease being allocated to each REO Property on
a pro rata basis and the Allocated Loan Amount for
each Mortgage Loan shall be decreased as of the
applicable Payment Date by the portion of such
Principal Payment Amount, if any, attributable to
principal payments on the related Mortgaged Loan;
(vi) In the event the Principal Indebtedness
is reduced as a result of (x) a Capital Event
executed pursuant to SECTION 2.7(a), (y) the receipt
of Loss Proceeds with respect to a Taking or casualty
affecting an REO Property or (z) the receipt of Net
Proceeds upon a sale of an REO Property or Mortgage
Loan following foreclosure, the Allocated Loan Amount
for the affected REO Property or Mortgage Loan shall
be reduced either (a) to zero (in the case of a
Capital Event, 100% Taking or a 100%
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casualty where the Lenders release their Lien) or (b)
by the amount of the reduction in Principal
Indebtedness (in the case of a casualty where the
Lenders do not release their Lien or a less than 100%
Taking), and, if after such reduction pursuant to the
foregoing CLAUSE (a) or (b) an additional payment of
principal is to occur pursuant to the terms hereof,
the Allocated Loan Amount for the unaffected REO
Properties and Mortgage Loans shall be decreased by
the additional payment amount, such decrease being
allocated to each remaining REO Property and Mortgage
Loan on a pro rata basis; and
(vii) Notwithstanding anything set forth
above to the contrary which provides for a pro rata
allocation, the Agent may, on behalf of the Lenders,
increase or decrease the Allocated Loan Amount of any
or all of the REO Properties and Mortgage Loans as
appropriate to reflect a change in Market Value;
PROVIDED, that any change pursuant to this clause
(vii) shall not change the aggregate Allocated Loan
Amount.
"APPLICATION" means the Application dated April 10, 1998,
prepared by and between Agent and Ocwen Partnership, L.P.
"APPLICATION DEPOSIT" has the meaning provided in the
Application.
"APPRAISAL" means or an appraisal with respect to an REO
Property or Mortgaged Property prepared by an Appraiser in accordance with the
Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation
and with the requirements of Title 11 of the Financial Institution Reform,
Recovery and Enforcement Act (or such other standards and requirements as shall
be reasonably acceptable to the Agent) and utilizing customary valuation methods
such as the income, sales/market or cost approaches and in form acceptable to
Agent in its sole discretion, as any of the same may be updated by
recertification from time to time by the Appraiser performing such Appraisal.
"APPRAISER" means any nationally recognized MAI appraiser
acceptable to Agent in its sole discretion.
"ASSIGNMENT" has the meaning set forth in SECTION 5.1(v)
hereof.
"ASSIGNMENT AND SECURITY AGREEMENT" means the Collateral
Assignment, Pledge and Security Agreement between the applicable Borrower and
Agent, substantially in the form attached hereto as EXHIBIT O, as such agreement
may be modified, supplemented or amended and in effect from time to time.
"ASSIGNMENT OF LEASES" means an assignment of leases, rents
and security deposits executed by a Mortgagor as assignor to the applicable
Borrower, or such Borrower's predecessor(s) in interest and thereafter duly
assigned to such Borrower, as assignee with respect to a Mortgaged Property,
assigning to such Borrower, or its predecessor(s) in interest and thereafter
duly assigned to such Borrower, such Mortgagor's interest in and to the Leases
and the Property Income with respect to the applicable Mortgaged Property, as
the same may be supplemented, amended or modified.
"ASSIGNMENT OF RENTS AND LEASES" means, with respect to each
REO Property, an Assignment of Rents and Leases, substantially in the form
attached hereto as Exhibit J, dated as of the applicable Advance Closing Date,
granted by a Borrower to the Agent, for the benefit of the Lenders with respect
to the applicable Leases, as same may hereafter from time to time be
supplemented, amended, modified or extended.
"BASIC CARRYING COSTS" means the following costs with respect
to each REO Property: (i) Impositions and (ii) insurance premiums for policies
of insurance required to be maintained pursuant to this Agreement or the other
Loan Documents.
"BASIC CARRYING COSTS ACCOUNT" has the meaning set forth in
SECTION 2.13(a).
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"BORROWER" has the meaning provided in the first paragraph of
this Agreement. References herein to a Borrower shall mean each entity defined
as Borrower, individually or collectively, as applicable.
"BORROWER EXCESS PROCEEDS" means, with respect to any Capital
Event, the excess of (i) the Capital Event Proceeds received over (ii) the sum
of (a) the Release Price for the applicable REO Property or Mortgage Loan and
(b) any other amount payable under this Agreement and the other Loan Documents
in connection with the Capital Event.
"BORROWER RELEASE PRICE CONTRIBUTION" means the amount to be
deposited by the Borrower into the Collection Account in connection with a
Capital Event if the Release Price for an REO Property or Mortgage Loan shall be
greater than the Capital Event Proceeds received which amount shall be equal to
the difference between such Release Price and such Capital Event Proceeds.
"BUSINESS DAY" means any day other than a Saturday and a
Sunday and a day on which federally insured depository institutions in the
States of New York or Illinois or any State where an REO Property or Mortgaged
Property is located are authorized or obligated by law, governmental decree or
executive order to be closed. When used with respect to an Interest
Determination Date, "BUSINESS DAY" shall mean a day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"CAPITAL EVENT" means any transfer, sale, refinancing,
assignment, conveyance, liquidation or disposition of any REO Property or
Mortgage Loan and "CAPITAL EVENTS" shall have meaning correlative to the
foregoing. For purposes of this Agreement, a "Capital Event" shall include a
refinancing in which a voluntary prepayment of the Principal Indebtedness is
made in the amount necessary to obtain a release of the Liens in favor of the
Agent encumbering an REO Property or Mortgage Loan.
"CAPITAL EVENT PROCEEDS" means any proceeds of a Capital Event
net of reasonable third-party expenses and sales commissions related to such
Capital Event payable at the time of the Capital Event.
"CAPITAL IMPROVEMENT COSTS" means costs incurred or to be
incurred in connection with replacements and capital repairs made or to be made
to any REO Property (including, without limitation, repairs to the structural
components, roofs, building systems, and parking lots, TI Costs and Leasing
Commissions).
"CLOSING DATE" means the date on which this Agreement shall
become effective pursuant to SECTION 3.1, such date being June 10, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor statutes
thereto, and applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.
"COLLATERAL" means, collectively, the "Collateral" under and
as defined in each and all of the Assignment and Security Agreement(s),
Collateral Assignments of Mortgage and REO Mortgages(s), together with any other
collateral or security provided by Borrower with respect to the Loan.
"COLLATERAL AGENT" means LaSalle National Bank, or such
Person's successor in interest or other successor.
"COLLATERAL ASSIGNMENT OF ASSIGNMENT OF LEASES" means, with
respect to any Mortgage Loan, a collateral assignment of assignment of leases,
rents and security deposits or similar instrument, substantially in the form
attached hereto as EXHIBIT Q, in recordable form, sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the collateral assignment of the Assignment of Leases to or for the
benefit of Agent on behalf of the Lenders.
"COLLATERAL ASSIGNMENT OF MORTGAGE" means, with respect to any
Mortgage Loan, a Collateral Assignment of Beneficial Interest in Mortgage and
Other Documents, notice of transfer or equivalent instrument,
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substantially in the form attached hereto as EXHIBIT P, in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the collateral assignment of the
Mortgage to or for the benefit of Agent on behalf of the Lenders.
"COLLATERAL IMPAIRMENT" means the occurrence of any of the
following events without the prior written consent of Agent:
(i) if Borrower or any Affiliate of Borrower
gives any written notice to any Mortgagor
that: (a) directs such person to make any
payments on account of or with respect to
any Mortgage Loan to which the Collateral
Agent is entitled to any Person other than
Collateral Agent; or (b) is otherwise
inconsistent with the rights and security
interests of Agent under any of the Loan
Documents;
(ii) if any Mortgagor makes any payment to
Borrower or any Affiliate of Borrower (or
Borrower or any Affiliate of Borrower
receives any Capital Event Proceeds or
Loss Proceeds) on account of or with
respect to any Mortgage Loan and Borrower
does not remit such payment to the Agent
as required by this Agreement;
(iii) if Borrower or any Affiliate of Borrower,
or any third-party cash bidder acting by
or on behalf of any of the foregoing or on
behalf of any principal of Borrower at any
foreclosure sale under a Mortgage Loan
acquires title to a Mortgaged Property and
does not comply with all requirements of
this Agreement relating to REO Mortgages
and REO Property;
(iv) if Borrower or any Affiliate of Borrower
causes or permits any Affiliate of
Borrower to be substituted as "trustee"
under any deed of trust securing a
Mortgage Loan;
(v) if Borrower or any Affiliate of Borrower
consents to (a) any change in the payment
terms of a Mortgage Loan or (b) any
payment or repayment of a Mortgage Loan
for an amount less than the Total Loan
Balance or (c) any material waiver,
amendment, or modification of any Ground
Lease affecting any Mortgaged Property
that is a leasehold or any Mortgage Loan;
(vi) if Borrower fails to return to Agent or
Collateral Agent any Mortgage Loan
Documents when and as required by Section
2.18(d); or
(vii) if Borrower or any Affiliate of Borrower
otherwise intentionally acts or fails to
act in any manner that has the effect of
impairing or diminishing any Collateral
under this Agreement, other than actions
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and omissions expressly permitted by this
Agreement which are performed in
compliance with this Agreement.
"COLLATERAL SECURITY INSTRUMENT" means any right, document or
instrument, other than an REO Mortgage, given as security for the Loan
(including, without limitation, the Pledge Agreement, each Management
Subordination and each Contract Assignment, as same may be amended or modified
from time to time).
"COLLECTION ACCOUNT" has the meaning set forth in SECTION
2.12(a) hereof.
"COLLECTION PERIOD" means, with respect to any Payment Date,
the prior calendar month; provided, HOWEVER, that in the case of the first
Payment Date, the "Collection Period" shall be the period from the Closing Date
to the day prior to such Payment Date.
"CONDEMNATION PROCEEDS" means, in the event of a Taking with
respect to an REO Property or Mortgaged Property, the proceeds in respect of
such Taking less any reasonable third party out-of-pocket expenses incurred in
connection with the Taking or in collecting such proceeds thereof.
"CONSUMER PRICE INDEX" means the Consumer Price Index for All
Urban Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, in the area in which each REO Property is located; All
Items (1982-84=100), or any successor index thereto, appropriately adjusted and
if the Consumer Price Index ceases to be published and there is no successor
thereto, such other index as Borrower and Agent shall agree upon.
"CONTINGENT OBLIGATION" means, as used in the definition of
Other Borrowings, without duplication, any obligation of the Borrower
guaranteeing any indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly. Without limiting the generality of the foregoing, the
term "Contingent Obligation" shall include any obligation of the Borrower,
whether or not contingent:
(i) to purchase any such primary
obligation or any property constituting direct or
indirect security therefor;
(ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of
the primary obligor;
(iii) to purchase property, securities or
services primarily for the purpose of assuring the
owner of any such primary obligation of the ability
of the primary obligor to make payment of such
primary obligation; or
(iv) otherwise to assure or hold harmless
the owner of such primary obligation against loss in
respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming the
Borrower is required to perform thereunder) as determined by the Agent in good
faith.
"CONTRACT ASSIGNMENT" means, with respect to each REO
Property, the Assignment of Contracts, Licenses, Permits, Agreements, Warranties
and Approvals, substantially in the form attached hereto as EXHIBIT A, dated as
of the applicable Advance Closing Date and executed by a Borrower.
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"CONTRACTS" means the Management Agreement, and all other
agreements to which Borrower is a party, of which Borrower is a beneficiary or
which are assigned to Borrower by the Manager in the Management Agreement and
which are executed in connection with the construction, operation and management
of the applicable REO Property (including, without limitation, agreements for
the sale, lease or exchange of goods or other property and/or the performance of
services by it, in each case whether now in existence or hereafter arising or
acquired), as any such agreements have been or may be from time to time amended,
supplemented or otherwise modified.
"DEED OF TRUST TRUSTEE" means the trustee under any REO
Mortgage that is legally a "deed of trust."
"DEFAULT" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.
"DEFAULT ADMINISTRATION FEE" means an amount equal to the
product of (x) 0.5% and (y) the Principal Indebtedness as of the date the
Default Administration Fee becomes payable; PROVIDED, that the Default
Administration Fee shall not be payable in the circumstance described in SECTION
7.4 (i.e., if the Repayment Fee is being paid in connection with a repayment or
prepayment of the Principal Indebtedness after the occurrence of such Event of
Default and prior to its cure).
"DEFAULT RATE" means the per annum interest rate equal to 5.0%
per annum in excess of the rate otherwise applicable hereunder.
"DEFICIENT AMOUNT" has the meaning set forth in SECTION 5.1
(x)(iv)(2).
"DOCUMENTS" means all "documents" as defined in the UCC or
other receipts covering, evidencing or representing goods now owned or hereafter
acquired by the Borrower.
"ELIGIBLE ACCOUNT" means a separate and identifiable account
from all other funds held by the holding institution that is: (i) an account
maintained with a federal or state chartered depository institution or trust
company whose (1) commercial paper, short-term debt obligations or other
short-term deposits (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the commercial
paper, short-term debt obligations or other short-term deposits of such holding
company) are rated by the Rating Agencies not less than "A-i" (or the
equivalent), if the deposits are to be held in the account for less than thirty
(30) days or (2) long-term unsecured debt obligations are rated at least "AA-"
(or the equivalent), if the deposits are to be held in the account more than
thirty (30) days, (ii) an account the deposits in which are fully insured by the
FDIC or (iii) a segregated trust account maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company subject to regulations regarding fiduciary funds on deposit similar to
Title 12 of the Code of Federal Regulations SECTION 9.10(b) which, in either
case, has corporate trust powers, acting in its fiduciary capacity. An Eligible
Account shall not be evidenced by a certificate of deposit, passbook or other
instrument. Following a downgrade, withdrawal, qualification or suspension of
such institution's rating, each account must promptly (and in any case within
not more than thirty (30) calendar days) be moved to a qualifying institution or
to one or more segregated trust accounts in the trust department of such
institution, if permitted.
"ENGINEER" means The Sear-Brown Group, Eckland Consultants
Inc. or such other Independent Engineer as shall be reasonably approved by the
Agent.
"ENGINEERING REPORT" means the structural engineering reports
with respect to an REO Property or Mortgaged Property prepared by an Engineer
and delivered to the Agent in connection with an Advance and any amendments or
supplements thereto delivered to the Agent.
"ENVIRONMENTAL AUDITOR" means Eckland Consultants Inc.,
Terrafirma or such other Independent environmental auditor as shall be approved
by the Agent.
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"ENVIRONMENTAL CLAIM" means any notice, notification, request
for information, claim, administrative, regulatory or judicial action, suit,
judgment, demand or other communication (whether written or oral) by any Person
or Governmental Authority alleging or asserting liability with respect to the
Borrower, the Manager in its capacity as Manager of any REO Property or any REO
Property (whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties)
arising out of, based on or resulting from (i) the presence, Use or Release into
the environment of any Hazardous Substance at any location (whether or not
owned, managed or operated by the Borrower or the Manager), (ii) any fact,
circumstance, condition or occurrence forming the basis of any violation, or
alleged violation, of any Environmental Law or (iii) any alleged injury or
threat of injury to health, safety or the environment.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means that certain
environmental indemnity agreement relating to Hazardous Substances,
Environmental Laws and environmental conditions with respect to the REO
Properties and Mortgaged Properties, dated as of the Closing Date, made by the
Borrower and the Guarantor to the Agent for the benefit of the Lenders, in the
form attached hereto as EXHIBIT K.
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the environment, human health or safety,
or the Release or threatened Release of Hazardous Substances or otherwise
relating to the Use of Hazardous Substances.
"ENVIRONMENTAL REPORTS" means a "Phase I Environmental Site
Assessment" (and, if necessary, a "Phase II Environmental Site Assessment") as
referred to in the ASTM Standards on Environmental Site Assessments for
Commercial Real Estate, E 1527-94 and an asbestos survey (if applicable, after
completion of the Phase I Environmental Site Assessment), with respect to each
REO Property or Mortgaged Property, prepared by an Environmental Auditor, and
any other environmental report delivered to the Agent pursuant to the provisions
hereof and any amendments or supplements thereto delivered to the Agent.
"EQUIPMENT" means all "equipment" as defined in the UCC, now
or hereafter owned by the Borrower or in which the Borrower has or shall acquire
an interest, now or hereafter located on, attached to or contained in or used or
usable in connection with any REO Property, and shall also mean and include all
building materials, construction materials, personal property constituting
furniture, fittings, appliances, apparatus, leasehold improvements, machinery,
devices, interior improvements, appurtenances, equipment, plant, furnishings,
fixtures, computers, electronic data processing equipment, telecommunications
equipment and other fixed assets now owned or hereafter acquired by the Borrower
and now or hereafter used in the operation of the business conducted at any REO
Property, and all Proceeds thereof and as well as all additions to,
substitutions for, replacements of or accessions to any of the items recited as
aforesaid and all attachments, components, parts (including spare parts) and
accessories, whether installed thereon or affixed thereto, and wherever located,
now or hereafter owned by the Borrower and used or intended to be used in
connection with, or with the operation of, any REO Property or the buildings,
structures, or other improvements now or hereafter located at such REO Property,
or in connection with any construction being conducted or which may be conducted
thereon, all regardless of whether the same are located on such REO Property or
are located elsewhere (including, without limitation, in warehouses or other
storage facilities or in the possession of or on the premises of a bailee,
vendor or manufacturer) for purposes of manufacture, storage, fabrication or
transportation and all extensions and replacements to, and proceeds of, any of
the foregoing, but exclusive of those items which are property of tenants of any
REO Property or owned by the Manager, a third party contractor or any other
third party.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
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"ERISA AFFILIATE" means any corporation or trade or business
that is a member of any group of organizations (i) described in SECTION 4 14(b)
or (c) of the Code of which the Borrower is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which the Borrower is a member.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 7.1
hereof.
"EXCESS PROCEEDS TEST" means, as of any date of calculation in
connection with a Capital Event, the test that shall be satisfied if, after the
consummation of a Capital Event, the Property Diversification Test is satisfied.
"EXCESS PROCEEDS TEST NOTICE" means a written notice from
Agent to the Borrower, a copy of which shall be delivered concurrently to the
Collateral Agent, advising the Borrower whether or not the Borrower has
satisfied the Excess Proceeds Test and stating the applicable Release Price and
Borrower Excess Proceeds.
"EXTENDED MATURITY DATE" has the meaning set forth in SECTION
2.17(a) hereof.
"EXTENSION CONDITIONS" has the meaning set forth in SECTION
2.17(a) hereof.
"EXTENSION FEE" has the meaning set forth in SECTION 2.17(a)
hereof.
"EXTENSION NOTICE" has the meaning set forth in SECTION
2.17(a) hereof.
"EXTENSION OPTION" has the meaning set forth in SECTION
2.17(a) hereof.
"FEE LETTER" means the letter entered into by and among the
Borrower, Agent and Collateral Agent, with respect to the fees of Collateral
Agent under this Agreement.
"FINAL COLLATERAL AGENT CERTIFICATION" has the meaning set
forth in SECTION 2.18(b).
"FIRST MORTGAGE LOAN" has the meaning set forth in SECTION
5.1(cc).
"FISCAL YEAR" means the 12-month period ending on December
31st of each year (or, in the case of the first fiscal year, such shorter period
from the Closing Date through such date) or such other fiscal year of Borrower
as Borrower may select from time to time with the prior consent of Agent.
"FUND" has the meaning set forth in the definition of
"Permitted Investments."
"GAAP" means generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.
"GENERAL INTANGIBLES" means all "general intangibles" as
defined in the UCC, now owned or hereafter acquired by the Borrower.
"GLOBAL NOTE" means the global note substantially in the form
of EXHIBIT B-1 hereto, made by Borrower to Agent pursuant to this Agreement, as
such note may be modified, amended, supplemented or extended. To the extent that
Agent from time to time exchanges interests in the Global Note for Registered
Notes pursuant to SECTION 2.4(b) hereof, every reference to the Global Note
shall be deemed to include all such Registered Notes.
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
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"GROSS REVENUE" means, for any period, the total dollar amount
of all income and receipts received by, or for the account of, the Borrower in
the ordinary course of business with respect to each REO Property or Mortgage
Loan (including, without limitation, all Rents, Money and Proceeds of any
Accounts), but excluding Loss Proceeds and Proceeds from any Capital Event with
respect to an REO Property or Mortgage Loan.
"GROUND LEASE" means, with respect to a Mortgage Loan or REO
Property, if applicable, the leasehold interest of a Mortgagor in a Mortgaged
Property or Borrower in such REO Property, respectively.
"GROUND LEASE IMPAIRMENT" means with respect to a Ground
Lease: (i) any termination, cancellation or surrender (in each case in whole or
in part and whether or not pursuant to an express right contained in the Ground
Lease); (ii) any modification, amendment or supplementation, or other change
affecting such Ground Lease; (iii) any subordination by a Borrower, or consent
to the subordination by a Borrower of, such Borrower's interest in such Ground
Lease to any mortgage or other Lien encumbering (or that may in the future
encumber) the estate of the lessor under the Ground Lease in any premise(s)
demised to a Borrower under a Ground Lease; or (iv) a Borrower's delivery of any
notice to any lessor under a Ground Lease that impairs or may impair, or
purports to limit the exercise of, Agent's rights and remedies under the related
leasehold REO Mortgage or the applicable Ground Lease, whether caused by a
Borrower or suffered or permitted to occur by a Borrower.
"GROUND RENT" means any and all payments required of a
Borrower under a Ground Lease, including base rent, fixed rent, additional rent,
and any other payments, sums or charges payable or required to be paid, whether
to the ground lessor or to a third party, under a Ground Lease.
"GUARANTOR" means Ocwen Partnership, L.P., a Virginia limited
partnership.
"GUARANTY OF PAYMENT" means, with respect to the Loan, the
Guaranty of Payment, as amended, guaranteeing the full and timely repayment of
the Loan, from the Guarantor to the Agent for the benefit of the Lenders, in the
form attached hereto as EXHIBIT M.
"GUARANTY OF NONRECOURSE OBLIGATIONS" means, with respect to
the Loan, the Guaranty of Nonrecourse Obligations guaranteeing the exceptions to
the nonrecourse provisions of the Loan Documents for which liability is retained
as described in SECTION 8.24 hereof, from the Guarantor to the Agent for the
benefit of the Lenders, in the form attached hereto as EXHIBIT G.
"HAZARDOUS SUBSTANCE" means, collectively, (i) any petroleum
or petroleum products or waste oils, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBS"),
lead in drinking water, and lead-based paint, (ii) any chemicals or other
materials or substances which are now or hereafter become defined as or included
in the definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", toxic pollutants", "contaminants", "pollutants" or words of similar
import under any Environmental Law and (iii) any other chemical or any other
hazardous material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"IMPOSITIONS" means all taxes (including, without limitation,
all real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible transaction
privilege, privilege or license or similar taxes), assessments (including,
without limitation, all assessments for public improvements or benefits, whether
or not commenced or completed within the term of the Loan, if any), ground
rents, water, sewer or other rents and charges, excises, levies, governmental
fees (including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, foreseen or unforeseen, of every
character in respect of any REO Property, including any Rents and Accounts
(including all interest and penalties thereon), which at any time prior to,
during or in respect of the term hereof may be assessed or imposed on or in
respect of or be a lien upon (i) the Borrower (including, without limitation,
all income, franchise, single business or other taxes imposed on the Borrower
for the privilege of doing business in the jurisdiction in which any REO
Property, or any other collateral delivered or pledged to the Lenders in
connection with the Loan, is located) or the Lenders, (ii) any REO Property,
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or any other collateral delivered or pledged to the Lenders in connection with
the Loan, or any part thereof or any Rents therefrom or any estate, right, title
or interest therein, or (iii) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with any REO Property or
the leasing or use of such REO Property or any part thereof, or the acquisition
or financing of the acquisition of such REO Property by the Borrower.
"IMPROVEMENTS" means all buildings, structures, fixtures and
improvements of every nature whatsoever situated on the Land comprising any REO
Property on the Closing Date or thereafter (including, without limitation, all
gas and electric fixtures, radiators, heaters, engines and machinery, boilers,
ranges, elevators and motors, plumbing and heating fixtures, carpeting and other
floor coverings, water heaters, awnings and storm sashes, and cleaning apparatus
which are or shall be attached to the Land or said buildings, structures or
improvements and including any additions, enlargements, extensions,
modifications, repairs or replacements thereto, but exclusive of those items
which are the property of the tenants of such REO Property or of any other
Person other than the Borrower).
"INDEBTEDNESS" means the Principal Indebtedness, together with
all other obligations and liabilities due or to become due to the Lenders
pursuant hereto, under the Global Note, any Registered Note, the REO Mortgages
or in accordance with any of the other Loan Documents, and all other amounts,
sums and expenses paid by or payable to the Lenders hereunder or pursuant to the
Global Note, any Registered Note or any of the other Loan Documents, including
any Repayment Fee.
"INDEMNIFIED PARTIES" has the meaning set forth in SECTION
5.1(i).
"INDEPENDENT" means, when used with respect to any Person, a
Person who (i) does not have any direct financial interest or any material
indirect financial interest in the Borrower or in any Affiliate of the Borrower
and (ii) is not connected with the Borrower or any Affiliate of the Borrower as
an officer, employee, trustee, partner, director or person performing similar
functions.
"INDEX MATURITY" has the meaning set forth in the definition
of LIBOR.
"INITIAL COLLATERAL AGENT CERTIFICATION" has the meaning set
forth in SECTION 2.18(a).
"INSTRUMENTS" means (i) all "instruments" as defined in the
UCC, "chattel paper" as defined in the UCC, or letters of credit, evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Collateral (including, without
limitation, promissory notes, drafts, bills of exchange and trade acceptances)
and chattel paper obtained by the Borrower in connection with any REO Property
or Mortgaged Property (including, without limitation, all ledger sheets,
computer records and printouts, data bases, programs, books of account and files
of the Borrower relating thereto), (ii) notes or other obligations of
indebtedness owing to the Borrower from whatever source arising, in each case
now owned or hereafter acquired by the Borrower and (iii) all material
covenants, agreements, restrictions and encumbrances contained in any
instruments, at any time in force affecting any REO Property or Mortgaged
Property or any part thereof (including, without limitation, any which may (a)
require material repairs, modifications or alterations in or to any REO Property
or Mortgaged Property or any part thereof, or (b) in any way limit the use and
enjoyment thereof).
"INSURANCE PROCEEDS" means, in the event of a casualty with
respect to any REO Property or Mortgaged Property, the proceeds received under
any insurance policy.
"INSURANCE REQUIREMENTS" means all material terms of any
insurance policy required pursuant to this Agreement or any Mortgage and all
material regulations and then current standards applicable to or affecting any
REO Property or Mortgaged Property or any part thereof or any use or condition
thereof, which may, at any time, be recommended by the Board of Fire
Underwriters, if any, having jurisdiction over such REO Property or Mortgaged
Property, or such other body exercising similar functions.
"INSURED CASUALTY" has the meaning set forth in SECTION 5.1
(X)(iv)(2).
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"INTEREST ACCRUAL PERIOD" means, in connection with the
calculation of interest accrued with respect to any Payment Date, the period
from and including the preceding Payment Date to but excluding such Payment
Date; PROVIDED, HOWEVER, that the first Interest Accrual Period for the Loan
shall be from the Closing Date to but excluding the first Payment Date.
"INTEREST DETERMINATION DATE" means, in connection with the
calculation of interest accrued for any Interest Accrual Period, the second
Business Day preceding the first day of such Interest Accrual Period.
"INVENTORY" means all of the Borrower's right, title and
interest in and to any "inventory" as defined in the UCC, whether now or
hereafter existing or acquired, and which arises out of or is used in connection
with, directly or indirectly, the ownership and operation of any REO Property,
all Documents representing the same and all Proceeds and products of such
Inventory.
"JOINDER" means, with respect to each Borrower joining this
Agreement, the Joinder, in the form attached as EXHIBIT S, dated as of the
applicable Advance Closing Date and executed by the applicable Borrower pursuant
to which such Borrower joins in and assumes the obligations of a Borrower under
this Agreement, the Global Note, each Registered Note and the other Loan
Documents and by each partner of member of such Borrower pursuant to which such
partner or member confirms the pledge of the related ownership interests to the
Agent.
"LAND" has the meaning provided in any REO Mortgage.
"LEASES" means all leases, subleases, lettings, occupancy
agreements, tenancies and licenses of a Mortgaged Property or by the Borrower as
landlord of each REO Property or any part thereof now or hereafter entered into,
and all amendments, extensions, renewals and guarantees thereof, and all
security therefor.
"LEASING COMMISSIONS" means leasing commissions incurred by
the Borrower (including, without limitation, under the Management Agreement) in
connection with leasing the commercial or retail space at any REO Property or
any portion thereof.
"LEGAL REQUIREMENTS" means all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either Borrower, an REO Property or Mortgaged Property or any part
thereof or the construction, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), and all permits,
licenses and authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, at any
time in force affecting such REO Property or Mortgaged Property or any part
thereof (including, without limitation, any which may (i) require repairs,
modifications or alterations in or to such REO Property or Mortgaged Property or
any part thereof, or (ii) in any way limit the use and enjoyment thereof), but
excluding matters which are the responsibility solely of tenants under Leases.
"LENDER" has the meaning provided in the first paragraph of
this Agreement.
"LENDER'S TERMS" has the meaning provided in SECTION 5.1(W).
"LIBOR" means the rate per annum calculated as set forth
below:
(i) On each Interest Determination Date,
LIBOR will be determined on the basis of the offered
rate for deposits of not less than U.S. $1,000,000
for a period of one month (the "INDEX MATURITY"),
commencing on such Interest Determination Date, which
appears on Telerate Page 3750 as of 11:00 a.m.,
London time (or such other page as may replace the
Telerate Page on that service for the purposes of
displaying London interbank offered rates of major
banks). If no such offered rate appears, LIBOR with
respect to the relevant Interest Accrual Period will
be determined as described in (ii) below.
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(ii) With respect to an Interest
Determination Date on which no such offered rate
appears on Telerate Page 3750 as described in (i)
above, LIBOR shall be the arithmetic mean, expressed
as a percentage, of the offered rates for deposits in
U.S. dollars for the Index Maturity which appears on
the Reuters Screen LIBO Page as of 11:00 a.m., London
time, on such date. If, in turn, such rate is not
displayed on the Reuters Screen LIBO Page at such
time, then LIBOR for such date will be obtained from
the preceding Business Day for which the Reuters
Screen LIBO Page displayed a rate for the Index
Maturity.
(iii) If on any Interest Determination Date
the Agent is required but unable to determine LIBOR
in the manner provided in paragraphs (i) and (ii)
above, LIBOR for the next Interest Accrual Period
shall be LIBOR as determined on the previous Interest
Determination Date or, in the case of the first
Interest Determination Date, 5.65625%.
All percentages resulting from any calculations referred to in this Agreement
will be rounded upwards, if necessary, to the nearest multiple of 1/100 of 1 %
(with one-half of 1/100 of 1 % or more being rounded upwards) and all U.S.
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent or more being rounded upwards).
"LIEN" means any mortgage, deed of trust, lien (statutory or
other), pledge, hypothecation, assignment, preference, priority, security
interest, or any other encumbrance or charge on or affecting an REO Property or
Mortgaged Property or any portion thereof or the Borrower, or any interest
therein (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, the filing of any financing statement or similar
instrument under the UCC or comparable law of any other jurisdiction, domestic
or foreign, and mechanic's, materialmen's and other similar liens and
encumbrances).
"LOAN" has the meaning provided in the Recitals hereto.
"LOAN AMOUNT" has the meaning provided in the Recitals hereto.
"LOAN DOCUMENTS" means this Agreement, the Global Note, the
Registered Note, the REO Mortgages, the Assignment and Security Agreement, the
Collateral Assignments of Mortgage, the Collateral Assignments of Assignment of
Leases, the Management Agreement, the Management Subordinations, the Contract
Assignments, the Assignments of Leases and Rents, the Guaranty of Nonrecourse
Obligations, the Guaranty of Payment, the Pledge Agreement, the Joinders and all
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower, the Manager or an Affiliate to evidence or secure the Loan
or otherwise in satisfaction of the requirements of this Agreement, the REO
Mortgages or the other documents listed above as same may be amended or modified
from time to time.
"LOSS PROCEEDS" means Condemnation Proceeds and/or Insurance
Proceeds.
"LOST NOTE AFFIDAVIT" means an affidavit, executed by the
mortgagee or its assignee or the successor in interest of either of them, with
respect to a Mortgage Note, certifying that the Mortgage Note has been lost or
misplaced and the circumstances of such loss, and containing the mortgagee's
indemnity against any loss, liability or expense incurred on account of such
loss, all on terms and conditions satisfactory to Agent.
"LOSSES" has the meaning set forth in SECTION 5.1(J).
"MANAGEMENT AGREEMENT" means, with respect to each REO
Property, the property management agreement entered into between Borrower and
the Manager, substantially in the form attached hereto as EXHIBIT D, or in such
other form as may be approved by the Agent, as such agreement may be amended,
modified or supplemented and in effect from time to time.
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"MANAGEMENT SUBORDINATION" means, with respect to each REO
Property, each Manager's Consent and Subordination of Management Agreement,
substantially in the form attached hereto as EXHIBIT E, dated as of the
applicable Advance Closing Date, executed by the Manager, the Borrower and the
Agent.
"MANAGER" means Compass Management and Leasing, Inc., a
Delaware corporation, or its successor in interest, or any other Manager
approved by Agent.
"MARKET VALUE" means, with respect to an REO Property or
Mortgage Loan at any time, Agent's estimate of the current market value of such
REO Property or Mortgage Loan based upon such methods of analysis as Agent shall
determine in its sole reasonable discretion; PROVIDED, that the "Market Value"
of any Mortgage Loan that is in default or which is thirty (30) days or more
delinquent in respect of any debt service payment required thereunder shall be
zero. Whenever a Market Value determination is required under this Agreement,
Borrower shall cooperate with Agent in its determination of Market Value of each
REO Property or Mortgage Loan (including, without limitation, providing all
information and documentation in the possession of Borrower regarding any
individual REO Property or Mortgaged Property).
"MARKET VALUE TEST" mean, as of any date of calculation, the
test that shall be satisfied if the Principal Indebtedness is not greater than
the product of the Market Value and 75%.
"MARKET VALUE TEST DEFAULT" means the Event of Default which
shall occur if the Borrower fails to make a mandatory prepayment of the Loan on
the date and in the amount required pursuant to SECTION 2.7(c). The exercise by
the Borrower of the right to prepay the entire Principal Indebtedness pursuant
to Section 5.1(bb) shall not in any way limit or affect the occurrence of a
Market Value Test Default pursuant to SECTION 2.7(c).
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon
(i) the business operations, properties, assets or condition (financial or
otherwise) of the Borrower, (ii) the ability of the Borrower to perform, or of
Lenders to enforce, any of the Loan Documents or (iii) the value of any REO
Property or Mortgage Loan or the operation thereof.
"MEZZANINE LOAN" has the meaning set forth in SECTION 5.1(cc).
"MORTGAGE" means, with respect to any Mortgage Loan, the
mortgage, deed of trust or other instrument creating a lien on or priority
ownership interest in an estate in fee simple in real property or a Ground Lease
securing a Mortgage Note. To the extent any such mortgage, deed of trust or
other instrument has been restated or amended, "Mortgage" shall mean such
mortgage, deed of trust or other instrument as so restated or amended.
"MORTGAGE LOAN" means each of the mortgage loans collaterally
assigned to or for the benefit of Agent pursuant to the provisions of the
Assignment and Security Agreement and the Collateral Assignments of Mortgage
(including proceeds from the conversion or sale of any Mortgage Loan) evidenced
by a Mortgage Note and secured by a first Lien Mortgage.
"MORTGAGE LOAN DOCUMENTS" means all of the documents or
instruments necessary in the reasonable judgment of Agent's counsel to
effectuate and perfect the pledge of the Mortgage Loans to or for the benefit of
Agent hereunder, which documents and instruments shall include, without
limitation:
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(a)THE ORIGINAL EXECUTED MORTGAGE NOTE ENDORSED IN BLANK BY
THE APPLICABLE BORROWER (OR IF THE ORIGINAL MORTGAGE NOTE HAS BEEN LOST, AN
ORIGINAL LOST NOTE AFFIDAVIT WITH A COPY OF THE ORIGINAL EXECUTED MORTGAGE NOTE
ATTACHED) CONTAINING (x) A COMPLETE CHAIN OF ORIGINAL ENDORSEMENTS FROM THE
NAMED PAYEE TO BORROWER (PROVIDED THAT WITH RESPECT TO MORTGAGE NOTES THAT HAVE
BEEN TRANSFERRED AT ANY TIME PURSUANT TO A STATUTORY MERGER, CONSOLIDATION OR
OTHER SUCH TRANSACTION, OTHER EVIDENCE OF THE LEGAL BASIS FOR THE ACQUISITION
THEREOF, SUCH AS A CERTIFICATE OF MERGER, MAY BE FURNISHED IN LIEU OF SUCH
ENDORSEMENTS) AND (y) ORIGINAL COUNTERPARTS OF ALL EXTENSIONS AND MODIFICATIONS
THEREOF (OR SIMILAR AFFIDAVITS AS TO LOST EXTENSIONS OR MODIFICATIONS);
(b)THE ORIGINAL RECORDED MORTGAGE, WITH EVIDENCE OF RECORDING
THEREON (OR, IN THOSE INSTANCES WHERE THE ORIGINAL IS NOT AVAILABLE AND IS NOT
REQUIRED IN ORDER TO ENFORCE BORROWER'S INTEREST IN SUCH MORTGAGE LOAN, A COPY
OF THE MORTGAGE CERTIFIED BY THE BORROWER TO BE A TRUE AND CORRECT COPY OF THE
ORIGINAL SUBMITTED FOR RECORDING) AND EACH ORIGINAL RECORDED (OR COPY CERTIFIED
AS SET FORTH ABOVE IN THIS PARAGRAPH) PRIOR INTERVENING ASSIGNMENT THEREOF
SHOWING A COMPLETE CHAIN OF RECORDED ASSIGNMENTS FROM THE ORIGINAL MORTGAGEE TO
BORROWER, AND THE ORIGINAL OF ANY ASSUMPTION OR MODIFICATION AGREEMENT WITH
EVIDENCE OF THE RECORDING THEREOF INDICATED THEREON, TOGETHER WITH ORIGINALS OR
COPIES OF ANY FORBEARANCE OR RESTRUCTURING AGREEMENTS PERTAINING THERETO;
(c)AN EXECUTED COLLATERAL ASSIGNMENT OF MORTGAGE IN RECORDABLE
FORM IN FAVOR OF AGENT;
(d)IF THE MORTGAGOR HAS ASSIGNED ITS RIGHTS UNDER LEASES ON
THE RELATED MORTGAGED PROPERTY TO THE HOLDER OF SUCH MORTGAGE BY A SEPARATE
INSTRUMENT, THE ORIGINAL ASSIGNMENT OF LEASES (OR, IN THOSE INSTANCES WHERE THE
ORIGINAL IS NOT AVAILABLE, A COPY OF THE ASSIGNMENT OF LEASES CERTIFIED BY THE
APPLICABLE BORROWER TO BE A TRUE AND CORRECT COPY OF THE ORIGINAL ASSIGNMENT OF
LEASES), WITH EVIDENCE OF RECORDING THEREON, AND ANY INTERVENING ASSIGNMENTS
THEREOF SHOWING A COMPLETE CHAIN OF RECORDED ASSIGNMENTS FROM THE ORIGINAL
MORTGAGEE TO BORROWER;
(e)AN EXECUTED COLLATERAL ASSIGNMENT OF ASSIGNMENT OF LEASES
IN RECORDABLE FORM IN FAVOR OF AGENT;
(f)WITH RESPECT TO ANY MORTGAGE LOAN FOR WHICH PAYMENTS ON THE
RELATED MORTGAGE NOTE SHALL BE OR HAVE BEEN AND CONTINUE TO BE GUARANTEED BY A
PERSON OTHER THAN THE RELATED MORTGAGOR, AN ORIGINAL (WHERE AVAILABLE) OR COPY
OF THE AGREEMENT RELATING TO SUCH GUARANTEE;
(g)THE ORIGINAL TITLE POLICY, INSURING THE INTEREST OF THE
LENDER WITH RESPECT TO THE MORTGAGED PROPERTY, OR, IF SUCH ORIGINAL TITLE POLICY
IS NOT AVAILABLE, A COPY THEREOF, IF ANY, AND SUCH TITLE POLICY SHALL INCLUDE
THE FOLLOWING ENDORSEMENTS, AS APPLICABLE: (a) FOR ANY ADDITIONAL ADVANCES OVER
THE ORIGINAL AMOUNT OF THE INSURED DEBT, AN ADDITIONAL ADVANCE ENDORSEMENT; (b)
FOR ANY REVOLVING MORTGAGE LOANS, A REVOLVING CREDIT ENDORSEMENT; (c) FOR ANY
MULTI-DISBURSEMENT LOAN, IN JURISDICTIONS WHERE BY CUSTOM THE AMOUNT OF TITLE
COVERAGE IS INCREASED BY ENDORSEMENT WITH EACH DISBURSEMENT, ALL SUCH
ENDORSEMENTS; (d) ALTA 110.5 ENDORSEMENTS OR EQUIVALENT, IN THE CASE TO THE
EXTENT THE SAME ARE APPLICABLE IN RESPECT OF THE RELATED MORTGAGE LOAN; (e) SUCH
OTHER ENDORSEMENTS AS AGENT SHALL REASONABLY REQUIRE; AND (f) AN ENDORSEMENT
RECOGNIZING BORROWER AS THE INSURED AND AGENT (OR COLLATERAL AGENT ACTING ON
AGENT'S BEHALF) AS COLLATERAL ASSIGNEE PURSUANT TO THE COLLATERAL ASSIGNMENT OF
MORTGAGE;
(h)A COPY OF THE UCC-1 FINANCING STATEMENT AND RELATED
CONTINUATION STATEMENTS, IF ANY, EACH WITH EVIDENCE OF FILING THEREON, TOGETHER
WITH EITHER (x) ASSIGNMENTS OF FINANCING STATEMENTS ON FORM UCC-3 OR UCC-2
NAMING BORROWER AS ASSIGNOR AND AGENT ON BEHALF OF THE LENDERS AS ASSIGNEE OR
(y) IF REQUIRED UNDER APPLICABLE LAW, A NEW FINANCING STATEMENT ON FORM UCC-1
NAMING BORROWER AS DEBTOR AND AGENT ON BEHALF OF THE LENDERS AS SECURED PARTY;
(i)IF SEPARATE FROM THE MORTGAGE, THE ORIGINAL SECURITY
AGREEMENT, ALL ORIGINAL PRIOR ASSIGNMENTS THEREOF (OR, IN THOSE INSTANCES WHERE
THE ORIGINAL SECURITY AGREEMENT AND ORIGINAL PRIOR ASSIGNMENTS THEREOF ARE NOT
AVAILABLE, A COPY OF THE ORIGINAL SECURITY AGREEMENT AND ORIGINAL PRIOR
ASSIGNMENTS CERTIFIED BY BORROWER TO BE A TRUE AND CORRECT COPY OF THE ORIGINAL
SECURITY AGREEMENT AND ORIGINAL PRIOR ASSIGNMENTS), AND AN ASSIGNMENT THEREOF
FROM BORROWER TO AGENT ON BEHALF OF THE LENDERS;
(j)ANY AND ALL AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS TO,
AND ANY WAIVERS RELATED TO, ANY OF THE FOREGOING;
(k)AN ORIGINAL ASSIGNMENT IN BLANK OF ALL THE MORTGAGE LOAN
DOCUMENTS UNDER WHICH BORROWER HOLDS RIGHTS, EXECUTED BY BORROWER;
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(l)A UNILATERAL NOTICE OF COLLATERAL ASSIGNMENT OF MORTGAGE
LOAN; AND
(m)SUCH OTHER DOCUMENTS, DELIVERIES, CERTIFICATES AND OTHER
ITEMS AS AGENT SHALL REQUIRE TO EFFECTUATE AND PERFECT THE COLLATERAL ASSIGNMENT
TO AGENT OR COLLATERAL AGENT OF THE MORTGAGE LOAN AND ALL RIGHTS OF BORROWER
UNDER THE MORTGAGE LOAN. "MORTGAGE NOTE" means the note or other evidence of the
indebtedness of a Mortgagor in respect of a Mortgage Loan secured by a Mortgage,
including any loan agreement evidencing or setting forth the terms of such
indebtedness.
"MORTGAGED PROPERTY" means the commercial or multi-family real
property that constitutes first Lien security for a Mortgage Loan, together with
any real or personal property, fixtures, leases and other property or rights
pertaining thereto.
"MORTGAGOR" means the obligor on a Mortgage Note and the
then-current owner of any Mortgaged Property.
"MATURITY DATE" means the earlier of (a) the Original Maturity
Date, or if such date has been extended pursuant to the provisions of SECTION
2.17 hereof, the Extended Maturity Date, or (b) such earlier date on which the
entire Loan is required to be paid in full, by acceleration or otherwise under
this Agreement or any of the other Loan Documents.
"MONEY" means all moneys, cash, rights to deposit or savings
accounts or other items of legal tender obtained from or for use in connection
with the operation of the Mortgaged Property.
"MONTHLY STATEMENT" has the meaning provided in SECTION
2.12(d).
"MULTIEMPLOYER PLAN" means a multiemployer benefit plan
defined as such in Section 3(37) of ERISA to which contributions have been, or
were required to have been, made by the Borrower or any ERISA Affiliate and
which is covered by Title IV of ERISA.
"NET PROCEEDS" means either (x) the purchase price (at
foreclosure or otherwise) actually received by the Agent from a third party
purchaser with respect to each REO Property or Mortgage Loan, as a result of the
exercise by the Agent of its rights, powers, privileges and other remedies after
the occurrence of an Event of Default or (y) in the event that the Agent (or its
nominee) is the purchaser at foreclosure of such REO Property or Mortgage Loan,
the higher of (i) the amount of the Agent's credit bid or (ii) such amount as
shall be determined in accordance with applicable law (including, if applicable,
the fair market value of such REO Property), and in either case minus all
reasonable costs and expenses (including, without limitation, all attorneys'
fees and disbursements and any brokerage fees, if applicable) incurred by the
Agent (and its nominee, if applicable) in connection with the exercise of such
remedies; PROVIDED, HOWEVER, that such costs and expenses shall not be deducted
to the extent such amounts previously have been added to the Indebtedness in
accordance with the terms of the applicable REO Mortgage or applicable law.
"NEW GROUND LEASE" means, after the termination or expiration
of any Ground Lease, any new, replacement or 4 substitute Ground Lease issued to
or obtained by Agent or its designee with respect to or in place of the
terminated Ground Lease, whether pursuant to any provision of the terminated
Ground Lease or otherwise.
"OFFICER'S CERTIFICATE" means a certificate delivered to the
Agent by the Borrower which is signed by an authorized officer of the Borrower.
"OPERATING BUDGET" means, with respect to any Fiscal Year, the
operating budget for each REO Property reflecting Borrower's projections of
Gross Revenues, operating expenses and Capital Improvement Costs for such REO
Property for such Fiscal Year and on an annual and monthly basis and submitted
by Borrower to the Agent for its approval in accordance with the provisions of
SECTION 5.1(R)(vi).
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"ORGANIZATION AGREEMENT" means, individually or collectively,
as applicable, the Limited Partnership Agreement of OAIC California Partnership,
L.P., dated as of August 26, 1997, and amended and restated as of May 13, 1998,
and of OAIC California Partnership II, L.P., dated as of January 16, 1998 and
amended and restated as of May 13, 1998, and each other limited partnership
agreement with respect to a limited partnership or limited liability company
agreement with respect to a limited liability company that joins this Agreement
after the Closing Date, each as amended and restated from time to time.
"ORIGINAL MATURITY DATE" has the meaning set forth in SECTION
2.17(a) hereof.
"ORIGINATION FEE" means the fee designated as "ORIGINATION
FEE" in the Application and payable by the Borrower to Agent on each Advance
Closing Date.
"OTHER BORROWINGS" means, with respect to the Borrower without
duplication (but not including the Indebtedness) (i) all indebtedness of the
Borrower for borrowed money or for the deferred purchase price of property or
services, (ii) all indebtedness of the Borrower evidenced by a note, bond,
debenture or similar instrument, (iii) the face amount of all letters of credit
issued for the account of the Borrower and, without duplication, all
unreimbursed amounts drawn thereunder, and obligations evidenced by bankers'
acceptances, (iv) all indebtedness of the Borrower secured by a Lien on any
property owned by the Borrower (whether or not such indebtedness has been
assumed), (v) all Contingent Obligations of the Borrower, (vi) liabilities and
obligations for the payment of money relating to a capitalized lease obligation
or sale/leaseback obligation, (vii) liabilities and obligations representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of business that would constitute
ordinarily a trade payable to trade creditors, and (viii) all payment
obligations of the Borrower under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
or similar agreements) and similar agreements.
"PARTICIPATION" has the meaning provided in SECTION 5.1(v).
"PAYMENT DATE" has the meaning provided in SECTION 2.5.
"PAYMENT DATE STATEMENT" has the meaning provided in SECTION
2.12(d).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"PERMITS" means all licenses, permits, variances and
certificates used in connection with the ownership, operation, use or occupancy
of any REO Property issued to or on behalf of Borrower (including, without
limitation, business licenses, state health department licenses, licenses to
conduct business and all such other permits, licenses and rights, obtained from
any Governmental Authority or private Person concerning ownership, operation,
use or occupancy of any REO Property).
"PERMITTED ENCUMBRANCES" means, with respect to each REO
Property or Mortgaged Property, collectively, (i) the Liens created by the
applicable REO Mortgage or Mortgage, respectively, and the other Loan Documents
of record, (ii) all Liens and other matters disclosed on the Title Insurance
Policy concerning such REO Property or Mortgaged Property, (iii) Liens, if any,
for Impositions imposed by any Governmental Authority not yet delinquent or
being contested in good faith and by appropriate proceedings in accordance with
the applicable REO Mortgage or Mortgage, respectively, and (iv) rights of
existing and future tenants and residents as tenants only pursuant to Leases.
"PERMITTED INVESTMENTS" means any one or more of the following
obligations or securities acquired at a purchase price of not greater than par:
(i) obligations of, or obligations fully
guaranteed as to payment of principal and interest
by, the United States or any agency or
instrumentality thereof,
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provided such obligations are backed by the full
faith and credit of the United States of America;
(ii) obligations of the following United
States of America government sponsored agencies:
Federal Home Loan Mortgage Corp. (debt obligations),
the Farm Credit System (consolidated systemwide
bonds and notes), the Federal Home Loan Banks
(consolidated debt obligations), the Federal
National Mortgage Association (debt obligations),
the Student Loan Marketing Association (debt
obligations), the Financing Corp. (debt
obligations), and the Resolution Funding Corp. (debt
obligations);
(iii) federal funds, unsecured certificates
of deposit, time deposits, bankers' acceptances and
repurchase agreements with maturates of not more
than 365 days of any bank, the short-term
obligations of which are rated in the highest
short-term rating category by the Rating Agencies;
(iv) certificates of deposit, demand or
time deposits, federal funds or banker's acceptances
issued by any depository institution or trust
company incorporated under the laws of the United
States or of any state thereof and subject to
supervision and examination by federal and/or state
banking authorities, PROVIDED that the commercial
paper and/or debt obligations of such depository
institution or trust company (or in the case of the
principal depository institution in a holding
company system, the commercial paper or debt
obligations of such holding company) has the highest
short-term rating of the Rating Agencies or is rated
with a long term rating of at least AA- by Standard
& Pool's Ratings Services or at least Aa3 by Moody's
Investors Service, Inc. for such securities;
(v) debt obligations with maturates of
not more than 365 days and rated by the Rating
Agencies in their highest long-term unsecured rating
category;
(vi) commercial paper (including both
non-interest-bearing discount obligations and
interest-bearing obligations payable on demand or on
a specified date not more than one year after the
date of issuance thereof) with maturates of not more
than 270 days and that is rated by the Rating
Agencies in their highest short-term unsecured debt
rating;
(vii) the Federated Prime Obligation Money
Market Fund (the "FUND") so long as the Fund is
rated "AAA" (or the equivalent) by the Rating
Agencies;
(viii) units of taxable money market funds
which funds are regulated investment companies and
seek to maintain a constant net asset value per
share and which are rated in the highest category by
the Rating Agencies; and
(ix) any other demand, money market or
time deposit, demand obligation or any other
obligation, security or investment, which the Agent
shall have approved in writing;
PROVIDED, HOWEVER, that (A) the investments described in CLAUSES (I) through
(VI) above must have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (B) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that index, and (C)
such investments must not be subject to liquidation prior to their maturity; and
PROVIDED, FURTHER, that, in the judgment of the Agent, such instrument continues
to qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6)
earning a passive return in the nature of interest and that no instrument or
security shall be a Permitted Investment if such instrument or security
evidences (x) a right to receive
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only interest payments or (y) the right to receive principal and interest
payments derived from an underlying investment at a yield to maturity in excess
of 120% of the yield to maturity at par of such underlying investment.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"PERSONALTY" means all right, title and interest of the
Borrower in and to all goods, accounts, general intangibles, instruments,
documents, chattel paper and all other personal property of any kind or
character, including such items of personal property as defined in the UCC, now
owned or hereafter acquired by the Borrower and now or hereafter affixed to,
placed upon, used in connection with, arising from or otherwise related to any
REO Property or which may be used in or relating to the planning, development,
financing or operation of such REO Property, including, without limitation,
furniture, furnishings, equipment, machinery, money, insurance proceeds,
accounts, contract rights, trademarks, goodwill, chattel paper, documents, trade
names, licenses and/or franchise agreements, rights of the Borrower under leases
of fixtures or other personal property or equipment, inventory, all refundable,
returnable or reimbursable fees, deposits or other funds or evidences of credit
or indebtedness deposited by or on behalf of the Borrower with any governmental
authorities, boards, corporations, providers of utility services, public or
private, including specifically, but without limitation, all refundable,
returnable or reimbursable tap fees, utility deposits, commitment fees and
development costs.
"PLAN" means an employee benefit or other plan (i) established
or maintained by the Borrower or any ERISA Affiliate during the five-year period
ended prior to the date of this Agreement or to which the Borrower or any ERISA
Affiliate makes, is obligated to make or has, within the five-year period ended
prior to the date of this Agreement, been required to make contributions and
(ii) that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412
of the Code, other than a Multiemployer Plan.
"PLEDGE AGREEMENT" means that certain Pledge Agreement, in the
form attached hereto as Exhibit L, dated as of the Closing Date or an Advance
Closing Date, as applicable, by the partners or members of the Borrower as
pledgor, to the Agent, as pledgee, as the same may thereafter from time to time
be supplemented, amended, modified or extended.
"POLICIES" has the meaning set forth in SECTION 5.1(X)(iii).
"PRINCIPAL" means Ocwen Asset Investment Corp., a Virginia
corporation.
"PRINCIPAL INDEBTEDNESS" means the principal amount of the
Loan outstanding as adjusted by each increase, by additional Advances or
otherwise (including for advances made by Lender to protect the Collateral), or
decrease in the principal amount of the Loan outstanding, whether as a result of
prepayment or otherwise, from time to time.
"PRINCIPAL PAYMENT AMOUNT" means the principal payment
required to be paid on the Loan on each Payment Date in an amount equal to the
sum of (1) with respect to any Payment Date, the principal payments on the
Mortgage Loans received during the related Collection Period and (2) with
respect to each Payment Date occurring after the Original Maturity Date an
amount equal to the sum of (i) the principal portion of the principal and
interest payment that would be sufficient to amortize fully the outstanding
Principal Indebtedness (other than any portion thereof equal to the Allocated
Loan Amount of the REO Properties that are hotels and of the Mortgage Loans) on
a level payment of principal and interest basis over a period of three hundred
(300) months, minus the number of Payment Dates that have occurred after the
Original Maturity Date, based upon the rate at which interest shall accrue on
the Loan with respect to the Interest Accrual Period during which such Payment
Date occurs and (ii) the principal portion of the principal and interest payment
that would be sufficient to amortize fully the portion of the outstanding
Principal Indebtedness equal to the Allocated Loan Amount of the REO Properties
that are hotels on a level payment of principal and interest basis over a period
of two hundred forty (240) months, minus the number of Payment Dates that have
occurred after the Original Maturity Date, based upon the rate at which interest
shall accrue on the Loan with respect to the Interest Accrual Period during
which such Payment Date occurs.
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"PROCEEDS" shall have the meaning given in the UCC and, in any
event, shall include, without limitation, all of the Borrower's right, title and
interest in and to proceeds, product, rents, profits or receipts, in whatever
form, arising from the Collateral.
"PROPERTY DIVERSIFICATION TEST" means, as of any date of
calculation, the test that shall be satisfied if no single REO Property or
Mortgage Loan has a Total Property Cost in excess of 25 % of the aggregate Total
Property Cost of the REO Properties and Mortgage Loans.
"PROPERTY INCOME" means all rents, income, issues, profits,
security deposits and other benefits to which the Mortgagor may now or hereafter
be entitled from a Mortgaged Property or under or in connection with the Leases,
including all income received from tenants, lessees, licensees and
concessionaires and other persons occupying space at such Mortgaged Property or
rendering services to such Mortgaged Property's tenants.
"RATING AGENCIES" means at least two of Fitch Investors
Service, L.P., Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co.
and Standard & Pool's Ratings Services.
"REGISTERED NOTES" has the meaning provided in SECTION 2.4(a).
"RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation,
the movement of Hazardous Substances through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata).
"RELEASE PRICE" means, with respect to any REO Property or
Mortgage Loan which is proposed to be the subject of a Capital Event, the
Allocated Loan Amount of such REO Property or Mortgage Loan; PROVIDED, that
notwithstanding the foregoing, if after the release of such REO Property or
Mortgage Loan the Property Diversification Test would not be satisfied, then the
"Release Price" shall equal the greater of (i) the amount that would be
sufficient to cause the outstanding Principal Indebtedness to be equal to or
less than the product of the Market Value and 65 % and (ii) the Allocated Loan
Amount of such REO Property or Mortgage Loan.
"RENTS" means all income, rents, issues, profits, revenues
(including all oil and gas or other mineral royalties and bonuses), deposits
(other than utility and security deposits) and other benefits from any REO
Property.
"REO MORTGAGE" means, with respect to any REO Property, a
first priority Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing or Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, substantially in the form attached hereto as
EXHIBIT C (or a substantially similar agreement as modified to meet legal
requirements of any jurisdiction in which an REO Property is located), dated as
of the applicable Advance Closing Date, granted by the Borrower to the Agent on
behalf of the Lenders (or, in the case of a Deed of Trust, to Deed of Trust
Trustee for the benefit of Agent) with respect to such REO Property as security
for the Loan, as same may hereafter from time to time be supplemented, amended,
modified or extended.
"REO PROPERTY" individually and in the aggregate means, at any
time, any or all of the Land, the Improvements, the Personalty, the Leases, the
Ground Leases, the Rents, and the Equipment (to the extent the same shall be
deemed to be fixtures), and all rights, titles, interests and estates
appurtenant thereto, encumbered by, and more particularly described in, the
applicable REO Mortgage.
"REPAYMENT FEE" means 0.50% of the total amount of Advances
under this Agreement, with respect to a Mortgage Loan or REO Property, payable
at the earliest to occur of (1) with respect to any individual Mortgage Loan or
REO Property, the time the Agent releases its Liens thereon in accordance with
this Agreement, (2) the Maturity Date or (3) termination of this Agreement;
PROVIDED, HOWEVER, that notwithstanding the foregoing, (i) the Repayment Fee
payable as described above shall be fully credited against the fees payable in
connection with a refinancing of the Loan by the initial Lender or by SSBH and
realized by the initial Lender or by SSBH (including any debt securitization
related to the REO Properties or Mortgage Loans lead managed by SSBH), (ii) no
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Repayment Fee shall be payable in connection with any prepayment or repayment of
the Principal Indebtedness (1) on any Payment Date out of Loss Proceeds, (2) if
the Borrower shall concurrently be paying the Default Administration Fee, (3)
pursuant to Section 9.1 (or comparable provision) of any REO Mortgage, (4) made
pursuant to SECTION 5.1 (bb) in connection with the Market Value Test or certain
Assignments of the Loan as described therein or (5) made pursuant to SECTION
2.7(a) in connection with a Capital Event with respect to an REO Property or
Mortgage Loan consummated with an Affiliate of the Borrower in the event the
Borrower consummates such Capital Event in order to comply with the Market Value
Test, but only to the extent of the reduction in the Principal Indebtedness
necessary to comply with the Market Value Test.
"REQUEST FOR RELEASE" means, with respect to one or more
Mortgage Loans or REO Properties, a Request for Release, substantially in the
form attached hereto as EXHIBIT U, executed by Borrower.
"SINGLE-PURPOSE ENTITY" means a Person, other than an
individual, which (i) is formed or organized solely for the purpose of acquiring
and directly holding an ownership interest in any REO Property or Mortgage Loan,
(ii) does not engage in any business unrelated to any REO Property or Mortgage
Loan and the financing thereof, (iii) does not hold or acquire any assets other
than those related to its interest in any REO Property or Mortgage Loan and the
financing thereof or incur any indebtedness other than as permitted by this
Agreement, any REO Mortgage or the other Loan Documents, (iv) has its own
separate books and records, and accounts, in each case which are separate and
apart from the books and records and accounts of any other Person, (v) is
subject to all of the limitations on powers set forth in the Organization
Agreement of Borrower as of the Closing Date, (vi) holds itself out as being a
Person separate and apart from any other Person and (vii) has or is controlled,
directly or indirectly, by a Person that has at least one independent director
that is not an employee, officer, director, or paid consultant of any Affiliate
of such Person or of any principal or officer of such Person.
"SSBH" means Salomon Smith Barney Holdings or its successor in
interest.
"SURVEY" means an ALTA/ACSM survey of each REO Property or
Mortgaged Property prepared by a registered Independent surveyor, certified to
Agent for the benefit of Lenders and the Title Companies, and in form and
content satisfactory to Agent and the Title Companies.
"TAKING" means a taking or voluntary conveyance during the
term hereof of all or part of any REO Property or Mortgaged Property, or any
interest therein or right accruing thereto or use thereof, as the result of, or
in settlement of, any condemnation or other eminent domain proceeding by any
Governmental Authority affecting such REO Property or Mortgaged Property or any
portion thereof whether or not the same shall have actually been commenced.
"TI COSTS" means tenant improvement costs and allowances
incurred by the Borrower in connection with renewing existing Leases or
executing new Leases on the commercial or retail space at any REO Property.
"TITLE COMPANIES" has the meaning set forth in the definition
of "Title Insurance Policy.
"TITLE INSURANCE POLICY" means a mortgagee's title insurance
policy or policies (a) issued by one or more title companies satisfactory to the
Agent (the "TITLE COMPANIES") which policy or policies shall be in form ALTA
1970 (with co-insurance or reinsurance as the Agent may require), naming
Borrower (or, in the case of an REO Property, the Agent) as the insured party,
(b) insuring the applicable Mortgage or, in the case of an REO Property, REO
Mortgage as being a first and prior lien upon the applicable Mortgaged Property
or, in the case of an REO Property, REO Property, (c) showing no encumbrances
against the applicable Mortgaged Property or, in the case of an REO Property,
REO Property (whether junior or superior to the applicable Mortgage or REO
Mortgage) which are not acceptable to the Agent other than Permitted
Encumbrances, (d) in an amount reasonably acceptable to the Agent for the
applicable REO Property or Mortgaged Property, and (e) otherwise in form and
content acceptable to the Agent. Such Title Insurance Policy shall include the
following endorsements or affirmative coverages, to the extent applicable to the
Advance, in form and substance reasonably acceptable to the Agent: variable rate
endorsement; survey endorsement; comprehensive endorsement; zoning (ALTA 3.1
with parking
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added); first loss, last dollar and tie-in endorsement; access coverage;
separate tax parcel coverage; contiguity (if applicable) coverage; and such
other endorsements as the Agent shall reasonably require in order to provide
insurance against specific risks identified by the Agent in connection with such
REO Property or Mortgaged Property.
"TOTAL LOAN BALANCE" means, as to any Mortgage Loan, an amount
equal to the full outstanding amount of such Mortgage Loan including all
principal, interest, prepayment premium, repayment premium, yield maintenance
payments (if any), minimum internal-rate-of-return payments (if any), breakage,
and other charges payable by the Mortgagor pursuant to the applicable
documentation.
"TOTAL PROPERTY COST" means, with respect to each REO Property
or Mortgage Loan, the sum of (i) in the case of an REO Property, the purchase
price or, in the case of a Mortgage Loan, the outstanding principal amount plus
related acquisition or origination costs and expenses reasonably approved by the
Agent and (ii) required Capital Improvement Costs identified at the time of the
related Advance to acquire such REO Property and mutually acceptable to the
Agent and the Borrower.
"TRADEMARK" means the trademark licenses, trademarks, rights
in intellectual property, trade names, service marks and copyrights relating to
any REO Property or the license to use intellectual property such as computer
software owned or licensed by the Borrower or other proprietary business
information relating to the Borrower's policies, procedures, manuals and trade
secrets.
"TRANSACTION" means the transaction contemplated by the Loan
Documents.
"TRANSACTION COSTS" means all costs and expenses paid or
payable by the Borrower relating to the Transaction (including, without
limitation, appraisal fees, legal fees and accounting fees and the costs and
expenses described in SECTION 8.23).
"TRANSFER" means the conveyance, assignment, sale, mortgaging,
encumbrance (other than a Permitted Encumbrance), pledging, hypothecation,
granting of a security interest in, granting of options with respect to, or
other disposition of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) all or any portion of any legal or beneficial interest (a) in all or any
portion of any REO Property or Mortgage Loan; (b) in the stock, membership,
partnership interests or other beneficial ownership interests in the members or
partners of the Borrower; (c) in the Borrower; or (d) in any Person having a
direct or indirect legal or beneficial ownership in the Borrower and shall also
include, without limitation to the foregoing, the following: an installment
sales agreement wherein the Borrower agrees to sell any REO Property or any part
thereof or any interest therein for a price to be paid in installments; an
agreement by the Borrower leasing all or a substantial part of any REO Property
to one or more Persons pursuant to a single or related transactions, or a sale,
assignment or other transfer of, or the grant of a security interest in, the
Borrower's right, title and interest in and to any Leases or any Rent; a
transaction or other event pursuant to which the Principal no longer controls
(directly or indirectly) the sole member of the Borrower; any instrument
subjecting any REO Property to a condominium regime or transferring ownership to
a cooperative corporation; the dissolution or termination of the Borrower or the
merger or consolidation of the Borrower with any other Person; and, except as
permitted hereby, any transfer of management of any REO Property to an entity
that is not controlled by the Borrower; PROVIDED, that whenever the term
"Transfer" is used in this Agreement, such term shall not include any
conveyance, sale, assignment or other disposition of any interest in the
Borrower or the Guarantor or the Principal if, after giving effect to the
proposed transaction, the ownership interests in the Borrower are owned not less
than 51 % directly or indirectly by the Guarantor or if the Guarantor does not
own at least such percentage of ownership interests in the Borrower, the
Guarantor exercises a majority of voting rights and operating control with
respect to the Borrower.
"UCC" means with respect to any Collateral, the Uniform
Commercial Code as in effect on the date hereof in the state where such
Collateral is located, as amended from time to time; PROVIDED, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
nonperfection of the security interest in any item or portion of the Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the state where such Collateral is located, "UCC" shall mean the Uniform
Commercial Code as in effect
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in such other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or nonperfection.
"UCC SEARCHES" has the meaning set forth in SECTION 3.5(g)
hereof.
"UNILATERAL NOTICE OF COLLATERAL ASSIGNMENT OF MORTGAGE LOAN"
means, with respect to any Mortgage Loan, a Unilateral Notice of Collateral
Assignment of Mortgage Loan, substantially in the form attached hereto as
EXHIBIT T, executed by Borrower.
"USE" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation of such
Hazardous Substance in connection with or affecting any REO Property.
"WELFARE PLAN" means an employee welfare benefit plan as
defined in Section 3(1) of ERISA established or maintained by the Borrower or
any ERISA Affiliate or that covers any current or former employee of the
Borrower or any ERISA Affiliate.
ARTICLE II.
GENERAL TERMS
SECTION 2.1. THE LOAN.
(a) Subject to the terms and conditions of
this Agreement, the Lenders shall lend
to Borrower from the initial Advance
Closing Date to but excluding the
Original Maturity Date a total amount up
to the Loan Amount in one or more
Advances. The proceeds of each Advance
shall be used solely for the purposes
identified in SECTION 2.2 hereof. On
each Advance Closing Date, upon the
satisfaction of the conditions set forth
in SECTIONS 3.3, 3.4 and 3.5 (in the
case of an Advance for the acquisition
of an REO Property or the acquisition or
origination of or making of additional
disbursements under a Mortgage Loan) or
SECTION 2.1(c) (in the case of an
Advance for Capital Improvement Costs),
the Lenders shall initiate a wire or
other transfer of immediately available
funds to an account designated by
Borrower in an amount equal to (x) the
principal amount of the related Advance,
less (y) the sum of (i) the Origination
Fee (giving credit to the Application
Deposit), (ii) the out-of-pocket
expenses incurred by Lenders in
connection with the origination and
funding of the Advance and (iii) the
reasonable fees and expenses of Agent's
counsel and Collateral Agent's counsel
(subject in the case of clauses (ii) and
(iii) to the restriction set forth in
SECTION 2.1(c)). After the making of the
initial Advance on the Closing Date,
Borrower may not receive (i) a single
Advance per month for REO Property
acquisitions or Mortgage Loan
acquisitions or originations or
additional disbursements and/or Capital
Improvement Costs in an amount less than
$250,000 or two other Advances per month
for REO Property acquisitions or
Mortgage Loan acquisitions or
originations or additional disbursements
only in an amount less than $5,000,000
each or (ii) an Advance at any time
after the Agent shall have notified
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the Borrower that the Market Value Test
has not been satisfied until the
Borrower shall have achieved
satisfaction of such test or (iii) an
Advance for the acquisition of an REO
Property or the acquisition or
origination of a Mortgage Loan which is
not acceptable to the Agent in its sole
determination after completion of its
due diligence evaluation. The maximum
principal amount of each Advance for the
acquisition of an REO Property or the
acquisition or origination of or the
making of an additional disbursement
under a Mortgage Loan shall be
determined as of the applicable Advance
Closing Date on which such REO Property
is acquired or Mortgage Loan is acquired
or originated or additional disbursement
with respect thereto and shall, in any
event, equal 75 % (or, if the Property
Diversification Test would not be
satisfied following the acquisition of
such REO Property or acquisition or
origination of such Mortgage Loan, 65%)
of the related purchase price in the
case of an REO Property or principal
amount in the case of a Mortgage Loan
plus related costs and expenses
reasonably approved by the Agent.
Notwithstanding anything in SECTION
2.1(a) or 2.1(c) to the contrary, the
maximum principal amount of Advances
made pursuant to this Agreement with
respect to an REO Property or Mortgage
Loan shall be limited to (a) 75% (or, if
the Property Diversification Test has
not been satisfied, 65%) of the lesser
of (1) the related Total Property Cost
and (2) the related Market Value. If the
Property Diversification Test was not
satisfied on any Advance Closing Date
for the acquisition of an REO Property
or Mortgage Loan but has been satisfied
as of a subsequent date, then the
Borrower shall be entitled, at
Borrower's request pursuant to SECTION
2.1(c), to receive an Advance on a
subsequent Advance Closing Date in the
amount with respect to all REO
Properties and Mortgage Loans sufficient
to cause the outstanding Principal
Indebtedness to be equal to 75% of the
lesser of (1) the related Total Property
Cost minus any required Capital
Improvement Costs identified at the time
of acquisition of the REO Properties and
mutually acceptable to the Borrower and
the Agent, but not incurred as of such
subsequent Advance Closing Date and (2)
the related Market Value.
(b) The Loan shall constitute one general
obligation of Borrower to the Lenders
and shall be secured by the security
interest in and Liens granted upon all
of the Collateral, and by all other
security interests and Liens at any time
or times hereafter granted by Borrower
to the Lenders or to Collateral Agent on
behalf of the Lenders.
(c) After the Closing Date, so long as no
Event of Default shall have occurred and
be continuing, the Lenders shall lend to
the Borrower Advances either (x) for
required Capital Improvement Costs
identified at the time of acquisition of
each REO Property and mutually
acceptable to the Borrower and the Agent
or (y) in the amount contemplated
pursuant to the last sentence of SECTION
2.1(a), in each case in accordance
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with the procedure set forth below, to
be applied in the case of clause (x)
solely towards such Capital Improvement
Costs referred to in an Operating Budget
(or pro forma financial statement)
approved by the Agent or to be remitted
in the case of clause (y) to the
Borrower for general partnership
purposes, respectively:
(i) the Borrower shall submit to the
Agent not less than ten (10)
Business Days prior to the
proposed funding date of such
Advance an Officer's Certificate,
substantially in the form of
EXHIBIT N, describing (x) in the
case of an Advance for Capital
Improvement Costs, the aggregate
Capital Improvement Costs for
which such funds are currently
intended to be applied and
currently need to be spent on
(attaching the Operating Budget,
invoices, receipts and evidence of
work completed) and of which such
funds equal not more than 75% (or,
if the Property Diversification
Test has not been satisfied, 65%)
of the required Capital
Improvement Costs identified at
the time of acquisition of the
related REO Property and mutually
acceptable to Borrower and Agent
and (y) the amount of the
requested Advance, and certifying
that (i) the representations and
warranties of the Borrower set
forth in SECTION 4.1 hereof are
true and correct on such date as
if made on such date (subject to
any exceptions set forth in a
schedule to such certificate),
(ii) no Default with respect to
the payment of money or Event of
Default has occurred and is
continuing on such date, (iii)
Borrower is in good standing in
its jurisdiction of formation and
(iv) there have been no changes in
the Organization Agreement since
the Closing Date (or if there have
been changes, certifying as to the
changes);
(ii) the Agent shall have five (5)
Business Days from the date of its
receipt of the Officer's
Certificate specified in CLAUSE
(i) above and the required
attachments to object in writing
to the Advance due to the proposed
costs not being required Capital
Improvement Costs identified at
the time of acquisition of such
REO Property referred to in the
Operating Budget (or pro forma
financial statement) or not being
permitted by the penultimate
sentence of SECTION 2.1(a); and
(iii) in the event the Lenders shall
make the Advance, on the Advance
Closing Date, so long as the
Borrower shall have satisfied each
of the conditions set forth in
SECTIONS 3.5(f) (in the case of an
Advance for Capital Improvement
Costs only) (for this purpose,
such condition being limited to
delivery of the appropriate
endorsement to the Title Insurance
Policy), (L), (M), and (N) (as if
the Additional Advance Date were
the
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Closing Date for this purpose),
the Lenders shall make the wire
transfer contemplated by SECTION
2.1(a) to an account designated by
Borrower of the Advance in
immediately available funds (the
out-of-pocket expenses and counsel
fees and expenses referred to in
SECTION 2.1(a) for this purpose
being limited to (1) in the case
of an Advance for Capital
Improvement Costs only, any
reasonable out-of-pocket expenses
incurred by the Agent in
connection with an inspection of
the applicable REO Property prior
to the making of such Advance and
(2) reasonable fees and expenses
of the Lenders' counsel relating
to issues raised in obtaining the
applicable Title Insurance Policy
endorsement).
SECTION 2.2. USE OF PROCEEDS. Proceeds of each Advance shall be used
for the following purposes: (a) to pay (whether on the date of acquisition or on
a subsequent date pursuant to the last sentence of SECTION 2.1(a)) a portion of
the acquisition cost and Capital Improvement Costs with respect to the REO
Properties or to provide funding for a portion of the principal amount of the
Mortgage Loans, (b) to pay to the Lenders the Origination Fee then due on
account of such Advance, (c) to pay to the Lenders the out-of-pocket expenses
incurred by the Lenders in connection with the origination and funding of the
Loan, and (d) to pay to counsel to each of the Collateral Agent, the Agent, and
the Borrower its respective fees, expenses and disbursements.
SECTION 2.3. SECURITY FOR THE LOAN. The Global Note and Borrower's
obligations hereunder and under the other Loan Documents shall be secured by (a)
liens upon the Mortgage Loans pursuant to the Collateral Assignments of
Mortgage, (b) liens upon the REO Properties pursuant to the REO Mortgages, (c)
the Guaranty of Nonrecourse Obligations, (d) the Pledge Agreement, (e) the
Guaranty of Payment and (f) the security interest and Liens granted in this
Agreement and in the other Loan documents.
SECTION 2.4. BORROWER'S GLOBAL NOTE.
(a) Borrower's obligation to pay the
principal of and interest on the Loan
and all other amounts due under the Loan
Documents shall be evidenced initially
by the Global Note, duly executed and
delivered by Borrower on the Closing
Date. The Global Note shall be payable
as to principal, interest and all other
amounts due under the Loan Documents, as
specified in this Agreement, with a
final maturity on the Maturity Date. The
Agent and the Collateral Agent are
hereby authorized to endorse on the
schedule attached to the Global Note (or
on a continuation of such schedule
attached to the Global Note and made a
part thereof) an appropriate notation
evidencing the date and amount of each
Advance and each payment of principal,
interest or other amounts due under the
Loan Documents, in respect thereof. Such
schedule shall, absent manifest error,
constitute prima facie evidence of the
accuracy of the information contained
therein. The failure of the Agent or the
Collateral Agent to make a notation on
the schedule to the Global Note as
aforesaid shall not affect the
obligations of Borrower hereunder or
under the Global Note or any other Loan
Document in any respect. The Agent shall
have the right to have the Global Note
subdivided, by exchange for
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promissory notes of lesser denominations
or otherwise, upon written request to
the Borrower and, in such event, the
Borrower shall promptly execute
additional or replacement Global Notes
(the Agent agreeing to return or cause
to be returned any superseded original
promissory notes to the Borrower prior
to or contemporaneously with the
delivery of the replacement or
additional Global Note); PROVIDED, that
the Borrower shall not incur any
additional cost or liability in
connection with such subdivision in
excess of that contemplated by the
original Global Note. At no time shall
the aggregate original principal amount
of the Global Note (or of such
replacement Notes) exceed the Loan
Amount.
(b) At the time of each Advance, upon
request of Agent, Agent may exchange
interests in the Global Note, in whole
or in part, for notes in the form of
registered notes ("REGISTERED NOTES")
set forth in EXHIBIT B-2 hereto.
Registered Notes shall be issued in the
name of Agent in the initial principal
amount requested by Agent and Agent
shall make appropriate notations on the
Global Note to reflect the reduced
aggregate principal amount of the Global
Note in an amount equal to such initial
principal amount of such Registered
Note. No such exchange of a beneficial
interest shall be effective absent such
notation. Upon delivery to Borrower of
Agent's request referred to above and a
copy of the Global Note containing such
notation, Borrower shall deliver to
Agent Registered Notes in the form of
EXHIBIT B-2. Registered Notes are not
exchangeable for interests in the Global
Note. Unless and until the Global Note
is exchanged in full, the Global Note
shall in all respects be entitled to the
same benefits under, and subject to the
same terms and conditions of, this
Agreement as Registered Notes delivered
hereunder. All Registered Notes issued
upon any exchange of interests in the
Global Note for a Registered Note shall
be the valid obligations of Borrower
evidencing the same debt, and entitled
to the same rights and benefits, as the
Global Note under this Agreement, and
any reference to the Global Note in any
of the Loan Documents shall be deemed to
also refer to such Registered Notes. As
an accommodation to the Borrower, the
Agent has on the Closing Date allowed
only OAIC Florida Partnership, L.P. to
execute and deliver a Registered Note
and may from time to time following the
Closing Date allow a Registered Note to
be signed by only one Borrower. All
Borrowers (including, but not limited to
OAIC Florida Partnership, Limited
Partnership who has joined this
Agreement pursuant to a Joinder)
acknowledge and agree that this
procedure is a formal accommodation only
and, notwithstanding the fact that any
individual Borrower is not a signatory
to any such Registered Note, all
Borrowers nevertheless remain jointly
and severally liable for the debt
evidenced by such Registered Note, and
that the Global Note and all of the
Registered Notes evidence a single debt
and a single Loan for which they are all
responsible.
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(c) The parties to this Agreement
acknowledge and agree that (i) as more
particularly set forth in the REO
Mortgage with respect to the REO
Property referred to as "Cortez Plaza"
in Bradenton, Florida, a portion of the
Indebtedness evidenced by the Global
Note is secured by such REO Mortgage,
and (ii) all State of Florida
documentary stamp and intangible taxes
payable with respect to such
Indebtedness was paid, and such payment
was noted, on such REO Mortgage at the
time of its recordation in the Public
Records of Manatee County, Florida. The
provisions of this SECTION 2.4(c) are
hereby incorporated by this reference
into the Global Note.
SECTION 2.5. PRINCIPAL AND INTEREST.
(a) Borrower shall pay to Lenders interest
on the Principal Indebtedness of the
Loan from the Closing Date to but
excluding the date the Loan shall be
paid in full at the interest rate
provided in SECTION 2.5(b) below.
Interest on the Loan shall accrue on the
Principal Indebtedness commencing on the
Closing Date and shall be payable in
arrears on July 1, 1998, and on the
first day of each and every month
thereafter through the month in which
the Maturity Date occurs, unless, in any
such case, such day is not a Business
Day, in which event such interest shall
be payable on the first Business Day
following such date (such date for any
particular month, the "PAYMENT DATE").
The Agent and the Collateral Agent shall
calculate LIBOR on each Interest
Determination Date for the related
Interest Accrual Period and shall
communicate to Borrower such rate and
the amount of interest due and payable
on the Global Note for such Interest
Accrual Period not less than five (5)
Business Days prior to the related
Payment Date. The entire outstanding
Principal Indebtedness of the Loan and
the Global Note, together with all
accrued but unpaid interest thereon and
all other amounts due under the Loan
Documents (including, without
limitation, the Repayment Fee) shall be
due and payable by Borrower to the
Lenders on the Maturity Date. Interest
shall be computed on the basis of a 360
day year and the actual number of days
elapsed.
(b) Each Advance shall bear interest during
each Interest Accrual Period from and
including its respective Advance Closing
Date at a rate per annum equal to the
sum of LIBOR determined as of the
Interest Determination Date immediately
preceding such Interest Accrual Period
plus 1.75 %.
(c) Principal payments on the Loan shall be
made on each Payment Date in an amount
equal to the Principal Payment Amount.
(d) While an Event of Default has occurred
and is continuing, Borrower shall pay to
the Lenders interest at the Default Rate
on any amount owing to Lenders not paid
when due until such amount is paid in
full.
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<PAGE>
SECTION 2.6. VOLUNTARY PREPAYMENT.
(a) Borrower may voluntarily prepay the
Loan, in whole or in part, on any
Payment Date; PROVIDED, HOWEVER, that,
any such prepayment shall be accompanied
by an amount representing all accrued
interest on the portion of the Loan
being prepaid and other amounts then due
under the Loan Documents (including,
without limitation, the Repayment Fee).
(b) In the event of any such voluntary
prepayment, Borrower shall give the
Agent written notice (or telephonic
notice promptly confirmed in writing) of
its intent to prepay, which notice shall
be given at least thirty (30) days'
prior to the date upon which prepayment
is to be made and shall specify the
Payment Date on which such prepayment is
to be made and the amount of such
prepayment. If any such notice is given,
the amount specified in such notice
shall be due and payable on the date
specified therein (unless such notice is
revoked by Borrower prior to the date
specified therein in which event
Borrower shall immediately reimburse the
Agent for any costs incurred in
connection with the giving of such
notice and its revocation).
SECTION 2.7. MANDATORY PREPAYMENT.
(a) So long as no Event of Default has
occurred and is continuing and the
Indebtedness has not been accelerated,
Borrower may enter into a Capital Event
with respect to an REO Property or
Mortgage Loan; PROVIDED, HOWEVER, that
(i) Borrower shall have given Agent at
least fifteen (15) Business Days' prior
written notice of the Capital Event and
the amount of anticipated Capital Event
Proceeds, (ii) if the Capital Event is
consummated with a Person that is not an
Affiliate of Borrower, then such Capital
Event shall be on an arms length basis,
as reasonably determined by the Agent,
(iii) if the Capital Event is
consummated with an Affiliate of
Borrower, then such Capital Event shall
require the prior written consent of the
Agent and (iv) Borrower shall make or
cause to be made the deposits to the
Collection Account referred to in
SECTION 2.12(a)(ii); PROVIDED, FURTHER,
that notwithstanding the acceleration of
the Indebtedness after an Event of
Default has occurred and is continuing,
a Capital Event may be consummated if
(1) the Indebtedness shall be repaid in
full as a result of such Capital Event
or (2) such Capital Event would cure the
event or condition that caused the Event
of Default and in the reasonable
determination of Agent based upon the
remaining REO Properties and Mortgage
Loans, the Lenders shall not be
disadvantaged by allowing the Capital
Event to proceed. Within ten (10)
Business Days of Agent's receipt of
Borrower's notice of a Capital Event,
Agent shall deliver to Borrower an
Excess Proceeds Test Notice with respect
to such Capital Event.
(b) Except as otherwise provided in SECTION
2.12(f) in the event Loss Proceeds are
required to be made available for
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restoration pursuant to SECTION 5.1(x)
or 5.1(y) and excluding Loss Proceeds
which the Borrower is obligated to turn
over to tenants or other third persons
pursuant to applicable law, in the event
of a casualty or a Taking of any REO
Property or Mortgaged Property, in whole
or in part, Borrower shall deposit or
cause to be deposited all Loss Proceeds
received by Borrower with respect to
such REO Property or Mortgaged Property
into the Collection Account no later
than the Business Day following
collection and receipt thereof. Such
Loss Proceeds shall be applied solely to
make the payments required pursuant to
CLAUSE SECOND of SECTION 2.12(b)(i) of
this Agreement.
(c) Not later than ten (10) Business Days
following the Business Day on which the
Agent shall have notified the Borrower
in writing that the Market Value Test
has not been satisfied, the Borrower
shall prepay the Loan in part in the
amount necessary to cause the Market
Value Test to be satisfied. Any such
prepayment shall be accompanied by an
amount representing all accrued interest
on the portion of the Loan being prepaid
and other amounts then due under the
Loan Documents (including, without
limitation, the Repayment Fee). The
Agent shall specify in any notice
delivered pursuant to the second
preceding sentence the amount of the
Principal Indebtedness the payment of
which shall satisfy the Market Value
Test.
(d) Upon payment or prepayment of the Loan
in full, Borrower shall pay to the
Lenders, in addition to the amounts
specified in SECTION 2.6, SECTION 2.7
and SECTION 2.12, as applicable, all
other amounts then due and payable to
the Lenders pursuant to the Loan
Documents.
SECTION 2.8. APPLICATION OF PAYMENTS AFTER EVENT OF DEFAULT. All
proceeds relating to any repayments of the Loan after the Collateral Agent shall
have received written notice of the occurrence of an Event of Default and the
acceleration of the Indebtedness shall be applied to pay: FIRST, any unpaid fees
of the Collateral Agent payable pursuant to the Fee Letter and any reasonable
out-of-pocket costs and expenses of Collateral Agent and the Lenders, in that
order, reimbursable pursuant to the terms of this Agreement arising as a result
of such repayment or in connection with any REO Property or Mortgaged Property;
SECOND, any accrued and unpaid interest then payable with respect to the Loan or
the portion thereof being repaid; THIRD, the Repayment Fee and the Default
Administration Fee; and FOURTH, the outstanding Principal Indebtedness or the
portion thereof being repaid.
SECTION 2.9. METHOD AND PLACE OF PAYMENT FROM THE COLLECTION
ACCOUNT TO THE AGENT.
(a) Except as otherwise specifically
provided herein, all payments and
prepayments under this Agreement and the
Note shall be made from the Collection
Account to the Agent not later than
12:00 P.M., New York City time, on the
date when due and shall be made in
lawful money of the United States of
America by wire transfer in federal or
other immediately available funds to its
account at Mellon Bank, Pittsburgh,
Pennsylvania (ABA No. 043000261, Account
No. 117-7107, Reference: Ocwen Property
Facility) and the Agent shall
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disburse such payments to the Person
entitled thereto on the Business Day of
receipt of such payments (or the next
Business Day if the payments are
received after 12:00 P.M., New York City
time on such Business Day) to the
account designated by such Person in
writing to the Agent from time to time
in accordance with SECTION 2.12. Any
funds received by the Agent after such
time shall, for all purposes hereof, be
deemed to have been paid on the next
succeeding Business Day. The Agent shall
notify Borrower and the Collateral Agent
in writing of any changes in the account
to which payments are to be made. All
payments made by Borrower hereunder, or
by Borrower under the other Loan
Documents, shall be made irrespective
of, and without any deduction for, any
set-offs or counterclaims.
(b) Except to the extent otherwise provided
herein, (i) each payment or prepayment
of principal of the Loan by Borrower
shall be made to the Agent for the
account of the Lenders pro rata in
accordance with the respective unpaid
portion of the Loan held by such Lenders
and (ii) each payment of interest on the
Loan by Borrower shall be made to the
Agent for the account of the Lenders pro
rata in accordance with the amounts of
interest on the portion of the Loan held
by such Lenders then due and payable to
the respective Lenders.
SECTION 2.10. TAXES. All payments made by Borrower under the Global
Note and this Agreement shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (other than taxes imposed on the income of the Lenders).
SECTION 2.11. RELEASE OF COLLATERAL.
(a) Notwithstanding any other provision of
this Agreement or any other Loan
Document, upon the occurrence of a
Capital Event with respect to any REO
Property or Mortgage Loan as described
in SECTION 2.7(a) hereof and the deposit
by Borrower into the Collection Account
of the Capital Event Proceeds with
respect thereto (including any required
Borrower Release Price Contribution),
Agent, on behalf of the Lenders, shall,
simultaneously with such Capital Event,
release the Lien of the applicable REO
Mortgage or Collateral Assignment of
Mortgage and UCC-1 financing statements
and any other Liens in favor of the
Lenders relating to such REO Property or
Mortgage Loan or the portion thereof
affected by such Capital Event.
(b) If (i) Agent on behalf of the Lenders
receives Loss Proceeds with respect to
any REO Property or Mortgage Loan in the
event of a Taking affecting such REO
Property or the related Mortgaged
Property in whole or a casualty
affecting 100% of such REO Property or
the related Mortgaged Property (or a
substantial portion thereof) as
described in SECTION 2.12(f), (ii)
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in the case of a casualty only, such
Loss Proceeds together with the Borrower
Release Price Contribution, if any, are
equal to at least the applicable Release
Price and (iii) such Loss Proceeds (and
Borrower Release Price Contribution, if
any) are applied to reduce the
Indebtedness in accordance with SECTIONS
2.7(b) and 2.12(b), then Agent on behalf
of the Lenders shall simultaneously with
such application release or cause to be
released the Lien of the applicable REO
Mortgage or Collateral Assignment of
Mortgage and UCC-1 financing statements
and any other Liens in favor of the
Lenders relating to such REO Property or
Mortgage Loan and shall execute all
documentation reasonably requested of
Agent with respect to such release;
PROVIDED, that in the case of a casualty
only, Agent shall not have any
obligation to release its Lien unless
and until it has received the payment of
the Principal Indebtedness in an amount
equal to the applicable Release Price.
(c) Upon and concurrently with repayment of
the Loan and all other amounts due
hereunder and under the Loan Documents
in full in accordance with the terms
hereof and thereof, the Lenders shall
release all Liens with respect to all
collateral.
(d) Upon receipt from the Borrower of a
Request for Release in the form attached
hereto, the Collateral Agent shall
promptly release the documents requested
therein for the purposes so requested.
The Agent shall promptly execute, and
shall cause the Collateral Agent to
execute, as appropriate, all documents
required to be executed in such Request
for Release.
SECTION 2.12. CENTRAL CASH MANAGEMENT.
(a) COLLECTION ACCOUNT DEPOSITS TO AND
WITHDRAWALS FROM THE COLLECTION ACCOUNT.
(i) On or before the Closing Date,
Borrower shall establish and
maintain with the Collateral Agent,
one collection account for the REO
Properties and Mortgage Loans (the
"COLLECTION ACCOUNT"), with a
separate and unique identification
number and entitled "LaSalle
National Bank (as Collateral Agent
for Salomon Brothers Realty Corp.)
pursuant to a Loan Agreement, dated
as of June 10, 1998, among OAIC
California Partnership, L.P. and
OAIC California Partnership II,
L.P. and Each Other Entity Joining
the Loan Agreement as a Borrower,
Salomon Brothers Realty Corp., as
Agent for the Lenders named therein
and LaSalle National Bank, as
Collateral Agent." The Collection
Account shall be an Eligible
Account. So long as the Collateral
Agent has not received written
notice from the Agent that an Event
of Default has occurred and is
continuing, all Rents and Money
received from Accounts and under
Leases for the REO Properties and
all Proceeds
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thereof and all payments and
collections on the Mortgage Loans
shall be payable directly to the
Borrower or the Manager at the
election of Borrower. Borrower and
Manager shall not have any right to
withdraw Money from the Collection
Account. All payments made to the
Collection Account by or on behalf
of Borrower which are payable to
Agent or Collateral Agent shall be
deemed received by Agent or
Collateral Agent, as applicable,
upon such deposit into the
Collection Account.
(ii) So long as no Event of Default
shall have occurred and be
continuing, the Borrower shall
deposit in the Collection Account:
(a) not later than the close of
business on the Business Day prior
to each Payment Date, funds
sufficient to pay (1) the interest
then due and payable on the Note
for the related Interest Accrual
Period, (2) the Principal Payment
Amount, if any, (3) the fees of the
Collateral Agent and (4) any other
amounts under this Agreement, the
Note or the Loan Documents due on
such Payment Date and regarding
which the Borrower has been
notified in writing, (b) as and
when required by SECTION 2.7(b),
Loss Proceeds received by the
Borrower, (c) simultaneously with
the consummation of any Capital
Event, the Capital Event Proceeds
resulting from such Capital Event,
and (d) not later than the close of
business on the Business Day prior
to the Business Day on which all or
a portion of such Capital Event
Proceeds are to be applied to
prepay the Principal Indebtedness,
an amount equal to the accrued and
unpaid interest with respect to the
Principal Indebtedness to be
prepaid with such Capital Event
Proceeds through the date of such
prepayment of the Principal
Indebtedness and, if applicable,
any Borrower Release Price
Contribution due in connection with
any such Capital Event.
(iii)So long as the Collateral Agent
shall not have received written
notice from the Agent that an Event
of Default has occurred and is
continuing, on the Business Day
succeeding the Business Day on
which any Capital Event Proceeds
are deposited in the Collection
Account, the Collateral Agent shall
apply such funds, together with
additional funds of Borrower
necessary to make the payments
described below, in each case to
the extent of the amounts set forth
in written instructions delivered
by Borrower to Collateral Agent and
Agent, as follows:
FIRST, to the payment to the Agent on behalf of the
Lenders of the Principal Indebtedness in an amount equal to
the applicable Release Price together with accrued and unpaid
interest on such amount of the Principal Indebtedness being
prepaid; and
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SECOND, to the payment to the Borrower of the
Borrower Excess Proceeds, if any.
(iv) In the event that the Agent on
behalf of the Lenders has notified
Borrower and the Collateral Agent
in writing that an Event of Default
has occurred and is continuing,
Borrower shall commence depositing
and shall thereafter deposit (or
shall cause the Manager to deposit)
directly into the Collection
Account, all Rents and Money
received from Accounts or under
Leases for the REO Properties and
all Proceeds thereof and all
payments and collections on the
Mortgage Loans. After the
Collateral Agent has received
written notice from the Agent on
behalf of the Lenders that an Event
of Default has occurred and is
continuing and the Indebtedness has
been accelerated,
(w) all payments and collections on the Mortgage
Loans and all Rents and Money received from Accounts or under
Leases and derived from any REO Property and all Proceeds
thereof shall be payable to Agent for the account of the
Lenders or as otherwise directed by the Agent on behalf of the
Lenders,
(x) the Agent on behalf of the Lenders shall make
deposits, or cause deposits to be made, of such payments,
collections, Rents, Money and Proceeds to the Collection
Account, as required by this Agreement, and the Borrower shall
cooperate (and shall cause the Manager to cooperate) with the
Agent on behalf of the Lenders in the making of such deposits
or causing such deposits to be made,
(y) Borrower shall not have any right to direct any
withdrawals from the Collection Account or the Basic Carrying
Costs Account, or to make any withdrawals therefrom without
the prior written consent of the Agent on behalf of the
Lenders, and
(z) Proceeds on deposit in the Collection Account and
the Basic carrying Costs Account may be applied by the
Collateral Agent on behalf of the Lenders for the payment of
the Indebtedness pursuant to SECTION 2.8 of this agreement.
(b) DISTRIBUTION OF CASH. So long as no
Event of Default has occurred and is
continuing, on each Payment Date, the
Collateral Agent shall withdraw the
funds on deposit in the Collection
Account on such Payment Date, and shall
apply such funds, in each case to the
extent of the amounts available in the
Collection Account as described above
and set forth in the related Payment
Date Statement delivered by Borrower, as
follows:
FIRST, to the payment to the Agent of the interest then due
and payable on the Note with respect to the related Interest Accrual
Period;
SECOND, to the payment to the Agent of the Principal
Indebtedness in an amount equal to the sum of the Principal Payment
Amount, if any, then due and payable and any amount to which the Agent
is entitled pursuant to Section 2.7(b) of this Agreement;
THIRD, to the payment to the Collateral Agent of the fees of
the Collateral Agent then due and payable; and
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FOURTH, to the payment of any indemnification to which an
Indemnified Party is entitled pursuant to SECTIONS 5.1(i) and 5.1(j)
FIFTH, to the extent any funds remain in the Collection
Account after payment of the amounts described in CLAUSES FIRST through
FOURTH above, to the Borrower.
(c) PERMITTED INVESTMENTS. Borrower shall
direct Collateral Agent in writing to
invest and reinvest any balance in the
Collection Account, from time to time in
Permitted Investments; PROVIDED,
HOWEVER, that (i) the maturity of the
Permitted Investments on deposit therein
shall be at the discretion of Borrower,
but in any event no later than the
Business Day immediately preceding the
date on which such funds are required to
be withdrawn therefrom pursuant to
SECTION 2.12(A) or (B) of this
Agreement, (ii) after Collateral Agent
has received written notice from the
Agent that an Event of Default has
occurred and is continuing, Borrower
shall not have any right to direct
investment of the balance in the
Collection Account, (iii) all such
Permitted Investments shall be held in
the name of Collateral Agent on behalf
of the Lenders and (iv) if no written
investment direction is provided to the
Collateral Agent by Borrower, the
Collateral Agent shall invest any
balance in the Collection Account in an
investment of the type described in
CLAUSE (VIII) of the definition of
Permitted Investments. Borrower shall
cause all income or other gain from
investments of Money held in the
Collection Account to be deposited in
such account immediately upon receipt
and any loss resulting from such
investments shall be charged to such
account. The Agent, the Lenders and
Collateral Agent shall have no liability
for any loss in investments of funds in
the Collection Account that are invested
in Permitted Investments (unless, in the
case of Collateral Agent, invested
contrary to the Agent's or Borrower's
written direction) and no such loss
shall affect Borrower's obligation to
fund, or liability for funding, the
Collection Account. Borrower shall
include all earnings on the Collection
Account as income of Borrower for
federal and applicable state tax
purposes.
(d) MONTHLY AND PAYMENT DATE STATEMENTS.
With respect to each Collection Period,
the Collateral Agent shall prepare and
deliver, or shall cause to be prepared
and delivered, to the Agent a statement
(each, a "MONTHLY STATEMENT") no later
than five (5) Business Days after the
end of such Collection Period setting
forth the aggregate deposits to and
withdrawals from the Collection Account
and the Basic Carrying Costs Account and
the opening and closing balances in such
accounts. With respect to each Payment
Date and the related Collection Period
and Interest Accrual Period, Borrower
shall prepare and deliver, or shall
cause to be prepared and delivered to
Collateral Agent and the Agent, a
statement (each, a "PAYMENT DATE
STATEMENT") no later than the second
Business Day prior to such Payment Date
with respect to each of the items below,
setting forth the following:
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(i) the aggregate deposits to the
Collection Account during the
related Collection Period and the
opening and closing balances in
the Collection Account;
(ii) the amount of interest then due
and payable on the Global Note
with respect to the Interest
Accrual Period (including the
applicable number of days and
interest rate which were applied
in determining such amount);
(iii) the amount of the Repayment Fee
and Extension Fee, if any, then
due and payable;
(iv) the amount of any fees and
expenses of Collateral Agent
payable pursuant to the Fee
Letter and any indemnification to
which an Indemnified Party is
entitled under this Agreement;
(v) the following information with
respect to the Principal
Indebtedness in a format
acceptable to the Agent: (1) the
Principal Indebtedness as of the
preceding Payment Date, (2) any
principal paid to the Lenders
since the prior Payment Date, (3)
the principal payable to the
Lenders pursuant to SECTION
2.12(B) on such Payment Date, (4)
the Principal Indebtedness on the
current Payment Date (taking into
account such payments) and (5)
the total Allocated Loan Amount
for the REO Properties and
Mortgage Loans as of the prior
Payment Date, any changes in
Allocated Loan Amount of any REO
Property or Mortgage Loan since
the prior Payment Date and on the
current Payment Date, and the
final Allocated Loan Amount of
each REO Property and Mortgage
Loan on the current Payment Date;
(vi) the amount remitted to the Basic
Carrying Costs Account in
accordance with SECTION 2.13(a);
(vii) the amount, if any, payable to
Borrower pursuant to SECTION
2.12(b); and
(viii) with respect to each Mortgage
Loan, the following information:
(1) principal and interest
payments since the prior Payment
Date, (2) prepayment notices,
whether voluntary or involuntary,
(3) extensions or requests for
modification, (4) delinquencies,
(5) material defaults or
negotiations with the Mortgagor
and (6) any other information
reasonably requested by Agent.
In addition, no later than the twentieth (20th) day of each calendar month (the
"ACTIVITY STATEMENT DATE"), commencing in the first full calendar month after
the Closing Date, Borrower shall prepare and deliver, or shall cause to be
prepared and delivered to the Collateral Agent and the Agent, a statement (each,
an "ACTIVITY STATEMENT") in hard copy and on diskette and/or a copy through
electronic mail with respect to the Collection Period
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and Interest Accrual Period for the Payment Date immediately preceding such
Activity Statement Date setting forth the following: (x) a cash flow report in a
format reasonably acceptable to the Agent describing with respect to each
Mortgage Loan, the interest and principal payments and balances in any reserve
accounts thereon and, with respect to each REO Property, the related Gross
Revenue, property expenses, Capital Improvement Costs and net operating income;
and (y) a summary report of new Leases, Lease renewals or extensions or
cancellations and Lease modifications and similar proposals with respect to each
REO Property or Mortgaged Property.
(e) LOSS PROCEEDS. In the event of a
casualty or Taking with respect to any
REO Property or Mortgaged Property,
unless pursuant to SECTION 5.1(x) or
5.1(y) or the related Mortgage, the Loss
Proceeds are to be made available for
restoration or to the tenants, all of
Borrower's interest in Loss Proceeds
shall be paid directly to the Collection
Account to satisfy the requirements of
SECTION 2.7(b). If the Loss Proceeds are
to be made available for restoration
pursuant to SECTION 5.1(x) or 5.1(y) of
the Mortgage or to the tenants, such
Loss Proceeds shall be held by
Collateral Agent in a segregated
interest-bearing escrow account in the
name of Collateral Agent on behalf of
the Lenders to be opened by the
Collateral Agent within three (3)
Business Days after the Collateral Agent
first receives written notice of the
necessity therefor from the Agent, to be
withdrawn by Collateral Agent for
delivery to Borrower or to the tenants
from time to time to pay restoration
costs pursuant to a schedule reasonably
acceptable to the Agent and Borrower. If
any Loss Proceeds are received by
Borrower, such Loss Proceeds shall be
received in trust for the Lenders, shall
be segregated from other funds of
Borrower, and shall be forthwith paid to
Collateral Agent to the extent necessary
to comply with this Agreement.
(f) LOCKBOXES. To the extent that any
Mortgage Loan includes or provides for a
lockbox for collection of Rents from the
Mortgaged Property, at such time as the
Mortgage Loan becomes Collateral under
this Agreement Borrower shall assign
such lockbox to the Collateral Agent (as
directed by Agent), and otherwise take
such steps as Agent shall require
(including delivery of notices to all
tenants directing them to pay all Rents
to the Collateral Agent) to have Rents
sent directly from tenants of the
Mortgaged Property to Collateral Agent
after the occurrence of an Event of
Default and acceleration of the
Indebtedness. All such Rents sent
directly to Collateral Agent shall be
deposited in the Collection Account and
applied in accordance with the
provisions of this Agreement. Collateral
Agent shall be under no obligation to
contact or communicate with any tenant.
(g) COLLATERAL AGENT'S RELIANCE. Collateral
Agent may rely and shall be protected in
acting or refraining from acting upon
any written notice, instruction or
request furnished to it hereunder and
believed by it to be genuine and to have
been signed or presented by the proper
party or parties. Collateral Agent may
rely on written notice from the Agent as
to the occurrence and continuance of an
Event of Default, without further
written notice by the Lenders to the
contrary.
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SECTION 2.13. BASIC CARRYING COSTS ACCOUNT.
(a) BASIC CARRYING COSTS ACCOUNT. Not later
than the Closing Date, the Borrower
shall establish and maintain with the
Collateral Agent an account which shall
be an Eligible Account and shall be
designated the Basic Carrying Costs
Account (the "BASIC CARRYING COSTS
ACCOUNT") for the benefit of the Lenders
until the Loan is paid in full. On each
Payment Date, if the Agent shall not
have notified the Borrower that an Event
of Default has occurred and is
continuing, the Borrower shall deposit
in the Basic Carrying Costs Account, an
amount equal to the product of (x)
0.0833, and (y) the sum of (i) the
annual amount set forth in the Operating
Budget approved by Agent with respect to
each REO Property referred to therein
for Basic Carrying Costs and (ii) the
Basic Carrying Costs included in any
pro-forma financial statement delivered
in connection with the making of an
Advance for an REO Property as to which
an Operating Budget has not been
delivered. Any and all Moneys remitted
to the Basic Carrying Costs Account
together with any Permitted Investments
in which such Moneys are or will be
invested or reinvested during the terms
of this Agreement, shall be held in the
Basic Carrying Costs Account and shall
be withdrawn by the Collateral Agent
within three (3) Business Days of
written request of the Borrower
delivered to Agent and Collateral Agent
together with documentation and other
evidence (including invoices) with
respect to the use of such funds, to pay
or reimburse the Borrower for Basic
Carrying Costs. In the event the
Borrower satisfies the outstanding
Indebtedness in full, the Lenders and
the Collateral Agent (upon receipt of
written notice thereof from the Agent)
shall release any and all amounts on
deposit in the Basic Carrying Costs
Account to the Borrower on the Business
Day on which the Borrower repays the
outstanding Indebtedness in full. The
Collateral Agent shall not be
responsible for confirmation of the
application of funds withdrawn from the
Basic Carrying Costs Account to the
applicable purposes set forth above.
(b) INVESTMENT OF FUNDS. All or a portion of
any Moneys in the Basic Carrying Costs
Account shall be invested and
reinvested, so long as Collateral Agent
has not received written notice from the
Agent that an Event of Default has
occurred and is continuing, by
Collateral Agent in accordance with
written instructions delivered by
Borrower, or after Collateral Agent has
received written notice from Agent that
an Event of Default has occurred and is
continuing, by Agent, in one or more
Permitted Investments. So long as
Collateral Agent has not received
written notice from the Agent that an
Event of Default has occurred and is
continuing, all such Permitted
Investments shall be made in the name of
Borrower, and after Collateral Agent has
received written notice from Agent that
an Event of Default has occurred and is
continuing, all such Permitted
Investments shall be made in the name of
the Agent on behalf of the Lenders or as
otherwise directed by the Agent.
Borrower or the Agent, as applicable,
shall cause
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all income or other gain from
investments of Money held in the Basic
Carrying Costs Account to be deposited
in the Basic Carrying Costs Account
immediately upon receipt and any loss
resulting from such investments shall be
charged to the Basic Carrying Costs
Account. Unless and until title to the
funds therein shall have vested in any
Person other than Borrower, Borrower
shall include all such income or gain on
the Basic Carrying Costs Account as
income of Borrower for federal and
applicable state tax purposes.
(c) EVENT OF DEFAULT. After Collateral Agent
has received written notice from the
Agent that an Event of Default has
occurred and is continuing and for so
long as such Event of Default is
continuing, Borrower shall not be
permitted to make any withdrawals from
the Basic Carrying Costs Account and the
Collateral Agent at the written
direction of the Agent may liquidate any
Permitted Investments of the amount on
deposit in the Basic Carrying Costs
Account, withdraw the proceeds of such
liquidation and use such amount on
deposit in the Basic Carrying Costs
Account to make payments on account of
the Loan in accordance with the
priorities set forth in SECTION 2.8.
SECTION 2.14. SECURITY AGREEMENT.
(a) PLEDGE OF ACCOUNT. To secure the full
and punctual payment and performance of
all of the Indebtedness, Borrower hereby
assigns, conveys, pledges and transfers
to the Lenders, to be held by Collateral
Agent on behalf of the Lenders as
agent/bailee, and grant a first and
continuing security interest in and to,
the following property, whether now
owned or existing or hereafter acquired
or arising and regardless of where
located (collectively, the "ACCOUNT
COLLATERAL"):
(i) all of Borrower's right, title
and interest in the Collection
Account and the Basic Carrying
Costs Account and all Money and
Permitted Investments, if any,
from time to time deposited or
held in the Collection Account
and the Basic Carrying Costs
Account;
(ii) all of Borrower's right, title
and interest in interest,
dividends, Money, Instruments and
other property from time to time
received, receivable or otherwise
payable in respect of, or in
exchange for, any of the
foregoing until such time as such
items are disbursed from the
Collection Account and the Basic
Carrying Costs Account; and
(iii) to the extent not covered by
CLAUSE (i) or (ii) above, all
Borrower's right, title and
interest in Proceeds of any or
all of the foregoing.
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(b) COVENANTS. So long as any portion of the
Indebtedness is outstanding and an Event
of Default has occurred and is
continuing, Borrower shall not open (or
permit the Manager to open) any account
other than the Collection Account for
the deposit of Rents or Money received
from Accounts or under Leases and
derived from the REO Property and all
Proceeds and payments and collections on
the Mortgage Loans to pay amounts owing
hereunder, other than any account for
amounts required by law to be segregated
by Borrower. The Account Collateral
shall be subject to such applicable
laws, and such applicable regulations of
the Board of Governors of the Federal
Reserve System and of any other banking
authority or Governmental Authority, as
may now or hereafter be in effect, and
to the rules, regulations and procedures
of Collateral Agent relating to demand
deposit accounts from time to time in
effect.
(c) FINANCING STATEMENTS; FURTHER
ASSURANCES. On the Closing Date,
Borrower shall execute and deliver to
the initial Lender for filing a
financing statement or statements in
connection with the Account Collateral
in the form required to properly perfect
Collateral Agent's security interest on
behalf of the Lenders in the Account
Collateral to the extent that it may be
perfected by such a filing. From time to
time, at the expense of Borrower,
Borrower shall promptly execute and
deliver all further instruments, and
take all further action, that the Agent
may reasonably request, in order to
perfect and protect the pledge and
security interest granted or purported
to be granted hereby, or to enable
Collateral Agent to exercise and enforce
Collateral Agent's rights and remedies
hereunder with respect to, any Account
collateral. Collateral Agent shall not
be responsible for the determination of
the financing statements and other
instruments necessary to perfect such
security interest or for the filing of
such financing statements and other
instruments at the locations necessary
to perfect such security interest and
shall rely on an opinion of counsel to
the Borrower as to the perfection of
such security interest.
(d) TRANSFERS AND OTHER LIENS. Borrower
shall not sell or otherwise dispose of
any of the Account Collateral other than
pursuant to the terms hereof, or create
or permit to exist any Lien upon or with
respect to all or any of the Account
Collateral, except for the Lien granted
to Collateral Agent under this
Agreement.
(e) NO WAIVER. Every right and remedy
granted to Collateral Agent and/or the
Lenders under this Agreement or by law
may be exercised by Collateral Agent at
any time and from time to time, and as
often as Collateral Agent and/or the
Lenders may deem expedient. Any and all
of Collateral Agent's and/or the
Lenders' rights with respect to the
pledge of and security interest in the
Account Collateral granted hereunder
shall continue unimpaired, and Borrower
shall be and remain obligated in
accordance with the terms hereof,
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notwithstanding (i) any proceeding of
the Borrower under the United States
Bankruptcy Code or any bankruptcy,
insolvency or reorganization laws or
statutes of any state, (ii) the release
or substitution of Account Collateral at
any time, or of any rights or interests
therein or (iii) any delay, extension of
time, renewal, compromise or other
indulgence granted by Collateral Agent
in the event of any Default with respect
to the Account Collateral or otherwise
hereunder. No delay or extension of time
by Collateral Agent in exercising any
power of sale, option or other right or
remedy hereunder, and no notice or
demand which may be given to or made
upon Borrower by Collateral Agent, shall
constitute a waiver thereof, or limit,
impair or prejudice Collateral Agent's
right, without notice or demand, to take
any action against Borrower or to
exercise any other power of sale, option
or any other right or remedy.
(f) AGENT APPOINTED ATTORNEY-IN-FACT.
Borrower hereby irrevocably constitutes
and appoints Agent as its true and
lawful attorneys-in-fact, with full
power of substitution, at any time after
the occurrence and during the
continuation of an Event of Default, to
execute, acknowledge and deliver any
instruments and to exercise and enforce
every right, power, remedy, option and
privilege of Borrower with respect to
the Account Collateral, and do in the
name, place and stead of Borrower, all
such acts, things and deeds for and on
behalf of and in the name of Borrower
with respect to the Account Collateral,
which Borrower could or might do in the
absence of an Event of Default or which
the Agent may deem reasonably necessary
or desirable to more fully vest in Agent
the rights and remedies provided for
herein with respect to the Account
Collateral and to accomplish the
purposes of this Agreement. The
foregoing powers of attorney are
irrevocable and coupled with an
interest.
(g) CONTINUING SECURITY INTEREST;
TERMINATION. This SECTION 2.14 shall
create a continuing pledge of and
security interest in the Account
Collateral and shall remain in full
force and effect until payment in full
by Borrower of the Indebtedness. Upon
payment in full by Borrower of the
Indebtedness, Borrower shall be entitled
to the return, upon its request and at
its expense, of such of the Account
Collateral as shall not have been sold
or otherwise applied pursuant to the
terms hereof, and, upon written
notification by the Agent to Collateral
Agent that the Indebtedness has been
paid in full, Collateral Agent shall
release any funds then held by it in
accounts established by Borrower with
Collateral Agent pursuant to this
Agreement and shall execute such
instruments and documents as may be
reasonably requested by Borrower to
evidence such termination and the
release of the pledge and lien hereof;
PROVIDED, HOWEVER, -------- ------- that
Borrower shall simultaneously pay on
demand upon presentation of invoices all
of Collateral Agent's expenses in
connection therewith (including
reasonable attorneys' fees and
disbursements).
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(h) RIGHT OF SET-OFF. Collateral Agent
waives any and all rights it may have at
law or otherwise to set off or make any
claim against the Account Collateral,
except, with respect to any checks
returned for insufficient funds, the
payment of Collateral Agent's fees and
expenses (including reasonable attorney
fees and disbursements), and for the
maintenance of the Account collateral.
SECTION 2.15. MORTGAGE RECORDING TAXES. The Lien to be created by
the REO Mortgages is intended to encumber each REO Property described therein to
the full extent of the Loan Amount (or, in the case of any REO Property located
in a State which imposes a tax on the recordation of REO Mortgages, an amount
reasonably acceptable to the Agent). On each Advance Closing Date, Borrower
shall have paid all state, county and municipal recording and all other taxes
imposed and required to be paid upon the execution and recordation of each newly
executed REO Mortgage, if any, and all other REO Mortgages dated on or prior to
the Advance Closing Date for which any such taxes shall not have been paid, if
any.
SECTION 2.16. GENERAL COLLATERAL AGENT PROVISIONS.
(a) APPOINTMENT. The Lenders hereby
designate and appoint LaSalle National
Bank as Collateral Agent of each of the
Lenders under this Agreement, and
authorize LaSalle National Bank, as
Collateral Agent for Lenders, to take
such action on their behalf under the
provisions of this Agreement and to
exercise such powers and perform such
duties as are expressly delegated to
Collateral Agent by the terms of this
Agreement, together with such other
powers as are reasonably incidental
thereto. Notwithstanding any provision
to the contrary elsewhere in this
Agreement, Collateral Agent shall not
have any duties or responsibilities,
except those expressly set forth herein,
or any fiduciary relationship with the
Lenders, and no implied covenants,
functions, responsibilities, duties,
obligations or liabilities shall be read
into this Agreement or any other Loan
Document or otherwise exist against
Collateral Agent.
(b) COLLATERAL AGENT'S RIGHT TO PERFORM. If
an Event of Default shall have occurred
and be continuing, Collateral Agent may,
but shall have no obligation to, itself
perform, or cause performance of, such
covenant or obligation giving rise to
such Event of Default after giving
Borrower at least five (5) Business Days
prior written notice of such intent, and
the reasonable fees and expenses of
Collateral Agent incurred in connection
therewith shall be payable by Borrower
to Collateral Agent upon demand.
Notwithstanding the foregoing,
Collateral Agent shall have no
obligation to send notice to Borrower of
any such failure unless directed to do
so by Agent in writing, except that
Collateral Agent shall not have the
right set forth in this SECTION 2.16(b)
to perform unless such notice has been
sent.
(c) STANDARD OF CARE. Beyond the observance
of Accepted Practices and the exercise
of reasonable care in the custody or
disbursement thereof, Collateral Agent
shall not have any duty
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as to any Account Collateral or any
income thereon in its possession or
control or in the possession or control
of any agents for, or of Collateral
Agent, or the preservation of rights
against any Person or otherwise with
respect thereto. Collateral Agent shall
be deemed to have exercised reasonable
care in the custody of the Account
Collateral in its possession if the
Account Collateral is accorded treatment
in accordance with the Accepted
Practices.
(d) EXCULPATORY PROVISIONS. Neither
Collateral Agent nor any of its
officers, directors, employees, agents,
attorneys, attorneys-in-fact or
Affiliates shall be responsible in any
manner to the Lenders for any recitals,
statements, representations or
warranties made by Borrower or any
officer thereof contained in this
Agreement or any other Loan Document or
in any certificate, report, statement or
other document referred to or provided
for in, or received by Collateral Agent
under or in connection with, this
Agreement or any other Loan Document or
for the value, validity, effectiveness,
genuineness, enforceability or
sufficiency of this Agreement, the Note
or any other Loan Document or for any
failure of Borrower to perform their
obligations hereunder or thereunder.
Collateral Agent shall not be under any
obligation to the Lenders to ascertain
or to inquire as to the agreements
contained in, or conditions of, this
Loan Agreement or any other Loan
Document, or to inspect the properties,
books or records of Borrower. Collateral
Agent shall not be required to take any
discretionary actions hereunder except
at the written direction of Borrower or
the Agent, it being understood and
agreed that Collateral Agent's duties
hereunder shall be wholly ministerial in
nature and that the Collateral Agent
shall not be responsible for calculating
any financial ratios or generating any
reports for the Lenders or the Borrower.
In connection with any discretionary
action which Borrower is permitted
hereunder to direct Collateral Agent to
take, if Collateral Agent shall follow
the Agent's directions and not
Borrower's directions, it shall have no
liability to Borrower (or to any other
Person) for following any such
directions of the Agent and for not
following such directions of Borrower
(if expressly permitted herein).
Collateral Agent shall not be under any
obligation or duty to perform any act
which, in Collateral Agent's sole
reasonable judgment, could involve it in
expense or liability or to institute or
defend any suit in respect hereof, or to
advance any of its own Moines, unless
the Agent or Borrower, as the case may
be, shall have offered to Collateral
Agent reasonable security or indemnity
against such expense, liability, suit or
advance.
(e) INDEMNIFICATION. Borrower shall
indemnify and hold Collateral Agent, and
its agents, attorneys, employees and
officers harmless from and against any
loss, cost or damage (including, without
limitation, reasonable attorneys' fees
and disbursements) incurred by
Collateral Agent in connection with the
transactions contemplated hereby,
excluding any loss,
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cost or damage (including, without
limitation, reasonable attorneys' fees
and disbursements) arising as a result
of Collateral Agent's failure to adopt
and follow Accepted Practices, bad
faith, willful misconduct or violation
of applicable law. The indemnification
set forth in this paragraph shall
survive the satisfaction and payment of
the Indebtedness and the termination of
this Agreement.
(f) COLLATERAL AGENT'S RELIANCE. Collateral
Agent shall be entitled to rely, and
shall be fully protected in relying,
upon any note, writing, resolution,
notice, consent, certificate, affidavit,
letter, cablegram, telegram, telescope,
telex or teletype message, statement,
order or other document reasonably
believed by it to be genuine and correct
and to have been signed, sent or made by
the proper Person or Persons and upon
advice and statements of legal counsel
and other experts selected by Collateral
Agent. Collateral Agent may deem and
treat the payee of the Note as the owner
thereof for all purposes unless a
written notice of assignment,
negotiation or transfer thereof shall
have been filed with Collateral Agent.
Collateral Agent shall be fully
justified in failing or refusing to take
any action under this Agreement or any
other Loan Document unless it shall
first receive such advice or concurrence
of Lender as it deems appropriate or it
shall first be indemnified to its
satisfaction by Lender against any and
all liability and expense which may be
incurred by it by reason of taking or
continuing to take any such action.
Provided that the Collateral Agent acts
in accordance with Accepted Practices,
Collateral Agent shall in all cases be
fully protected in acting, or in
refraining from acting, under this
Agreement in accordance with a request
of Lenders, and such request and any
action taken or failure to act pursuant
thereto shall be binding upon Lenders
and all future holders of the Note. All
requests to the Collateral Agent for
wire transfers of funds, for transfers
between accounts established pursuant to
this Agreement or any other transfer not
specifically described in this Agreement
shall be in writing.
(g) NOTICE OF DEFAULT. Collateral Agent
shall not be deemed to have knowledge or
notice of the occurrence of any Default
or Event of Default hereunder unless
Collateral Agent has received written
notice from the Agent referring to this
Agreement, describing such Default or
Event of Default and stating that such
notice is a "notice of default."
Collateral Agent shall take such action
with respect to such Default or Event of
Default as shall be directed by the
Agent, including any action under this
Agreement.
(h) NONRELIANCE ON COLLATERAL AGENT. Neither
Collateral Agent nor any of its
officers, directors, employees, agents,
attorneys, attorneys-in-fact or
Affiliates has made any representations
or warranties to the Lenders and no act
by Collateral Agent hereinafter taken
(including any review of the affairs of
Borrower) shall be deemed to constitute
any representation or
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warranty by Collateral Agent to the
Lenders. Except for notices, reports and
other documents expressly required to be
furnished to the Agent by Collateral
Agent hereunder, Collateral Agent shall
not have any duty or responsibility to
provide the Lenders with any credit or
other information concerning the
business, operations, property,
condition (financial or otherwise),
prospects or creditworthiness of
Borrower which may come into the
possession of Collateral Agent or any of
its officers, directors, employees,
agents, attorneys, attorneys-in-fact or
Affiliates.
(i) REMOVAL AND RESIGNATION. Collateral
Agent shall have the right to resign as
collateral agent hereunder and Agent
shall have the right to remove
Collateral Agent as collateral agent
hereunder, in each case upon thirty (30)
days' written notice to the other
parties to this Agreement. In the event
of such resignation or removal, the
Agent shall appoint a successor
Collateral Agent with the consent of
Borrower (such consent not to be
unreasonably withheld or delayed). No
such removal of or resignation by
Collateral Agent shall become effective
until a successor Collateral Agent shall
have accepted such appointment and
executed an instrument by which it shall
have assumed all of the rights and
obligations of Collateral Agent
hereunder. If no such successor
Collateral Agent is appointed within
sixty (60) days (or, if fees payable
under the Fee Letter have not been paid,
thirty (30) days) after receipt of the
resigning Collateral Agent's notice of
resignation or removal, the resigning
Collateral Agent may petition a court
for the appointment of a successor
Collateral Agent. In connection with any
removal of or resignation by Collateral
Agent, (A) the removed or resigning
Collateral Agent shall (at the sole cost
and expense of the Borrower in the case
of a removal of the Collateral Agent
without cause) (1) duly assign, transfer
and deliver to the successor Collateral
Agent this Agreement and all Money and
Permitted Investments held by it
hereunder, (2) execute such financing
statements and other instruments as may
be necessary to assign to the successor
Collateral Agent the security interests
existing in favor of the retiring
Collateral Agent hereunder, and to
otherwise give effect to such succession
and (3) take such other actions as may
be reasonably required by Borrower, the
Agent or the successor Collateral Agent
in connection with the foregoing and (B)
the successor Collateral Agent shall
establish in its name, as agent for the
Lenders, as secured party, the
Collection Account and Reserve Account
as Borrower is required to maintain
pursuant to the terms of this Agreement.
(j) INDIVIDUAL CAPACITY. Collateral Agent
and its Affiliates may make loans to,
accept deposits from and generally
engage in any kind of business with
Borrower or any Affiliate, as though
Collateral Agent were not Collateral
Agent hereunder, or under the other Loan
Documents.
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SECTION 2.17. EXTENSION OPTION.
(a) Borrower shall have the option (the
"EXTENSION OPTION"), to extend the
Maturity Date of the Loan from the
Payment Date in June, 2001 (the
"ORIGINAL MATURITY DATE"), to the
Payment Date in June, 2002 (the
"EXTENDED MATURITY DATE"), upon
satisfaction of each of the following
conditions (the "EXTENSION CONDITIONS"):
(i) Borrower shall have given written
notice (an "EXTENSION NOTICE") to
the Agent and Collateral Agent
not less than sixty (60) days
prior to the Original Maturity
Date of its election to exercise
the Extension Option;
(ii) no Default or Event of Default
shall have occurred and be
continuing on the Original
Maturity Date;
(iii) Borrower shall have paid to the
Agent for the benefit of the
Lenders on the Original Maturity
Date a fee (an "EXTENSION FEE")
equal to the product of 0.50% and
the Principal Indebtedness; and
(iv) Borrower shall have delivered to
the Agent such evidence of
corporate and limited liability
company authorization and other
documents relating to the
Extension Option as the Agent
shall reasonably require.
(b) Borrower may revoke any Extension Notice
by written notice (or telephonic notice
promptly confirmed in writing) to the
Agent on behalf of the Lenders and to
the Collateral Agent on or prior to the
fifteenth (15th) Business Day prior to
the Original Maturity Date; PROVIDED,
HOWEVER, that Borrower shall pay the
reasonable costs incurred by the Agent
and Collateral Agent in connection with
the giving of any Extension Notice and
its revocation. If the term of the Loan
is extended pursuant to the provisions
of this SECTION ------- 2.17, then all
the terms and conditions of the Loan
---- Documents shall remain in full
force and effect and unmodified, except
that the Maturity Date shall be the
Extended Maturity Date.
SECTION 2.18. DELIVERY AND CUSTODY OF MORTGAGE LOAN DOCUMENTS.
(a) DELIVERY OF MORTGAGE LOAN DOCUMENTS. Not
later than each Advance Closing Date on
which a Mortgage Loan is being added to
the Collateral, Borrower shall deliver
or cause to be delivered to Collateral
Agent (including, but not limited to,
through an escrow arrangement), the
Mortgage Note relating to such Mortgage
Loan. On each Advance Closing Date on
which a Mortgage Loan is being added to
the Collateral, Collateral Agent shall
deliver to Agent and Borrower an initial
certification in the form attached
hereto as EXHIBIT R-1 (the "INITIAL
COLLATERAL AGENT CERTIFICATION") with
respect to possession of the related
Mortgage Note, if applicable. On or
prior to each Advance
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Closing Date on which a Mortgage Loan is
being added to the Collateral, Borrower
shall deliver or cause to be delivered
to Collateral Agent, the original
Mortgage Loan Documents (other than the
Mortgage Note) for such Mortgage Loan,
if applicable. From time to time,
Borrower may forward to Collateral Agent
additional original documents or
additional documents relating to the
Mortgage Loans.
(b) CERTIFICATION OF COLLATERAL AGENT. As
soon as practicable but in any event no
later than the date that is forty-five
(45) days immediately succeeding the
date of delivery of the Mortgage Loan
Documents by Borrower to Collateral
Agent, Collateral Agent shall review the
Mortgage Loan Documents delivered to it
and shall deliver to Agent and Borrower
a final certification with respect to
the Mortgage Loan Documents specified in
paragraphs (A) through (M) of the
definition of "Mortgage Loan Documents",
in the form attached hereto as EXHIBIT
R-2 (the "FINAL COLLATERAL AGENT
CERTIFICATION"). Any defects or
exceptions to the foregoing noted by
Collateral Agent shall be reflected on
an exception list attached to the
certification. Under no circumstances
shall Collateral Agent be obligated to
verify the authenticity of any signature
on any of the documents received or
examined by it in connection with this
Agreement or the authority or capacity
of any person to execute or issue any
such document. Collateral Agent shall
not be responsible for the form,
substance, sufficiency, validity,
perfection, priority, effectiveness or
enforceability of any of such documents
nor for making any determination as to
the availability of alternative
documents, or the customs or
requirements of any jurisdiction or any
applicable law. Collateral Agent may
accept but shall not be responsible for
examining or determining the meaning or
effect of any document that is not
expressly described in the definition of
Mortgage Loan Documents; PROVIDED, that
Collateral Agent -------- shall be
responsible to notify Agent and Borrower
of the existence of any such items. On
or prior to the date that is 30 days
immediately succeeding the date of such
certification, Borrower shall cure in
all material respects the material
defects or exceptions set forth on the
exception list attached to such
certification with respect to which the
Agent shall have notified the Borrower
that such defect or exception has a
Material Adverse Effect.
(c) OBLIGATIONS OF COLLATERAL AGENT. With
respect to each Mortgage Loan Document
that is delivered to Collateral Agent or
which comes into the possession of
Collateral Agent, Collateral Agent is
the custodian for Agent and Borrower as
their interests may appear herein.
Collateral Agent shall hold all Mortgage
Loan Documents for the exclusive use and
benefit of Agent and Borrower as their
interests may appear herein, and shall
make disposition thereof only in
accordance with this Agreement.
Collateral Agent shall segregate and
maintain continuous custody of the
Mortgage Loan
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Documents in secure and fireproof
facilities in accordance with customary
standards for such custody.
(d) RELEASE FOR SERVICING. From time to time
as appropriate for the administration
and servicing of any of the Mortgage
Loans, Collateral Agent is hereby
authorized, upon written receipt from
Borrower (provided that no uncured Event
of Default has occurred and is
continuing) of a Request for Release in
the form attached hereto to release to
Borrower or its agent, the related
Mortgage Loan Documents. Agent may, from
time to time by written notice to
Borrower, establish reasonable
limitations on the aggregate number or
Market Value of Mortgage Loans as to
which the Mortgage Loan Documents may be
outside Collateral Agent's possession at
any time. To the extent that original
Mortgage Loan Documents need to be
released by Collateral Agent to
facilitate legal enforcement of rights
or remedies thereunder, such releases
shall be made directly to counsel
pursuant to direct agreements with such
counsel to return the original Mortgage
Loan Documents to Collateral Agent
within ten (10) Business Days after such
counsel determines that the need for
them no longer exists. All documents so
released to Borrower or its agent shall
be held by Borrower or its agent in
trust for the benefit of Agent and the
Lenders. Borrower or its agent shall
return to Collateral Agent the Mortgage
Loan Documents or other such documents
within ten (10) Business Days after
Borrower or its agent has determined
that the need thereof in connection with
such servicing no longer exists or
(except to the extent the Mortgage Loan
Documents or other documents are in
custody of a court for purposes of
enforcement thereof) within ten (10)
Business Days after the earlier request
by Agent or Collateral Agent to return
such documents to Collateral Agent.
Borrower shall be responsible to Agent
for the reconstruction of any documents
lost while released pursuant to this
paragraph.
(e) RELEASE FOR PAYMENT. Upon (i) the
payment in full of or a discounted
payoff in full satisfaction of any
Mortgage Loan or upon a Transfer of any
Mortgage Loan, or (ii) the payment in
full of the Indebtedness and, in either
case, written receipt by Collateral
Agent of a related Request for Release
in the form attached hereto, Collateral
Agent shall promptly release the related
Mortgage Loan Documents and the
Collateral and any liens related thereto
to Borrower or, to the extent necessary
to facilitate future savings of mortgage
tax in states that impose mortgage
taxes, assign such Liens as Borrower
shall request, provided that any such
assignments shall be without recourse,
representation, or warranty of any kind,
except that Agent shall represent and
warrant that such Lien has not been
previously assigned. Agent and
Collateral Agent shall with reasonable
promptness execute any document or
instrument necessary to effectuate such
release or assignment.
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(f) EXAMINATION OF MORTGAGE LOAN DOCUMENTS.
Upon reasonable prior notice to
Collateral Agent, Agent or Borrower and
their agents, accountants, attorneys and
auditors shall be permitted during
normal business hours to examine the
Mortgage Loan Documents, documents,
records and other papers in the
possession of or under the control of
Collateral Agent relating to any or all
of the Mortgage Loan Documents.
(g) INSURANCE OF COLLATERAL AGENT. At its
own expense, Collateral Agent shall
maintain at all times during the
existence of this Agreement and keep in
full force and effect fidelity
insurance, theft of documents insurance,
forgery insurance and errors and
omissions insurance. All such insurance
shall be in amounts, with standard
coverage and subject to deductibles, all
as is customary for insurance typically
maintained by banks which act as a
custodian.
ARTICLE III.
CONDITIONS PRECEDENT
SECTION 3.1. CONDITIONS PRECEDENT TO EFFECTIVENESS.
This Agreement shall become effective on the date that all of
the following conditions shall have been satisfied (or waived in accordance with
SECTION 8.4) (the "CLOSING DATE"), it being understood and agreed that the
funding of an Advance on each Advance Closing Date shall be deemed evidence that
all such conditions have been satisfied or waived by the Agent as of such
Advance Closing Date:
(A) LOAN AGREEMENT. Borrower shall have executed and
delivered this Agreement to the Agent.
(B) GLOBAL NOTE. Borrower shall have executed and
delivered to Agent the Global Note.
(C) PLEDGE AGREEMENT; ENVIRONMENTAL INDEMNITY
AGREEMENT; GUARANTY OF NONRECOURSE OBLIGATIONS; GUARANTY OF
PAYMENT. The partners of the Borrower shall have executed and
delivered the Pledge Agreement to the Agent. Borrower and
Guarantor shall have executed and delivered the Environmental
Indemnity Agreement to the Agent. Guarantor shall have
executed and delivered to Agent the Guaranty of Nonrecourse
Obligations and the Guaranty of Payment.
(D) OPINIONS OF COUNSEL. Agent and the Collateral
Agent shall have received from in-house counsel to Borrower
and the Guarantor, the legal opinions, substantially in the
form attached hereto as EXHIBIT F-2, with respect to limited
partnership matters. Such legal opinions will be addressed to
Agent and Collateral Agent, dated the Closing Date, and in
form and substance satisfactory to Agent and Collateral Agent
and their respective counsel.
(E) ORGANIZATIONAL DOCUMENTS. Agent shall have
received with respect to each of Borrower and the Guarantor
its certificate of formation, certificate of incorporation or
certificate of limited partnership, as the case may be, each
as amended, modified or supplemented to the Closing Date, as
filed with the Secretary of State in the jurisdiction of
organization and in effect on the Closing Date and certified
to be true, correct and complete by the appropriate Secretary
of State as of a date not more than ten (10) days prior to the
Closing Date, together with a good standing certificate from
such Secretary of State and a good standing certificate from
the
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Secretaries of State (or the equivalent thereof) of each other
State in which such Person is required to be qualified to
transact business.
(F) CERTIFIED RESOLUTIONS, ETC. Agent shall have
received a certificate of the general partner of Borrower and
the Guarantor dated the Closing Date, certifying (i) the names
and true signatures of its incumbent officers authorized to
sign the Loan Documents to which Borrower or the Guarantor is
each a party, (ii) the Organization Agreement of Borrower and
true and correct copies of the operating agreements, by-laws,
partnership agreements or other applicable organizational
documents of the Guarantor and such general partner, in each
case as in effect on the Closing Date, (iii) the resolutions
of Borrower and the Guarantor and such general partner, as
applicable, approving and authorizing the execution, delivery
and performance of the Loan Documents to which it is a party,
and (iv) with respect to Borrower, that there have been no
changes in the Organization Agreement since the date of
execution thereof.
(G) TRANSACTION COSTS. Borrower shall have paid all
Transaction Costs for which bills have been submitted in
accordance with the provisions of SECTION 8.23.
(H) ADDITIONAL MATTERS. The Agent shall have
received such other certificates, opinions, documents and
instruments relating to the Loan as may have been reasonably
requested by the Agent. All corporate and other organizational
proceedings, all other documents (including, without
limitation, all documents referred to herein and not appearing
as exhibits hereto) and all legal matters in connection with
the Loan shall be reasonably satisfactory in form and
substance to the Agent.
(I) NO DEFAULT OR EVENT OF DEFAULT. No Default with
respect to the payment of money or Event of Default shall have
occurred and be continuing on the Closing Date.
(J) NO INJUNCTION. No law or regulation shall have
been adopted, no order, judgment or decree of any Governmental
Authority shall have been issued, and no litigation shall be
pending or threatened, which in the good faith judgment of the
initial Lender would enjoin, prohibit or restrain, or impose
or result in the imposition of any material adverse condition
upon, the making or repayment of the Loan or the consummation
of the Transaction.
(K) REPRESENTATIONS AND WARRANTIES. The
representations and warranties herein and in the other Loan
Documents shall be true and correct on the Closing Date.
SECTION 3.2. EXECUTION AND DELIVERY OF AGREEMENT.
The execution and delivery by Borrower of this Agreement
shall constitute a representation and warranty by Borrower to Agent that all of
the conditions required to be satisfied under SECTION 3.1 have been satisfied or
waived in accordance with SECTION 8.4.
SECTION 3.3. PROCEDURE FOR DISBURSEMENT OF AN ADVANCE FOR AN REO
PROPERTY ACQUISITION OR MORTGAGE LOAN ACQUISITION OR
ORIGINATION OR ADDITIONAL DISBURSEMENT.
(a) REQUEST FOR ADVANCE. In the event
Borrower wishes to receive an Advance
for an acquisition of an REO Property or
acquisition or origination of a Mortgage
Loan on an Advance Closing Date,
Borrower shall submit to Agent, on
behalf of the Lenders, a written request
for such Advance, including therein (A)
the amount of the proposed Advance and
an explanation of how such amount was
derived; (B) the items set forth in
SECTION 3.4 below for such REO
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Property or Mortgage Loan or the related
Mortgage Property; (C) a submission
underwriting memorandum describing such
REO Property in reasonable detail; (D)
in the case of a Mortgage Loan only,
copies of loan documentation (including,
without limitation, the Mortgage and
related Mortgage Note); and (E) such
other documents, deliveries, and
certificates as Agent may reasonably
request.
(b) GRANT OR DENIAL. Agent shall, in its
sole discretion and subject to the terms
of this Agreement, grant or deny
Borrower's request for such Advance in
writing (including in the case of a
grant the amount of the related Advance)
within ten (10) Business Days after its
receipt of all the information delivered
pursuant to SECTION 3.3(A).
(c) MAKING OF ADVANCE. If Agent approves a
request for an Advance, an Advance shall
be made on the date that the conditions
set forth in SECTION 3.5 below shall
have been satisfied (or waived in
accordance with SECTION 8.4), which date
shall be at Borrower's option but on an
Advance Closing Date not more than
fifteen (15) Business Days after Agent's
approval has been given. On each Advance
Closing Date, Borrower shall be required
to satisfy or cause to be satisfied the
conditions set forth in SECTION 3.5 with
respect to the applicable REO Property
or Mortgage Loan being added to the
Collateral on such Advance Closing Date.
SECTION 3.4. INFORMATION DELIVERY REQUIREMENTS.
If Borrower proposes to add an REO Property or Mortgage Loan
to the Collateral on an Advance Closing Date, Borrower shall be required to
satisfy the following information delivery requirements with respect to such REO
Property or the related Mortgaged Property, unless such information delivery
requirements shall be waived by the Agent in accordance with SECTION 8.4:
(A) SURVEY: APPRAISAL. Agent shall have received the
Survey with respect to such REO Property or Mortgaged Property
and shall have received an Appraisal with respect to such REO
Property or Mortgaged Property (or notified Borrower that
Agent shall obtain an Appraisal after the REO Property or
Mortgaged Property is added to the Collateral), which shall
each be in form and substance satisfactory to Agent.
(B) ENGINEERING REPORT. Agent shall have received an
Engineering Report with respect to such REO Property or
Mortgaged Property in form and substance acceptable to Agent
in its sole discretion.
(C) ENVIRONMENTAL MATTERS. Agent shall have received
an Environmental Report with respect to such REO Property or
Mortgaged Property prepared by the Environmental Auditor,
which Environmental Report shall be acceptable to Agent in its
sole discretion.
(D) SITE INSPECTION. Agent shall have performed, or
caused to be performed on its behalf, an on-site due diligence
review of such REO Property or Mortgaged Property satisfactory
to Agent in its sole discretion.
(E) FINANCIAL INFORMATION. Agent shall have received
acceptable financial information relating to such REO Property
or Mortgaged Property. Such information shall include the
following, to the extent reasonably available and in the
possession of or capable of delivery by Borrower:
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(i) operating statements for the current year (including
actual to date information, an annual budget and trailing twelve month
data in hard copy) and for not less than the two preceding years
(including tenant improvements costs, leasing commissions, capital
reserves, major repairs, replacement items and occupancy rates in hard
copy),
(ii) copies of Leases with respect to commercial tenants
occupying such REO Property or Mortgaged Property,
(iii) current property rent roll data on a tenant by tenant
basis in hard copy (including name, square footage, lease term,
expiration date, renewal options, base rent per square foot, additional
rent clauses (including stops, offsets, and other special provisions),
escalation clauses for increase in operating expense, maintenance,
insurance, real estate taxes and utilities, assignment, sublet and
cancellation provisions and purchase options),
(iv) current prospective property leasing information
(including asking rent rates for available retail/office space, amount
of current vacant commercial space out for signature and under
negotiation, typical retail and office tenant improvement cost per
square foot (new versus renewal) and leasing concessions (free rent),
leasing commissions (new versus renewal),
(v) current real estate tax bills,
(vi) insurance certificates indicating the type and amount
of coverage, and
(vii) the most recent annual consolidated financial
statements and unaudited quarterly consolidated financial statements.
(F) PRO-FORMA FINANCIAL STATEMENT. The Agent shall
have received the initial pro forma financial statement for
such REO Property or Mortgaged Property for the following
twelve months (including in the case of an REO Property on an
annual and monthly basis a break-down of projected Gross
Revenues, operating expenses (including Basic Carrying Costs),
Capital Improvement Costs, and replacement reserve costs) and
a financial statement that forecasts projected revenues and
operating expenses for not less than five years (including the
assumptions used in such forecast).
SECTION 3.5. CONDITIONS PRECEDENT TO EACH DISBURSEMENT OF AN
ADVANCE FOR AN REO PROPERTY ACQUISITION OR MORTGAGE LOAN ACQUISITION OR
ORIGINATION. An Advance shall be made on an Advance Closing Date only when each
of the conditions set forth below shall have been satisfied (or waived in
accordance with SECTION 8.4):
(A) REO PROPERTY OR MORTGAGE LOAN DOCUMENTS.
(i) REO MORTGAGE; ASSIGNMENT OF RENTS
AND LEASES. Borrower shall have
executed and delivered to Agent
an REO Mortgage and an Assignment
of Rents and Leases with respect
to each REO Property being added
to the Collateral (or, if
approved by Agent, an amendment
to an existing REO Mortgage and
Assignment of Rents and Leases)
and such REO Mortgage and
Assignment of Rents and Leases
(or amendment) shall have been
filed of record in the
appropriate filing office in the
jurisdiction in which such REO
Property is located or
irrevocably delivered to a title
agent for such recordation.
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(ii) ASSIGNMENT AND SECURITY
AGREEMENT; COLLATERAL ASSIGNMENT
OF MORTGAGE; COLLATERAL
ASSIGNMENT OF ASSIGNMENT OF
LEASES. Borrower shall have
executed and delivered to Agent
the Assignment and Security
Agreement. Borrower shall have
executed and delivered to Agent a
Collateral Assignment of Mortgage
and a Collateral Assignment of
Assignment of Leases with respect
to each Mortgage Loan being added
to the Collateral and such
Collateral Assignment of Mortgage
and Collateral Assignment of
Assignment of Leases shall be
filed of record in the
appropriate filing office in the
jurisdiction in which the related
Mortgaged Property is located or
irrevocably delivered to a title
agent for such recordation.
(iii) FINANCING STATEMENTS. Borrower
shall have executed and delivered
to Agent all financing statements
in the form specified on Exhibit
J attached hereto or such other
form as is required by the
applicable filing jurisdiction
and such financing statements
shall have been filed of record
in the appropriate filing offices
in each of the appropriate
jurisdictions or irrevocably
delivered to a title agent for
such recordation.
(iv) MANAGEMENT AGREEMENT AND
MANAGEMENT SUBORDINATION. With
respect to each REO Property,
Agent shall have received the
executed Management Agreement and
Manager shall have executed and
delivered the Management
Subordination to Agent.
(v) MORTGAGE LOAN DOCUMENTS. With
respect to any Mortgage Loan,
Borrower shall have delivered the
other Mortgage Loan Documents to
the Collateral Agent, pursuant to
SECTION 2.17 and shall have
caused the Collateral Agent to
deliver to Agent the Initial
Collateral Agent Certification.
(vi) CONTRACT ASSIGNMENT. With respect
to each REO Property, Borrower
shall have executed and delivered
to Agent a Contract Assignment.
(vii) JOINDER. The applicable Borrower
and the holders of the ownership
interests in such Borrower shall
have executed and delivered to
Agent a Joinder.
(B) Opinions of Counsel. The Agent and
Collateral Agent shall have received from counsel to the
Borrower and the Guarantor, legal opinions in substantially
the form attached hereto as Exhibit F-1, F-2 and F-3, with
respect to limited partnership matters, the enforceability of
the Loan Documents to which it is a party and related matters.
Such legal opinions shall be addressed to Agent and Collateral
Agent and their successors and assigns, dated the Advance
Closing Date, and in form and substance satisfactory to Agent
and its Collateral Agent and their respective Counsel.
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(C) ORGANIZATIONAL DOCUMENTS. The Agent shall
have received with respect to the Borrower and the Guarantor
its certificate of formation, certificate of incorporation or
certificate of limited partnership, as the case may be, each
as amended, modified or supplemented to the Advance Closing
Date, as filed with the Secretary of State in the jurisdiction
of organization and in effect on the Advance Closing Date and
certified to be true, correct and complete by the appropriate
Secretary of State as of a date not more than ten (10) days
prior to the Advance Closing Date, together with a good
standing certificate from such Secretary of State and a good
standing certificate from the Secretaries of State (or the
equivalent thereof) of each other State in which the Borrower
is required to be qualified to transact business.
(D) CERTIFIED RESOLUTIONS, ETC. The Agent shall
have received a certificate of the manager of the Borrower and
the Guarantor dated the Advance Closing Date, certifying (i)
the names and true signatures of its incumbent officers
authorized to sign the Loan Documents to which the Borrower
and the Guarantor is a party, (ii) the Organizational
Agreement of the Borrower and true and correct copies of the
operating agreements, by-laws, partnership agreements or other
applicable organizational documents of the Guarantor, in each
case as in effect on the Advance Closing Date, (iii) the
resolutions of the member of the Borrower and the Guarantor,
approving and authorizing the execution, delivery and
performance of the Loan Documents to which it is a party, and
(iv) in the case of the Borrower, that there have been no
changes in the Organizational Agreement since the date of
execution thereof.
(E) INSURANCE. Agent shall have received
certificates of insurance demonstrating insurance coverage in
respect of the REO Property or Mortgaged Property of types, in
amounts, with insurers and otherwise in compliance with the
terms, provisions and conditions set forth in this Agreement
or the related Mortgage. Such certificates shall indicate in
the case of an REO Property only that Agent is a named
additional insured and shall contain a loss payee endorsement
in favor of Agent with respect to the property policies
required to be maintained under this Agreement.
(F) TITLE INSURANCE POLICY. Agent shall have
received either (i) an unconditional commitment (in form and
substance reasonably satisfactory to Agent) to issue the Title
Insurance Policy covering the REO Property or Mortgaged
Property (which may, in the case of a Mortgaged Property, be
the Title Insurance Policy delivered in connection with the
original funding of the Mortgage Loan) with an amount of
insurance reasonably acceptable to the Agent, or (ii) an
endorsement to the existing Title Insurance Policy in favor of
Agent (in form and substance satisfactory to Agent) which
amends the existing Title Insurance Policy by (x) adding the
legal description of the REO Property or Mortgaged Property to
Schedule A thereof, (y) adding Permitted Encumbrances to
Schedule B thereof, if applicable, and (z) stating that the
amount of insurance is equal to an amount reasonably
acceptable to Agent.
(G) LIEN SEARCH REPORTS. Agent shall have
received satisfactory reports of UCC (collectively, the "UCC
SEARCHES"), tax lien, judgment and litigation searches and
title updates conducted by search firms and/or title companies
acceptable to Agent with respect to the Collateral, the
Guarantor and the Borrower such searches to be conducted in
each of the locations set forth on EXHIBIT I attached hereto
and such other locations as Agent shall reasonably require.
(H) CONSENTS, LICENSES, APPROVALS, ETC. Agent
shall have received copies of all consents, licenses and
approvals, if any, required in connection with the execution,
delivery and performance by Borrower, and the validity and
enforceability, of the Loan Documents, and such consents,
licenses and approvals shall be in full force and effect.
(I) ADDITIONAL REAL ESTATE MATTERS. The Agent
shall have received such other real estate related
certificates and documentation relating to such REO Property
or Mortgaged Property as may have been reasonably requested by
the Agent all of which shall be in form and
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substance acceptable to Agent. Such documentation shall
include the following, to the extent reasonably available:
(i) certificates of occupancy issued by the appropriate
local Governmental Authority of the jurisdiction in which such REO
Property or Mortgaged Property is located reflecting the use of the REO
Property or Mortgaged Property as of the Advance Closing Date,
(ii) letters from the appropriate local Governmental
Authority of the jurisdiction in which such REO Property or Mortgaged
Property is located, certifying that such REO Property or Mortgaged
Property is in compliance with all applicable zoning laws, rules and
regulations, or a zoning endorsement to the applicable Title Insurance
Policy with respect to the REO Property or Mortgaged Property or an
opinion of zoning counsel to such effect,
(iii) abstracts of the Leases in effect at the REO Property
or Mortgaged Property and copies of such of the Leases as Agent may
request (in addition to the copies delivered above),
(iv) tenant estoppel certificates from the tenants at such
REO Property or Mortgaged Property,
(v) certification by Borrower satisfactory to initial
Lender that such REO Property is served by adequate utilities
(including but not limited to electricity, heat and hot water),
(vi) copies of major service contracts, and
(vii) graphics (including interior and exterior photographs,
rental brochures and a competitive properties map).
(J) FINANCIAL STATEMENTS. Agent shall have
received the audited financial statements of Guarantor and
Principal for the most recent Fiscal Year, commencing with the
Fiscal Year ending on December 31, 1998, and the unaudited
financial statements of Borrower for the three-, six-, nine-
and twelve-month periods ended on a date not more than three
(3) months prior to the Advance Closing Date. All audited
financial statements must have been prepared by a "Big Four"
certified public accounting firm or other firm reasonably
acceptable to Agent.
(K) REPRESENTATIONS AND WARRANTIES. The
representations and warranties herein and in the other Loan
Documents shall be true and correct in all material respects
on such date both before and after giving effect to the making
of the Advance (other than those representations and
warranties which are no longer true but are either in the
process of being made true by Borrower or whose falsity does
not result in a Material Adverse Effect).
(L) NO DEFAULT OR EVENT OF DEFAULT. No Default
with respect to the payment of money or Event of Default shall
have occurred and be continuing on such date either before or
after giving effect to the making of the Advance.
(M) NO INJUNCTION. No law or regulation shall
have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued, and no
litigation shall be pending or threatened, which in the good
faith judgment of Agent would enjoin, prohibit or restrain, or
impose or result in the imposition of any material adverse
condition upon, the making or repayment of the Advance or the
Loan or the consummation of the Transaction.
(N) TRANSACTION COSTS. Borrower shall have paid
all Transaction Costs for which bills have been submitted and
have not been previously paid.
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(O) BRING-DOWN CERTIFICATES. Agent shall have
received a certificate of the Borrower and Guarantor, dated
the Advance Closing Date, certifying that (i) the
representations and warranties herein are true and correct on
such Advance Closing Date as if made on such date by each such
Person (or, alternatively, indicating any modifications to
such representations with respect to the REO Property being
acquired with the requested Advance); (ii) no Default with
respect to the payment of Money or Event of Default shall have
occurred and be continuing on such Advance Closing Date; (iii)
Borrower and Guarantor is in good standing in its respective
jurisdiction of organization and (iv) there have been no
changes in the Organizational Agreement of any such Person,
since the date of the most recent certification thereof (or if
there have been changes, certifying as to the changes).
(P) CLOSING STATEMENT. The Agent shall have
received a detailed closing statement for such REO Property or
Mortgage Loan from Borrower in a form acceptable to the Agent,
which includes a complete description of Borrower's sources
and uses of funds on the Advance Closing Date.
(Q) MATERIAL ADVERSE CHANGE. With respect to any
REO Property for which Advances are intended to be applied to
pay for Capital Improvement Costs and any proposed Advance for
such Capital Improvement Costs only, there shall not have
occurred any change in the physical condition or the financial
results of such REO Property which is reasonably likely to
have a Material Adverse Effect as reasonably determined by the
Agent.
SECTION 3.6. ACCEPTANCE OF BORROWINGS.
The acceptance by Borrower of the proceeds of an Advance shall
constitute a representation and warranty by Borrower to Agent that all of the
conditions to be satisfied under SECTION 3.4 and 3.5 in connection with the
making of the Advance have been satisfied or waived in accordance with SECTION
8.4.
SECTION 3.7. FORM OF LOAN DOCUMENTS AND RELATED MATTERS.
All of the Loan Documents, whether or not referred to in this
ARTICLE III, unless otherwise specified, shall be delivered to the Agent, and
shall be satisfactory in form and substance to the Agent in its sole discretion
(unless the form thereof is prescribed herein).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES AS TO THE BORROWER.
Borrower represents and warrants as of each Advance Closing
Date:
(A) ORGANIZATION. Borrower (i) is a duly
organized, validly existing and in good standing under the
laws of the state of its formation or establishment, (ii) has
the requisite power and authority to own its properties
(including, without limitation, each REO Property or Mortgage
Loan) and to carry on its business as now being conducted and
is qualified to do business in the jurisdiction in which each
REO Property is located, and (iii) has the requisite power to
execute and deliver, and perform its obligations under, this
Agreement, the Global Note and all of the other Loan Documents
to which it is a party.
(B) AUTHORIZATION; NO CONFLICT; CONSENTS AND
APPROVALS. The execution and delivery by the Borrower of this
Agreement, the Global Note and each of the other Loan
Documents to which it is a party, performance of its
obligations hereunder and thereunder and the creation of the
security interests and liens provided for in this Agreement
and the other Loan Documents to which it is a party (i) have
been duly authorized by all requisite action, (ii) will not
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violate any provision of any Legal Requirements, any order of
any court or other Governmental Authority, the Organization
Agreement of the Borrower or any indenture or material
agreement or other instrument to which the Borrower is a party
or by which the Borrower is bound, and (iii) will not be in
conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or result in
the creation or imposition of any Lien of any nature
whatsoever upon any of the property or assets of the Borrower
pursuant to, any such indenture or material agreement or
instrument. Other than those previously obtained or filed,
Borrower is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement
with, any Governmental Authority or other agency in connection
with or as a condition to the execution, delivery or
performance of this Agreement, the Global Note or the other
Loan Documents executed and delivered by it on or prior to the
Advance Closing Date.
(C) ENFORCEABILITY. This Agreement, the Global
Note and each other Loan Document executed by the Borrower in
connection with the Loan (including, without limitation, any
Collateral Security Instrument), is the legal, valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, subject to bankruptcy,
insolvency, and other limitations on creditors' rights
generally and to equitable principles. This Agreement, the
Global Note and such other Loan Documents are not subject to
any right of rescission, set-off, counterclaim or defense by
the Borrower (including the defense of usury), nor will the
operation of any of the terms of this Agreement, the Global
Note and such other Loan Documents, or the exercise of any
right thereunder, render any such document unenforceable
against the Borrower, in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense by the
Borrower, including the defense of usury, and no right of
rescission, set-off, counterclaim or defense with respect
thereto has been asserted.
(D) LITIGATION. To the Actual Knowledge of
Borrower, there are no actions, suits or proceedings at law or
in equity by or before any Governmental Authority or other
agency now pending and served or threatened against the
Borrower or any Collateral, which actions, suits or
proceedings, if determined adversely, are reasonably likely to
result in a Material Adverse Effect.
(E) ` AGREEMENTS. Borrower is not in default in
the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any
agreement or instrument to which it is a party or by which
such Borrower or any Collateral is bound which is reasonably
likely to have a Material Adverse Effect. Borrower is not a
party to any agreement or instrument or subject to any
restriction which is reasonably likely to have a Material
Adverse Effect.
(F) NO BANKRUPTCY FILING. Borrower is not
contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of its assets or
property. To the best knowledge of Borrower, no Person is
contemplating the filing of any such petition against it.
(G) SOLVENCY. Giving effect to the transactions
contemplated hereby, the fair saleable value of Borrower's
assets, exceeds and will, immediately following the making of
the Loan, exceed Borrower's total liabilities (including,
without limitation, subordinated, unliquidated, disputed and
contingent liabilities). The fair saleable value of Borrower's
assets is and will, immediately following the making of the
Loan, be greater than Borrower's probable liabilities
(including the maximum amount of its contingent liabilities on
its debts as such debts become absolute and matured).
Borrower's assets do not and, immediately following the making
of the Loan will not, constitute unreasonably small capital to
carry out its business as conducted or as proposed to be
conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including, without
limitation, Contingent Obligations and other commitments)
beyond its ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in
respect of obligations of Borrower).
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(H) OTHER DEBT. Except for the debt permitted
under SECTION 6.1(c), Borrower has not borrowed or received
other debt financing whether unsecured or secured by any
Collateral or any part thereof.
(I) FULL AND ACCURATE DISCLOSURE. No statement
of fact made by or on behalf of Borrower in this Agreement or
in any of the other Loan Documents contains any untrue
statement of a material fact or omits to state any material
fact necessary to make statements contained herein or therein
not misleading. To the Actual Knowledge of Borrower, there is
no fact which has not been disclosed to the Agent which is
likely to result in a Material Adverse Effect.
(J) FINANCIAL INFORMATION. All financial data
concerning Borrower and any REO Property or Mortgage Loan that
has been delivered by Borrower to the Agent is true, complete
and correct in all material respects; PROVIDED, that the
foregoing representation is made to the Actual Knowledge of
Borrower with respect to any data provided to the Borrower by
a third party (including, but not limited to, a seller) and
subsequently delivered to the Agent. Since the delivery of
such data, except as otherwise disclosed in writing to the
Agent, there has been no change in the financial position of
Borrower or, to the Actual Knowledge of Borrower, any REO
Property or Mortgage Loan, or in the results of operations of
Borrower, which change is reasonably likely to result in a
Material Adverse Effect. Borrower has not incurred any
obligation or liability, contingent or otherwise, not
reflected in such financial data which is reasonably likely to
have a Material Adverse Effect upon its business operations or
any REO Property or Mortgage Loan.
(K) INVESTMENT COMPANY ACT; PUBLIC UTILITY
HOLDING COMPANY ACT. Borrower is not (i) an "investment
company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended, (ii) a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of either a "holding
company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or
(iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow
money in accordance with this Agreement.
(L) COMPLIANCE. To the Actual Knowledge of the
Borrower, Borrower is in compliance with all applicable Legal
Requirements (including, without limitation, building and
zoning ordinances and codes) and all applicable Insurance
Requirements, except for noncompliance which is not reasonably
likely to have a Material Adverse Effect. Borrower is not in
default or violation of any order, writ, injunction, decree or
demand of any Governmental Authority except for defaults or
violations which are not reasonably likely to have a Material
Adverse Effect.
(M) USE OF PROCEEDS; MARGIN REGULATIONS.
Borrower will use the proceeds of the Loan for the purposes
described in SECTION 2.2. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any
"margin stock" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System or for any other
purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements.
(N) SINGLE-PURPOSE ENTITY.
(i) Borrower at all times since its formation has been a
duly formed and existing limited liability company or limited
partnership and currently exists as a Single-Purpose Entity. Borrower
is duly qualified, if required, as a foreign limited liability company
or limited partnership in the jurisdiction in which any REO Property is
located.
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(ii) Borrower at all times since its formation has complied
with the provisions of its Organization Agreement and the laws of the
State of Borrower's formation relating to limited liability companies
or limited partnerships.
(iii) All customary formalities regarding the limited
liability company or limited partnership existence of Borrower have
been observed at all times since the Organization Agreement was
executed and delivered.
(iv) Borrower has at all times since it began maintaining
such items accurately maintained its financial statements, accounting
records and other documents separate from those of its members or
partners, Affiliates of its members or partners and any other Person.
Borrower or partners has not at any time since its formation commingled
its assets with those of its members or partners, any Affiliates of its
members or partners, or any other Person. Borrower has at all times
since establishing its own bank accounts accurately maintained its own
bank accounts and separate books of account.
(v) Borrower has at all times since receiving funds paid
its own liabilities from its own separate assets.
(vi) Borrower has at all times since its formation
identified itself in all dealings with the public, under its own name
and as a separate and distinct entity and has not at any time since its
formation identified itself as being a division or a part of any other
entity. Borrower has not at any time since its formation identified its
members or partners or any Affiliates of its members or partners as
being a division or part of the Borrower.
(vii) Borrower is as of the date hereof adequately
capitalized in light of the nature of its business.
(viii) Borrower has not at any time since its formation
assumed or guaranteed the liabilities of its members or partners (or
any predecessor corporation, partnership or limited liability company),
any Affiliates of its members or partners, or any other Persons, except
for liabilities relating to an REO Property and except as permitted by
or pursuant to this Agreement. Borrower has not at any time since its
formation acquired obligations or securities of its members or partners
(or any predecessor corporation, partnership or limited liability
company), or any Affiliates of its members or partners. Borrower has
not at any time since its formation made loans to its members or
partners (or any predecessor corporation, partnership or limited
liability company), or any Affiliates of its members or partners.
(ix) Borrower has not at any time since its formation
entered into and was not a party to any transaction with its members or
partners (or any predecessor corporation, partnership or limited
liability company) or any Affiliates of its members or partners except
in the ordinary course of business on terms which are no less favorable
than would be obtained in a comparable arm's length transaction with an
unrelated third party.
(O) NO DEFAULTS. No Default or Event of Default
exists under or with respect to any Loan Document.
(P) PRE-CLOSING DATE ACTIVITIES. Borrower has
not conducted any business or other activity, other than in
connection with the acquisition, management and ownership of
an REO Property or Mortgage Loan.
(Q) PLANS AND WELFARE PLANS. The assets of
Borrower are not treated as "plan assets" under U.S.
Department of Labor regulations Section 2510.3-101 currently
promulgated under ERISA. Each Plan, and, to the Actual
Knowledge of Borrower, each Multiemployer Plan, is in
compliance in all material respects with, and has been
administered in all material respects in compliance with, its
terms and the applicable provisions of ERISA, the Code and any
other
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federal or state law, and no event or condition has occurred
and is continuing as to which the Borrower would be under an
obligation to furnish a report to Agent under SECTION
5.1(U)(I). Other than an application for a favorable
determination letter with respect to a Plan, there are no
pending issues or claims before the Internal Revenue Service,
the United States Department of Labor or any court of
competent jurisdiction related to any Plan or Welfare Plan. No
event has occurred, and there exists no condition or set of
circumstances, in connection with any Plan or Welfare Plan
under which the Borrower or, to the best knowledge of
Borrower, any ERISA Affiliate, directly or indirectly (through
an indemnification agreement or otherwise), is reasonably
likely to be subject to any material risk of liability under
Section 409 or 502(i) of ERISA or Section 4975 of the Code. No
Welfare Plan provides or will provide benefits, including,
without limitation, death or medical benefits (whether or not
insured) with respect to any current or former employee of the
Borrower, or, to the best knowledge of Borrower, any ERISA
Affiliate beyond his or her retirement or other termination of
service other than (i) coverage mandated by applicable law,
(ii) death or disability benefits that have been fully
provided for by fully paid up insurance or (iii) severance
benefits.
(R) LOCATION OF CHIEF EXECUTIVE OFFICES. The
location of the Borrower's principal place of business and
chief executive office is at the address set forth in the
opening paragraph of this Agreement.
(S) NOT FOREIGN PERSON. Borrower is not a
"foreign person" within the meaning of ss. 1445(f)(3) of the
Code.
(T) LABOR MATTERS. Borrower is not a party to
any collective bargaining agreements.
SECTION 4.2. REPRESENTATIONS AND WARRANTIES AS TO THE MORTGAGE
LOANS. Borrower hereby represents and warrants to the Agent that, as to each
Mortgage Loan, as of each Advance Closing Date for such Mortgage Loan:
(A) OWNERSHIP OF MORTGAGE LOANS. Borrower has
good and marketable title to, and is the sole owner and holder
of, such Mortgage Loan, free and clear of any and all liens,
encumbrances and other interests on, in or to such Mortgage
Loan.
(B) MORTGAGE LOAN INFORMATION. The information
in respect of the Mortgage Loan delivered to Agent is true and
correct in all material respects, and Borrower has delivered
to Agent all material information relating to such Mortgage
Loan and the related Mortgagor.
(C) PAYMENT RECORD. Such Mortgage Loan is not 30
days or more delinquent in respect of any debt service payment
required thereunder, without giving effect to any applicable
grace period. Such Mortgage Loan has not been 30 days or more
delinquent during the thirty-six months preceding the Advance
Closing Date hereunder on account of such Mortgage Loan, or,
if such Mortgage Loan was originated in the twelve month
period prior to such Advance, since the date of acquisition.
For purposes of the foregoing, a Mortgage Loan is not 30 days
delinquent until a payment required to be made to the
mortgagee is past due on the succeeding due date.
(D) LIEN PRIORITY. The related Mortgage
constitutes a valid first lien upon the related commercial or
multi-family Mortgaged Property, including all buildings
located thereon and all fixtures attached thereto, subject
only to Permitted Encumbrances. The Permitted Encumbrances do
not materially interfere with the security intended to be
provided by the related Mortgage, the current use or operation
of the related Mortgaged Property or the current ability of
the Mortgaged Property to generate net operating income
sufficient to service the Mortgage Loan. The Mortgage,
together with any separate security agreement, similar
agreement and UCC financing statement, if any, establishes and
creates a first priority, perfected security interest, to the
extent
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such security interest can be perfected by the recordation of
a Mortgage and the filing of a UCC financing statement, in all
personal property owned by the Mortgagor that is used in, and
is reasonably necessary to, the operation of the related
Mortgaged Property. There exists with respect to such
Mortgaged Property an assignment of leases and rents
provision, whether as part of the related Mortgage or as a
separate document or instrument, which establishes and creates
a first priority security interest in and to leases and rents
arising in respect of the related Mortgaged Property, subject
only to Permitted Encumbrances and no Person other than the
related Mortgagor owns any interest in any payments due under
such leases that is superior to or of equal priority with the
mortgagee's interest therein.
(E) TITLE INSURANCE. The lien of the related
Mortgage is insured by an ALTA lender's title insurance
policy, or its equivalent as adopted in the applicable
jurisdiction, issued by a nationally recognized title
insurance company, insuring the originator of such Mortgage
Loan, its successors and assigns, as to the first priority
lien of the Mortgage in the original principal amount of the
Mortgage Loan after all advances of principal, subject only to
Permitted Encumbrances (or, if a title insurance policy has
not yet been issued in respect of the Mortgage Loan, a policy
meeting the foregoing description is evidenced by a commitment
for title insurance "marked-up" at the closing of such loan).
Each such title policy (or, if it has yet to be issued, the
coverage to be provided thereby) is in full force and effect
and all premiums thereon have been paid. No claims have been
made thereunder and no claims have been paid thereunder. No
holder of the related Mortgage has done, by act or omission,
anything that would materially impair the coverage under such
title policy. The insurer that issued such title policy is
qualified to do business in the state in which the related
Mortgaged Property is located. The Borrower or its successors
or assigns is the sole named insured of such policy. Such
policy is assignable to the Agent without the consent of, or
any notification to, the insurer.
(F) NO WAIVERS OF MATERIAL DEFAULTS. No holder
of such Mortgage or Mortgage Note has waived any material
default, breach, violation or event of acceleration existing
under such Mortgage or Mortgage Note.
(G) NO OFFSETS, DEFENSES OR COUNTERCLAIMS. There
is no valid offset, defense or counterclaim to such Mortgage
Loan.
(H) CONDITION OF PROPERTY; CONDEMNATION. Except
as set forth in the Engineering Report, to the Actual
Knowledge of Borrower, the related Mortgaged Property is free
and clear of any damage that would materially and adversely
affect its value as security for such Mortgage Loan. Borrower
has no Actual Knowledge of the commencement of a proceeding
for the condemnation of all or any material portion of the
related Mortgaged Property.
(I) COMPLIANCE WITH LAWS. Such Mortgage Loan
complied with all applicable usury laws in effect at its date
of origination, and any subsequent change in usury laws has
not caused such Mortgage Loan to become illegal, invalid, or
unenforceable, in whole or in part. Any and all other
requirements of federal, state and local laws (including,
without limitation, truth-in-lending, real estate settlement
procedures, equal credit opportunity or disclosure laws)
applicable to such Mortgage Loan have been complied with as of
the date of origination of such Mortgage Loan, except for any
non-compliance which is not reasonably likely to have a
Material Adverse Effect.
(J) FULL DISBURSEMENT OF MORTGAGE LOAN PROCEEDS.
Except as disclosed to the Agent by the Borrower in connection
with the pledge of the related Mortgage Loan hereunder, the
proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder.
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(K) ENFORCEABILITY. The related Mortgage Note
and Mortgage and all other documents and instruments
evidencing, guaranteeing, insuring or otherwise securing such
Mortgage Loan have been duly and properly executed by the
parties thereto, and each is the legal, valid and binding
obligation of the maker thereof (subject to any non-recourse
provisions contained in any of the foregoing agreements and
any applicable state anti-deficiency legislation), enforceable
in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or
affecting the rights of creditors generally and by general
principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law).
(L) INSURANCE. All improvements upon the related
Mortgaged Property are insured against loss by hazards of
extended coverage in an amount (subject to a customary
deductible) at least equal to the lesser of the outstanding
principal balance of such Mortgage Loan and 100% of the full
replacement cost of the improvements located on such Mortgaged
Property and the related hazard insurance policy contains
appropriate endorsements to avoid the application of
co-insurance and does not permit reduction in insurance
proceeds for depreciation. Each related Mortgaged Property is
also covered by business interruption insurance and
comprehensive general liability insurance in amounts generally
required by institutional lenders for similar properties. If
any portion of the related Mortgaged Property was, at the time
of the origination of such Mortgage Loan, in an area
identified in the Federal Register by the Flood Emergency
Management Agency as having special flood hazards, and flood
insurance was available, a flood insurance policy meeting any
requirements of the then current guidelines of the Federal
Insurance Administration is in effect with a generally
acceptable insurance carrier, in an amount representing
coverage not less than the least of (1) the outstanding
principal balance of such Mortgage Loan, (2) the full
insurable value of such Mortgaged Property, (3) the maximum
amount of insurance available under the National Flood
Insurance Act of 1968, as amended, and (4) 100% of the
replacement cost of the improvements located on such Mortgaged
Property. All premiums on such insurance premiums required to
be paid have been paid. Each such insurance policy requires
prior notice to the holder of the Mortgage of termination or
cancellation, and no such notice has been received that has
not been cured. Each related Mortgage obligates the related
borrower to maintain all such insurance and, at such
borrower's failure to do so, authorizes the mortgagee to
maintain such insurance at the borrower's cost and expense and
to seek reimbursement therefor from such borrower.
(M) ENVIRONMENTAL CONDITION. The related
Mortgaged Property was subject to one or more Environmental
Reports which were performed on behalf of Borrower, or as to
which such Environmental Report was delivered to Borrower in
connection with its acquisition or origination of such
Mortgage Loan: and Borrower, having made no independent
inquiry other than reviewing the Environmental Report(s)
and/or employing an environmental consultant to perform the
assessment(s) referenced herein, has no Actual Knowledge of
any material and adverse environmental conditions or
circumstance affecting such Mortgaged Property that was not
disclosed in the Environmental Report(s). Borrower has not
received any actual notice of a material violation of any
Environmental Law with respect to the related Mortgaged
Property that was not disclosed in the Environmental Report.
(N) NO CONNECTION WITH OTHER MORTGAGE LOANS. The
Mortgage Loan is not cross-collateralized or cross-defaulted
with any other loan or obligation of any Person (including the
Mortgagor under such Mortgage Loan), except with any Mortgage
Loan previously or simultaneously made part of the Collateral.
(O) WAIVERS AND MODIFICATIONS. The terms of the
related Mortgage and the Mortgage Note have not been impaired,
waived, altered, modified, satisfied, cancelled, subordinated
or rescinded, except as specifically set forth in the related
Mortgage Loan Documents and the related Mortgaged Property has
not been released from the lien of the related
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Mortgage in any manner which materially interferes with the
security intended to be provided by such Mortgage.
(P) TAXES AND ASSESSMENTS. Except as set forth
in the title insurance policy referred to in SECTION 4.2(e)
above, there are no delinquent taxes, ground rents, water
charges, sewer rents, assessments or other similar outstanding
charges affecting the related Mortgaged Property which are or
may become a lien of priority equal to or higher than the lien
of the related Mortgage, and no portion of such Mortgaged
Property is located in any tax lot that includes any real
property other than such Mortgaged Property.
(Q) MORTGAGOR'S INTEREST IN MORTGAGED PROPERTY.
The interest of the related Mortgagor in the related Mortgaged
Property consists of a fee simple estate in real property,
except where Agent has approved a Ground Lease that fully
complies with the requirements of this Agreement applicable to
Ground Leases.
(R) WHOLE LOAN. The Mortgage Loan is a whole
loan and not a participation interest.
(S) VALID ASSIGNMENT. The Collateral Assignment
of Mortgage and related Collateral Assignment of Assignment of
Leases, if any, or assignment of any other agreement executed
in connection with such Mortgage Loan constitutes the legal,
valid and binding assignment of such Mortgage from Borrower to
or for the benefit of Agent, and validly grants a security
interest in such Mortgage Loan to or for the benefit of Agent
free and clear of any other pledge, lien, encumbrance or
security interest.
(T) ESCROWS. All escrow deposits relating to
such Mortgage Loan that are required to be deposited with the
mortgagee or its agent have been so deposited.
(U) NO MECHANICS' OR MATERIALMEN'S LIENS. As of
the date of origination of such Mortgage Loan and as of the
Advance Closing Date, to the Actual Knowledge of Borrower, the
related Mortgaged Property was and is free and clear of any
mechanics' and materialmen's liens or liens in the nature
thereof which create a lien prior to or equal with that
created by the related Mortgage except those which are insured
against by the lender's title insurance policy referred to in
paragraph E.
(V) NO MATERIAL ENCROACHMENTS. To the Actual
Knowledge of Borrower, as of the date of origination, no
improvement that was included for the purpose of determining
the appraised value of the related Mortgaged Property at the
time of origination of such Mortgage Loan lay outside the
boundaries and building restriction lines of such property to
any material extent (unless affirmatively covered by the Title
Policy), and no improvements on adjoining properties
encroached upon such Mortgaged Property to any material
extent. The improvements located on or forming part of such
Mortgaged Property comply in all material respects with
applicable zoning laws and ordinances (except to the extent
that they may constitute legal non-conforming uses).
(W) ORIGINATOR AUTHORIZED. To the extent
required under applicable law, Borrower was authorized to do
business in the jurisdiction in which the related Mortgaged
Property is located at all times when it held the Mortgage
Loan.
(X) NO MATERIAL DEFAULT. To the Actual Knowledge
of Borrower, there exists no default, breach or event of
acceleration under the related Mortgage or Mortgage Note, and
no event (other than payments due but not yet delinquent)
that, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute such
a default, breach or event of acceleration; provided, however,
that this representation and warranty does not cover any
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default, breach or event of acceleration that specifically
pertains to any matter otherwise covered or addressed by any
other representation and warranty made by Borrower therein.
(Y) NO EQUITY PARTICIPATION OR CONTINGENT
INTEREST. The Mortgage Loan contains no equity participation
by the lender and does not provide for any contingent or
additional interest in the form of participation in the cash
flow of the related Mortgaged Property, or for negative
amortization.
(Z) NO ADVANCES OF FUNDS. To the Actual
Knowledge of Borrower, no holder of the Mortgage Loan has
advanced funds or induced, solicited or knowingly received any
advance of funds from a party other than the owner of the
related Mortgaged Property, directly or indirectly, for the
payment of any amount required by the Mortgage Loan. No
current or prior holder of the Mortgage Loan is holding any
escrows, impounds, reserves, or other cash deposits in
connection with such Mortgage Loan other than as set forth in
the documents and schedules provided to Agent hereunder.
(AA) LICENSES, PERMITS, ETC. To the Actual
Knowledge of Borrower, as of the date of origination of the
Mortgage Loan, the related Mortgagor was in possession of all
licenses, permits and other authorizations required by
applicable laws for the ownership and operation of the related
Mortgaged Property as it was then operated, except for
authorizations which, if not obtained, are not reasonably
likely to have a Material Adverse Effect. All such licenses,
permits and authorizations are valid and in full force and
effect.
(BB) SERVICING. The servicing and collection
practices used with respect to the Mortgage Loan have complied
with applicable law in all material respects and are
consistent with those employed by prudent servicers of
comparable mortgage loans.
(CC) CUSTOMARY REMEDIES. The related Mortgage or
Mortgage Note, together with applicable state law, contains
customary and enforceable provisions (subject to the
exceptions set forth in paragraph (K)) such as to render the
rights and remedies of the holders thereof adequate for the
practical realization against the related Mortgaged Property
of the principal benefits of the security intended to be
provided thereby.
(DD) INSURANCE AND CONDEMNATION PROCEEDS. The
related Mortgage provides that insurance proceeds and
condemnation proceeds will be applied either to restore or
repair the Mortgaged Property (subject to normal and customary
disbursement conditions and procedures, including a
requirement that such proceeds be held by or on behalf of the
holder of the Mortgage Loan pending disbursement and that any
shortfall in proceeds be fully funded before restoration
commences), or to repay the principal of the Mortgage Loan or
otherwise at the option of the holder of the Mortgage.
(EE) LEASEHOLD ESTATE. Each Mortgaged Property
consists of the related Mortgagor's fee simple estate in real
estate or, if the related Mortgage Loan is secured in whole or
in part by the interest of a Mortgagor as a lessee under a
ground lease of a Mortgaged Property (a "GROUND LEASE"), by
the related Mortgagor's interest in the Ground Lease but not
by the related fee interest in such Mortgaged Property (the
"FEE INTEREST") and, with respect to any such Ground Lease:
(a) Such Ground Lease or a memorandum thereof has been or
will be duly recorded; such Ground Lease (or the related estoppel
letter or lender protection agreement between the Seller and related
lessor) permits the interest of the lessee thereunder to be encumbered
by the related Mortgage; and, to the Actual Knowledge of the Borrower,
there has been no material change in the payment terms of such Ground
Lease since the origination of the related Mortgage Loan, with the
exception of material changes reflected in written instruments that are
a part of the related Mortgage Loan Documents;
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(b) To the Actual Knowledge of Borrower, the lessee's
interest in such Ground Lease is not subject to any liens or
encumbrances superior to, or of equal priority with, the related
Mortgage, other than Permitted Encumbrances;
(c) The Mortgagor's interest in such Ground Lease is
assignable to the Agent and its successors and assigns upon notice to,
but without the consent of, the lessor thereunder (or, if such consent
is required, it has been obtained) and, in the event that it is so
assigned, is further assignable by Agent and its successors and assigns
upon notice to, but without the need to obtain the consent of, such
lessor;
(d) Such Ground Lease is in full force and effect, and
Borrower has received no notice that an event of default has occurred
thereunder, and, to Borrower's Actual Knowledge, there exists no
condition that, but for the passage of time or the giving of notice, or
both, would result in an event of default under the terms of such
Ground Lease;
(e) Such Ground Lease, or an estoppel letter or other
agreement, requires the lessor under such Ground Lease to give notice
of any default by the lessee to the mortgagee, provided that the
mortgagee has provided the lessor with notice of its lien in accordance
with the provisions of such Ground Lease, and such Ground Lease, or an
estoppel letter or other agreement, further provides that no notice of
termination given under such Ground Lease is effective against the
mortgagee unless a copy has been delivered to the mortgagee;
(f) A mortgagee is permitted a reasonable opportunity
(including, where necessary, sufficient time to gain possession of the
interest of the lessee under such Ground Lease) to cure any default
under such Ground Lease, which is curable after the receipt of notice
of any such default, before the lessor thereunder may terminate such
Ground Lease;
(g) Such Ground Lease has an original term (including any
extension options set forth therein) which extends not less than ten
years beyond the stated maturity date of the related Mortgage Loan;
(h) Under the terms of such Ground Lease and the related
Mortgage, taken together, any related insurance proceeds other than in
respect of a total or substantially total loss or taking, will be
applied either to the repair or restoration of all or part of the
related Mortgaged Property, with the mortgagee or a trustee appointed
by it having the right to hold and disburse such proceeds as the repair
or restoration progresses (except in such cases where a provision
entitling another party to hold and disburse such proceeds would not be
viewed as commercially unreasonable by a prudent commercial mortgage
lender), or to the payment of the outstanding principal balance of the
Mortgage Loan together with any accrued interest thereon; and
(i) Such Ground Lease does not impose any restrictions on
subletting which would be viewed, as of the date of origination of the
related Mortgage Loan, as commercially unreasonable by the Borrower;
and such Ground Lease contains a covenant that the lessor thereunder is
not permitted, in the absence of an uncured default, to disturb the
possession, interest or quiet enjoyment of any subtenant of the lessee,
or in any manner, which would adversely affect the security provided by
the related Mortgage
(FF) DEED OF TRUST. If the related Mortgage is a
deed of trust, a trustee, duly qualified under applicable law
to serve as such, is properly designated and serving under
such Mortgage, and such trustee is not Borrower or an
Affiliate of Borrower.
(GG) LIEN RELEASES. Except in cases where either
(a) a release of a portion of the Mortgaged Property was
contemplated at origination of the Mortgage Loan and such
portion was not considered material for purposes of
underwriting the Mortgage Loan or (b) release is conditioned
upon the satisfaction of certain underwriting and legal
requirements (such that after the release the Mortgage Loan
will continue to comply with all applicable representations
and
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warranties in this Agreement effective upon the consummation
of such release) and the payment of a release price the effect
of which is to increase the Loan to Value Ratio for such
Mortgage Loan after consummation of the release, the related
Mortgage Note or Mortgage does not require the holder thereof
to release all or any portion of the Mortgaged Property from
the lien of the related Mortgage except upon payment in full
of all amounts due under such Mortgage Loan.
(HH) JUNIOR LIENS. The related Mortgaged Property
is not encumbered by any mortgage or other lien except for the
lien of the related Mortgage.
(II) MORTGAGOR STATUS. The Mortgagor is a special
purpose bankruptcy remote entity with no liabilities or assets
(other than the Mortgage Loan and the Mortgaged Property) and
is not a debtor in any state or federal bankruptcy or
insolvency proceeding.
(JJ) DUPLICATE NOTES. Only one original exists of
the promissory note (and amendments and assignments thereof)
secured by the Mortgage Loan. No duplicate original(s)
exist(s) of any such promissory note or amendment or
assignment.
(KK) MORTGAGOR REPRESENTATIONS AND WARRANTIES. To
the Actual Knowledge of the Borrower, all representations and
warranties made by the Mortgagor in the Mortgage and all
related Mortgage Loan Documents are true and collect in all
material aspects.
SECTION 4.3. REPRESENTATIONS AND WARRANTIES AS TO THE REO
PROPERTIES. Borrower hereby represents and warrants to the Agent that, as to
each REO Property and related REO Mortgage, as of each Advance Closing Date with
respect to such REO Property and REO Mortgage:
(A) TITLE TO THE REO PROPERTY. Borrower owns
good, marketable and insurable title to the applicable REO
Property, in fee simple (or where Borrower's interest in the
Land is as lessee under a Ground Lease, in such Ground Lease),
free and clear of all Liens, other than the Permitted
Encumbrances applicable to such REO Property. There are no
outstanding options to purchase or rights of first refusal or
restrictions on transferability affecting such REO Property.
(B) OTHER DEBT. Except for the debt permitted
under SECTION 6.1(C), Borrower has not borrowed or received
other debt financing whether unsecured or secured by the
applicable REO Property or any part thereof.
(C) CONDEMNATION. No Taking has been commenced
or, to the best of Borrower's knowledge, is contemplated with
respect to all or any portion of the applicable REO Property
or for the relocation of roadways providing access to such REO
Property.
(D) COMPLIANCE. To the Actual Knowledge of
Borrower, the applicable REO Property is in compliance with
all applicable Legal Requirements (including, without
limitation, building and zoning ordinances and codes) and all
applicable Insurance Requirements, except for noncompliance
which is not reasonably likely to have a Material Adverse
Effect.
(E) ENVIRONMENTAL COMPLIANCE. Except for matters
set forth in the Environmental Reports delivered to Agent in
connection with the Advance (true, correct and complete copies
of which have been provided to the Agent by Borrower):
(i) To the Actual Knowledge of the
Borrower, Borrower and each REO Property are each in
compliance with all applicable Environmental Laws
(which compliance includes, but is not limited to,
the possession of all environmental, health and
safety permits, licenses and other governmental
authorizations required in connection with the
ownership and operation of such REO Property under
all Environmental Laws),
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except for noncompliance which is not reasonably
likely to have a Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to the
Actual Knowledge of Borrower, threatened, and no penalties arising
under Environmental Laws have been assessed with respect to such REO
Property against the Borrower or, to the Actual Knowledge of Borrower,
against any Person whose liability for any Environmental Claim the
Borrower has or may have retained or assumed either contractually or by
operation of law, and no investigation or review is pending or, to the
Actual Knowledge of Borrower, threatened by any Governmental Authority,
citizens group, employee or other Person with respect to such REO
Property or any alleged failure by the Borrower or such REO Property to
have any environmental, health or safety permit, license or other
authorization required under, or to otherwise comply with, any
Environmental Law or with respect to any alleged liability of Borrower
for any Use or Release of any Hazardous Substances.
(iii) There are no present and, to the Actual Knowledge of
the Borrower, have been no past Releases of any Hazardous Substance
that are reasonably likely to form the basis of any Environmental Claim
against the Borrower or against any Person whose liability for any
Environmental Claim the Borrower has or may have retained or assumed
either contractually or by operation of law.
(iv) Without limiting the generality of the foregoing, to
the Actual Knowledge of the Borrower there is not present at, on, in or
under such REO Property, PCB containing equipment, asbestos or asbestos
containing materials, underground storage tanks or surface impoundments
for Hazardous Substances, lead in drinking water (except in
concentrations that comply with all Environmental Laws), or lead-based
paint.
(v) No liens are presently recorded with the appropriate
land records under or pursuant to any Environmental Law with respect to
such REO Property and no Governmental Authority has taken or is in the
process of taking any action that could subject such REO Property to
Liens under any Environmental Law.
(vi) There have been no environmental investigations,
studies, audits, reviews or other analyses conducted by or that are in
the possession of Borrower in relation to such REO Property which have
not been made available to the Agent.
(F) REO MORTGAGE AND OTHER LIENS. The applicable
REO Mortgage creates a valid and enforceable first priority
Lien on the related REO Property described therein, as
security for the repayment of the Indebtedness, subject only
to the Permitted Encumbrances applicable to such REO Property.
Each Collateral Security Instrument establishes and creates a
valid, subsisting and enforceable Lien on and a security
interest in, or claim to, the rights and property described
therein. All property covered by any Collateral Security
Instrument is subject to a UCC financing statement filed
and/or recorded, as appropriate (or irrevocably delivered to
an agent for such recordation or filing) in all places
necessary to perfect a valid first priority Lien with respect
to the rights and property that are the subject of such
Collateral Security Instrument to the extent governed by the
UCC.
(G) ASSESSMENTS. There are no pending or, to the
Actual Knowledge of the Borrower, proposed special or other
assessments for public improvements or otherwise affecting the
applicable REO Property, nor are there any contemplated
improvements to such REO Property that may result in such
special or other assessments.
(H) NO JOINT ASSESSMENT; SEPARATE LOTS. Borrower
has not suffered, permitted or initiated the joint assessment
of the applicable REO Property (i) with any other real
property constituting a separate tax lot, and (ii) with any
portion of such REO Property which may be deemed to constitute
personal property, or any other procedure whereby the lien of
any taxes
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which may be levied against such personal property shall be
assessed or levied or charged to such REO Property as a single
lien. Such REO Property is comprised of one or more parcels,
each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot.
(I) NO PRIOR ASSIGNMENT. The Agent is the
assignee of Borrower's interest under the Leases. There are no
prior assignments of the Leases or any portion of the Rent due
and payable or to become due and payable which are presently
outstanding.
(J) PERMITS; CERTIFICATE OF OCCUPANCY. To the
Actual Knowledge of Borrower, all Permits necessary to the use
and operation of each REO Property have been obtained, the use
being made of such REO Property is in conformity with the
certificate of occupancy and/or Permits for such REO Property
and any other restrictions, covenants or conditions affecting
such REO Property, and such REO Property is zoned as a matter
of right for its current use.
(K) FLOOD ZONE. To the Actual Knowledge of
Borrower, except as shown on the Survey, the applicable REO
Property is not located in a flood hazard area as defined by
the Federal Insurance Administration.
(L) PHYSICAL CONDITION. To the Actual Knowledge
of Borrower, the applicable REO Property is free of structural
defects and all building systems contained therein are in good
working order subject to ordinary wear and tear.
(M) SECURITY DEPOSITS. To the Actual Knowledge
of Borrower, Borrower is in compliance with all Legal
Requirements relating to all security deposits with respect to
the applicable REO Property.
(N) NO DEFAULTS. No Default or Event of Default
exists under or with respect to any Loan Document.
(O) INTELLECTUAL PROPERTY. To the Actual
Knowledge of Borrower, (i) all material trademarks, trade
names and service marks that Borrower owns or has pending, or
under which it is licensed, are in good standing and
uncontested; (ii) there is no right under any trademark, trade
name or service mark necessary to the business of Borrower as
presently conducted or as Borrower contemplates conducting its
business; (iii) Borrower has not infringed, is not infringing,
and has not received notice of infringement with respect to
asserted trademarks, trade names and service marks of others;
and (iv) there is no infringement by others of material
trademarks, trade names and service marks of Borrower.
(P) NO ENCROACHMENTS. To the Actual Knowledge of
the Borrower, except as shown on the Survey, (i) all of the
Improvements lie wholly within the boundaries and building
restriction lines of each REO Property, (ii) no improvements
on adjoining properties encroach upon such REO Property, (iii)
no easements or other encumbrances upon such REO Property
encroach upon any of the Improvements, so as to affect the
value or marketability of such REO Property except those which
are insured against by title insurance; and (iv) all of the
Improvements comply with all material requirements of any
applicable zoning and subdivision laws and ordinances.
(Q) MANAGEMENT AGREEMENT. The Management
Agreement is in full force and effect. There is no default,
breach or violation existing thereunder by any party thereto
and no event (other than payments due but not yet delinquent)
which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a
default, breach or violation by any party thereunder.
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(R) LEASES.
(i) The applicable REO Property is not subject to any
Leases other than the applicable Leases described in any rent roll
delivered to the Agent in connection with the making of each Advance.
The location and size of each leased premises and the commencement and
expiration date and the rent currently payable thereunder is in all
material respects accurately set forth in such rent roll. To the Actual
Knowledge of the Borrower, none of the applicable Leases referred to in
such rent roll has been assigned, modified, supplemented or amended in
any way that would render inaccurate any material information contained
in such rent roll. Except as set forth in such rent roll, no tenant
under any such Lease has any right or option to renew or extend such
Lease. Except as set forth in such rent roll, there are no "free rent"
or other rental concessions under such existing Leases effective during
the term of this Agreement.
(ii) Except in connection with the Loan, the Borrower has
not assigned, pledged or hypothecated its right, title or interest in,
to or under the Leases of any REO Property or of the rentals
thereunder. No tenant under any Lease has any right or option to cancel
the Lease (other than pursuant to customary casualty and condemnation
provisions). To the Actual Knowledge of the Borrower, all of the
construction and other obligations to be performed by the landlord
under the Leases have been satisfied, and any and all required payments
to be made by the landlord under the Leases for tenant improvements
have been made. No rent under the Leases has been paid more than one
month in advance. No actions, whether voluntary or involuntary, are
pending against any tenant under a Lease at any REO Property under the
bankruptcy or insolvency laws of the United States or any state or
territory of the United States. The current Leases are in full force
and effect and there are no defaults thereunder by either party and no
conditions which with the passage of time and/or notice would
constitute defaults thereunder, and there are no existing defenses,
offsets or counterclaims held by any tenant of an REO Property against
the enforcement of such Leases by Borrower.
(S) UTILITIES AND PUBLIC ACCESS. To the Actual
Knowledge of the Borrower, each REO Property has adequate
rights of access to public ways and is served by water,
electric, sewer, sanitary sewer and storm drain facilities,
all public utilities necessary to the continued use and
enjoyment of such REO Property as presently used and enjoyed
are located in the public right-of-way abutting the premises,
and all such utilities are connected so as to serve such REO
Property without passing over other property except for land
of the utility company providing such utility service. To the
Actual Knowledge of the Borrower, all roads necessary for the
full utilization of such REO Property for its current purpose
have been completed and dedicated to public use and accepted
by all Governmental Authorities or are the subject of access
easements for the benefit of such REO Property.
(T) LEASEHOLD ESTATE. Each REO Property consists
of the related Borrower's fee simple estate in real estate or,
if the related REO Mortgage is secured in whole or in part by
the interest of a Borrower as a lessee under a Ground Lease of
an REO Property, by the related Borrower's interest in the
Ground Lease but not by the related fee interest in such REO
Property and, with respect to any such Ground Lease:
(a) Such Ground Lease or a memorandum
thereof has been duly recorded; such
Ground Lease (or the related estoppel
letter or lender protection agreement
between the seller and related lessor)
permits the interest of the lessee
thereunder to be encumbered by the
related REO Mortgage; and, to the Actual
Knowledge of the Borrower, there has
been no material change in the payment
terms of such Ground Lease since
recordation with the exception of
material changes disclosed in writing to
Agent;
(b) To the Actual Knowledge of Borrower, the
lessee's interest in such Ground Lease
is not subject to any liens or
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encumbrances superior to, or of equal
priority with, the related REO Mortgage,
other than Permitted Encumbrances;
(c) The Borrower's interest in such Ground
Lease is assignable to the Agent and its
successors and assigns upon notice to,
but without the consent of, the lessor
thereunder (or, if such consent is
required, it has been obtained) and, in
the event that it is so assigned, is
further assignable by Agent and its
successors and assigns upon notice to,
but without the need to obtain the
consent of, such lessor;
(d) Such Ground Lease is in full force and
effect, and Borrower has received no
notice that an event of default has
occurred thereunder, and, to Borrower's
Actual Knowledge, there exists no
condition that, but for the passage of
time or the giving of notice, or both,
would result in an event of default
under the terms of such Ground Lease;
(e) Such Ground Lease, or an estoppel letter
or other agreement, requires the lessor
under such Ground Lease to give notice
of any default by the lessee to the
mortgagee, provided that the mortgagee
has provided the lessor with notice of
its lien in accordance with the
provisions of such Ground Lease, and
such Ground Lease, or an estoppel letter
or other agreement, further provides
that no notice of termination given
under such Ground Lease is effective
against the mortgagee unless a copy has
been delivered to the mortgagee;
(f) A mortgagee is permitted a reasonable
opportunity (including, where necessary,
sufficient time to gain possession of
the interest of the lessee under such
Ground Lease) to cure any default under
such Ground Lease, which is curable
after the receipt of notice of any such
default, before the lessor thereunder
may terminate such Ground Lease;
(g) Such Ground Lease has an original term
(including any extension options set
forth therein) which extends not less
than ten years beyond the stated
maturity date of the related REO
Mortgage;
(h) Under the terms of such Ground Lease and
the related REO Mortgage, taken
together, any related insurance proceeds
other than in respect of a total or
substantially total loss or taking, will
be applied either to the repair or
restoration of all or part of the
related REO Property, with the mortgagee
or a trustee appointed by it having the
right to hold and disburse such proceeds
as the repair or restoration progresses
(except in such cases where a provision
entitling another party to hold and
disburse such proceeds would not be
viewed as commercially unreasonable by a
prudent commercial mortgage lender), or
to the payment of the outstanding
principal balance of the Loan together
with any accrued interest thereon;
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(i) Such Ground Lease does not impose any
restrictions on subletting which would
be viewed, as of the date of origination
of the related Advance, as commercially
unreasonable by the Borrower; and such
Ground Lease contains a covenant that
the lessor thereunder is not permitted,
in the absence of an uncured default, to
disturb the possession, interest or
quiet enjoyment of any subtenant of the
lessee, or in any manner, which would
adversely affect the security provided
by the related REO Mortgage;
(j) All Ground Rent due and payable through
and including the related Advanced
Closing Date has been paid; and
(k) Each Ground Lease requires the lessor to
enter into a New Ground Lease upon the
termination of the Ground Lease for any
reason, including the rejection of a
Ground Lease in bankruptcy.
SECTION 4.4. SURVIVAL OF REPRESENTATIONS. Borrower agrees that (i)
all of the representations and warranties of Borrower set forth in SECTION 4.1
and in the other Loan Documents delivered on the Closing Date are made as of the
Closing Date, and (ii) all of the representations and warranties of Borrower set
forth in SECTION 4.2 and 4.3 and elsewhere in this Agreement (including in
SECTION 4.1) and in the other Loan Documents are made, or reaffirmed, as of each
Advance Closing Date (subject to Section 3.5(O)), and (iii) all representations
and warranties made by Borrower shall survive the delivery of the Global Note
and making of the Loan and continue for so long as any amount remains owing to
the Lenders under this Agreement, the Global Note or any of the other Loan
Documents; PROVIDED, HOWEVER, THAT the representations set forth in SECTION
4.2(m) and 4.3(e) shall survive in perpetuity. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents
shall be deemed to have been relied upon by the Lenders and Collateral Agent
notwithstanding any investigation heretofore or hereafter made by the Lenders
and Collateral Agent or on their behalf.
ARTICLE V.
AFFIRMATIVE COVENANTS
SECTION 5.1. AFFIRMATIVE COVENANTS. Borrower covenants and agrees
that, from the date hereof and until payment in full of the Indebtedness:
(A) EXISTENCE; COMPLIANCE WITH LEGAL
REQUIREMENTS; INSURANCE. Borrower shall do or cause to be done
all things reasonably necessary to preserve, renew and keep in
full force and effect its existence as a limited liability
company or limited partnership, all rights, licenses, Permits
and franchises necessary for the conduct of its business and
to comply with all Legal Requirements and Insurance
Requirements applicable to it and each REO Property. Borrower
shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of
its property necessary for the continued conduct of its
business and keep each REO Property in good repair, working
order and condition, except for reasonable wear and use, and
from time to time make, or cause to be made, all reasonably
necessary repairs, renewals, replacements, betterments and
improvements thereto, all as more fully provided in the REO
Mortgages. Borrower shall keep or shall cause the Manager to
keep each REO Property insured at all times, by financially
sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is
more fully provided in this Agreement.
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(B) BASIC CARRYING COST AND OTHER CLAIMS.
Borrower shall pay and discharge or cause Manager to pay and
discharge all Impositions, as well as all lawful claims for
labor, materials and supplies or otherwise, which could become
a Lien, all as more fully provided in, and subject to any
rights to contest contained in, any REO Mortgage. Borrower
shall pay all Basic Carrying Costs with respect to itself and
each REO Property in accordance with the provisions of the REO
Mortgages, subject, however, to rights to contest payment of
Impositions in accordance with the REO Mortgages. The
obligation to pay Basic Carrying Costs pursuant to this
Agreement shall include, to the extent permitted by applicable
law, Impositions resulting from future changes in law which
impose upon the Lenders an obligation to pay any property
taxes on any REO Property or other Impositions.
(C) LITIGATION. Borrower shall give prompt
written notice to the Agent of any litigation or governmental
proceedings pending or threatened (in writing) against either
Borrower or the Manager which is reasonably likely to have a
Material Adverse Effect.
(D) ENFORCEMENT OF MORTGAGE LOANS. Borrower
shall with reasonable diligence and continuity enforce or seek
to enforce all obligations of Mortgagors under the Mortgage
Loans, except to the extent that Borrower, in the reasonable
exercise of its reasonable business judgment, and with Agent's
approval, such approval not to be unreasonably withheld or
delayed, determines not to enforce such obligations.
(E) PERFORMANCE UNDER MORTGAGE LOANS. Borrower
shall timely perform all its obligations, and make all
payments required, under the Mortgage Loan Documents and shall
not permit any of the foregoing to go into default, whether or
not any cure period or grace period shall have commenced or
expired. Borrower shall promptly provide Agent with a copy of
any notice of default and any operating budget given or
received by Borrower with respect to any Mortgage Loan.
Borrower shall provide Agent with copies of any and all other
documentation received by Borrower or Collateral Agent with
respect to any Mortgage Loan.
(F) RESERVED.
(G) RESERVED.
(H) RESERVED.
(I) ENVIRONMENTAL INDEMNIFICATION. Borrower
shall indemnify, reimburse, defend, and hold harmless the
Agent, each Lender, the Collateral Agent and each of their
respective parents, partners, shareholders, principals,
subsidiaries, Affiliates, directors, officers, employees,
representatives, agents, successors, assigns and attorneys
(collectively, the "Indemnified Parties") for, from, and
against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses
(including, without limitation, interest, penalties,
reasonable attorneys' fees, disbursements and expenses, and
reasonable consultants' fees, disbursements and expenses (but
excluding internal overhead, administrative and similar costs
of the Agent, the Lenders and the Collateral Agent)), asserted
against, resulting to, imposed on, or incurred by any
Indemnified Party, directly or indirectly, in connection with
any of the following (except to the extent same are directly
and solely caused by the fraud, bad faith, gross negligence or
willful misconduct of any Indemnified Party and except that
any Indemnified Party shall not be indemnified against claims
resulting from actions taken with respect to any REO Property
after the Agent forecloses its Lien or security interest upon
such REO Property unless and to the extent such
indemnification relates to any of the following which occurred
while the Borrower owned such REO Property):
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(i) events, circumstances, or conditions
which are alleged to, or do, form the
basis for an Environmental Claim;
(ii) any pollution or threat to human health
or the environment that is related in
any way to the Borrower's or any
previous owner's or operator's
management, use, control, ownership or
operation of such REO Property
(including, without limitation, all
on-site and off-site activities
involving Hazardous Substances), and
whether occurring, existing or arising
prior to or from and after the date
hereof, and whether or not the pollution
or threat to human health or the
environment is described in the
Environmental Reports;
(iii) any Environmental Claim against any
Person whose liability for such
Environmental Claim the Borrower has or
may have assumed or retained either
contractually or by operation of law; or
(iv) the breach of any representation,
warranty or covenant set forth in
SECTION 4.2(m), 4.3(e) or Article VI (or
any comparable provisions) of an REO
Mortgage, inclusive.
The provisions of and undertakings and indemnification set forth in this SECTION
5.1(I) shall survive the satisfaction and payment of the Indebtedness and
termination of this Agreement.
(J) GENERAL INDEMNITY.
(i) Borrower shall at its sole cost and expense, protect,
defend, indemnify and hold harmless the Indemnified Parties from and
against any and all claims, suits, liabilities (including, without
limitation, strict liabilities), administrative and judicial actions
and proceedings, obligations, debts, damages, losses, costs, expenses,
fines, penalties, charges, fees, expenses, judgments, awards, and
litigation costs, of whatever kind or nature and whether or not
incurred in connection with any judicial or administrative proceedings
(including, but not limited to, reasonable attorneys' fees and other
reasonable costs of defense) (the "LOSSES") imposed upon or incurred by
or asserted against any Indemnified Parties (other than those arising
from a state of facts that first came into existence after the Lenders
acquired title to any REO Property of the Borrower through foreclosure
or a deed in lieu thereof or forecloses its Lien upon the Mortgage
Loans or from the Lenders' bad faith, willful misconduct or gross
negligence), and directly or indirectly arising out of or in any way
relating to any one or more of the following: (a) ownership of the
Global Note, the REO Mortgages, any of the other Loan Documents or any
REO Property or Mortgage Loan of the Borrower or any interest therein
or receipt of any Rents, or Borrower's acquisition of any REO Property
or Mortgage Loan or any claim made by any prior owner of such REO
Property or the related Mortgaged Property relating to such acquisition
or any sums that may be payable to such prior owner in connection
therewith; (b) any amendment to, or restructuring of, the Indebtedness,
the Global Note or any of the other Loan Documents; (c) any and all
lawful action that may be taken by the Lenders in connection with the
enforcement of the provisions of this Agreement, the Global Note or any
of the other Loan Documents, whether or not suit is filed in connection
with same, or in connection with the Borrower or any Affiliate of the
Borrower becoming a party to a voluntary or involuntary federal or
state bankruptcy, insolvency or similar proceeding; (d) any accident,
injury to or death of persons or loss of or damage to property
occurring in, on or about any REO Property or Mortgaged Property or any
part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse
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or condition in, on or about any REO Property or Mortgaged Property or
any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (f) any failure on
the part of the Borrower to perform or be in compliance with any of the
terms of this Agreement or any of the other Loan Documents; (g)
performance of any labor or services or the furnishing of any materials
or other property in respect of any REO Property or Mortgaged Property
or any part thereof; (h) the failure of any person to file timely with
the Internal Revenue Service an accurate Form 1099-B, Statement for
Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Agreement;
(i) any failure of any REO Property or Mortgaged Property to be in
compliance with any Legal Requirement; (j) the enforcement by any
Indemnified Party of the provisions of this SECTION 5.1(J) or (k) any
and all claims and demands whatsoever which may be asserted against the
Lenders by reason of any alleged obligations or undertakings on their
part to perform or discharge any of the terms, covenants, or agreements
contained in any Lease. Any amounts payable to an Indemnified Party by
reason of the application of this SECTION 5.1(J)(I) shall become due
and payable ten (10) days after demand and shall bear interest at the
Default Rate from the tenth (10th) day after demand until paid.
(ii) The Borrower shall, at its sole cost and expense,
protect, defend, indemnify and hold harmless the Indemnified Parties
from and against any and all Losses imposed upon or incurred by or
asserted against any of the Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the
making and/or recording of this Agreement, the Global Note or any of
the other Loan Documents (other than taxes imposed on the income of the
Lenders).
(iii) The Borrower shall, at its sole cost and expense,
protect, defend, indemnify and hold harmless the Indemnified Parties
from and against any and all Losses that the Indemnified Parties may
incur, directly or indirectly, as a result of a default under the
Borrower's covenants with respect to ERISA and employee benefits plans
contained herein.
(iv) Promptly after receipt by an Indemnified Party under
this SECTION 5.1(j) or SECTION 5.1(i), of notice of the making of any
claim or the commencement of any action, such Indemnified Party shall,
if a claim in respect thereof is to be made by such Indemnified Party
against the Borrower under this SECTION 5.1(j) or SECTION 5.1(i),
notify the Borrower in writing, but the omission so to notify the
Borrower will not relieve the Borrower from any liability which it may
have to any Indemnified Party under this SECTION 5.1(j) or SECTION
5.1(i) , or otherwise unless and to the extent that neither Borrower
otherwise possessed knowledge of such claim or action and such failure
resulted in the forfeiture by the Borrower of substantial rights and
defenses. In case any such claim is made or action is brought against
any Indemnified Party and such Indemnified Party seeks or intends to
seek indemnity from the Borrower, the Borrower will be entitled to
participate in, and, to the extent that they may wish, to assume the
defense thereof with a single counsel reasonably satisfactory to the
Lenders; and, upon receipt of notice from the Borrower to such
Indemnified Party of their election so to assume the defense of such
claim or action and only upon approval by the Indemnified Party of such
counsel, the Borrower will not be liable to such Indemnified Party
under this SECTION 5.1(j) or SECTION 5.1(i), for any legal or other
expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof. Notwithstanding the preceding sentence, each
Indemnified Party will be entitled to employ counsel separate from such
counsel for the Borrower and from any other party in such action if
such Indemnified Party reasonably determines that a conflict of
interest exists which makes representation by counsel chosen by the
Borrower not advisable. In such event, the reasonable fees and
disbursements of such separate counsel will be paid by the Borrower.
The Borrower shall not, without the prior written consent of an
Indemnified Party, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought
hereunder (whether or not such Indemnified Party is an actual or
potential party to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising out of such claim, action,
suit or proceeding. Each Indemnified Party shall not enter into a
settlement of or consent to the entry of any judgment with respect to
or otherwise compromise any action, claim, suit or proceeding as to
which an Indemnified Party would be entitled to indemnification
hereunder without the written consent of the Borrower which shall not
be unreasonably withheld or delayed.
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The provisions of and undertakings and indemnification set forth in this SECTION
5.1(J) shall survive the satisfaction and payment of the Indebtedness and
termination of this Agreement.
(K) ACCESS TO REO PROPERTY. Borrower shall
permit or shall cause Manager to permit agents,
representatives and employees of the Lenders to inspect the
respective REO Property or Mortgaged Property or any part
thereof at such reasonable times as may be requested by the
Agent upon reasonable advance written notice, subject,
however, to the rights of the tenants of such REO Property or
Mortgaged Property and to the rights of the Mortgagor of a
Mortgaged Property.
(L) NOTICE OF DEFAULT. Borrower shall promptly
advise the Agent of any change in Borrower's condition,
financial or otherwise, which is reasonably likely to have a
Material Adverse Effect, or of the occurrence of any Default
or Event of Default.
(M) COOPERATE IN LEGAL PROCEEDINGS. Borrower
shall cooperate fully with the Agent with respect to any
proceedings before any Governmental Authority which may
materially affect the rights of the Lenders hereunder or any
rights obtained by the Lenders under any of the Loan Documents
and, in connection therewith, not prohibit the Agent, at its
election, from participating in any such proceedings.
(N) PERFORM LOAN DOCUMENTS. Borrower shall
observe, perform and satisfy or cause the Manager to observe,
perform and satisfy all the terms, provisions, covenants and
conditions required to be observed, performed or satisfied by
it or the Manager, and shall pay when due all costs, fees and
expenses required to be paid by it or the Manager, under the
Loan Documents executed and delivered by the Borrower or its
Member and the Manager.
(O) INSURANCE BENEFITS. Borrower shall cooperate
with the Agent in obtaining for the Lenders the benefits of
any Insurance Proceeds lawfully or equitably payable to the
Lenders or the Borrower in connection with any REO Property or
Mortgaged Property, respectively. The Agent shall be
reimbursed for any expenses reasonably incurred in connection
therewith (including reasonable attorneys' fees and
disbursements and the payment by the Borrower of the expense
of an Appraisal on behalf of the Agent in case of a fire or
other casualty affecting such REO Property or any part
thereof, but excluding internal overhead, administrative and
similar costs of the Agent) out of such Insurance Proceeds,
all as more specifically provided in this Agreement.
(P) FURTHER ASSURANCES. Borrower shall, at
Borrower's sole cost and expense:
(i) upon the Agent's reasonable request therefor given from
time to time (but not more often than once during each six month period
following the Closing Date), pay for (a) reports of UCC, tax lien,
judgment and litigation searches with respect to the Borrower or any
Mortgagor and (b) searches of title to any REO Property or Mortgaged
Property, each such search to be conducted by search firms designated
by the Agent in each of the locations designated by the Agent;
(ii) furnish to the Agent all instruments, documents,
boundary surveys, footing or foundation surveys, certificates, plans
and specifications, Appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement
and instrument required to be furnished pursuant to the terms of the
Loan Documents or reasonably requested by Agent in connection
therewith;
(iii) execute and deliver to the Agent such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary, to evidence, preserve and/or protect the
Collateral at any time securing or intended to secure the Note, as the
Agent may reasonably require (including, without limitation, amended or
replacement REO Mortgages, UCC financing statements or Collateral
Security Instruments);
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(iv) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more
effective carrying out of the intents and purposes of this Agreement
and the other Loan Documents, as the Agent shall reasonably require
from time to time; and
(v) with respect to each Mortgaged Property for which
Borrower acquires title pursuant to a foreclosure or acceptance of a
deed-in-lieu of foreclosure or otherwise, Borrower shall (x) record an
REO Mortgage to secure the Loan from the Lender in an amount equal to
the Principal Indebtedness (or in those jurisdictions in which Borrower
would be responsible for a mortgage tax or other similar tax measured
by the amount of debt secured and no value-based allocation is
permitted, in an amount reasonably acceptable to the Agent relating to
such REO Property) together with all necessary UCC financing statements
relating to the perfection of Liens on Personalty situated on such REO
Property, and promptly provide Collateral Agent, or such other Person
as the Lender may designate, certified copies of REO Mortgage and such
financing statements with evidence of recording or filing indicated
thereon and (y) concurrently with the recordation of REO Mortgage
referred to in CLAUSE (X) above, with respect to such Mortgaged
Property, provide to the Lender a marked up commitment to issue a Title
Insurance Policy for the benefit of Agent on behalf of the Lenders
(showing no exceptions to title other than those to which the original
Mortgage Loan was subject) in an amount not less than the Allocated
Loan Amount for such Mortgaged Property and a legal opinion from
counsel satisfactory to Agent and addressed to Agent, to the effect
that such REO Mortgage is binding and enforceable in accordance with
its terms, in each case in form and substance reasonably satisfactory
to Agent.
(Q) MANAGEMENT OF REO PROPERTY. Each REO
Property shall be managed at all times by the Manager or a
successor manager approved by Agent subject to the terms and
conditions below pursuant to a Management Agreement or a
successor management agreement approved by Agent subject to
the terms and conditions below until terminated as herein
provided. Pursuant to a Management Subordination, the Manager
shall agree that the Management Agreement is subject and
subordinate in all respects to the Lien of the applicable REO
Mortgage. The Management Agreement may be terminated (1) by
Borrower at any time in accordance with the provisions of the
Management Agreement so long as a successor manager as
specified below shall have been appointed and such successor
manager has (i) entered into a management agreement
substantially in the form of the Management Agreement entered
into by the previous Manager, subject to any modifications
approved by Agent, and (ii) executed and delivered the
Management Subordination to Agent, and (2) by Agent upon
thirty (30) days' prior written notice to Borrower and the
Manager (a) upon the occurrence and continuation of an Event
of Default or (b) if the Manager commits any act which would
permit termination under the Management Agreement (subject to
any applicable notice, grace and cure periods provided in the
Management Agreement). Subject to the preceding sentence, the
Borrower may from time to time appoint a successor manager to
manage any REO Property with the Agent's prior written
consent. Notwithstanding the foregoing, any successor manager
selected hereunder by the Agent or Borrower to manage such REO
Property shall be a reputable management company having
appropriate experience in the management of commercial real
property in the applicable City and State of a similar type,
size and quality as such REO Property under management.
Borrower further covenants and agrees that the Manager
(including any successor property manager serving as the
Manager) shall at all times during the term of the Loan
maintain workers' compensation insurance as required by
Governmental Authorities. The Borrower further covenants and
agrees that, with respect to the Management Agreement and the
applicable Management Subordination and the applicable REO
Property, the Borrower shall: (i) promptly notify the Agent of
the occurrence of any default under the Management Agreement;
and (ii) promptly deliver to the Agent a copy of each written
financial statement, business plan, capital expenditures plan,
notice and report, if any, received under the Management
Agreement.
(R) FINANCIAL REPORTING.
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(i) Borrower shall keep and maintain or
shall cause to be kept and maintained on a Fiscal
Year basis in accordance with GAAP consistently
applied, books, records and accounts reflecting in
reasonable detail all of the financial affairs of
Borrower and all items of income and expense in
connection with the operation of each REO Property
and ownership of each Mortgage Loan and REO Property
and in connection with any services, equipment or
furnishings provided in connection with the operation
of such REO Property, whether such income or expense
may be realized by such Person or by any other Person
whatsoever. The Agent shall have the right from time
to time at all times during normal business hours
upon reasonable prior written notice to examine such
books, records and accounts at the office of Borrower
or other Person maintaining such books, records and
accounts and to make such copies or extracts thereof
as the Agent shall desire. After the occurrence of an
Event of Default, Borrower shall pay any costs and
expenses incurred by the Agent to examine the
accounting records with respect to such REO Property,
as the Agent shall reasonably determine to be
necessary or appropriate in the protection of the
Lenders interest.
(ii) Borrower shall furnish to the Agent
annually, within ninety (90) days following the end
of each Fiscal Year, a complete copy of the
Guarantor's and the Principal's financial statement
audited by an Independent certified public accountant
acceptable to the Agent in accordance with GAAP
consistently applied covering each such Person's
financial position and results of operations, for
such Fiscal Year and containing a statement of
revenues and expenses, a statement of assets and
liabilities and a statement of each such Person's
equity, all of which shall be in form and substance
acceptable to the Agent. The Agent shall have the
right from time to time to review the auditing
procedures used in the preparation of such annual
financial statements and to consult with the
accountant with respect to such procedures. Together
with the annual financial statements, Borrower shall
furnish to the Agent an Officer's Certificate
certifying as of the date thereof (x) that the annual
financial statements present fairly in all material
respects the results of operations and financial
condition of Borrower all in accordance with GAAP
consistently applied, and (y) whether Borrower knows
of the existence of an Event of Default or Default,
and if such Event of Default or Default exists, the
nature thereof, the period of time it has existed and
the action then being taken to remedy same.
(iii) Borrower shall furnish to the Agent,
within forty-five (45) days following the end of each
Fiscal Year quarter a quarterly financial statement
with respect to each REO Property for that quarter
certified by the Borrower to be true, complete and
correct. Borrower shall furnish to the Agent copies
of any report sent to its member pursuant to an
Organization Agreement. Borrower shall furnish to the
Agent information with respect to any change in the
ownership interests of Borrower promptly after the
consummation of any such transaction (and in any
event not later than five Business Days after the
related closing).
(iv) Borrower shall furnish or shall cause
the Manager to furnish to Lender, within fifteen (15)
Business Days after request, such request to occur
not more often than once each calendar quarter, such
further information with respect to the operation of
each REO Property or Mortgaged Property and the
financial affairs of Borrower as may be reasonably
requested by the Agent, including all business plans
prepared for the Borrower.
(v) Borrower shall furnish to the Agent,
within fifteen (15) Business Days after request, such
further information regarding any Plan or
Multiemployer Plan and any reports or other
information required to be filed under ERISA as may
be reasonably requested by the Agent.
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(vi) Not later than each Advance Closing
Date for an acquisition and, subsequently, at least
thirty (30) days prior to the end of each of
Borrower's Fiscal Years, Borrower shall submit or
cause to be submitted to the Agent an Operating
Budget of property expenses, Capital Improvement
Costs (including Leasing Commissions and TI Costs),
replacement reserve costs as well as projected Gross
Revenues for the next Fiscal Year for each REO
Property. Such draft Operating Budget shall not be
effective or implemented without the prior written
approval of Agent, such approval not to be
unreasonably withheld or delayed. Until so approved
by the Agent for the subsequent Fiscal Year, the
Operating Budget approved by the Agent for the
preceding Fiscal Year shall remain in effect for
purposes of Section 2.12; PROVIDED, that for so long
as such prior Operating Budget remains in effect,
amounts set forth in the prior Operating Budget with
respect to property expenses, TI Costs and Leasing
Commissions shall be deemed increased on a percentage
basis by an amount equal to the increase in the
Consumer Price Index (expressed as a percentage) as
measured over the calendar year that the prior
Operating Budget was in effect.
(S) CONDUCT OF BUSINESS. The Borrower shall
cause the operation of each REO Property to be conducted at
all times in a manner consistent with at least the level of
operation of such REO Property as of the applicable Advance
Closing Date for the related acquisition, including, without
limitation, the following:
(i) to maintain or cause to be maintained
the standard of such REO Property at all times at a
level not lower than that maintained by prudent
managers of similar facilities or land in the region
where such REO Property is located;
(ii) to operate or cause to be operated
such REO Property in a prudent manner in compliance
in all material respects with applicable Legal
Requirements and Insurance Requirements relating
thereto and maintain or cause to be maintained all
licenses, Permits and any other agreements necessary
for the continued use and operation of such REO
Property; and
(iii) to maintain or cause to be maintained
sufficient Inventory and Equipment of types and
quantities at such REO Property to enable it or the
Manager to operate such REO Property.
(T) SINGLE-PURPOSE ENTITY.
(i) Borrower at all times will continue
to be a duly formed and validly existing limited
liability company or limited partnership under the
laws of the State of its formation and a
Single-Purpose Entity.
(ii) Borrower shall at all times comply
with the provisions of its Organization Agreement and
the laws of the State of its formation relating to
limited liability companies or limited partnerships.
(iii) Borrower shall observe all customary
formalities regarding its existence.
(iv) Borrower shall accurately maintain
its financial statements, accounting records and
other corporate documents separate from those of its
members or partners, Affiliates of its members or
partners and any other Person. Borrower shall not
commingle its assets with those of its members or
partners, any Affiliates of its members or partners,
or any other Person and shall continue to accurately
maintain its own bank accounts and separate books of
account.
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(v) Borrower shall continue to pay its
own liabilities from its own separate assets.
(vi) Borrower shall continue to identify
itself in all dealings with the public, under its own
name or trade names and as a separate and distinct
entity and shall not identify itself as being a
division or a part of any other entity. Borrower will
not identify its members or partners or any
Affiliates of its members or partners as being a
division or part of the Borrower.
(vii) Borrower shall continue to be
adequately capitalized in light of the nature of its
business.
(viii) Borrower shall not assume or
guarantee the liabilities of its members or partners
(or any predecessor corporation, partnership or
limited liability company), any Affiliates of its
members or partners or any other Person, except for
liabilities relating to an REO Property and except as
permitted by or pursuant to this Agreement. Borrower
shall not acquire obligations or securities of its
members or partners (or any predecessor corporation,
partnership or limited liability company), or any
Affiliates of its members or partners. Borrower shall
not make loans to its members or partners (or any
predecessor corporation, partnership or limited
liability company), or any Affiliates of its members
or partners.
(ix) Borrower shall not enter into or be a
party to any transaction with its members or partners
(or any predecessor corporation, partnership or
limited liability company) or any Affiliates of its
members or partners, except for in the ordinary
course of business on terms which are no less
favorable than would be obtained in a comparable
arm's length transaction with an unrelated third
party (other than in connection with the execution of
the Management Agreement).
(U) ERISA. Borrower shall deliver to the Agent
as soon as possible, and in any event within fifteen (15)
Business Days after the Borrower knows or has reason to know
that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan has occurred or
exists, an Officer's Certificate setting forth details
respecting such event or condition and the action, if any,
that the Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required
to be filed with or given to PBGC by the Borrower or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued
thereunder, with respect to a Plan, as to which PBGC
has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event
(provided that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of
ERISA, including, without limitation, the failure to
make on or before its due date a required installment
under Section 412(m) of the Code or Section 302(e) of
ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 4
12(d) of the Code); and any request for a waiver
under Section 4 12(d) of the Code for any Plan;
(ii) the distribution under Section 4041
of ERISA of a notice of intent to terminate any Plan
or any action taken by the Borrower or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of
proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Plan, or the
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receipt by the Borrower or any ERISA Affiliate of the
Borrower of a notice from a Multiemployer Plan that
such action has been taken by PBGC with respect to
such Multiemployer Plan;
(iv) the complete or partial withdrawal
from a Multiemployer Plan by the Borrower or any
ERISA Affiliate of the Borrower that results in
material liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the
receipt by the Borrower or any ERISA Affiliate of the
Borrower of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of
ERISA;
(v) the institution of a proceeding by a
fiduciary (within the meaning of Section 3(2 1) of
ERISA) of any Multiemployer Plan against the Borrower
or any ERISA Affiliate of the Borrower to enforce
Section 515 of ERISA, which proceeding is not
dismissed within thirty (30) days;
(vi) the adoption of an amendment to any
Plan that, pursuant to Section 401(a)(29) of the Code
or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is
a part if the Borrower or an ERISA Affiliate of the
Borrower fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
and
(vii) the imposition of a lien pursuant to
Section 302(f) of ERISA or Section 4 12(h) of the
Code in connection with a Plan.
(V) ASSIGNMENT OR PARTICIPATION OF NOTE. In the
event that the Agent notifies Borrower that a secondary market
sale (an "ASSIGNMENT") of, or a sale of a participation
interest (a "Participation") in, the Global Note to another
party is a desirable course of action with respect to the
Loan, then Borrower shall cooperate with the Agent, in the
preparation of any information reasonably necessary or
incidental to such Assignment or Participation with respect to
the Collateral which is reasonably within the possession or
control of Borrower or is obtainable by Borrower and shall in
good faith enter into any amendments to this Agreement and/or
the other Loan Documents and execute and deliver a new Global
Note or Global Notes to the assignee, all as necessary to
accomplish the Assignment or Participation; PROVIDED, HOWEVER,
that such cooperation shall be conditioned upon (a) Borrower
incurring no additional liability or obligation as a result of
such Assignment or Participation and (b) all costs related to
such cooperation, and all costs incurred by Agent as a result
of such Assignment or Participation, shall be paid by Agent
(including, without limitation, all reasonable out of pocket
costs incurred by Borrower related thereto).
(W) MISCELLANEOUS. BORROWER SHALL:
(i) notify the Agent in writing of any full repayment of a
Mortgage Loan promptly upon receipt of the related funds; and
(ii) to the extent not previously delivered, cause any
Mortgage Loan Documents that come into its possession after the related
Mortgage Loan is collaterally assigned to the Agent hereunder to be
delivered to the Collateral Agent.
(X) INSURANCE.
(i) Borrower, at its sole cost and
expense, shall keep the Improvements and Equipment
with respect to each REO Property insured (including,
but not limited to, any period of renovation,
alteration and/or construction) during the term of
the Loan with
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the coverage and in the amounts required under this
Agreement for the mutual benefit of Borrower, the
Agent for the benefit of the Lenders against loss or
damage by fire and against loss or damage by other
risks and hazards covered by a standard extended
coverage insurance policy (including, without
limitation, riot and civil commotion, vandalism,
malicious mischief, burglary, collapse, theft and
such other coverages as may be reasonably required by
the Agent on the special form (formerly known as an
all risk form). Such insurance shall be in an amount
(i) equal to at least then full replacement cost of
the Improvements and Equipment (exclusive of the cost
of foundations and footings), without deduction for
physical depreciation, and (ii) such that the insurer
would not deem Borrower a co-insurer under said
policies. The policies of insurance carried in
accordance with this SECTION 5.1(X) shall be paid not
less than thirty (30) days in advance and shall
contain the "Replacement Cost Endorsement" with a
waiver of depreciation.
(ii) Borrower, at its sole cost and
expense, for the mutual benefit of Borrower and the
Agent, shall also obtain and maintain or cause to be
obtained and maintained during the entire term of the
Loan the following policies of insurance for each REO
Property:
(1) flood insurance, if any part of
such REO Property is located in
an area identified by the
Federal Emergency Management
Agency as an area having
special flood hazards and in
which flood insurance has been
made available under the
National Flood Insurance Act of
1968 (and any amendment or
successor act thereto) in an
amount at least equal to the
maximum limit of coverage
available with respect to the
Improvements and Equipment
under said Act;
(2) commercial general liability
insurance, including broad form
property damage, blanket
contractual and personal
injuries (including death
resulting therefrom) coverages,
liquor law liability coverage
and containing minimum limits
of $1,000,000 per occurrence
aggregate and excess/umbrella
liability coverage containing
minimum limits of $20,000,000;
(3) business interruption insurance
(including rental value) in an
amount equal to the estimated
Gross Revenues from the Leases
of such REO Property
(including, without limitation,
the loss of all Rents and
additional Rents payable by all
of the lessees under the Leases
(whether or not such Leases are
terminable in the event of a
fire or casualty)), such
insurance to cover losses for a
period of at least one year
after the date of the fire or
casualty in question and to be
increased or decreased, as
applicable, from
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time to time during the term of
the Loan (but not more than
once in any 12 month period)
if, and when, the Gross
Revenues from the Leases of
such REO Property materially
increase or decrease, as
applicable (including, without
limitation, increases from new
Leases and renewal Leases
entered into in accordance with
the terms of this Agreement),
to reflect all increased Rent
and increased additional Rent
payable by all of the lessees
under such renewal Leases and
all Rent and additional Rent
payable by all of the lessees
under such new Leases;
(4) insurance against loss or
damage from (x) leakage of
sprinkler systems and (y)
explosion of steam boilers, air
conditioning equipment, high
pressure piping, machinery and
equipment, pressure vessels or
similar apparatus now or
hereafter installed in the
Improvements (without exclusion
for explosions), in an amount
reasonably required by the
Agent;
(5) workers' compensation insurance
coverage (in amounts not less
than the statutory minimums for
all persons employed by the
Borrower, if any, and in
compliance with all other
requirements of applicable
local, state and federal law)
and "Employers Liability"
insurance in amounts not less
than required by statute;
(6) earthquake damage insurance in
an amount and form satisfactory
to the Agent in the event that
one or more REO Properties is
located in an area with a high
degree of seismic activity,
provided that earthquake
insurance coverage is
reasonably commercially
available; and
(7) such other insurance as may
from time to time be reasonably
required by the Agent in order
to protect its interests with
respect to the Loan and such
REO Property.
(iii) All policies of insurance (the
"POLICIES") required pursuant to this SECTION 5.1(X)
(i) shall be issued by an insurer which has a claims
paying ability rating of not less than "A" (or the
equivalent) by Standard & Pool's and one other Rating
Agency satisfactory to the Agent or A:XII or better
as to claims paying ability by AM Best (other than
the policies described in SECTION 5.1(X)(II)(6)),
(ii) other than with respect to workers' compensation
insurance coverage, shall name the Agent, for the
benefit of the Lenders, as additional insureds as
their interests may appear and contain a standard
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noncontributory mortgagee clause naming the Agent
(and/or such other party as may be designated by the
Agent) as the party to which all payments made by
such insurance company shall be paid, (iii) shall be
maintained throughout the term of the Loan without
cost to the Agent, (iv) shall contain such provisions
as the Agent deems reasonably necessary or desirable
to protect its interest (including, without
limitation, endorsements providing that neither the
Borrower, the Agent nor any other party shall be a
co-insurer under said Policies and that the Agent
shall receive at least thirty (30) days prior written
notice of any modification, reduction or
cancellation), (v) shall contain a waiver of
subrogation against the Agent and (vi) shall be
reasonably satisfactory in form and substance to the
Agent and reasonably approved by the Agent as to
amounts, form, risk coverage, deductibles, loss
payees and insureds. Borrower shall pay the premiums
for such Policies as the same become due and payable.
Copies of said Policies, certified as true and
correct by Borrower, or insurance certificates
thereof, shall be delivered to the Agent. Not later
than fifteen (15) Business Days prior to the
expiration date of each of the Policies, Borrower
will deliver to the Agent satisfactory evidence of
the renewal of each Policy. The insurance coverage
required under this SECTION 5.1(X) may be effected
under a blanket policy or policies covering such REO
Property and other property and assets not
constituting a part of such REO Property; provided
that any such blanket policy shall provide at least
the same amount and form of protection as would a
separate policy insuring the REO Property
individually, which amount shall not be less than the
amount required pursuant to this SECTION 5.1(AA), and
which shall in any case comply in all other respects
with the requirements of this SECTION 5.1 (AA).
(iv) If any REO Property shall be damaged
or destroyed, in whole or in part, by fire or other
casualty, Borrower shall give prompt notice thereof
to the Agent.
(1) In case of loss covered by
Policies, the Agent may either
(A) jointly with the Borrower
settle and adjust any claim or
(B) allow the Borrower to agree
with the insurance company or
companies on the amount to be
paid upon the loss; PROVIDED,
that the Borrower may adjust
losses aggregating not in
excess of the greater of (x) 3%
of the related Allocated Loan
Amount and (y) $100,000, if
such adjustment is carried out
in a commercially reasonable
and timely manner, PROVIDED,
FURTHER, that if at the time of
the settlement of such claim a
monetary Event of Default has
occurred and is continuing,
then the Agent shall settle and
adjust such claim without the
consent of the Borrower. In any
such case the Agent shall and
is hereby authorized to collect
and receipt for any such
Insurance Proceeds subject to
and to the extent provided for
in this Agreement. The
reasonable expenses incurred by
the Agent in the adjustment and
collection of Insurance
Proceeds shall become part of
the Indebtedness and be secured
by the applicable Mortgage and
shall be reimbursed by Borrower
to the Agent upon demand
therefor.
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(2) In the event of any insured
damage to or destruction of an
REO Property or any part
thereof (herein called an
"INSURED Casualty") where the
aggregate amount of the loss,
as reasonably determined by an
Independent insurance adjuster,
is less than ten percent (10%)
of the related Allocated Loan
Amount, and if, in the
reasonable judgment of the
Agent, such REO Property can be
restored within twelve (12)
months of settlement of the
claim and at least twelve (12)
months prior to the Maturity
Date to a condition at least
equal to the condition thereof
that existed prior to the
Insured Casualty, or if the
Agent otherwise elects to allow
the Borrower to restore such
REO Property, then, if no Event
of Default shall have occurred
and be continuing, the
Insurance Proceeds (after
reimbursement of any reasonable
expenses incurred by the Agent
in connection with the
collection of any applicable
Insurance Proceeds) shall be
made available to pay or to
reimburse the Borrower for the
cost of restoring, repairing,
replacing or rebuilding such
REO Property or part thereof
subject to the Insured
Casualty, as provided for
below. Borrower hereby
covenants and agrees to
commence and diligently to
prosecute such restoring,
repairing, replacing or
rebuilding; PROVIDED, that
Borrower shall pay all costs
(and if required by the Agent,
Borrower shall deposit the
total thereof with the Agent in
advance) of such restoring,
repairing, replacing or
rebuilding in excess of the
Insurance Proceeds made
available pursuant to the terms
hereof (the "DEFICIENT
Amount").
(3) Except as provided above, the
Insurance Proceeds collected
upon any Insured Casualty shall
be held in an Eligible Account
by the Agent and shall, at the
option of the Agent in its sole
discretion, be applied to the
payment of the Indebtedness as
provided in SECTION 2.12(F) of
this Agreement or applied to
the cost of restoring,
repairing, replacing or
rebuilding such REO Property or
part thereof subject to the
Insured Casualty, in the manner
set forth below.
(4) In the event that Insurance
Proceeds (after reimbursement
of any reasonable expenses
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incurred by the Agent in
connection with the collection
of any applicable Insurance
Proceeds), if any, shall be
made available to the Borrower
for the restoring, repairing,
replacing or rebuilding of such
REO Property, the Borrower
covenants to restore, repair,
replace or rebuild the same to
be of at least comparable value
as prior to such damage or
destruction, all to be effected
in accordance with Legal
Requirements and plans and
specifications approved in
advance by the Agent, such
approval not to be unreasonably
withheld or delayed. The
Borrower shall pay all costs
(and if required by the Agent,
the Borrower shall deposit the
total thereof with the Agent in
advance) of such restoring,
repairing, replacing or
rebuilding in excess of the
Insurance Proceeds made
available pursuant to the terms
hereof.
(5) In the event the Borrower is
entitled to the use of or
reimbursement out of Insurance
Proceeds held by the Agent,
such proceeds shall be
disbursed from time to time
upon the Agent (or at the
Agent's election, the
Collateral Agent) being
furnished with (A) evidence
reasonably satisfactory to it
of the estimated cost of
completion of the restoration,
repair, replacement and
rebuilding, (B) funds, or, at
the Agent's option, assurances
reasonably satisfactory to the
Agent that such funds are
available and sufficient in
addition to the Insurance
Proceeds to complete the
proposed restoration, repair,
replacement and rebuilding, and
(C) such architect's
certificates, waivers of lien,
contractor's sworn statements,
title insurance endorsements,
bonds and other evidences of
cost, payment and performance
of the foregoing repair,
restoration, replacement or
rebuilding as the Agent may
reasonably require and approve.
The Agent may, in any event,
require that all plans and
specifications for such
restoration, repair,
replacement and rebuilding be
submitted to and approved by
the Agent prior to commencement
of work, such approval not to
be unreasonably withheld or
delayed. All proceeds of rental
or business interruption
insurance shall be administered
in accordance with SECTION
2.12(a) of this Agreement. The
Agent may retain a
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construction consultant to
inspect such work and review
the Borrower's request for
payments and the Borrower
shall, on demand by the Agent,
reimburse the Agent for the
reasonable fees and
disbursements of such
consultant. No payment made
prior to the final completion
of the restoration, repair,
replacement and rebuilding
shall exceed ninety percent
(90%) of the value of the work
performed from time to time
(except for restoration work on
a trade by trade basis in which
event, payment may be made in
full upon the completion of
such work); funds other than
Insurance Proceeds shall be
disbursed prior to disbursement
of such proceeds; and, at all
times, the undisbursed balance
of such proceeds remaining in
the accounts of the Agent,
together with funds deposited
for that purpose or irrevocably
committed to the repayment of
the Agent by or on behalf of
the Borrower for that purpose,
shall be at least sufficient in
the reasonable judgment of the
Agent to pay for the cost of
completion of the restoration,
repair, replacement or
rebuilding, free and clear of
all liens or claims for lien,
except for Permitted
Encumbrances. Any surplus which
may remain out of Insurance
Proceeds held by the Agent
after payment of such costs of
restoration, repair,
replacement or rebuilding shall
be paid to the Borrower so long
as no Event of Default has
occurred and is continuing.
(v) Borrower shall not carry separate
insurance, concurrent in kind or form or contributing
in the event of loss, with any insurance required
under this Agreement; PROVIDED, HOWEVER, that
notwithstanding the foregoing, Borrower may carry
insurance not required under this Agreement if any
such insurance affecting such REO Property shall be
for the mutual benefit of Borrower and the Agent, as
their respective interests may appear, and shall be
subject to all other provisions of this SECTION
5.1(X).
(Y) CONDEMNATION.
(i) Borrower shall promptly give the
Agent written notice of the actual or threatened
commencement of any proceeding for a Taking and shall
deliver to the Agent copies of any and all papers
served in connection with such proceedings. The Agent
is hereby irrevocably appointed as Borrower's
attorney-in-fact, coupled with an interest, with
exclusive power to collect, receive and retain any
Condemnation Proceeds for said Taking. With respect
to any compromise or settlement in connection with
such proceeding, the Agent will jointly with Borrower
compromise and reach settlement unless at the time of
such Taking a monetary Event of Default has occurred,
in which event the Agent shall compromise and reach
settlement without the consent of Borrower.
Notwithstanding the foregoing provisions of this
Section 5.1(Y), Borrower is authorized
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to negotiate, compromise and settle, without
participation by the Agent, Condemnation Proceeds of
up to 1 % of the related Allocated Loan Amount in
connection with any Taking. Notwithstanding any
Taking, Borrower shall continue to pay the
Indebtedness at the time and in the manner provided
for in this Agreement and the other Loan Documents
and the Indebtedness shall not be reduced except in
accordance therewith.
(ii) Borrower shall cause the Condemnation
Proceeds to be paid directly to the Agent as provided
in SECTION 2.12(f) of this Agreement. The Agent may,
in its reasonable discretion, apply any such
Condemnation Proceeds to the reduction or discharge
of the Indebtedness (whether or not then due and
payable). If Condemnation Proceeds in respect of such
Taking are applied to the payment of the Indebtedness
as provided for in this Agreement, Borrower shall be
relieved of any duty to restore, repair, replace or
rebuild the applicable REO Property.
(iii) With respect to a Taking in part,
which shall mean any Taking which does not render
such REO Property physically or economically
unsuitable in the reasonable judgment of the Agent
for the use to which it was devoted prior to the
Taking, Borrower shall cause the Condemnation
Proceeds to be paid to the Agent or deposited into
the applicable account pursuant to the provisions of
this Agreement, to be applied to the cost of
repairing, replacing, restoring or rebuilding such
REO Property as follows:
(1) Provided that Condemnation
Proceeds shall be made
available to Borrower for the
restoring, repairing, replacing
or rebuilding of such REO
Property, Borrower hereby
covenants to restore, repair,
replace or rebuild the same to
be of at least comparable value
and, to the extent commercially
practicable, of substantially
the same character as prior to
the Taking, all to be effected
in accordance with applicable
law and plans and
specifications approved in
advance by the Agent, such
approval not to be unreasonably
withheld or delayed. Borrower
shall pay all costs (and if
required by the Agent, Borrower
shall deposit the total thereof
with the Agent in advance) of
such restoring, repairing,
replacing or rebuilding in
excess of the Condemnation
Proceeds made available
pursuant to the terms hereof.
(2) The Condemnation Proceeds held
by the Agent shall be held in
an Eligible Account and shall
be disbursed from time to time
upon the Agent (or at the
Agent's election, the
Collateral Agent) being
furnished with (A) evidence
reasonably satisfactory to it
of the estimated cost of
completion of the restoration,
repair, replacement and
rebuilding, (B) funds, or, at
the Agent's option, assurances
satisfactory to the Agent that
such funds are available and
sufficient in addition to the
Condemnation Proceeds to
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complete the proposed
restoration, repair,
replacement and rebuilding, and
(C) such architect's
certificates, waivers of lien,
contractor's sworn statements,
title insurance endorsements,
bonds and other evidences of
cost, payment and performance
of the foregoing repair,
restoration, replacement or
rebuilding as the Agent may
reasonably require and approve.
The Agent may, in any event,
require that all plans and
specifications for such
restoration, repair,
replacement and rebuilding be
submitted to and approved by
the Agent prior to commencement
of work, which approval shall
not be unreasonably withheld or
delayed. The Agent may retain a
construction consultant to
inspect such work and review
the Borrower's request for
payments and the Borrower
shall, on demand by the Agent,
reimburse the Agent for the
reasonable fees and
disbursements of such
consultant. No payment made
prior to the final completion
of the restoration, repair,
replacement and rebuilding
shall exceed ninety percent
(90%) of the value of the
construction work performed
from time to time; funds other
than Condemnation Proceeds
shall be disbursed prior to
disbursement of such proceeds;
and at all times, the
undisbursed balance of such
proceeds remaining in the hands
of the Agent, together with
funds deposited for that
purpose or irrevocably
committed to the repayment of
the Agent by or on behalf of
the Borrower for that purpose,
shall be at least sufficient in
the reasonable judgment of the
Agent to pay for the cost of
completion of the restoration,
repair, replacement or
rebuilding, free and clear of
all liens or claims for lien.
Any surplus which may remain
out of Condemnation Proceeds
held by the Agent after payment
of such costs of restoration,
repair, replacement or
rebuilding shall be paid to the
Borrower so long as no Event of
Default has occurred and is
continuing.
(3) If such REO Property is sold,
through foreclosure or
otherwise, prior to the receipt
by the Agent of any such
Condemnation Proceeds to which
it is entitled hereunder, the
Agent shall have the right,
whether or not a deficiency
judgment on the Note shall have
been sought, recovered or
denied, to
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have reserved in any
foreclosure decree a right to
receive said award or payment,
or a portion thereof sufficient
to pay the Indebtedness. In no
case shall any such application
reduce or postpone any payments
otherwise required pursuant to
this Agreement, other than the
final payment on the Note.
(Z) LEASES AND RENTS.
(i) Borrower absolutely and
unconditionally assigns to the Agent, Borrower's
right, title and interest in all current and future
Leases and Rents, it being intended by Borrower that
this assignment constitutes a present, absolute
assignment and not an assignment for additional
security only. Such assignment to the Agent shall not
be construed to bind the Agent to the performance of
any of the covenants, conditions or provisions
contained in any such Lease or otherwise impose any
obligation upon the Agent. Borrower shall execute and
deliver to the Agent such additional instruments, in
form and substance reasonably satisfactory to the
Agent, as may hereafter be reasonably requested in
writing by the Agent to further evidence and confirm
such assignment. Nevertheless, subject to the terms
of this SECTION 5.1(Z), the Agent grants to Borrower
a license to lease, own, maintain, operate and manage
each REO Property and to collect, use and apply the
Rent, which license is revocable upon the occurrence
of an Event of Default under this Agreement. Any
portion of the Rents held by Borrower shall be held
in trust for the benefit of the Agent for use in the
payment of the Indebtedness. Upon the occurrence of
an Event of Default and during the continuance
thereof, the license granted to Borrower herein shall
automatically be revoked, and the Agent shall
immediately be entitled to possession of all Rents,
whether or not the Agent enters upon or takes control
of such REO Property. The Agent is hereby granted and
assigned by Borrower the right, at its option, upon
revocation of the license granted herein, to enter
upon such REO Property in person, by agent or by
court-appointed receiver to collect the Rents. Any
Rents collected after the revocation of the license
shall be applied toward payment of the Indebtedness
in the priority and proportions set forth in SECTION
2.8 hereof or otherwise as the Agent in its
discretion shall deem proper.
(ii) All Leases entered into by the
Borrower shall provide for rental rates comparable to
then-existing local market rates and terms and
conditions commercially reasonable and consistent
with then-prevailing local market terms and
conditions for similar type properties in similar
condition. With respect to any Lease for more than
10% of the rentable square footage of an REO
Property, Borrower shall not enter into any such
Leases, without the prior written consent of the
Agent, such consent not to be unreasonably withheld
or delayed. Borrower shall furnish the Agent with (1)
detailed term sheets in advance in the case of any
Leases, modifications, amendments or renewals for
which Agent's consent is required and (2) in the case
of any other Leases, executed copies of such Leases
upon written request. All renewals or amendments or
modifications of Leases which do not satisfy the
requirements of the first sentence of this SECTION
5.1 (Z)(ii) shall be subject to the prior approval of
the Agent. All Leases executed after the date hereof
shall provide that they are subordinate to the
applicable Mortgage and that the lessee agrees to
attorn to the Agent. The Agent shall, upon the
request of any tenant occupying space in excess of
10% of the rentable square footage of an REO
Property, execute and deliver a non-disturbance
agreement in form reasonably satisfactory to the
Agent. Borrower (i) shall observe and perform all of
the material obligations imposed upon the lessor
under the Leases and shall not do or permit to be
done anything to materially impair the value of the
Leases as security for the
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Indebtedness; (ii) shall promptly send copies to the
Agent of all written notices of default which
Borrower shall send or receive thereunder; (iii)
shall enforce all of the material terms, covenants
and conditions contained in the Leases upon the part
of the lessee thereunder to be observed or performed
and shall effect a termination or diminution of the
obligations of tenants under leases, only in a manner
that a prudent owner of a similar property to such
REO Property would enforce such terms covenants and
conditions or effect such termination or diminution
in the ordinary course of business; (iv) shall not
collect any of the Rents more than one (1) month in
advance; (v) shall not execute any other assignment
of lessor's interest in the Leases or Rents; and (vi)
shall not convey or transfer or suffer or permit a
conveyance or transfer of such REO Property or of any
interest therein so as to effect a merger of the
estates and rights of, or a termination or diminution
of the obligations of, lessees thereunder.
(iii) Borrower shall deposit security
deposits of lessees which are turned over to or for
the benefit of Borrower or otherwise collected by or
on behalf of Borrower, into an Eligible Account with
the same name as the Collection Accounts. Any bond or
other instrument which the Borrower is permitted to
hold in lieu of cash security deposits under any
applicable Legal Requirements shall be maintained in
full force and effect unless replaced by cash
deposits as hereinabove described, shall, if
permitted pursuant to Legal Requirements, name the
Agent as payee or mortgagee thereunder (or at the
Agent's option, be fully assignable to the Agent) and
shall, in all respects, comply with any applicable
Legal Requirements and otherwise be reasonably
satisfactory to the Agent. Borrower shall, upon
request, provide the Agent with evidence reasonably
satisfactory to the Agent of the Borrower's
compliance with the foregoing. Upon the occurrence
and during the continuance of any Event of Default,
Borrower shall, upon the Agent's request, if
permitted by any applicable Legal Requirements, turn
over to the Agent the security deposits (and any
interest theretofore earned thereon) with respect to
all or any portion of such REO Property, to be held
by the Agent subject to the terms of the Leases.
(AA) MAINTENANCE OF REO PROPERTY. Borrower shall
cause each REO Property to be maintained in a good and safe
condition and repair, subject to wear and tear and damage
caused by casualty or condemnation. The Improvements and the
Equipment shall not be removed, demolished or altered (except
for (a) normal replacement of the Equipment or (b) pursuant to
Leases in effect from time to time or (c) for removals,
demolition or alterations that cost up to $250,000) without
the consent of the Agent, such consent not to be unreasonably
withheld or delayed. Except with respect to an Insured
Casualty which shall be governed by the terms and conditions
provided herein, Borrower shall (or, in the case of commercial
tenants, shall cause such tenants to) promptly repair, replace
or rebuild any part of such REO Property that becomes damaged,
worn or dilapidated. Borrower shall or shall cause their
tenants to complete and pay for any structure at any time in
the process of construction or repair on the Land. Borrower
shall not initiate, join in, or consent to any change in any
private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may
be made of such REO Property or any part thereof, without
consent of the Agent. If under applicable zoning provisions
the use of all or any portion of such REO Property is or shall
become a nonconforming use, Borrower will not cause or permit
such nonconforming use to be discontinued or abandoned without
the express written consent of the Agent, such consent not to
be unreasonably withheld or delayed. Borrower shall not (i)
change the use of the Land in any material respect, (ii)
permit or suffer to occur any waste on or to such REO Property
or to any portion thereof or (iii) take any steps whatsoever
to convert such REO Property, or any portion thereof, to a
condominium or cooperative form of ownership or management.
(BB) BORROWER'S RIGHT TO PREPAY. In the event
that either (x) the Agent or any Lender intends to enter into
an Assignment transaction with any real estate investment
trust which has
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publicly offered shares in such entity and whose principal
activity is holding mortgages secured by real property (other
than a repurchase agreement transaction or any other
Assignment effected by a secured party foreclosing upon the
Global Note in the exercise of remedies pursuant to a
repurchase agreement transaction or other secured financing
after a default thereunder by any Lender) or (y) the Agent
shall have determined that the outstanding Principal
Indebtedness is greater than 86.25% of the Market Value of the
REO Properties and Mortgage Loans, the Agent or such Lender,
as applicable, shall notify the Borrowers of the proposed sale
or such determination. The Borrower shall have the right, in
its sole discretion, to prepay the Loan pursuant to Section
2.6 (without payment of any Repayment Fee) in a principal
amount equal to the principal amount of the proposed
Assignment (in the case of clause (x) above) or the entire
Principal Indebtedness (in the case of clause (y) above);
PROVIDED, HOWEVER, that the Borrower shall have notified the
Agent or such Lender, as applicable, in writing of its
intention to prepay the Loan within five (5) Business Days of
receipt of such notice and shall make such prepayment of the
Loan within fifteen (15) Business Days of receipt of such
notice (in the case of clause (x) above) or with ninety (90)
calendar days of receipt of such notice (in the case of clause
(y) above). In the event the Borrower notifies the Agent or
such Lender of its intention to prepay the Loan (in the case
of clause (x) above) and fails to make such payment within the
required time period, then the Repayment Fee on the principal
amount of the proposed Assignment shall be payable on the
Payment Date immediately following the end of such time period
as if such prepayment had been made pursuant to Section 2.6.
Failure to make the payment of the entire Principal
Indebtedness on the applicable date in the case of clause (y)
above shall be an immediate Event of Default.
(CC) CONVERSION RIGHT. The Borrower hereby
acknowledges and agrees that the Agent shall have a one-time
right during the term of the Loan to bifurcate the Loan into
(a) a senior loan secured by the first priority Liens upon all
collateral (modified as necessary in connection with such
bifurcation) (the "FIRST MORTGAGE LOAN") and (b) a mezzanine
loan to Guarantor secured by a pledge of the entire ownership
interests in the Borrower pursuant to a pledge agreement
substantially in the form of EXHIBIT L (the "MEZZANINE LOAN"),
PROVIDED that the effective interest rate on the First
Mortgage Loan and the Mezzanine Loan shall not exceed the
existing rate on the Loan. The Borrower agrees that it shall,
and it shall cause the Guarantor to, cooperate in all respects
with the Agent in the bifurcation of the Loan (including,
without limitation, amending this Agreement and the other Loan
Documents, and executing such additional documents, as
reasonably may be required by the Agent); PROVIDED that all
reasonable costs incurred by the Borrower (including, without
limitation, legal fees and expenses) in so cooperating with
the Agent shall be borne by the Agent.
(DD) POST-CLOSING DATE AFFIRMATIVE COVENANTS.
(i) Not later than thirty (30) days
following the Closing Date, Borrower shall have
delivered with respect to the Mortgaged Property
referred to as "Cortez Plaza" in Bradenton, Florida
to the Agent an update to the Survey provided prior
to the Closing Date, which update is sufficient to
remove the limited survey exception in the related
Title Insurance Policy, such update to be certified
to and otherwise acceptable to Agent.
(ii) Promptly following the Closing Date,
Borrower shall use commercially reasonable efforts to
provide to the Agent a letter from the appropriate
Governmental Authority certifying that the Mortgaged
Property referred to as "Cortez Plaza" in Bradenton,
Florida is in compliance with all applicable zoning
laws, rules and regulations.
(iii) If at any time during the term of the
Loan, the Lenders shall release the Guarantor from
its obligations under the Guaranty of Payment, the
Borrower shall, within ten (10) Business Days from
the date of any such release, deliver to the Agent
from counsel to Borrower and Guarantor a legal
opinion addressed to the Agent and the
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Collateral Agent and in form and substance
satisfactory to the Agent and its counsel with
respect to the non-consolidation under applicable
bankruptcy laws of the Borrower and the Guarantor in
the event of the bankruptcy of the Guarantor or the
Principal; PROVIDED, that in the event counsel to the
Borrower and the Guarantor is unable to deliver such
opinion unless certain of the REO Properties are
released as Collateral for the Loan, then the
Borrower shall have the right to enter into a Capital
Event with an Affiliate of the Borrower with respect
to such REO Properties in accordance with the
procedure set forth in SECTION 2.7(a) prior to and in
order to permit the delivery of such opinion (the
Agent agreeing hereby to deliver the consent to such
Capital Event required under SECTION 2.7(a)).
(EE) GROUND LEASES.
(i) Borrower shall pay, promptly when due and payable
(before the commencement of any "cure" or "grace" period), all Ground
Rent. Upon notice from Agent, simultaneously with the making of each
and every payment of Ground Rent payable after the delivery of such
notice, Borrower shall simultaneously deliver to Agent a copy of the
check in the amount of such payment delivered to the payee.
(ii) Borrower shall perform and observe (before the
commencement of any "cure" or "grace" period) all terms, covenants, and
conditions that Borrower is required to perform and observe under the
applicable Ground Lease and do everything necessary to preserve and to
keep unimpaired and in full force and effect the applicable Ground
Lease. Borrower shall not permit any Ground Lease to go into default
(whether or not any cure period in the Ground Lease has expired).
(iii) Borrower shall enforce the obligations of the
applicable lessor under each Ground Lease so that Borrower may at all
times enjoy all its rights, benefits and privileges under the
applicable Ground Leases.
(iv) Borrower shall not, without Agent's consent, cause,
agree to, permit, or suffer to occur any Ground Lease Impairment. Any
Ground Lease Impairment made without Agent's consent shall be null,
void, and of no force or effect.
(v) Borrower shall not, without Agent's consent, refuse
to consent or consent to any action that any lessor under a Ground
Lease or any third party takes or desires to take under or with respect
to any Ground Lease.
(vi) Borrower shall promptly deliver to Agent a copy of
any notice of default or termination, or demand for performance (other
than routine bills for current Ground Rent) that it receives from any
lessor under a Ground Lease. Borrower shall furnish to Agent all
information that Agent may request from time to time concerning the
Ground Leases and Borrower's compliance with the Ground Leases.
Borrower, immediately upon learning that any lessor under a Ground
Lease has failed to perform the terms and provisions under any Ground
Lease (including by reason of a rejection or disaffirmance or purported
rejection or disaffirmance of such Ground Lease pursuant to any state
or federal bankruptcy law), shall notify Agent thereof. Promptly after
the Closing Date, and again promptly after execution of any amendment
to the related leasehold Mortgage, Borrower shall notify the applicable
Ground Lessor of the execution and delivery of the related leasehold
REO Mortgage or such amendment. Such notice shall set forth, verbatim,
in a form satisfactory to Agent, all provisions of the related
leasehold REO Mortgage relating to Ground Lease Impairments.
(vii) Borrower shall promptly notify Agent of any request
that any party to a Ground Lease makes for arbitration or other dispute
resolution procedure pursuant to such Ground Lease and of the
institution of any such arbitration or dispute resolution. Borrower
hereby authorizes Agent to participate in any such arbitration or
dispute resolution. Such participation may, at Agent's option, be to
the exclusion of,
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and in place of, the Borrower. The Borrower shall promptly deliver to
Agent a copy of the determination of each such arbitration or dispute
resolution mechanism.
(viii) If Agent or its designee shall acquire or obtain a
New Ground Lease, then Borrower shall have no right, title or interest
whatsoever in or to such New Ground Lease, or any proceeds or income
arising from the estate arising under any such New Ground Lease,
including from any sale or other disposition thereof. Agent or its
designee shall hold such New Ground Lease free and clear of any right
or claim of Borrower.
ARTICLE VI.
NEGATIVE COVENANTS
SECTION 6.1. NEGATIVE COVENANTS. Borrower covenants and agrees
that, until payment in full of the Indebtedness, it will not do, directly or
indirectly (and, as to a Transfer of interests in Borrower, no direct or
indirect owner of such interests shall do), any of the following unless the
Agent consents thereto in writing:
(A) LIENS ON THE COLLATERAL. Except as expressly
permitted by or pursuant to the REO Mortgages, incur, create,
assume, become or be liable in any manner with respect to, or
permit to exist, any Lien with respect to any Mortgage Loan
or, except as expressly permitted by or pursuant to the REO
Mortgages, any REO Property, except: (i) Liens in favor of the
Lenders and (ii) the Permitted Encumbrances.
(B) OWNERSHIP AND TRANSFER. Except as expressly
permitted by or pursuant to this Agreement or the REO
Mortgages, own any property other than the Mortgage Loans and
the REO Properties or Transfer or permit to be Transferred any
Mortgage Loan or REO Property or any portion thereof or
interest therein or any direct or indirect ownership interests
in the Borrower.
(C) OTHER BORROWINGS. Incur, create, assume, become
or be liable in any manner with respect to Other Borrowings,
except that the Borrower may (i) with respect to an REO
Property only, incur secured or unsecured indebtedness
relating solely to financing of trade payables, the
acquisition of goods, services and supplies (including, but
not limited to reasonable attorney's fees and costs) used in
the ordinary course of Borrower's business or the acquisition
or leasing of Equipment used in the ordinary course of
Borrower's business, to the extent that such loans or leases
are ordinary and customary in the industry of operating
properties similar to an REO Property, and the proceeds of
which are not distributed to Borrower except as reimbursement
for monies expended by Borrower to pay for trade payables, the
acquisition of goods, services and supplies and to fund the
financing, acquisition or leasing of such Equipment, (ii)
incur loans from its members or partners or their respective
Affiliates; provided that (a) such loans are subordinate to
the Loan and unsecured, (b) the terms of such loans provide
that such member or partner shall not take any judicial or
non-judicial action to commence any foreclosure proceeding
with respect thereto for so long as any of the Indebtedness
remains outstanding, (c) the proceeds of such loans are used
by Borrower to pay expenses (including operating expenses) or
closing costs relating to an REO Property or Mortgage Loan, to
fund the Account Collateral, to acquire Equipment or to make
interest payments on the Loan, and (d) such loans are on terms
satisfactory to the Agent on behalf of the Lenders, or (iii)
incur other indebtedness previously approved by the Agent in
its reasonable discretion.
(D) DISSOLUTION; MERGER OR CONSOLIDATION. Dissolve,
terminate, liquidate, merge with or consolidate into another
Person.
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(E) CHANGE IN BUSINESS. Cease to be a Single-Purpose
Entity, or make any material change in the scope or nature of
its business objectives, purposes or operations, or undertake
or participate in activities other than the continuance of its
present business.
(F) DEBT CANCELLATION. Cancel or otherwise forgive
or release any material claim or debt owed to such Person by
any other Person, except for adequate consideration or in the
ordinary course of its business, or cancel or otherwise
forgive or release any obligations owed under any Mortgage
Loan.
(G) AFFILIATE TRANSACTIONS. Enter into, or be a
party to, any transaction with an Affiliate of the Borrower,
except in the ordinary course of business and on terms which
are fully disclosed to the Agent in advance and are no less
favorable to the Borrower than would be obtained in a
comparable arm's length transaction with an unrelated third
party.
(H) CREATION OF EASEMENTS. Except as expressly
permitted by or pursuant to an REO Mortgage or this Agreement
or required by a Mortgage Loan, create, or permit an REO
Property or Mortgaged Property or any part thereof to become
subject to, any easement, license or restrictive covenant,
other than a Permitted Encumbrance (the Agent agreeing not to
unreasonably withhold or delay any consent requested by
Borrower pursuant to this Section 6.1(h)).
(I) MISAPPLICATION OF FUNDS. Distribute any Rents or
Moneys received from Accounts in violation of the provisions
of Section 2.12, or fail to deliver any security deposit to
the Manager, or misappropriate any security deposit or portion
thereof.
(J) CERTAIN RESTRICTIONS. Enter into any agreement
which expressly restricts its ability to enter into
amendments, modifications or waivers of any of the Loan
Documents or (other than pursuant to the Loan Documents) any
of the Mortgage Loans.
(K) ASSIGNMENT OF LICENSES AND PERMITS. Assign or
transfer any of its interest in any Permits pertaining to an
REO Property, or assign, transfer or remove or permit any
other Person to assign, transfer or remove any records
pertaining to such REO Property, except as otherwise permitted
hereunder.
(L) PLACE OF BUSINESS. Change its chief executive
office or its principal place of business without giving the
Agent at least fifteen (15) days' prior written notice thereof
and promptly providing the Agent such information as the Agent
may reasonably request in connection therewith.
(M) LEASES. Enter into, amend or cancel Leases,
except as permitted by or pursuant to this Agreement.
(N) MANAGEMENT AGREEMENT. (i) Terminate or cancel
the Management Agreement except in accordance with this
Agreement, (ii) consent to either the reduction of the term of
or the assignment of the Management Agreement, (iii) increase
or consent to the increase of the amount of any charges under
the Management Agreement, or (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its
rights and remedies under, the Management Agreement in any
material respect; PROVIDED, HOWEVER, that if a Management
Agreement is terminated and a successor manager is not
appointed to manage the REO Property within three (3) months
of the date of termination, then the Agent may appoint a
successor manager.
(O) PLANS AND WELFARE PLANS. Knowingly (i) engage in
or permit any transaction in connection with which the
Borrower or any ERISA Affiliate is reasonably likely to be
subject to either a material civil penalty or tax assessed
pursuant to Section 502(i) or 502(1) of ERISA or Section 4975
of the Code, (ii) permit any Welfare Plan to provide benefits
(including, without
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limitation, medical benefits (whether or not insured)), with
respect to any of its current or former employees beyond his
or her retirement or other termination of service other than
(a) coverage mandated by applicable law, (b) death or
disability benefits that have been fully provided for by paid
up insurance or otherwise or (c) severance benefits, (iii)
permit its assets to become "plan assets", whether by
operation of law or under regulations promulgated under ERISA
or (iv) adopt, amend (except as may be required by applicable
law or to maintain tax qualified status) or increase the
amount of any benefit or amount payable under, or permit any
ERISA Affiliate to adopt, amend (except as may be required by
applicable law or to maintain tax qualified status) or
increase the amount of any benefit or amount payable under,
any Plan or Welfare Plan, except for normal increases in the
ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase
in its benefits expense to Borrower or any ERISA Affiliate.
(P) COLLATERAL IMPAIRMENTS; GROUND LEASE IMPAIRMENT.
Cause or permit the occurrence of any Collateral Impairment or
Ground Lease Impairment.
ARTICLE VII.
EVENT OF DEFAULT
SECTION 7.1. EVENT OF DEFAULT. The occurrence of one or more of
the following events shall be an "EVENT OF DEFAULT" hereunder:
(i) if on any Payment Date the
Borrower fails to pay any
accrued and unpaid interest on
the Loan or any other principal
amount referred to in SECTION
2.12(b) then due and payable in
accordance with the provisions
hereof;
(ii) if Borrower fails (a) to pay
the outstanding Indebtedness on
the Maturity Date or the fees
payable to the Collateral Agent
on any Payment Date, (b) to
deposit into the Collection
Account, the amount required
pursuant to SECTION 2.7(a) or
2.7(b), respectively or (c) to
reduce the outstanding
Principal Indebtedness by the
amount payable on any Payment
Date or Business Day pursuant
to SECTION 2.7(a) or 2.7(b),
respectively;
(iii) if Borrower fails to pay any
other amount payable pursuant
to this Agreement or any other
Loan Document when due and
payable in accordance with the
provisions hereof or thereof,
as the case may be, and such
failure continues for ten (10)
Business Days after the Agent
delivers written notice thereof
to Borrower;
(iv) if any representation or
warranty made herein or in any
other Loan Document, or in any
report, certificate, financial
statement or other Instrument,
agreement or document furnished
by the Borrower or its member
or the Manager in connection
with this Agreement, the Note
or any other Loan Document
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executed and delivered by any
such Person, shall be false as
of the date such representation
or warranty was made and shall
continue to be false sixty (60)
days after notice from the
Agent;
(v) if the Borrower, the Guarantor
or the general partner of
Borrower or Guarantor makes an
assignment for the benefit of
creditors;
(vi) if a receiver, liquidator or
trustee shall be appointed for
the Borrower or the Guarantor
or the general partner of
Borrower or Guarantor or if the
Borrower or the Guarantor or
the general partner of Borrower
or Guarantor shall be
adjudicated a bankrupt or
insolvent, or if any petition
for bankruptcy, reorganization
or arrangement pursuant to
federal bankruptcy law, or any
similar federal or state law,
shall be filed by or against,
consented to, or acquiesced in
by, the Borrower or the
Guarantor or the general
partner of Borrower or
Guarantor, or if any proceeding
for the dissolution or
liquidation of the Borrower or
the Guarantor or the general
partner of Borrower or
Guarantor shall be instituted;
PROVIDED, HOWEVER, that if such
appointment, adjudication,
petition or proceeding was
involuntary and not consented
to by the Borrower or the
Guarantor or the general
partner of Borrower or
Guarantor, upon the same not
being discharged, stayed or
dismissed within sixty (60)
days, or if the Borrower or the
Guarantor or the general
partner of Borrower or
Guarantor shall generally not
be paying its debts as they
become due;
(vii) except in accordance with this
Agreement, if the Borrower
attempts to delegate its
obligations or assign its
rights under this Agreement,
any of the other Loan Documents
or any interest herein or
therein, or if any Transfer
occurs;
(viii) if any provision of an
Organization Agreement
affecting the purpose for which
the Borrower is formed is
amended or modified in a manner
which is reasonably likely to
have a Material Adverse Effect,
the Agent or Collateral Agent,
or if the Borrower fails to
perform or enforce the
provisions of the
Organizational Agreement and
such failure is reasonably
likely to have a Material
Adverse Effect or attempts to
dissolve without Agent's
consent;
(ix) if an Event of Default as
defined or described in the
Global Note, the Mortgages or
any other Loan Document occurs
(whether as to the Borrower or
any REO Property or any portion
thereof); or
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(x) if a Market Value Test Default
occurs;
(xi) if any Collateral Impairment
occurs; or
(xii) if the Borrower shall continue
to be in Default under any of
the other terms, covenants or
conditions of this Agreement,
the Global Note or the other
Loan Documents (other than
SECTION 6.1(p)), for thirty
(30) days after notice from the
Agent or its successors or
assigns, in the case of any
other Default (unless otherwise
provided herein or in such
other Loan Document); PROVIDED,
HOWEVER, that if such
non-monetary Default is
susceptible of cure but cannot
reasonably be cured within such
thirty (30) day period and the
Borrower shall have commenced
to cure such Default within
such thirty (30) day period and
thereafter diligently and
expeditiously proceeds to cure
the same, such thirty (30) day
period shall be extended for an
additional reasonable period
not to exceed sixty (60) days
in total.
then, upon the occurrence of any such Event of Default and at any time
thereafter, the Agent or any Lender or its successors or assigns, may, in
addition to any other rights or remedies available to it pursuant to this
Agreement, the Global Note and the other Loan Documents, or at law or in equity,
take such action, without further notice or demand, as the Agent or any Lender
or its successors or assigns, deems advisable to protect and enforce its rights
against Borrower and in and to all or any portion of any Collateral (including,
without limitation, declaring the entire Indebtedness to be immediately due and
payable) and may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against the Borrower and/or any Collateral
(including, without limitation, all rights or remedies available at law or in
equity).
Notwithstanding anything to the contrary herein or in the
other Loan Documents, if a Default or Event of Default shall occur hereunder or
under another Loan Document because a representation, warranty, affirmative
covenant, negative covenant or other provision hereunder or thereunder shall be
breached or violated as it affects a particular REO Property or Mortgage Loan,
(x) such Default or Event of Default may be cured, (y) any related acceleration
of the Loan shall be rescinded and (z) any other remedy relating to such Default
or Event of Default, other than any indemnification to which an Indemnified
Party may be entitled hereunder, shall cease to apply upon the Borrower causing
a Capital Event with respect to such REO Property or Mortgage Loan to occur and
the payment to the Collection Account of the Release Price of such REO Property
or Mortgage Loan, in which event all Liens on such REO Property or Mortgage Loan
and the Collateral related thereto created hereunder or under the other Loan
Documents shall be deemed to be released and terminated. Such a Capital Event
shall occur within 30 Business Days of any acceleration of the Loan. The only
condition precedent to the Borrower's right to cause such Capital Event to occur
shall be the payment of the Release Price as set forth above in this paragraph.
SECTION 7.2. REMEDIES.
(a) Upon the occurrence of an Event
of Default, all or any one or
more of the rights, powers,
other remedies available to the
Agent or the Lenders against
Borrower or any other Person
under this Agreement, the
Global Note or any of the other
Loan Documents or at law or in
equity may be exercised by
Lenders at any time and from
time to time, whether or not
all or any portion of the
Indebtedness shall be declared
due and payable, and whether or
not the Agent shall have
commenced any foreclosure
proceeding or other action for
the enforcement of its rights
and remedies under any of the
Loan Documents with
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respect to all or any portion
of the Collateral. Any such
actions taken by the Agent
shall be cumulative and
concurrent and may be pursued
independently, singly,
successively, together or
otherwise, at such time and in
such order as the Agent may
determine in its sole
discretion, to the fullest
extent permitted by law,
without impairing or otherwise
affecting the other rights and
remedies of the Agent and the
Lenders permitted by law,
equity or contract or as set
forth herein or in the other
Loan Documents.
(b) In the event of the foreclosure
or other action by the Agent or
any Lender to enforce its
remedies in connection with all
or any portion of the REO
Properties, the Agent shall
apply all Net Proceeds received
to repay the Indebtedness in
accordance with SECTION 2.8,
the Indebtedness shall be
reduced to the extent of such
Net Proceeds and the remaining
portion of the Indebtedness
shall remain outstanding and
secured by the Loan Documents,
it being understood and agreed
by the Borrower that the
Borrower is liable, subject to
SECTION 8.24, for the repayment
of all the Indebtedness and
that any "excess" foreclosure
proceeds are part of the
cross-collateralized and
cross-defaulted security
granted to the Agent for the
benefit of the Lenders pursuant
to the Loan Documents;
PROVIDED, HOWEVER, that the
Global Note shall be deemed to
have been accelerated only to
the extent of the Net Proceeds
actually received by Agent with
respect to the Collateral and
applied in reduction of the
Indebtedness evidenced by the
Global Note in accordance with
the provisions of the Global
Note, after payment by Borrower
of all Transaction Costs and
costs of enforcement.
(c) Upon the occurrence and during
the continuance of any Event of
Default, Agent shall have the
right, in addition to any other
rights or remedies of Agent
hereunder or under the other
Loan Documents, but not the
obligation, in its own name or
in the name of Borrower, to
enter into possession of all or
any portion of the REO
Properties, to perform all work
necessary to complete the
construction, reconstruction,
maintenance or renovation of
the REO Properties or to
operate all or any portion of
the REO Properties and to
employ watchmen and other
safeguards to protect the REO
Properties. Borrower hereby
appoints Agent as its
attorney-in-fact, if Agent
elects to do so, at any time
upon the occurrence and during
the continuance of any Event of
Default, (i) to use such sums
as are necessary to make such
alteration, repairs and
renovations to all or any
portion of the REO Properties
and to employ such architects,
engineers and contractors as
may be required for the purpose
of completing any construction,
reconstruction, maintenance or
renovation of all or any
portion of the REO Properties
or for the operation of the REO
Properties or any portion
thereof, (iii) to endorse the
name of Borrower on any checks
or drafts representing proceeds
of the insurance policies or
condemnation awards, or other
checks or instruments payable
to the Borrower with respect to
the REO
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Properties, (iv) to do every
act with respect to the
alteration, repair or
renovation of or the
construction, repair,
maintenance and operation of
the REO Properties or any
portion thereof which Borrower
otherwise may do, and (v) to
prosecute or defend any action
or proceeding incident to the
REO Properties. The
power-of-attorney granted
hereby is a power coupled with
an interest and is irrevocable.
Agent shall have no obligation
to undertake any of the
foregoing actions, but if Agent
should do so, it shall have no
liability to Borrower for the
sufficiency or adequacy of any
such actions taken by Agent,
except with respect to
liability arising from Agent's
gross negligence, willful
misconduct or failure to comply
with Legal Requirements.
Notwithstanding the foregoing,
it is expressly understood that
Agent assumes no liability or
responsibility for (i)
performance of any duties of
the Borrower hereunder or under
any of the Loan Documents or
(ii) any other matters
pertaining to control over the
management and affairs of the
Borrower, nor by any such
action shall Agent be deemed to
create a partnership or joint
venture with the Borrower.
SECTION 7.3. REMEDIES CUMULATIVE. The rights, powers and remedies
of the Agent or any Lender under this Agreement shall be cumulative and not
exclusive of any other right, power or remedy which the Agent or any Lender may
have against Borrower or any other Person pursuant to this Agreement or any of
the other Loan Documents or existing at law or in equity or otherwise. The Agent
or any Lender's rights, powers and remedies may be pursued singly, concurrently
or otherwise, at such time and in such order as the Agent may determine in the
Agent's sole discretion. No delay or omission to exercise any remedy, right or
power accruing upon an Event of Default shall impair any such remedy, right or
power or shall be construed as a waiver thereof, but any such remedy, right or
power may be exercised from time to time and as often as may be deemed
expedient. A waiver of any Default or Event of Default shall not be construed to
be a waiver of any subsequent Default or Event of Default or to impair any
remedy, right or power consequent thereon. Notwithstanding any other provision
of this Agreement, the Agent for the benefit of the Lenders reserves the right
to seek a deficiency judgment or preserve a deficiency claim, in connection with
the foreclosure of an REO Mortgage on any of the REO Property, to the extent
necessary to foreclose on other parts of the Collateral.
SECTION 7.4. DEFAULT ADMINISTRATION FEE. At any time after an
Event of Default shall have occurred and has been continuing for thirty (30)
days, as reimbursement and compensation for the additional internal
expenditures, administrative expenses, fees and other costs associated with
actions to be taken in connection with such Event of Default, and regardless of
whether the Agent shall have commenced the exercise of any remedies pursuant to
Section 7.2, the Default Administration Fee shall be payable by Borrower to the
Agent for the benefit of the Lenders upon demand; provided, that the Default
Administration Fee and interest thereon shall not be payable in connection with
any repayment or prepayment of the Principal Indebtedness after the occurrence
of such Event of Default and prior to its cure, in the event the Borrower shall
be paying the Repayment Fee together with such repayment or prepayment.
SECTION 7.5. WAIVER OF AUTOMATIC STAY. IN THE EVENT THE BORROWER
OR ITS MEMBER SHALL (i) FILE A PETITION WITH ANY COURT OF COMPETENT JURISDICTION
OR BE THE SUBJECT OF ANY PETITION UNDER THE BANKRUPTCY CODE, (ii) BE THE SUBJECT
OF ANY ORDER FOR RELIEF ISSUED UNDER THE BANKRUPTCY CODE, (iii) FILE OR BE THE
SUBJECT OF ANY PETITION SEEKING ANY REORGANIZATION, ARRANGEMENT, COMPOSITION,
READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR
FUTURE FEDERAL OR
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STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR OTHER RELIEF, (iv) HAVE
SOUGHT OR CONSENTED TO OR ACQUIESCED IN THE APPOINTMENT OF ANY TRUSTEE,
RECEIVER, CONSERVATOR, OR LIQUIDATOR FOR ALL OR SUBSTANTIALLY ALL OF ITS ASSETS,
OR (v) BE THE SUBJECT OF ANY ORDER, JUDGMENT, OR DECREE ENTERED BY ANY COURT OF
COMPETENT JURISDICTION APPROVING A PETITION FILED AGAINST THE BORROWER OR ANY
MEMBER FOR ANY REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT,
LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL
OR STATE LAW RELATING TO BANKRUPTCY, INSOLVENCY OR REORGANIZATION FOR THE
BORROWER OR ITS MEMBER, THEN, AGENT SHALL THEREUPON BE ENTITLED TO OBTAIN AND
THE BORROWER OR ITS MEMBER, AS THE CASE MAY BE, TO THE FULLEST EXTENT PERMITTED
BY LAW, IRREVOCABLY AND UNCONDITIONALLY CONSENT TO GRANT AGENT IMMEDIATE RELIEF
FROM ANY AUTOMATIC STAY IMPOSED BY SECTION 362 OF THE BANKRUPTCY CODE, OR
OTHERWISE, ON OR AGAINST THE EXERCISE OF THE RIGHTS AND REMEDIES WHICH WOULD
OTHERWISE BE AVAILABLE TO AGENT AS PROVIDED IN THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENTS AND AS OTHERWISE PROVIDED BY LAW, AND BORROWER AND THE MEMBER, AS THE
CASE MAY BE, TO THE EXTENT PERMITTED BY LAW, HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE THEIR RIGHT TO OBJECT TO SUCH RELIEF.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. SURVIVAL. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, the making by the initial Lender of the Loan hereunder and the
execution and delivery by Borrower to the initial Lender of the Global Note, and
shall continue in full force and effect so long as any portion of the
Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All covenants, promises and agreements in
this Agreement contained, by or on behalf of Borrower, shall inure to the
benefit of the respective successors and assigns of the Agent and each Lender.
Nothing in this Agreement or in any other Loan Document, express or implied,
shall give to any Person other than the parties and the holder of the Global
Note and the other Loan Documents, and their legal representatives, successors
and assigns, any benefit or any legal or equitable right, remedy or claim
hereunder.
SECTION 8.2. AGENT'S DISCRETION. Whenever pursuant to this
Agreement, Lenders exercise any right given to approve or disapprove, or any
arrangement or term is to be satisfactory to the Agent, the decision of the
Agent to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of the Agent and shall be final and
conclusive.
SECTION 8.3. GOVERNING LAW.
(a) This Agreement was negotiated
in New York, and made by the
Lenders and accepted by
Borrower in the State of New
York, and the proceeds of the
Note delivered pursuant hereto
were disbursed from New York,
which State the parties agree
has a substantial relationship
to the parties and to the
underlying transaction embodied
hereby, and in all respects
(including, without limitation,
matters of construction,
validity and performance), this
Agreement and the obligations
arising hereunder shall be
governed by, and construed in
accordance with, the laws of
the State of New York
applicable to contracts
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made and performed in such
State and any applicable law of
the United States of America.
(b) Any legal suit, action or
proceeding against the Lenders
or Borrower arising out of or
relating to this Agreement
shall be instituted in any
federal or state court in New
York, New York. Borrower hereby
(i) irrevocably waives, to the
fullest extent permitted by
applicable law, any objection
which it may now or hereafter
have to the laying of venue of
any such suit, action or
proceeding brought in such a
court and any claim that any
such proceeding brought in such
a court has been brought in an
inconvenient forum, and (ii)
irrevocably submits to the
jurisdiction of any such court
in any such suit, action or
proceeding.
SECTION 8.4. MODIFICATION, WAIVER IN WRITING. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Global Note or any other Loan Document, or consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to or demand on Borrower shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.
SECTION 8.5. DELAY NOT A WAIVER. Neither any failure nor any delay
on the part of any Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Global Note, or of any other Loan Document, or
any other instrument given as security therefor, shall operate as or constitute
a waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Global Note
or any other Loan Document, each Lender shall not be deemed to have waived any
right either to require prompt payment when due of all other amounts due under
this Agreement, the Global Note or the other Loan Documents, or to declare a
default for failure to effect prompt payment of any such other amount.
SECTION 8.6. NOTICES. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if hand delivered or
sent by (a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and by telecopier (with answer back
acknowledged), addressed if to Agent at its address set forth on the first page
hereof, Attention: David Vadon, if to Collateral Agent at its address set forth
on the first page hereof, and if to the Borrower at its address set forth on the
first page hereof, or at such other address and Person as shall be designated
from time to time by any party hereto, as the case may be, in a written notice
to the other parties hereto in the manner provided for in this SECTION 8.6. A
copy of all notices, consents, approvals and requests directed to the Agent
shall be delivered to Latham & Watkins, 885 Third Avenue, New York, New York
10022, Attention: Brian Krisberg, Esq.; a copy of all notices, consents,
approvals and requests directed to Borrower shall be delivered to (i) Ocwen
Capital Corporation, 1675 West Palm Beach Lakes Blvd., Suite 1002, West Palm
Beach, Florida 33401, Attention: Secretary, phone no.: (561) 682-8000; fax no.:
(561) 682-9177, (ii) Ocwen Capital Corporation, 1675 West Palm Beach Lakes
Blvd., Suite 900, West Palm Beach, Florida 33401, Attention: Mark S. Zeidman,
phone no.: (561) 682-8600; fax no.: (561) 682-8174 and (iii) Gibson, Dunn &
Crutcher LLP, Jamboree Center, 4 Park Plaza, Irvine, California 92614-8557,
Attention: Karen Clark, Esq., phone no.: (714) 451-3868; fax no.: (714)
475-4628; and a copy of all notices, consents, approvals and requests directed
to Collateral Agent shall be delivered to Collateral Agent at its address set
forth on the first page hereof, Attention: Thomas F. Quinlan, Jr. A notice shall
be deemed to have been given: in
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the case of hand delivery, at the time of delivery; in the case of registered or
certified mail, when delivered or two Business Days after mailing; or in the
case of expedited prepaid delivery and telecopy, on the Business Day after the
same was sent. A party receiving a notice which does not comply with the
technical requirements for notice under this SECTION 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given.
SECTION 8.7. TRIAL BY JURY. BORROWER, TO THE FULLEST EXTENT THAT
IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH
RESPECT TO THIS AGREEMENT, THE GLOBAL NOTE OR THE OTHER LOAN DOCUMENTS.
SECTION 8.8. HEADINGS. The Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 8.9. ASSIGNMENT. Borrower may not sell, assign or transfer
any interest in the Loan Documents or any portion thereof (including, without
limitation, its rights, title, interests, remedies, powers and duties hereunder
and thereunder) without Agent's prior written consent. Each Lender shall have
the right, without the consent of Borrower, to assign or participate this
Agreement and/or any of the other Loan Documents and the obligations hereunder
to any Person (including, without limitation, in connection with a
securitization transaction of the Global Note, either alone or together with
other debt instruments). In the case of an Assignment by any Lender, (a) the
assignee shall have, to the extent of such Assignment, the same rights, benefits
and obligations as it would have if it were the original "Lender" hereunder and
(b) upon any such substitution of any Lender, a replacement or addition "Lender
signature page" shall be executed by Lender and attached to this Agreement and
thereupon become a part of this Agreement. Each potential assignee or
participant lender shall be required to sign a confidentiality agreement, which
shall provide for protection of all proprietary and confidential information of
Borrower and Guarantor. Subject to the preceding sentence, each participating
lender shall be entitled to receive all information received by the Agent under
this Agreement. The Borrower shall keep confidential to the same extent as such
potential assignee or participant lender shall have agreed in such
confidentiality agreement all information relating to such proposed Assignment
or Participation and the identity of such potential assignee or participant.
Notwithstanding anything in this Agreement to the contrary, after an Assignment
by any Lender, the "Lender" (prior to the Assignment) shall continue to have the
benefits of any rights or indemnifications and shall continue to have the
obligations contained herein which such Lender had during the period such party
was "Lender" hereunder.
SECTION 8.10. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
SECTION 8.11. PREFERENCES. The Lenders shall have no obligation to
marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the obligations of Borrower pursuant to this Agreement,
the Global Note or any other Loan Document. The Lenders shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments by Borrower to any portion of the obligations of Borrower hereunder,
PROVIDED that such application or reapplication is performed by the Lenders in
accordance with the terms of this Agreement or any other applicable Loan
Document. To the extent the Borrower makes a payment or payments to any Lender
for the Borrower's benefit, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied
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shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by such Lender.
SECTION 8.12. WAIVER OF NOTICE. Borrower shall not be entitled to
any notices of any nature whatsoever from any Lender or Collateral Agent except
with respect to matters for which this Agreement or the other Loan Documents
specifically and expressly provides for the giving of notice by such Lender
and/or Collateral Agent to Borrower and except with respect to matters for which
Borrower are not, pursuant to applicable Legal Requirements, permitted to waive
the giving of notice. Borrower hereby expressly waives the right to receive any
notice from any Lender and Collateral Agent with respect to any matter for which
this Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by such Lender or Collateral Agent to Borrower.
SECTION 8.13. FAILURE TO CONSENT. If the Borrower shall seek the
approval by or consent of the Agent or the Lenders hereunder or under the Global
Note, or any of the other Loan Documents and the Agent or the Lenders shall fail
or refuse to give such consent or approval, the Borrower shall not be entitled
to any damages for any withholding or delay of such approval or consent by the
Agent or the Lenders, it being intended that the Borrower's sole remedy shall be
to bring an action for an injunction or specific performance which remedy for
injunction or specific performance shall be available only in those cases where
the Agent has expressly agreed hereunder or under the Global Note or under any
of the other Loan Documents not to unreasonably withhold or delay its consent or
approval.
SECTION 8.14. EXHIBITS INCORPORATED. The information set forth on
the cover, heading and recitals hereof, and the Exhibits attached hereto, are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
SECTION 8.15. OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee of
any Lender's interest in and to this Agreement, the Global Note and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to this Agreement, the Global Note and the other
Loan Documents which Borrower may otherwise have against any assignor or this
Agreement, the Global Note and the other Loan Documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon this Agreement, the
Global Note and other Loan Documents and any such right to interpose or assert
any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrower.
SECTION 8.16. NO JOINT VENTURE OR PARTNERSHIP. Borrower and each
Lender intend that the relationship created hereunder be solely that of borrower
and lender. Nothing herein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and any Lender
nor to grant any Lender any interest in the Collateral other than that of
mortgagee or lender.
SECTION 8.17. WAIVER OF MARSHALLING OF ASSETS DEFENSE. To the
fullest extent Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and others with interests in Borrower,
and of the Collateral, or to a sale in inverse order of alienation in the event
of foreclosure of the interests hereby created, and agree not to assert any
right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of any Lender under the Loan Documents to a sale of any Collateral for the
collection of the Indebtedness without any prior or different resort for
collection, or the right of any Lender to the payment of the Indebtedness out of
the Net Proceeds of the Collateral in preference to every other claimant
whatsoever.
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SECTION 8.18. RESERVED.
SECTION 8.19. CONFLICT; CONSTRUCTION OF DOCUMENTS. In the event of
any conflict between the provisions of this Agreement and the provisions of the
Global Note or any of the other Loan Documents, the provisions of this Agreement
shall prevail. The parties hereto acknowledge that they were represented by
counsel in connection with the negotiation and drafting of the Loan Documents
and that the Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same.
SECTION 8.20. BROKERS AND FINANCIAL ADVISORS. Borrower and the
initial Lender hereby represent that they have dealt with no financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement. Subject to the preceding
sentence, Borrower and initial Lender hereby agree to indemnify and hold the
other and Collateral Agent harmless from and against any and all claims,
liabilities, costs and expenses of any kind in any way relating to or arising
from a claim by any Person that such Person acted on behalf of the indemnifying
party in connection with the transactions contemplated herein. The provisions of
this Section 8.20 shall survive the expiration and termination of this Agreement
and the repayment of the Indebtedness.
SECTION 8.21. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
SECTION 8.22. ESTOPPEL CERTIFICATES. Borrower and each Lender
hereby agree at any time and from time to time upon not less than fifteen (15)
days prior written notice by Borrower or such Lender to execute, acknowledge and
deliver to the party specified in such notice, a statement, in writing,
certifying that this Agreement is unmodified and in full force and effect (or if
there have been modifications, that the same, as modified, is in full force and
effect and stating the modifications hereto), and stating whether or not, to the
knowledge of such certifying party, any Default or Event of Default has occurred
and is then continuing, and, if so, specifying each such Default or Event of
Default; PROVIDED, HOWEVER, that it shall be a condition precedent to any
Lender's obligation to deliver the statement pursuant to this Section 8.22, that
such Lender shall have received, together with Borrower's request for such
statement, an Officer's Certificate stating that no Default or Event of Default
exists as of the date of such certificate (or specifying such Default or Event
of Default).
SECTION 8.23. PAYMENT OF EXPENSES. Borrower shall pay all
Transaction Costs, which shall include, without limitation, (a) reasonable
out-of-pocket costs and expenses of Lenders in connection with (i) the
negotiation, preparation, execution and delivery of the Loan Documents and the
documents and instruments referred to therein, (ii) the creation, perfection or
protection of Lenders' Liens in the Collateral both prior to and following the
Closing Date (including, without limitation, fees and expenses for title and
lien searches or amended or replacement REO Mortgages, UCC Financing Statements
or Collateral Security Instruments, title insurance premiums and filing and
recording fees, third party due diligence expenses for the REO Properties and
Mortgaged Properties plus travel expenses, accounting firm fees, costs of the
Appraisals, Environmental Reports (and an environmental consultant), and the
Engineering Reports), (iii) the negotiation, preparation, execution and delivery
of any amendment, waiver or consent relating to any of the Loan Documents and
(iv) the preservation of rights under and enforcement of the Loan Documents and
the documents and instruments referred to therein, including any restructuring
or rescheduling of the Indebtedness, (b) the reasonable fees, expenses and
disbursements of counsel to Lenders in connection with all of the foregoing, (c)
all fees and expenses of Collateral Agent and its counsel and (d) any Lender's
reasonable out-of-pocket travel expenses in connection with site visits
contemplated in this Agreement.
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SECTION 8.24. NONRECOURSE. Anything contained herein, in the Global
Note or in any other Loan Document to the contrary notwithstanding, no recourse
shall be had for the payment of the principal or interest on the Global Note or
for any other Indebtedness, obligation or liability hereunder or under any other
Loan Document or for any claim based hereon or thereon or otherwise in respect
hereof or thereof against (i) any partner, agent, contractor, director, officer,
member, consultant, manager, stockholder, subscriber to capital stock,
incorporator, beneficiary, participant, trustee or advisor of the Borrower, any
partner or member in the Borrower, or any partner or member therein; (ii) any
legal representative, heir, estate, successor or assign of any thereof; (iii)
any corporation (or any officer, director, employee or shareholder thereof),
limited liability company (or member thereof), partnership (or any partner
thereof), individual or entity to which any ownership interest in the Borrower
shall have been directly or indirectly transferred; (iv) any purchaser of any
asset of the Borrower; or (v) any other Person (except the Borrower), for any
deficiency or other sum owing with respect to the Global Note or any other
Indebtedness, obligation or liability or arising under this Agreement or any
Loan Document. It is understood that neither the Global Note nor any other
Indebtedness, obligation or liability under or with respect to this Agreement
and any other Loan Document may be enforced against any Person described in
clauses (i) through (v) above; PROVIDED, HOWEVER, that the foregoing provisions
of this paragraph shall not:
(1) prevent recourse to the
Borrower, any Collateral or
other assets encumbered by the
REO Mortgages, any Collateral
Security Instrument or any
other instrument or document
granting the Lenders any
security interest or lien
pursuant to the Loan Documents;
(2) in the event of any actual
fraud, misapplication or
misappropriation of funds or
intentional misrepresentation,
estop the Agent or the Lenders
from instituting or prosecuting
a legal action or proceeding or
otherwise making a claim
against the Person or Persons
committing such actual fraud,
misapplying or misappropriating
such funds or making such
intentional misrepresentation,
or the recipient or beneficiary
of such fraud, misapplication,
misappropriation or intentional
misrepresentation, whether or
not such Person, recipient or
beneficiary, is any Person
described in CLAUSES (i)
through (v) above for losses
relating to or arising from
such actual fraud,
misapplication,
misappropriation or intentional
misrepresentation;
(3) have any applicability
whatsoever to the Pledge
Agreement, the Guaranty of
Payment or the Guaranty of
Non-Recourse Obligations or the
liability of the parties
thereunder;
(4) prevent recourse to the
Borrower or the Guarantor (but
not any of the other Persons
described in CLAUSES (i)
through (v) above) with respect
to the breach of any provision
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in the Environmental Indemnity
Agreement or this Agreement
concerning Environmental Laws,
Hazardous Substances and any
indemnification of the Agent or
any Lender with respect thereto
contained in either document;
(5) constitute a waiver, release or
discharge of any indebtedness
or obligation evidenced by the
Global Note or secured by the
Loan Documents, and the same
shall continue until paid or
discharged in full; or
(6) apply with respect to the right
of the Lenders after an Event
of Default to recover security
deposits received by the
Borrower or any Person
described in CLAUSES (i)
through (v) above (or that the
Borrower or such Person
received credit for) from
tenants and not previously
refunded or turned over.
ARTICLE IX.
THE AGENT
SECTION 9.1. APPOINTMENT. POWERS AND IMMUNITIES. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms of this Agreement and of the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Agent (which term as used in this sentence and in
SECTION 9.5 and the first sentence of Section 9.6 hereof shall include reference
to its Affiliates and its own and its Affiliates' officers, directors, employees
and agents): (a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not by
reason of this Agreement or any other Loan Document be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement or any other Loan Document,
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, the Global Note or any other Loan Document or any
other document referred to or provided for herein or therein or for any failure
by the Borrower or any other Person to perform any of their obligations
hereunder or thereunder; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder or under any other Loan Document;
and (d) shall not be responsible for any action taken or omitted to be taken by
it hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct. The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
SECTION 9.2. RELIANCE BY AGENT. The Agent shall be entitled to
rely upon any certification, notice or other communication (including, without
limitation, any thereof by telephone, telecopy, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the Agent.
As to any matters not expressly provided for by this Agreement or any other Loan
Document, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance
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with the instructions given by all of the Lenders, and such instructions of such
Lenders and any action taken or failure to act pursuant thereto shall be binding
on all of the Lenders.
SECTION 9.3. DEFAULTS. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Event of Default unless
the Agent has received written notice from a Lender or the Borrower specifying
such Default and stating that such notice is a "Notice of Default." In the event
that the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to SECTION 9.7 hereof) take such action with respect to such
Default or Event of Default as shall be directed by all Lenders, PROVIDED that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Lenders except to the extent that this
Agreement expressly requires that such action be taken, or not be taken, only
with the consent or upon the authorization of all of the Lenders.
SECTION 9.4. RIGHTS AS A LENDER. With respect to the Loan made by
it, the Agent in its capacity as a Lender hereunder shall have the same rights
and powers hereunder as any other Lender and may exercise the same as though it
were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the Agent in its individual capacity.
The Agent and its Affiliates may (without having to account therefor to any
Lender) lend money to, make investments in and generally engage in any kind of
business with the Borrower or any of its Affiliates as if it were not acting as
the Agent, and the Agent and its Affiliates may accept fees and other
consideration from the Borrower or such Affiliate for services in connection
with this Agreement or otherwise without having to account for the same to the
Lenders.
SECTION 9.5. INDEMNIFICATION. The Lenders agree to indemnify the
Agent (to the extent not reimbursed under SECTION 5.1(J), but without limiting
the obligations of Borrower under said SECTION 5.1(J)) ratably in accordance
with their respective portion of the Loan, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Agent (including by any Lender) arising
out of or by reason of any investigation in or in any way relating to or arising
out of this Agreement or any other Loan Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses that the Borrower is obligated to pay under SECTION 5.1(J)), but
excluding, unless a Default or Event of Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, PROVIDED that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
SECTION 9.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
agrees that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and their Affiliates and
decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or under any other Loan Document. The Agent shall not be required to keep itself
informed as to the performance or observance by Borrower of this Agreement or
any of the other Loan Documents or to inspect the properties or books of
Borrower or any of their Affiliates. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of Borrower or any of their Affiliates that may
come into the possession of the Agent or any of its Affiliates.
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<PAGE>
SECTION 9.7. FAILURE TO ACT. Except for action expressly required
of the Agent hereunder and under the other Loan Documents, the Agent shall in
all cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction from
the Lenders of their indemnification obligations under SECTION 9.5 hereof
against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action.
SECTION 9.8. RESIGNATION OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign upon
giving notice thereof to the Lenders and the Borrower; PROVIDED, HOWEVER, that
such resignation shall not be effective until such time as the successor Agent
is in place. Upon any such resignation, the Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Lenders and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent, that shall be a
sophisticated financial institution. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article IX shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent.
SECTION 9.9. AGENCY FEE. Each Lender will pay to the Agent an
agency fee as may be agreed upon between such Lender and the Agent. Borrower
shall not be liable for the payment of such fee.
SECTION 9.10. CONSENTS UNDER LOAN DOCUMENTS. The Agent may consent
to any modification, supplement or waiver under any of the Loan Documents;
PROVIDED that, without the prior consent of each Lender, the Agent shall not
release any Collateral or otherwise terminate any Lien under any Loan Document
providing for collateral security, or agree to additional obligations being
secured by such collateral security (unless the Lien for such additional
obligations shall be junior to the Lien in favor of the Indebtedness), except
that no such consent shall be required, and the Agent is hereby authorized, to
release any Lien covering Collateral that is the subject of a disposition
permitted hereunder.
SECTION 9.11. NOTICES, REPORTS AND OTHER COMMUNICATIONS. The Agent
shall provide, at its expense, copies of each notice, report, document,
correspondence or other written communication delivered to the Agent by Borrower
or any Affiliate of Borrower pursuant to any Loan Document, to each Lender
identified in such notice, report, document, correspondence or other written
communication or reasonably determined by the Agent to be entitled thereto or
affected thereby, as soon as practicable after the Agent's receipt thereof.
ARTICLE X.
WAIVERS
SECTION 10.1. WAIVER OF SUBROGATION AND CONTRIBUTION. Until all
amounts due under the Loan Documents are paid in full, each Borrower hereby
absolutely and irrevocably waives any and all (a) rights which it may have or
may now or hereafter acquire by way of subrogation, reimbursement or indemnity
against any Borrower by virtue of any' action taken by Agent with respect to any
of its rights or remedies under any of the Loan Documents or otherwise
(including, without limitation, by reason of any payments made by any Borrower
with respect to the Note), and (b) other claims or rights against any Borrower
relating to this Agreement, the Loan Documents or any of the obligations of any
Borrower to Lender.
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EACH BORROWER ACKNOWLEDGES AND AGREES THAT PURSUANT TO THE
FOREGOING PARAGRAPH, IT HAS WAIVED, AMONG OTHER SPECIFIC RIGHTS GRANTED TO IT AT
LAW OR IN EQUITY, ITS RIGHTS, IF ANY, TO SUBROGATION, REIMBURSEMENT AND/OR
INDEMNITY AGAINST EACH OF THE OTHER BORROWERS. SUCH WAIVER INCLUDES, WITHOUT
LIMITATION, A WAIVER OF EACH BORROWER'S RIGHTS THROUGH SUBROGATION, AFTER
PAYMENT OF ITS OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS TO WHICH IT IS A
PARTY AND THE APPLICATION OF SUCH PAYMENT BY AGENT TO THE INDEBTEDNESS EVIDENCED
BY ANY NOTE(S) WITH RESPECT TO WHICH IT IS NOT THE MAKER, TO BE SUBSTITUTED IN
PLACE OF AGENT WITH RESPECT TO THE OBLIGATIONS OF SUCH OTHER BORROWER SUCH THAT
IT COULD SUCCEED TO AGENT'S RIGHTS, REMEDIES AND/OR SECURITY RELATING TO SUCH
OBLIGATIONS AND ASSERT A CLAIM AGAINST SUCH OTHER BORROWER. CERTAIN AUTHORITIES
HAVE DETERMINED THAT, IN THE ABSENCE OF AN EFFECTIVE WAIVER, PARTICULAR ACTIONS
OF A LENDER THAT IMPAIR OR DESTROY A GUARANTOR'S OR OTHER SURETY'S SUBROGATION
RIGHTS COULD PROVIDE SUCH GUARANTOR OR OTHER SURETY WITH A DEFENSE TO THE
PAYMENT AND PERFORMANCE OF ITS OBLIGATIONS UNDER ITS GUARANTY OR OTHER SURETY
OBLIGATION. BY WAY OF EXAMPLE, BUT NOT OF LIMITATION, COURTS HAVE HELD THAT,
ABSENT AN EFFECTIVE WAIVER, A GUARANTOR OR OTHER SURETY MAY BE EXONERATED FROM
ITS OBLIGATIONS UNDER A GUARANTY OR OTHER SURETY OBLIGATION, AS APPLICABLE, IF A
LENDER COMPROMISES OR EXTINGUISHES THE GUARANTOR'S OR OTHER SURETY'S, AS THE
CASE MAY BE, SUBROGATION RIGHTS BY ELECTING TO FORECLOSE NON-JUDICIALLY, BY
POWER OF SALE, ON REAL PROPERTY SECURITY THEREBY INVOKING THE DEFICIENCY BAR OF
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 580D. EACH BORROWER AGREES THAT SUCH
DEFENSES ARE INAPPLICABLE IN LIGHT OF ITS IRREVOCABLE WAIVER OF SUBROGATION,
REIMBURSEMENT AND/OR INDEMNITY RIGHTS AGAINST EACH OTHER BORROWER SET FORTH IN
THE FOREGOING PARAGRAPH AND THAT NO ACTION BY AGENT IN ENFORCING ITS RIGHTS AND
REMEDIES AGAINST SUCH OTHER BORROWER OR OTHERWISE MAY COMPROMISE OR EXTINGUISH
SUCH RIGHTS BECAUSE EACH SUCH RIGHT HAS BEEN IRREVOCABLY WAIVED BY IT HEREUNDER.
EACH BORROWER HEREBY ACKNOWLEDGES THAT IT HAS BEEN NOTIFIED OF THE NATURE OF ALL
OF ITS RIGHTS AND DEFENSES AS A GUARANTOR OR SURETY AND HAS KNOWINGLY AND WITH
THE ADVICE OF LEGAL COUNSEL WAIVED SUCH RIGHTS AND DEFENSES AS SET FORTH HEREIN.
EACH OF THE WAIVERS CONTAINED HEREIN WERE SEPARATELY BARGAINED FOR.
INITIALS: __________ ___________ ___________
SECTION 10.2. OBLIGATIONS INDEPENDENT: WAIVERS.
(i) Each Borrower agrees that (i)
its obligations and liabilities
under each of the Loan
Documents to which it is a
party are joint and several and
are independent of and in
addition to the undertakings of
any other Borrower pursuant to
the Loan Documents to which
such other Borrower is a party,
any Note(s) made and delivered
by such other Borrower in
connection therewith or any
other collateral security given
to secure the same, (ii) a
separate action may be brought
to enforce the provisions of
such Loan Documents whether any
other Borrower is a party in
any such action or not, (iii)
Agent may at any time, or from
time to time, in its sole
discretion, (a) extend or
change the time of payment
and/or performance and/or the
manner, place or terms of
payment and/or performance of
all or any of the obligations
secured
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by such Loan Documents; (b)
exchange, release and/or
surrender all or any of the
collateral security, or any
part thereof, by whomsoever
deposited, which is now or may
hereafter be held by Agent in
connection with all or any of
such obligations; (c) sell
and/or purchase all or any such
collateral at public or private
sale, or at any broker's board,
in the manner permitted by law
and after giving any notice
which may be required, and
after deducting all costs and
expenses of every kind for
collection, sale or delivery,
the net proceeds of any such
sale may be applied by Lender
upon all or any of such
obligations; and (d) settle or
compromise with such other
Borrower, and/or any other
person liable thereon, any and
all of such obligations, and/or
subordinate the payment of
same, or any part thereof, to
the payment of any other debts
or claims, which may at any
time be due or owing to Agent
and/or any other person or
corporation, and (iv) Agent
shall be under no obligation to
marshal any assets in favor of
any Borrower, or in payment of
any or all of such Obligations.
(ii) Except as expressly required
herein or in the other Loan
Documents, each Borrower hereby
waives (i) presentment, demand,
protest, notice of acceptance,
notice of dishonor, notice of
nonperformance and any other
notice with respect to any of
the obligations secured by any
of the Loan Documents to which
it is a party and this
Agreement, and promptness in
commencing suit against any
party thereto or liable
thereon, and/or in giving any
notice to or making any claim
or demand hereunder upon it,
(ii) any right to require Agent
to (a) proceed against other
Borrower liable with respect to
such obligations (b) proceed
against or exhaust any security
held from such other Borrower,
or (c) pursue any remedy in
Agent's power whatsoever; (iii)
any defense arising by reason
of any disability or other
defense of such other Borrower
or by reason of the cessation
from any cause whatsoever of
the liability of such other
Borrower other than full
payment of such obligations;
(iv) any defense it may acquire
by reason of Agent's election
of any remedy against it or any
other Borrower or both,
including, without limitation,
any defense which, absent this
waiver, it would have that its
obligations and liabilities
under the Loan Documents to
which it is a party could be
exonerated based upon Agent's
election to foreclosure on its
collateral by conducting a
non-judicial foreclosure under
the power of sale set forth in
any Mortgage even though
certain of its rights may
thereby be impaired or
extinguished under applicable
law (including, without
limitation, the anti-deficiency
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statutes of the State of
California and any similar laws
in any other state); (v) to the
fullest extent permitted by
applicable law, all rights and
benefits purporting to reduce a
guarantor s obligations in
proportion to the principal
obligation (including, without
limitation, those set forth in
Section 2809 of the California
Civil Code and any similar law
in any other state); (vi) to
the fullest extent permitted by
law, all rights and benefits
under (a)Section 580a of the
California Code of Civil
Procedure, and/or any other
similar law in any other state,
purporting to limit the amount
of any deficiency judgment
which might be recoverable
following the occurrence of a
trustee's sale under a deed of
trust, (b) Section 580b of the
California Code of Civil
Procedure and/or any other
similar law in any other state
stating that no deficiency may
be recovered on a real property
purchase money obligation, (c)
Section 580d of the California
Code of Civil Procedure and/or
any other similar law in any
other state stating that no
deficiency may be recovered on
a note secured by a deed of
trust on real property in case
such real property is sold
under the power of sale
contained in such deed of
trust, and (d)Section 726 of
the California Code of Civil
Procedure and/or any other
similar law in any other state
stating that there may be but
one form of action on an
indebtedness secured by real
property, if such sections, or
any of them, have any
application hereto or any'
application to the undersigned
and (vii) to the fullest extent
permitted by law, (a) any
defense arising as a result of
Agent's election, in any
proceeding instituted under the
Bankruptcy Code, of the
application of Section 1111
(b)(2) of the Bankruptcy Code,
(b) any defense based on any
borrowing or grant or a
security interest under Section
364 of the Bankruptcy Code, and
(c) without limiting the
generality of the foregoing or
any other provision hereof, all
rights and benefits which might
otherwise be available to the
undersigned under California
Civil Code Sections 2810, 2819,
2822, 2839, 2845, 2849, 2850,
2899, and 3433, and/or any
other similar law in any other
state.
(iii) Each Borrower warrants that (i)
to the extent any of the Loan
Documents to which it is a
party secure the obligations of
any other Borrower to Agent,
such Loan Documents were
executed and/or amended at the
request of such other Borrower,
(ii) Agent has made no
representation to any Borrower
as to the creditworthiness of
any other Borrower, and (iii)
it has established adequate
means of obtaining from each
other Borrower on a continuing
basis financial and other
information pertaining to such
other Borrower's financial
condition. Each Borrower
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agrees to keep adequately
informed from such means as it
deems appropriate of any facts,
events or circumstances which
might in any way affect its
risks and liabilities under
such Loan Documents and further
agrees that Lender shall have
no further obligation to
disclose to it information or
materials required in the
course of Agent's relationship
with such other Borrower.
(iv) Borrower hereby expressly
waives any right it may have
under California Civil Code
2954.10 or under any other law
to prepay the Note, in whole or
in part, without prepayment
charge, upon acceleration of
the maturity date of this Note,
and agrees that if for any
reason, a prepayment of any or
all of this Note is made,
whether voluntarily or upon or
following any acceleration of
the maturity date of this Note
by Agent, then Borrowers shall
pay any charge, fee or penalty
set forth herein. By initialing
this provision in the space
provided below, Borrower hereby
declares that the Agent's
agreement to make the Loan at
the interest rate and for the
term set forth in this Note
constitutes adequate
consideration, given individual
weight by Borrower, for this
waiver and agreement.
Initials of Borrower: ______
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
AGENT AND INITIAL LENDER:
SALOMON BROTHERS REALTY CORP., a New York corporation
By: /s/ MARY ANN MEROLA
-----------------------------
Name: Mary Ann Merola
Title: Authorized Agent
BORROWER:
OAIC CALIFORNIA PARTNERSHIP, L.P., a California limited
partnership
By: Ocwen California General, Inc., its general partner
By: /s/ JOHN R. BARNES
-----------------------------
Name: John R. Barnes
Title: Senior Vice President
OAIC CALIFORNIA PARTNERSHIP II, L.P., a California limited
partnership
By: Ocwen California General, Inc., its general partner
By: /s/ JOHN R. BARNES
-----------------------------
Name: John R. Barnes
Title: Senior Vice President
COLLATERAL AGENT:
LASALLE NATIONAL BANK, a nationally chartered bank (as
Collateral Agent for Salomon Brothers Realty Corp. only)
By: THOMAS F. QUINLAN, JR.
-----------------------------
Name: Thomas F. Quinlan, Jr.
Title:Trust Officer
1
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EXHIBITS
The following exhibits have been omitted from this filing, but copies thereof
are available to the Commission upon request:
A - Assignment of Contracts, Licenses, Permits, Agreements,
Warranties and Approvals (Form)
C - Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Form)
D - Management Agreement
E - Manager's Consent and Subordination of Management Agreement
(Form)
F-1 - Closing Date Opinion of Gibson, Dunn & Crutcher LLP (corporate
matters, Loan Document (other than Florida Deed of Trust and
Assignment of Rents and Leases) enforceability)
F-2 - Closing Date Opinion of In-house Counsel to the Guarantor
(corporate matters)
F-3 - Closing Date Opinion of Jones, Foster, Johnston & Stubbs, P.A.
(Florida Deed of Trust and Assignment of Rents and Leases
enforceability)
H - Financing Statements (Form)
I - Lien Search Jurisdictions
J - Assignment of Rents and Leases (Form)
L - Pledge Agreement (Form)
N - Request for Advance
O - Collateral Assignment, Pledge and Security Agreement (Form)
P - Collateral Assignment of Mortgage (Form)
Q - Collateral Assignment of Assignment of Leases (Form)
R-1 - Initial Collateral Agent Certification (Form)
R-2 - Final Collateral Agent Certification (Form)
S - Joinder (Form)
T - Unilateral Notice of Collateral Assignment of Mortgage Loan
U - Request for Release
2
<PAGE>
EXHIBIT B-1
GLOBAL NOTE
$200,000,000 APRIL 30, 1998
NEW YORK, NEW YORK
FOR VALUE RECEIVED, OAIC CALIFORNIA PARTNERSHIP, L.P., a
California limited partnership, and OAIC CALIFORNIA PARTNERSHIP II, L.P., a
California limited partnership (collectively, the "BORROWER"), hereby promise to
pay to the order of SALOMON BROTHERS REALTY CORP., a New York corporation
("SALOMON"; Salomon together with any subsequent holder of this Global Note
being hereinafter referred to as the "HOLDER"), at its principal office at 7
World Trade Center, 29th Floor, New York, New York 10048, the sum of TWO HUNDRED
MILLION DOLLARS ($200,000,000) (or such portion thereof as may be outstanding
from time to time) in lawful money of the United States of America and in
immediately available funds, on the date provided in the Loan Agreement
(hereinafter defined), and to pay interest on the unpaid Principal Indebtedness
(as such term is defined in the Loan Agreement), at such office, in like money
and funds, for the period commencing on the initial Advance Closing Date (as
such term is defined in the Loan Agreement) until such Principal Indebtedness
shall be paid in full, at the rates per annum and on the dates provided in the
Loan Agreement.
The date and amount of each Advance (as such term is defined
in the Loan Agreement) on each Advance Closing Date and the date and amount of
each payment of interest, principal and other amounts due under the Loan
Documents (as such term is defined in the Loan Agreement), shall be recorded by
Agent (as such term is hereinafter defined) on the schedule attached hereto
PROVIDED that the failure of Agent to make any such recordation shall not affect
the obligations of the Borrower to make a payment when due of any amount owing
under the Loan Agreement or hereunder.
This Global Note is the Global Note referred to in the Loan
Agreement, dated as of the date hereof (as modified and supplemented and in
effect from time to time, the "LOAN AGREEMENT") among the Borrower, Salomon (as
initial lender and as agent for administration of the Loan ("AGENT")), and
LaSalle National Bank, as collateral agent for the Lenders, and evidences the
Principal Indebtedness loaned thereunder.
Reference to the Loan Agreement is hereby made for a statement
of the rights of the Agent and the duties and obligations of the Borrower, but
neither this reference to the Loan Agreement nor any provision thereof shall
affect or impair the obligation of the Borrower to pay the principal, interest
and other amounts, if any, payable with respect to this Global Note when due.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Loan Agreement.
This Global Note is secured by the Mortgages and certain other
Loan Documents.
The principal sum evidenced by this Global Note, together with
accrued interest and all other sums or amounts due hereunder, shall become
immediately due and payable at the option of the Holder upon the occurrence of
any Event of Default in accordance with the provisions of the Loan Agreement.
With respect to the amounts due pursuant to this Global Note,
Borrower hereby waives the following: (1) all rights of exemption of property
from levy or sale under execution or other process for the collection of debts
under the Constitution or laws of the United States or any state thereof; (2)
demand, presentment, protest, notice of dishonor, notice of nonpayment, suit
against any party, diligence in collection of this Global Note,
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and all other requirements necessary to enforce this Global Note, except for
notices required by Governmental Authorities and notices required by the Loan
Agreement; and (3) any further receipt by or acknowledgement of any Collateral
now or hereafter deposited as security for the Loan.
In no event shall the amount of interest (and any other sums
or amounts that are deemed to constitute interest under applicable Legal
Requirements) due or payable hereunder (including interest calculated at the
Default Rate) exceed the maximum rate of interest designated by applicable Legal
Requirements (the "MAXIMUM AMOUNT"), and in the event such payment is
inadvertently paid by the Borrower or inadvertently received by the Holder, then
such excess sum shall be credited as a payment of principal, and if in excess of
such balance, shall be immediately returned to the Borrower upon such
determination. It is the express intent hereof that the Borrower not pay and the
Holder not receive, directly or indirectly, interest in excess of the Maximum
Amount.
The Holder shall not by any act, delay, omission or otherwise
be deemed to have modified, amended, waived, extended, discharged or terminated
any of its rights or remedies, and no modification, amendment, waiver,
extension, discharge or termination of any kind shall be valid unless in writing
and signed by the Holder. All rights and remedies of the Holder under the terms
of this Global Note and applicable Legal Requirements shall be cumulative, and
may be exercised successively or concurrently. Borrower agrees that as of the
date hereof there are no defenses, equities or setoffs with respect to the
obligations set forth herein, and to the extent any such defenses, equities, or
setoffs may exist, the same are hereby expressly released, forgiven, waived and
forever discharged.
Wherever possible, each provision of this Global Note shall be
interpreted in such manner as to be effective and valid under applicable Legal
Requirements, but if any provision of this Global Note shall be prohibited by or
invalid under applicable Legal Requirements, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Global Note.
The Holder may, at its option, release to the Borrower any
Collateral given to secure the Indebtedness evidenced hereby, and no such
release shall impair the obligations of any Borrower to the Holder.
This Global Note was negotiated in New York, and made by the
Borrower and accepted by the Holder in the State of New York, and the proceeds
of this Global Note were disbursed from New York, which state the parties agree
has a substantial relationship to the parties and to the underlying transactions
embodied hereby, and in all respects (including, without limitation, matters of
construction, validity, performance and maximum permissible rates of interest),
this global note and the obligations arising hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in such state and any applicable law of the United
States of America.
Any legal suit, action or proceeding against the Holder by the
Borrower arising out of or relating to this Global Note shall be instituted in
any federal or state court in New York, New York. Any legal suit, action or
proceeding against the Borrower by the Holder arising out of or related to this
Global Note shall be instituted in any federal or state court in New York, New
York or the state where any Collateral is located. Borrower hereby (i)
irrevocably waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum,
and (ii) irrevocably submits to the jurisdiction of any such court in any such
court in any such suit, action or proceeding.
BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION,
ANY TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS GLOBAL NOTE
OR THE OTHER LOAN DOCUMENTS. BORROWER AGREES THAT THE HOLDER MAY FILE A COPY OF
THIS
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WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED AGREEMENT OF THE BORROWER TO IRREVOCABLY WAIVE ITS RIGHT TO TRIAL BY
JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN BORROWER AND THE HOLDER SHALL INSTEAD BE TRIED IN
A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
The provisions of this Global Note shall be subject to the
provisions of SECTION 8.24 of the Loan Agreement, which provisions are hereby
incorporated herein by reference as if set forth in full.
The Loan Agreement provides for the acceleration of the
maturity of this Global Note upon the occurrence of certain events and for
prepayment of this Global Note upon the terms and conditions specified therein.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the Borrower has caused this Global Note
to be properly executed on the date first above written and has authorized this
Global Note to be dated as of the day and year first above written.
BORROWER:
OAIC CALIFORNIA PARTNERSHIP, L.P.
a California limited partnership
By: Ocwen California General, Inc.
a Delaware corporation,
its general partner
By: _________________________________
Name:
Title:
OAIC CALIFORNIA PARTNERSHIP II, L.P.
a California limited partnership
By: Ocwen California General, Inc.
a Delaware corporation,
its general partner
By: _________________________________
Name:
Title:
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SCHEDULE OF NOTES
This Global Note, together with any Registered Note delivered in
exchange for any portion of this Global Note, evidences the aggregate principal
amount of the Loan outstanding or which may be outstanding from time to time
under the Loan Agreement, subject to the payments and prepayments of principal
set forth below:
DATE OF AMOUNT OF AMOUNT PAID AGGREGATE UNPAID NOTATION
LOAN ADVANCE LOAN ADVANCE OR PREPAID PRINCIPAL AMOUNT MADE BY
------------ ------------ ---------- ---------------- -------
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EXHIBIT B-2
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EXHIBIT G
GUARANTY OF NON-RECOURSE OBLIGATIONS
GUARANTY OF NON-RECOURSE OBLIGATIONS (this "AGREEMENT" or
"GUARANTY"), made as of April 30, 1998, between OCWEN PARTNERSHIP, L.P., having
an address at The Forum, Suite 1000, 1675 Palm Beach Lakes Boulevard, West Palm
Beach, Florida 33401 ("GUARANTOR"), and SALOMON BROTHERS REALTY CORP., a New
York corporation, having an office at Seven World Trade Center, New York, New
York 10048 ("AGENT").
W I T N E S S E T H :
WHEREAS, Agent has agreed to make a loan to OAIC CALIFORNIA
PARTNERSHIP, L.P., a California limited partnership, and OAIC CALIFORNIA
PARTNERSHIP II, L.P., a California limited partnership, (individually and
collectively, as the context requires, the "BORROWER"), in the amount of up to
Two Hundred Million Dollars ($200,000,000) (the "LOAN"); and
WHEREAS, to evidence the Loan, Borrower is this day giving its
Global Note, dated the date hereof, in the maximum principal amount of
$200,000,000 (as modified, supplemented, amended, extended, renewed, replaced,
exchanged or substituted and in effect from time to time, the "NOTE") to Agent
pursuant to a Loan Agreement dated the date hereof, among the Borrower, the
Agent and LaSalle National Bank, as collateral agent (the "LOAN AGREEMENT"); and
WHEREAS, Borrower shall, pursuant to the Loan Agreement, grant
to Agent certain Mortgages with respect to the Mortgaged Property (as such terms
are defined in the Loan Agreement) in order to secure the Note; and
WHEREAS, Guarantor directly or indirectly owns the entire
limited partnership interest in each Borrower, and shall derive a substantial
economic benefit from the making of the Loan by Agent to Borrower; and
WHEREAS, as a condition precedent to the making of the Loan,
Borrower has agreed to procure and deliver to Agent this Agreement; and
WHEREAS, Agent has declined to make the Loan unless this
Agreement is duly executed by Guarantor and delivered to Agent.
NOW, THEREFORE, in consideration for, and as an inducement to,
Agent's making the Loan, and for other good and valuable consideration the legal
sufficiency of which and receipt thereof are hereby acknowledged, and
notwithstanding any provision to the contrary contained in the Loan Agreement,
the Note, the Mortgages or any of the other Loan Documents (as such term is
defined in the Loan Agreement), including without limitation, any "non-recourse"
provision, Agent and Guarantor do hereby agree as follows:
1. Guarantor, on behalf of itself and its successors and
assigns (collectively, "SUCCESSORS") does hereby absolutely, unconditionally,
irrevocably and personally: (i) guaranty to Agent payment and performance of all
of the obligations, representations, covenants, warranties and liabilities of
Borrower under clauses (2) and (5) of the proviso to Section 8.24 of the Loan
Agreement and (ii) agrees to reimburse Agent for, and hold Agent harmless from
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and against, any and all losses, damages, claims, expenses, deficiencies,
liabilities and costs (including, without limitation, reasonable attorneys' fees
and disbursements) incurred, suffered or sustained by Agent and/or its
successors and assigns as a result of or arising out of, in connection with or
resulting from, the enforcement of this Agreement against Guarantor (the
obligations of Guarantor under clauses "i" and "ii" above being referred to
hereinafter, collectively, as "GUARANTOR'S OBLIGATION").
2. It is agreed that the obligations of Guarantor hereunder
shall be primary and this Agreement shall be enforceable against Guarantor and
its Successors without the necessity for any suit or proceeding of any kind or
nature whatsoever brought by Agent against Borrower or its respective successors
or assigns or any other party or against any security for the payment of the
Guarantor's Obligation and without the necessity of any notice of non-payment or
non-observance or of any notice of acceptance of this Agreement or of any notice
of demand to which Guarantor might otherwise be entitled (including, without
limitation, diligence, presentment, notice of maturity, extension of time,
protest, notice of dishonor or default, change in nature or form of the
Guarantor's Obligation, acceptance of further security, release of further
security, imposition or agreement arrived at as to the amount of or the terms of
the Guarantor's Obligation, notice of adverse change in Borrower's financial
condition and any other fact that might materially increase the risk to
Guarantor), all of which Guarantor hereby expressly waives. Guarantor hereby
expressly agrees that the validity of this Agreement and the obligations of
Guarantor hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
Agent against Borrower, or its successors or assigns, any of the rights or
remedies reserved to Agent pursuant to the provisions of the Loan Agreement, the
Note, the Mortgages or any other Loan Documents.
3. Guarantor waives, and covenants and agrees that it will not
at any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any and all appraisal, valuation, stay, extension,
marshalling-of-assets or redemption laws, or right of homestead or exemption,
whether now or at any time hereafter in force, that may delay, prevent or
otherwise affect the performance by Guarantor of its obligations under, or the
enforcement by Agent of, this Agreement. Guarantor further covenants and agrees
not to set up or claim any defense, counterclaim, cross-claim, offset, set-off,
right of recoupment, or other objection of any kind to any action, suit or
proceeding in law, equity or otherwise, or to any demand or claim that may be
instituted or made by Agent hereunder other than the defense of the actual
timely performance of Guarantor's Obligations hereunder. Guarantor represents,
warrants and agrees that, as of the date hereof, its obligations under this
Agreement are not subject to any counterclaims, cross-claims, rights of
recoupment, offsets or affirmative or other defenses of any kind against Agent.
4. Guarantor agrees that any notice or directive given at any
time by Guarantor to Agent that is inconsistent with any waiver contained in
this Agreement shall be void and may be ignored by Agent, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Agreement for the reason that such pleading or introduction would be at variance
with the written terms of this Agreement, unless Agent has specifically agreed
otherwise in a writing, signed by a duly authorized officer. Guarantor
specifically acknowledges and agrees that the foregoing waivers are of the
essence of the Loan transaction and that, but for this Agreement and such
waivers, Agent would not make the Loan to Borrower.
5. The provisions of this Agreement are for the benefit of
Agent and its successors and assigns, and nothing herein contained shall impair,
as between Borrower and Agent, the obligations of Borrower under the Loan
Agreement, the Note, the Mortgages or any of the other Loan Documents.
6. This Agreement shall be a continuing guaranty (until the
full satisfaction of Guarantor's Obligation) and the liability of Guarantor
hereunder shall in no way be terminated, affected, modified, impaired or
diminished (to the extent permitted by law) by reason of the happening, from
time to time, of any of the following, although without notice or the further
consent of Guarantor:
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(a) any assignment, amendment, modification or waiver of or
change in any of the terms, covenants, conditions or provisions of the Loan
Agreement, the Note, any Mortgage or any of the other Loan Documents or the
invalidity or unenforceability of any of the foregoing; or
(b) any extension of time that may be granted by Agent to
Borrower, Guarantor or Guarantor's Successors; or
(c) any action that Agent or Borrower may take or fail to take
under or in respect of any of the Loan Documents or by reason of any waiver of,
or failure to enforce any of the rights, remedies, powers or privileges
available to Agent under this Agreement or available to Agent at law, equity or
otherwise, or any action on the part of Agent or Borrower granting indulgence or
extension in any form whatsoever; or
(d) any dealing, transaction, matter or thing occurring
between Agent, Borrower, Guarantor or Guarantor's Successors; or
(e) any sale, exchange, release, or other disposition of any
property pledged, mortgaged or conveyed, or any property in which Agent has been
granted a lien or security interest to secure any indebtedness of Borrower to
Agent; or
(f) any release of any person or entity who may be liable in
any manner for the payment and collection of any amounts owed by Borrower to
Agent; or
(g) the application of any sums by whomsoever paid or however
realized to any amounts owing by Borrower to Agent in such manner as Agent shall
determine in its sole discretion; or
(h) any Event of Default (as such term is defined in the Loan
Agreement), whether or not Agent has exercised any of its rights and remedies as
set forth in the Loan Agreement or any Mortgage upon the happening of any such
Event of Default; or
(i) Borrower's and/or Guarantor's voluntary or involuntary
liquidation, dissolution, sale of all or substantially all of their respective
assets and liabilities, appointment of a trustee, receiver, liquidator,
sequestrator or conservator for all or any part of Borrower's or Guarantor's
assets, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment, or the commencement of
other similar proceedings affecting Borrower or Guarantor or any of the assets
of either of them, including, without limitation, (A) the release or discharge
of Borrower from the payment and performance of its obligations under any of the
Loan Documents by operation of law, or (B) the impairment, limitation or
modification of the liability of Borrower, any of its partners or members or
Guarantor in bankruptcy, or of any remedy for the enforcement of the Guarantor's
Obligation, under any of the Loan Documents, or Guarantor's liability under this
Agreement, resulting from the operation of any present or future provisions of
the Federal Bankruptcy Code or other present or future federal, state or
applicable statute of law or from the decision in any court; or
(j) any change in or termination of the ownership interest of
Guarantor in [any entity comprising] Borrower (whether direct or indirect); or
(k) any conveyance of any Mortgaged Property, whether or not
pursuant to a foreclosure sale, a deed in lieu of foreclosure, a transfer
through bankruptcy, or otherwise; or
(l) the addition of any joinder party to the Loan Agreement,
the Note, any Mortgage or any other Loan Document under any joinder agreement or
any increase or other change in any individual or aggregate liability or
obligation of Borrower under the Loan Agreement, the Note, any Mortgage, or any
other Loan Document as a result thereof.
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7. Guarantor acknowledges that this Guaranty and Guarantor's
Obligations are and shall (until full satisfaction of Guarantor's Obligation)
continue to be absolute, unconditional and irrevocable in all respects, and
shall at all times be valid and enforceable irrespective of any other agreement
or circumstances of any nature whatsoever that might otherwise constitute a
defense to this Guaranty or the obligations of any other person or party
(including, without limitation, Borrower or any other guarantor) relating to
this Guaranty or the obligations of Guarantor hereunder.
8. Guarantor agrees that if at any time all or any part of any
payment at any time received by Agent from Borrower or Guarantor under or with
respect to this Agreement is or must be returned by Agent for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of Borrower or Guarantor), then Guarantor's Obligations hereunder
shall, to the extent of the payment returned, be deemed to have continued in
existence notwithstanding such previous receipt by Agent, and Guarantor's
Obligations hereunder shall continue to be effective or reinstated, as the case
may be, as to such returned payment, as though such returned payment to Agent
had never been made.
9. Guarantor (a) shall have no right of subrogation against
Borrower by reason of any payments or acts of performance by Guarantor in
compliance with the obligations of Guarantor hereunder; (b) hereby waives any
right to enforce any remedy that Guarantor now or hereafter shall have against
Borrower by reason of any one or more payments or acts of performance in
compliance with the obligations of Guarantor hereunder, to the extent
enforcement of such remedy would impair any right or remedy available to Agent
under any Loan Document; (c) shall subordinate any liability or indebtedness of
Borrower now or hereafter held by Guarantor or any affiliate of Guarantor to the
obligations of Borrower under the Loan Documents; (d) shall not file, assert or
receive payment on any claim, whether now existing or hereafter arising, against
Borrower in the event of the commencement of a case by or against Borrower under
federal or state insolvency laws; (e) hereby waives the benefit of any right to
participate in any security now or hereafter held by Agent; and (f) hereby
waives any defense based upon the institution or consummation of any judicial or
nonjudicial foreclosure proceeding against Borrower or any other person, and
acknowledges that its liability shall not be affected by the fact that any such
proceeding might operate under any antideficiency (or other) law to limit or
deprive Guarantor of rights of subrogation or recovery, whether or not it had
notice or opportunity to participate in such proceeding.
10.Guarantor represents and warrants to Agent, with the
knowledge that Agent is relying upon the same, as follows:
(a) Guarantor is solvent and has the legal right to
enter into this Agreement and to perform its obligations under
the terms hereof;
(b) there is no action, suit, proceeding or
investigation pending or, to Guarantor's Actual Knowledge,
threatened against or affecting Guarantor at law, in equity,
in admiralty or before any arbitrator or any governmental
department, commission, board, bureau, agency or
instrumentality (domestic or foreign) that is likely to result
in any material adverse change in the property, assets or
condition (financial or otherwise) of Guarantor or that is
likely to impair materially the ability of Guarantor to
perform its obligations under this Agreement;
(c) all financial statements that have heretofore
been furnished by Guarantor to Agent in connection with this
Agreement, and all such financial statements that hereafter
may be furnished to Agent by Guarantor, have been and shall be
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prepared by an independent certified public accountant
approved by Agent in accordance with the Loan Agreement, shall
be consistent in form with prior statements and shall be
certified by Guarantor (provided no default shall have
occurred and be continuing under the Loan, in which event any
such statements shall be certified by such independent
certified public accountant); are and shall be true, correct
and complete; and do and shall fairly present the financial
condition of Guarantor, all as of the respective dates
thereof; and
(d) Guarantor shall own the entire membership
interest in each entity which is a limited liability company
or the entire partnership interest in each entity which is a
limited partnership which executes a joinder to any Loan
Document.
11. As long as this Agreement shall be outstanding, Guarantor
shall furnish to Agent, within 45 days after the end of each calendar year,
Guarantor's financial statement for such period, in scope and detail reasonably
satisfactory to Agent.
12. Guarantor and Agent acknowledge and agree that this
Agreement is a guaranty of payment and performance and not of collection and
enforcement in respect of any of the Guarantor's Obligation. Nothing contained
in any of the other Loan Documents shall in any event or under any circumstances
modify, qualify or affect the personal recourse obligations of Guarantor
hereunder.
13. Agent may freely assign any or all of its rights under
this Agreement, but any such assignment shall be made in compliance with the
Loan Agreement and no such assignment shall increase Guarantor's Obligations or
diminish its rights hereunder. In the event of any such assignment, Agent shall
give Guarantor prompt notice of same, but the consent of Guarantor shall not be
required for any such assignment and failure to give such notice shall not
affect the validity or enforceability of any such assignment or subject Agent to
any liability and Guarantor shall continue to remain bound by and obligated to
perform under and with respect to this Agreement.
14. The representations, warranties and obligations of
Guarantor set forth in this Agreement shall survive until this Agreement shall
terminate in accordance with the terms hereof.
15. This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter and may not be modified,
amended, supplemented or discharged except by a written agreement signed by
Guarantor and Agent. This Agreement also may be discharged by full performance
of the Guarantor's Obligation in accordance with the terms hereof, or as
otherwise provided herein.
16. If all or any portion of any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion thereof shall be deemed
stricken and severed from this Agreement and the remaining provision and
portions thereof shall continue in full force and effect.
17. All notices, requests, demands and other communications
under or in connection with this Agreement shall be in writing and shall be
deemed to have been given or made for all purposes when delivered in person to
the addresses set forth below or three (3) business days after same is sent by
registered or certified mail, return receipt requested, postage prepaid, to the
following addresses:
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If to Guarantor: The address listed above
With a copy to: Gibson, Dunn & Crutcher LLP
Jamboree Center
4 Park Plaza
Irvine, California 92614-8557
Attn: Karen H. Clark, Esq.
and
If to Agent: The address listed above
With a copy to: Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Attn: Brian Krisberg, Esq.
The above addresses may be changed on written notice given as hereinabove
provided. Notices may be sent by a party hereto or on its behalf by its
attorney.
18. This Agreement shall be binding upon Guarantor and its
Successors and shall inure to the benefit of Agent and its successors and
assigns.
19. The failure of Agent to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Agent, nor excuse
Guarantor from its obligations hereunder. Any waiver of any such right or remedy
to be enforceable against Agent must be expressly set forth in writing signed by
Agent.
20. (a) Any suit initiated by Agent against Guarantor or in
connection with or arising, directly or indirectly, out of or relating to, this
Agreement (an "ACTION") may, at Agent's option, be brought in any state or
federal court in the State of New York having jurisdiction over the subject
matter hereof. Guarantor hereby submits himself to the jurisdiction of any such
court and agrees that service of process against Guarantor in any such action
may be effected by any means permissible under federal law or under the laws of
the state in which such Action is brought. Guarantor hereby agrees that insofar
as is permitted under applicable law, this consent to personal jurisdiction
shall be self-operative and no further instrument or action, other than service
of process in one of the manners specified in this Guaranty, or as otherwise
permitted by law, shall be necessary in order to confer jurisdiction upon
Guarantor.
(b) Guarantor agrees that, provided that service of
process is effected upon Guarantor in one of the manners hereinafter specified
or as otherwise permitted by law, Guarantor irrevocably waives, to the fullest
extent permitted by law, and agrees not to assert, by way of motion, as a
defense or otherwise, (i) any objection that Guarantor may have or may hereafter
have to the laying of the venue of any Action brought in any court as provided
for by this Agreement, (ii) any claim that any Action brought in any such court
has been brought in an inconvenient forum, or (iii) any claim that Guarantor is
not personally subject to the jurisdiction of such court. Guarantor agrees that,
provided that service of process is effected upon Guarantor in one of the
manners specified in this Guaranty or as otherwise permitted by law, a final
judgment from which Guarantor has not appealed or may not appeal in any Action
brought in any such court shall be conclusive and binding upon Guarantor and
may, so far as permitted under applicable law, be enforced in the courts of any
state or any federal court or in any other courts to the jurisdiction of which
it is subject, by a suit upon such judgment and that Guarantor shall not assert
any defense, counterclaim or set-off in any such suit upon such judgment.
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(c) Guarantor agrees to execute, deliver and file all
such further instruments or documents as may be necessary under the laws of the
State of New York or the laws of the United States in order to make effective
Guarantor's consent to jurisdiction as provided for in this Guaranty.
(d) Guarantor hereby consents to process being served in
any Action by the mailing of a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to the notice address for Guarantor
as set forth in this Guaranty. Guarantor hereby agrees that provided that
service is made in accordance with this paragraph or as otherwise permitted by
law, Guarantor irrevocably waives, to the fullest extent permitted by law, all
claim of error in connection with any such service and agrees that such service
(i) shall be deemed in every respect effective service of process upon it in any
Action, and (ii) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon and personal delivery to Guarantor.
(e) Nothing in this Agreement shall limit Agent's right
to serve process in any manner permitted by law or limit Agent's right or the
right of any of its successors or assigns to bring proceedings against Guarantor
in the courts of any jurisdiction(s).
(f) To the extent that Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment before judgment, attachment in
aid of execution, execution or otherwise) with respect to Guarantor or
Guarantor's property, Guarantor hereby irrevocably waives such immunity in
respect of its obligations under this Agreement.
(g) As a further inducement to Agent's making of the Loan
to Borrower, and in consideration thereof, Agent and Guarantor each covenant and
agree that in any action or proceeding brought on, under or by virtue of this
Agreement, Agent and Guarantor each shall and do hereby unconditionally and
irrevocably waive trial by jury.
(h) Guarantor hereby further covenants and agrees to and
with Agent that Guarantor may be joined in any action against Borrower in
connection with the Loan Agreement, the Note, the Mortgages, or any of the other
Loan Documents, solely with respect to the subject matter of this Agreement.
(i) Guarantor covenants and agrees to indemnify and save
Agent harmless of and from, and defend it against, all losses, costs,
liabilities, expenses, damages or claims suffered by reason of Guarantor's
failure to perform its obligations hereunder.
21. All of Agent's rights and remedies under the Loan
Agreement, the Note, the Mortgages or any of the other Loan Documents or under
this Agreement are intended to be distinct, separate and cumulative and no such
right or remedy therein or herein mentioned is intended to be in exclusion of or
a waiver of any other right or remedy available to Agent.
22. Guarantor hereby consents that from time to time, before
or after any default by Borrower, with or without further notice to or assent
from Guarantor, any security at any time held by or available to Agent for any
obligation of Borrower, or any security at any time held by or available to
Agent for any obligation of any other person or party secondarily or otherwise
liable for all or any portion of the Loan, may be exchanged, surrendered or
released and any obligation of Borrower, or of any such other person or party,
may be changed, altered, renewed, extended, continued, surrendered, compromised,
waived or released in whole or in part, or any default with respect thereto
waived, and Agent may fail to set off and may release, in whole or in part, any
balance of any deposit account or credit on its books in favor of Borrower, or
of any such other person or party, and may extend further credit in any manner
whatsoever to Borrower, and generally deal with Borrower or any such security or
other person or party as Agent may see fit; and Guarantor shall remain bound
under this Agreement notwithstanding any such exchange, surrender, release,
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change, alteration, renewal, extension, continuance, compromise, waiver, action,
inaction, extension of further credit or other dealing. This Agreement is
independent of, and in addition to, all collateral granted, pledged or assigned
under the Loan Documents.
23. The terms of this Agreement have been negotiated, and
this Agreement has been delivered in the State of New York, and it is the
intention of the parties hereto that this Agreement be construed and enforced in
accordance with the laws of such State.
24. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
25. This Agreement may be executed in counterparts, which
together shall constitute the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty of Non-Recourse Obligations as of the date and year first above
written.
GUARANTOR
OCWEN PARTNERSHIP, L.P.,
a Virginia limited partnership,
By: Ocwen General, Inc.,
its general partner
By: ____________________________
Name:
Title:
17
<PAGE>
EXHIBIT K
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "INDEMNITY"),
dated as of the 30th day of April, 1998, is made by and among OAIC CALIFORNIA
PARTNERSHIP, L.P., and OAIC CALIFORNIA PARTNERSHIP II, L.P., a California
limited partnership, each having an office at The Forum, Suite 1000, 1675 Palm
Beach Lakes Boulevard, West Palm Beach, Florida 33401 (individually and
collectively, as the context requires, the "BORROWER"), OCWEN PARTNERSHIP, L.P.,
a Virginia limited partnership having an office at The Forum, Suite 1000, 1675
Palm Beach Lakes Boulevard, West Palm Beach, Florida 33401 (the "Guarantor"; the
Guarantor and the Borrower, collectively, the "INDEMNITOR"), and SALOMON
BROTHERS REALTY CORP., a New York corporation having an office at Seven World
Trade Center, New York, New York 10048 ("AGENT").
W I T N E S S E T H :
WHEREAS, contemporaneously with the execution and delivery
hereof (i) the Borrower, as maker, has executed and delivered to Agent, as
payee, a note, dated the date hereof (the "NOTE"), in the maximum principal face
amount of up to Two Hundred Million Dollars ($200,000,000) in evidence of the
loan being made this day by Agent to the Borrower in said amount (the "LOAN"),
and (ii) the Borrower, as borrower and Agent, as initial lender, have executed
and delivered that certain Loan Agreement (the "LOAN AGREEMENT"), of even date
herewith, pursuant to which the Loan is being made (capitalized terms used but
not defined herein shall have the meanings ascribed to them in the Loan
Agreement);
WHEREAS, the Loan is secured by the Borrower's interest in and
to the real property (the "PROPERTY") more particularly described in EXHIBIT A
attached hereto and made a part hereof;
WHEREAS, the Guarantor owns the entire [limited] partnership
interest in each Borrower;
WHEREAS, the Indemnitor will derive significant financial
benefits from the making of the Loan;
WHEREAS, in order to induce Agent to make the Loan to the
Borrower, the Indemnitor has agreed to indemnify and hold Agent and its
successors and assigns (for purposes of this Indemnity, Agent and such
successors and assigns being sometimes referred to collectively hereinafter as
"AGENT") harmless from and against any and all Indemnified Environmental
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Liabilities (as defined in Section 1 hereof) of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against Agent, Collateral
Agent and each of their respective parents, subsidiaries, Affiliates, directors,
officers, employees, representatives, agents, successors and assigns and
attorneys (collectively, the "INDEMNIFIED PARTIES").
NOW, THEREFORE, in consideration of the premises and the sum
of One Dollar in hand paid by Agent to the Indemnitor, receipt and sufficiency
whereof is hereby acknowledged, the Indemnitor, intending to be legally bound,
hereby agrees for itself and its successors and assigns as follows:
1. The Indemnitor shall indemnify, reimburse, defend, and hold
harmless the Indemnified Parties for, from, and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses (including, without limitation, interest, penalties, reasonable
attorneys' fees, disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses (but excluding internal overhead, administrative and
similar costs of the Agent and the Collateral Agent)) asserted against,
resulting to, imposed on, or incurred by any Indemnified Party, directly or
indirectly, in connection with any of the following (except to the extent same
are directly and solely caused by the fraud, bad faith, gross negligence or
willful misconduct of, or the violation of any applicable law by, any
Indemnified Party and except that any Indemnified Party shall not be indemnified
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against claims resulting from acts or omissions with respect to the applicable
Property after the Agent forecloses its Lien or security interest upon the
Property or accepts a deed in lieu of foreclosure and is a so-called
"mortgagee-in-possession", unless and to the extent such indemnification relates
to any of the following which occurred while the Indemnitor owned the related
Property (any such demand, claim, action, cause of action, assessment, loss,
damage, liability, cost or expense (including, without limitation, interest,
penalties, reasonable attorneys' fees, disbursements and expenses, and
reasonable consultants' fees, disbursements and expenses) relating to any of the
following, collectively, the "INDEMNIFIED ENVIRONMENTAL LIABILITIES")):
(i) events, circumstances, or conditions which are alleged
to, or do, form the basis for an Environmental Claim;
(ii) any pollution or threat to human health or the
environment that is related in any way to the Indemnitor's or any
previous owner's or operator's management, use, control, ownership or
operation of the applicable Property (including, without limitation,
all on-site and off-site activities involving Hazardous Substances),
and whether occurring, existing or arising prior to or from and after
the date hereof, and whether or not the pollution or threat to human
health or the environment is described in the Environmental Reports;
(iii) any Environmental Claim against any Person whose
liability for such Environmental Claim the Indemnitor has or may have
assumed or retained either contractually or by operation of law; or
(iv) the breach of any representation, warranty or covenant
set forth in SECTION 4.1(q) of the Loan Agreement or Article VI of any
Mortgage.
2. The liability of the Indemnitor hereunder shall, without
however limiting the indemnity provided in the preceding paragraph, extend to
and include all costs, expenses and attorneys' fees incurred or sustained by
Agent in making any investigation on account of any such Indemnified
Environmental Liability or in prosecuting or defending any action brought in
connection therewith, in obtaining or seeking to obtain a release therefrom and
in enforcing any of the agreements herein contained.
3. Agent, upon giving the Indemnitor thirty (30) days' prior
notice, shall have the right, in good faith, to pay, settle or compromise, or
litigate any Indemnified Environmental Liability under the belief that it is
liable therefor, whether liable or not, without the consent or approval of
Indemnitor unless Indemnitor shall protest in writing and simultaneously with
such protest deposit with Agent collateral satisfactory to it sufficient to pay
and satisfy any penalty or interest which may accrue as a result of such protest
with respect to such Indemnified Environmental Liability.
4. It is agreed that the obligations of the Indemnitor
hereunder are primary and this Indemnity shall be enforceable against the
Indemnitor, and its respective successors and assigns without (i) the necessity
for any suit or proceeding of any kind or nature whatsoever brought by Agent or
any party against any party or against any security with respect to the
Indemnified Environmental Liability, and (ii) the necessity of any notice of
non-payment or non-observance or of any notice of acceptance of this Indemnity
or of any notice or demand to which the Indemnitor might otherwise be entitled
(including, without limitation, diligence, presentment, notice of maturity,
extension of time, change in nature or form of the Indemnified Environmental
Liability, or acceptance of further security, release of further security,
imposition or agreement arrived at as to the amount of or the terms of the
Indemnified Environmental Liability, notice of adverse change in the
Indemnitor's, or any other party's financial condition and any other fact which
might materially increase the risk to the Indemnitor), all of which the
Indemnitor hereby expressly waives. The Indemnitor hereby expressly agrees that
the validity of this Indemnity and the obligations of the Indemnitor hereunder
shall in no way be terminated, affected, diminished, modified or impaired by
reason of the assertion of or the failure to assert by Agent or any other party
against the Indemnitor, or any other party or its respective successors or
assigns, any of the rights or remedies reserved to Agent, or such other party or
pursuant to the provisions of the Note, the Mortgages given to secure the Note
or any other Loan Document or other document or agreement. The Indemnitor agrees
that any notice or directive given at any time to Agent which is inconsistent
with the waiver in the sentence preceding the immediately preceding sentence
shall be void and may be ignored by Agent, and, in addition, may not be pleaded
or introduced as evidence in any litigation relating to this Indemnity for the
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<PAGE>
reason that such pleading or introduction would be at variance with the written
terms of this Indemnity, unless Agent has specifically agreed otherwise in a
writing, signed by a duly authorized officer. The Indemnitor specifically
acknowledges and agrees that the foregoing waivers are of the essence of the
Loan transaction and that, but for this Indemnity Agreement and such waivers,
Agent would decline to make the Loan.
5. This Indemnity shall be a continuing indemnification and
the liability of the Indemnitor hereunder shall, except as otherwise provided
herein, in no way be terminated, affected, modified, impaired or diminished by
reason of the happening, from time to time, of any of the following, without
notice or the further consent of the Indemnitor:
(a) any assignment, amendment, modification or waiver
of or change in any of the terms, covenants, conditions or
provisions of any of the Loan Documents, or the invalidity or
unenforceability of any of the foregoing; or
(b) any extension of time that may be granted by
Agent to the Indemnitor or its successors or assigns; or
(c) any action which Agent may take or fail to take
under or in respect of any of the Loan Documents against the
Indemnitor or any other party thereto, or by reason of any
waiver of, or failure to enforce any of the rights, remedies,
powers or privileges available to Agent under this Indemnity
or available to Agent, or other parties, at law, equity or
otherwise, or any action on the part of Agent or any other
parties granting indulgence or extension in any form
whatsoever; or
(d) any dealing, transaction, matter or thing
occurring between Agent and the Indemnitor or any other
parties or their respective successors and assigns; or
(e) any sale, exchange, release, or other disposition
of any property pledged, mortgaged, conveyed or otherwise
encumbered by any of the Loan Documents, or any property in
which Agent has been granted a lien or security interest to
secure any indebtedness of the Indemnitor to Agent; or
(f) any release of any person or entity who may be
liable in any manner for (i) the payment and collection of any
amounts owed by the Indemnitor to Agent, or (ii) any matters
included within the Indemnified Environmental Liabilities; or
(g) the application of any sums by whomsoever paid or
howsoever realized to any amounts owing by the Indemnitor to
Agent in such manner as Agent shall determine in its sole
discretion; or
(h) any Event of Default under the Loan Agreement or
any Mortgage, whether or not Agent has exercised any of its
rights and remedies as set forth in such Mortgage upon the
happening of any such Event of Default; or
(i) the Indemnitor's, its managing member's or its
general partner's voluntary or involuntary liquidation,
dissolution, sale of all or substantially all of their
respective assets and liabilities, appointment of a trustee,
receiver, liquidator, sequestrator or conservator for all or
any part of any of their respective assets, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment, or
the commencement of other similar proceedings affecting any of
the foregoing or any of the respective assets of any of the
foregoing, including, without limitation, (i) the release or
discharge of any of the foregoing from the payment and
performance of their respective obligations under any of the
Loan Documents, by operation of law or otherwise, or (ii) the
impairment, limitation or modification of the liability of any
of the foregoing in bankruptcy, or of any remedy relating to
the Indemnified Environmental Liabilities or the
indemnification contained herein or the Indemnitor's liability
4
<PAGE>
under this Indemnity, resulting from the operation of any
present or future provisions of the Federal Bankruptcy Code or
other present or future federal, state or applicable statute
or law or from the decision in any court; or
(j) satisfaction and payment of the Indebtedness and
termination of the Loan Agreement.
6. That the failure of Agent to insist upon strict compliance
with any of the terms hereof shall not be considered to be nor be deemed to be a
waiver of any of such terms nor shall it militate against the right of Agent to
insist upon strict compliance herewith at any time thereafter.
7. That if any provision of this Indemnity shall be contrary
to the laws of the jurisdiction in which the same shall be sought to be
enforced, the illegality or unenforceability of any such provision shall not
affect the other terms, covenants or conditions hereof, and the same shall be
binding upon the Indemnitor with the same force and effect as though such
illegal or unenforceable provision were not contained herein.
8. (a) All notices, demands, requests and other communications
under or in connection with this Indemnity shall be in writing and shall be
deemed to have been given or made for all purposes when delivered in person to
the addresses set forth below or two (2) business days after same is sent by
registered or certified mail, return receipt requested: if to Agent, at the
address set forth above, to the attention of David Vadon, and Latham & Watkins,
885 Third Avenue, Suite 1000, New York, New York 10022, Attention: Brian
Krisberg, Esq.; if to the Indemnitor, at the address set forth above, Attention:
Andrew Pellman, with copies to Gibson, Dunn & Crutcher LLP, Jamboree Center, 4
Park Plaza, Irvine, California 92614-8557, Attention: Karen H. Clark, Esq. The
above addresses may be changed on written notice given as hereinabove provided.
(b) This Indemnity contains the entire agreement between
the parties hereto with respect to the terms, conditions and agreements
contained herein and supersedes all prior agreements relating thereto and may
not be modified, amended, supplemented or discharged except by a written
agreement signed by the Indemnitor and Agent.
(c) THIS INDEMNITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Indemnity may be executed in any number of
counterparts, all of which when taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Indemnity by
signing any such counterpart.
(e) TO THE FULLEST EXTENT PERMITTED BY LAW THE INDEMNITOR
HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING BROUGHT BY
THE INDEMNITOR OR AGENT INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS INDEMNITY.
(f) This Indemnity shall inure to the benefit of the
Indemnified Parties and their successors and assigns and shall be binding on the
Indemnitor and its respective successors and assigns.
(g) THE INDEMNITOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS INDEMNITY,
ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE INDEMNITOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(h) Notwithstanding anything to the contrary contained in
this Indemnity, Agent shall not have the right to be indemnified for its own
fraud, bad faith, gross negligence or willful misconduct.
(i) Notwithstanding anything to the contrary contained in
this Indemnity, the liability of the Persons described in clauses (i) through
(v) in SECTION 8.24 of the Loan Agreement is subject to the limitation on
liability provisions of such SECTION 8.24 (which provisions are incorporated by
this reference as if herein set forth in full).
[SIGNATURE PAGE FOLLOWS]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnity to be duly executed under seal as of the day first above written.
INDEMNITOR:
OAIC CALIFORNIA PARTNERSHIP, L.P.
a California limited partnership
By: Ocwen California General, Inc., a
Delaware corporation, its general partner
By: _________________________________
Name:
Title:
OAIC CALIFORNIA PARTNERSHIP II, L.P.
a California limited partnership
By: Ocwen California General, Inc., a
Delaware corporation, its general partner
By: _________________________________
Name:
Title:
OCWEN PARTNERSHIP, L.P.,
a Virginia limited partnership,
By: Ocwen General, Inc.,
its general partner
By: ____________________________
Name:
Title:
AGENT:
SALOMON BROTHERS REALTY CORP.,
a New York corporation
By: ______________________________
Name:
Title:
6
<PAGE>
EXHIBIT A
DESCRIPTION OF PROPERTY
[see attached]
<PAGE>
EXHIBIT M
GUARANTY OF PAYMENT
GUARANTY OF PAYMENT (this "AGREEMENT"), made as of April 30,
1998, by and between OCWEN PARTNERSHIP, L.P., a Virginia limited partnership,
having an office at The Forum, Suite 1000, 1675 Palm Beach Lakes Boulevard, West
Palm Beach, Florida 33401 (the "GUARANTOR"), and SALOMON BROTHERS REALTY CORP.,
a New York corporation, having an office at Seven World Trade Center, New York,
New York 10048 as agent for the lenders ("AGENT").
W I T N E S S E T H :
WHEREAS, Agent has agreed to make a loan to OAIC CALIFORNIA
PARTNERSHIP, L.P., a California limited partnership, and OAIC CALIFORNIA
PARTNERSHIP II, L.P., a California limited partnership (individually and
collectively, as the context requires, "BORROWER"), in the amount of up to TWO
HUNDRED MILLION DOLLARS ($200,000,000) (the "LOAN"); and
WHEREAS, to evidence the Loan, Borrower is this day giving its
Global Note, dated the date hereof, in the maximum principal amount of up to TWO
HUNDRED MILLION DOLLARS ($200,000,000) (as modified, supplemented, amended,
extended, renewed, replaced, exchanged or substituted as in effect from time to
time the "NOTE") to Agent; and
WHEREAS, Borrower, as borrower, Agent, as agent and initial
lender, and LaSalle National Bank, as collateral agent, are parties to a Loan
Agreement, dated as of the date hereof, with respect to the Loan (said Loan
Agreement, as modified and supplemented and in effect from time to time, the
"LOAN AGREEMENT"; capitalized terms used but not otherwise defined herein shall
have the respective meanings given to them in the Loan Agreement); and
WHEREAS, Guarantor owns the entire limited partnership
interest in each Borrower, and shall derive a substantial economic benefit from
the making by Agent to Borrower of the Loan; and
WHEREAS, as a condition precedent to the making of the Loan,
Borrower has agreed to procure and deliver to Agent this Agreement; and
WHEREAS, Agent has declined to make the Loan unless this
Agreement is duly executed by Guarantor and delivered to Agent; and
NOW, THEREFORE, in consideration for, and as an inducement to,
Agent's making the Loan, and for other good and valuable consideration the legal
sufficiency of which and receipt thereof are hereby acknowledged, and
notwithstanding any provision to the contrary contained in the Note, the Loan
Agreement or any of the other Loan Documents, including without limitation, any
"non-recourse" provision, Agent and Guarantor do hereby agree as follows:
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GUARANTOR, ON BEHALF OF ITSELF AND ITS SUCCESSORS AND ASSIGNS
(COLLECTIVELY, "SUCCESSORS") DOES HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND PERSONALLY: (i) GUARANTY TO AGENT PAYMENT OF THE INDEBTEDNESS
PAYABLE UNDER THE LOAN DOCUMENTS, AND (ii) AGREE TO REIMBURSE AGENT FOR, AND
HOLD AGENT HARMLESS FROM AND AGAINST, ANY AND ALL LOSSES, DAMAGES, CLAIMS,
EXPENSES, DEFICIENCIES, LIABILITIES AND COSTS (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES AND DISBURSEMENTS) INCURRED, SUFFERED OR SUSTAINED BY AGENT
AND/OR ITS SUCCESSORS AND ASSIGNS AS A RESULT OF OR ARISING OUT OF, IN
CONNECTION WITH OR RESULTING FROM, THE ENFORCEMENT OF THIS AGREEMENT AGAINST
GUARANTOR (THE OBLIGATIONS OF GUARANTOR UNDER CLAUSES "i" AND "ii" ABOVE BEING
REFERRED TO HEREINAFTER, COLLECTIVELY, AS "GUARANTOR'S OBLIGATION").
IT IS AGREED THAT THE OBLIGATIONS OF GUARANTOR HEREUNDER SHALL
BE PRIMARY AND THIS AGREEMENT SHALL BE ENFORCEABLE AGAINST GUARANTOR AND ITS
SUCCESSORS WITHOUT THE NECESSITY FOR ANY SUIT OR PROCEEDING OF ANY KIND OR
NATURE WHATSOEVER BROUGHT BY AGENT AGAINST BORROWER OR ITS RESPECTIVE SUCCESSORS
OR ASSIGNS OR ANY OTHER PARTY OR AGAINST ANY SECURITY FOR THE PAYMENT OF THE
GUARANTOR'S OBLIGATION AND WITHOUT THE NECESSITY OF ANY NOTICE OF NON-PAYMENT OR
NON-OBSERVANCE OR OF ANY NOTICE OF ACCEPTANCE OF THIS AGREEMENT OR OF ANY NOTICE
OF DEMAND TO WHICH GUARANTOR MIGHT OTHERWISE BE ENTITLED (INCLUDING, WITHOUT
LIMITATION, DILIGENCE, PRESENTMENT, NOTICE OF MATURITY, EXTENSION OF TIME,
PROTEST, NOTICE OF DISHONOR OR DEFAULT, CHANGE IN NATURE OR FORM OF THE
GUARANTOR'S OBLIGATION, ACCEPTANCE OF FURTHER SECURITY, RELEASE OF FURTHER
SECURITY, IMPOSITION OR AGREEMENT ARRIVED AT AS TO THE AMOUNT OF OR THE TERMS OF
THE GUARANTOR'S OBLIGATION, NOTICE OF ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AND ANY OTHER FACT THAT MIGHT MATERIALLY INCREASE THE RISK TO
GUARANTOR), ALL OF WHICH GUARANTOR HEREBY EXPRESSLY WAIVES. GUARANTOR HEREBY
EXPRESSLY AGREES THAT THE VALIDITY OF THIS AGREEMENT AND THE OBLIGATIONS OF
GUARANTOR HEREUNDER SHALL IN NO WAY BE TERMINATED, AFFECTED, DIMINISHED,
MODIFIED OR IMPAIRED BY REASON OF THE ASSERTION OF OR THE FAILURE TO ASSERT BY
AGENT AGAINST BORROWER, OR ITS SUCCESSORS OR ASSIGNS, ANY OF THE RIGHTS OR
REMEDIES RESERVED TO AGENT PURSUANT TO THE PROVISIONS OF THIS AGREEMENT, THE
LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENTS.
GUARANTOR WAIVES, AND COVENANTS AND AGREES THAT IT WILL NOT AT
ANY TIME INSIST UPON, PLEAD OR IN ANY MANNER WHATSOEVER CLAIM OR TAKE THE
BENEFIT OR ADVANTAGE OF, ANY AND ALL APPRAISAL, VALUATION, STAY, EXTENSION,
MARSHALLING-OF-ASSETS OR REDEMPTION LAWS, OR RIGHT OF HOMESTEAD OR EXEMPTION,
WHETHER NOW OR AT ANY TIME HEREAFTER IN FORCE, THAT MAY DELAY, PREVENT OR
OTHERWISE AFFECT THE PERFORMANCE BY GUARANTOR OF ITS OBLIGATIONS UNDER, OR THE
ENFORCEMENT BY AGENT OF, THIS AGREEMENT. GUARANTOR FURTHER COVENANTS AND AGREES
NOT TO SET UP OR CLAIM ANY DEFENSE, COUNTERCLAIM, CROSS-CLAIM, OFFSET, SET-OFF,
RIGHT OF RECOUPMENT, OR OTHER OBJECTION OF ANY KIND TO ANY ACTION, SUIT OR
PROCEEDING IN LAW, EQUITY OR OTHERWISE, OR TO ANY DEMAND OR CLAIM THAT MAY BE
INSTITUTED OR MADE BY AGENT HEREUNDER OTHER THAN THE DEFENSE OF THE ACTUAL
TIMELY PERFORMANCE OF GUARANTOR'S OBLIGATIONS HEREUNDER. GUARANTOR REPRESENTS,
WARRANTS AND AGREES THAT, AS OF THE DATE HEREOF, ITS OBLIGATIONS UNDER THIS
AGREEMENT ARE NOT SUBJECT TO ANY COUNTERCLAIMS, CROSS-CLAIMS, RIGHTS OF
RECOUPMENT, OFFSETS OR AFFIRMATIVE OR OTHER DEFENSES OF ANY KIND AGAINST AGENT.
GUARANTOR AGREES THAT ANY NOTICE OR DIRECTIVE GIVEN AT ANY
TIME BY GUARANTOR TO AGENT THAT IS INCONSISTENT WITH ANY WAIVER CONTAINED IN
THIS AGREEMENT SHALL BE VOID AND MAY BE IGNORED BY AGENT, AND, IN ADDITION, MAY
NOT BE PLEADED OR INTRODUCED AS EVIDENCE IN ANY LITIGATION RELATING TO THIS
AGREEMENT FOR THE REASON THAT SUCH PLEADING OR INTRODUCTION WOULD BE AT VARIANCE
WITH THE WRITTEN TERMS OF THIS AGREEMENT, UNLESS AGENT HAS SPECIFICALLY AGREED
OTHERWISE IN A WRITING, SIGNED BY A DULY AUTHORIZED OFFICER. GUARANTOR
SPECIFICALLY ACKNOWLEDGES AND AGREES THAT THE FOREGOING WAIVERS ARE OF THE
ESSENCE OF THE LOAN TRANSACTION AND THAT, BUT FOR THIS AGREEMENT AND SUCH
WAIVERS, AGENT WOULD NOT MAKE THE LOAN TO BORROWER.
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THE PROVISIONS OF THIS AGREEMENT ARE FOR THE BENEFIT OF AGENT
AND ITS SUCCESSORS AND ASSIGNS, AND NOTHING HEREIN CONTAINED SHALL IMPAIR, AS
BETWEEN BORROWER AND AGENT, THE OBLIGATIONS OF BORROWER UNDER THE NOTE, THE LOAN
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
THIS AGREEMENT SHALL BE A CONTINUING GUARANTY (UNTIL THE FULL
SATISFACTION OF GUARANTOR'S OBLIGATION) AND THE LIABILITY OF GUARANTOR HEREUNDER
SHALL IN NO WAY BE TERMINATED, AFFECTED, MODIFIED, IMPAIRED OR DIMINISHED (TO
THE EXTENT PERMITTED BY LAW) BY REASON OF THE HAPPENING, FROM TIME TO TIME, OF
ANY OF THE FOLLOWING, ALTHOUGH WITHOUT NOTICE OR THE FURTHER CONSENT OF
GUARANTOR:
ANY ASSIGNMENT, AMENDMENT, MODIFICATION OR WAIVER OF OR CHANGE IN ANY
OF THE TERMS, COVENANTS, CONDITIONS OR PROVISIONS OF THE NOTE, THE LOAN
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE INVALIDITY OR
UNENFORCEABILITY OF ANY OF THE FOREGOING; OR
ANY EXTENSION OF TIME THAT MAY BE GRANTED BY AGENT TO BORROWER,
GUARANTOR OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS, HEIRS, EXECUTORS,
ADMINISTRATORS OR PERSONAL REPRESENTATIVES; OR
ANY ACTION THAT AGENT OR BORROWER MAY TAKE OR FAIL TO TAKE UNDER OR IN
RESPECT OF ANY OF THE LOAN DOCUMENTS OR BY REASON OF ANY WAIVER OF, OR FAILURE
TO ENFORCE ANY OF THE RIGHTS, REMEDIES, POWERS OR PRIVILEGES AVAILABLE TO AGENT
UNDER THIS AGREEMENT OR AVAILABLE TO AGENT AT LAW, EQUITY OR OTHERWISE, OR ANY
ACTION ON THE PART OF AGENT OR BORROWER GRANTING INDULGENCE OR EXTENSION IN ANY
FORM WHATSOEVER; OR
ANY DEALING, TRANSACTION, MATTER OR THING OCCURRING BETWEEN AGENT,
BORROWER, GUARANTOR OR THEIR RESPECTIVE SUCCESSORS AND ASSIGNS; OR
ANY SALE, EXCHANGE, RELEASE, OR OTHER DISPOSITION OF ANY PROPERTY
PLEDGED, MORTGAGED OR CONVEYED, OR ANY PROPERTY IN WHICH AGENT HAS BEEN GRANTED
A LIEN OR SECURITY INTEREST TO SECURE ANY INDEBTEDNESS OF BORROWER TO AGENT; OR
ANY RELEASE OF ANY PERSON OR ENTITY WHO MAY BE LIABLE IN ANY MANNER
FOR THE PAYMENT AND COLLECTION OF ANY AMOUNTS OWED BY BORROWER TO AGENT; OR
THE APPLICATION OF ANY SUMS BY WHOMSOEVER PAID OR HOWEVER REALIZED TO
ANY AMOUNTS OWING BY BORROWER TO AGENT IN SUCH MANNER AS AGENT SHALL DETERMINE
IN ITS SOLE DISCRETION; OR
ANY EVENT OF DEFAULT, WHETHER OR NOT AGENT HAS EXERCISED ANY OF ITS
RIGHTS AND REMEDIES AS SET FORTH IN THE LOAN AGREEMENT UPON THE HAPPENING OF ANY
SUCH EVENT OF DEFAULT; OR
BORROWER'S AND/OR GUARANTOR'S VOLUNTARY OR INVOLUNTARY LIQUIDATION,
DISSOLUTION, SALE OF ALL OR SUBSTANTIALLY ALL OF THEIR RESPECTIVE ASSETS AND
LIABILITIES, APPOINTMENT OF A TRUSTEE, RECEIVER, LIQUIDATOR, SEQUESTRATOR OR
CONSERVATOR FOR ALL OR ANY PART OF BORROWER'S OR GUARANTOR'S ASSETS, INSOLVENCY,
BANKRUPTCY, ASSIGNMENT FOR THE BENEFIT OF CREDITORS, REORGANIZATION,
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<PAGE>
ARRANGEMENT, COMPOSITION OR READJUSTMENT, OR THE COMMENCEMENT OF OTHER SIMILAR
PROCEEDINGS AFFECTING BORROWER OR GUARANTOR OR ANY OF THE ASSETS OF EITHER OF
THEM, INCLUDING, WITHOUT LIMITATION, (A) THE RELEASE OR DISCHARGE OF BORROWER
FROM THE PAYMENT AND PERFORMANCE OF ITS OBLIGATIONS UNDER ANY OF THE LOAN
DOCUMENTS BY OPERATION OF LAW, OR (B) THE IMPAIRMENT, LIMITATION OR MODIFICATION
OF THE LIABILITY OF BORROWER, ANY OF ITS PARTNERS OR MEMBERS OR GUARANTOR IN
BANKRUPTCY, OR OF ANY REMEDY FOR THE ENFORCEMENT OF THE GUARANTOR'S OBLIGATION,
UNDER ANY OF THE LOAN DOCUMENTS, OR GUARANTOR'S LIABILITY UNDER THIS AGREEMENT,
RESULTING FROM THE OPERATION OF ANY PRESENT OR FUTURE PROVISIONS OF THE FEDERAL
BANKRUPTCY CODE OR OTHER PRESENT OR FUTURE FEDERAL, STATE OR APPLICABLE STATUTE
OF LAW OR FROM THE DECISION IN ANY COURT; OR
ANY CHANGE IN OR TERMINATION OF THE OWNERSHIP INTEREST OF GUARANTOR IN
BORROWER (WHETHER DIRECT OR INDIRECT); OR
ANY CONVEYANCE OF ANY MORTGAGED PROPERTY, WHETHER OR NOT PURSUANT TO A
FORECLOSURE SALE, A DEED IN LIEU OF FORECLOSURE, A TRANSFER THROUGH BANKRUPTCY,
OR OTHERWISE; OR
THE ADDITION OF ANY JOINDER PARTY TO THE LOAN AGREEMENT, THE NOTE, ANY
MORTGAGE OR ANY OTHER LOAN DOCUMENT UNDER ANY JOINDER AGREEMENT OR ANY INCREASE
OR OTHER CHANGE IN ANY INDIVIDUAL OR AGGREGATE LIABILITY OR OBLIGATION OF
BORROWER UNDER THE LOAN AGREEMENT, THE NOTE, ANY MORTGAGE, OR ANY OTHER LOAN
DOCUMENT.
GUARANTOR ACKNOWLEDGES THAT THIS AGREEMENT AND
GUARANTOR'S OBLIGATIONS UNDER THIS AGREEMENT ARE AND SHALL AT ALL TIMES CONTINUE
TO BE ABSOLUTE, UNCONDITIONAL AND IRREVOCABLE IN ALL RESPECTS, AND SHALL (UNTIL
FULL SATISFACTION OF GUARANTOR'S OBLIGATION) BE VALID AND ENFORCEABLE
IRRESPECTIVE OF ANY OTHER AGREEMENT OR CIRCUMSTANCES OF ANY NATURE WHATSOEVER
THAT MIGHT OTHERWISE CONSTITUTE A DEFENSE TO THIS AGREEMENT OR THE OBLIGATIONS
OF ANY OTHER PERSON OR PARTY (INCLUDING, WITHOUT LIMITATION, BORROWER OR ANY
OTHER GUARANTOR) RELATING TO THIS AGREEMENT OR THE OBLIGATIONS OF GUARANTOR
HEREUNDER.
GUARANTOR AGREES THAT IF AT ANY TIME ALL OR ANY PART
OF ANY PAYMENT AT ANY TIME RECEIVED BY AGENT FROM BORROWER OR GUARANTOR UNDER OR
WITH RESPECT TO THIS AGREEMENT IS OR MUST BE RETURNED BY AGENT FOR ANY REASON
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE INSOLVENCY, BANKRUPTCY OR
REORGANIZATION OF BORROWER OR GUARANTOR), THEN GUARANTOR'S OBLIGATIONS HEREUNDER
SHALL, TO THE EXTENT OF THE PAYMENT RETURNED, BE DEEMED TO HAVE CONTINUED IN
EXISTENCE NOTWITHSTANDING SUCH PREVIOUS RECEIPT BY AGENT, AND GUARANTOR'S
OBLIGATIONS HEREUNDER SHALL CONTINUE TO BE EFFECTIVE OR REINSTATED, AS THE CASE
MAY BE, AS TO SUCH RETURNED PAYMENT, AS THOUGH SUCH RETURNED PAYMENT TO AGENT
HAD NEVER BEEN MADE.
GUARANTOR (a) SHALL HAVE NO RIGHT OF SUBROGATION
AGAINST BORROWER BY REASON OF ANY PAYMENTS OR ACTS OF PERFORMANCE BY GUARANTOR
IN COMPLIANCE WITH THE OBLIGATIONS OF GUARANTOR HEREUNDER; (b) HEREBY WAIVE ANY
RIGHT TO ENFORCE ANY REMEDY THAT GUARANTOR NOW OR HEREAFTER SHALL HAVE AGAINST
BORROWER BY REASON OF ANY ONE OR MORE PAYMENTS OR ACTS OF PERFORMANCE IN
COMPLIANCE WITH THE OBLIGATIONS OF GUARANTOR HEREUNDER, TO THE EXTENT
ENFORCEMENT OF SUCH REMEDY WOULD IMPAIR ANY RIGHT OR REMEDY AVAILABLE TO AGENT
UNDER ANY LOAN DOCUMENT; (c) SHALL SUBORDINATE ANY LIABILITY OR INDEBTEDNESS OF
BORROWER NOW OR HEREAFTER HELD BY GUARANTOR OR ANY AFFILIATE OF GUARANTOR TO THE
OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS; (d) SHALL NOT FILE, ASSERT OR
RECEIVE PAYMENT ON ANY CLAIM, WHETHER NOW EXISTING OR HEREAFTER ARISING, AGAINST
4
<PAGE>
BORROWER IN THE EVENT OF THE COMMENCEMENT OF A CASE BY OR AGAINST BORROWER UNDER
FEDERAL OR STATE INSOLVENCY LAWS; (e) HEREBY WAIVES THE BENEFIT OF ANY RIGHT TO
PARTICIPATE IN ANY SECURITY NOW OR HEREAFTER HELD BY AGENT; AND (f) HEREBY
WAIVES ANY DEFENSE BASED UPON THE INSTITUTION OR CONSUMMATION OF ANY JUDICIAL OR
NONJUDICIAL FORECLOSURE PROCEEDING AGAINST BORROWER OR ANY OTHER PERSON, AND
ACKNOWLEDGES THAT ITS LIABILITY SHALL NOT BE AFFECTED BY THE FACT THAT ANY SUCH
PROCEEDING MIGHT OPERATE UNDER ANY ANTIDEFICIENCY (OR OTHER) LAW TO LIMIT OR
DEPRIVE GUARANTOR OF RIGHTS OF SUBROGATION OR RECOVERY, WHETHER OR NOT IT HAD
NOTICE OR OPPORTUNITY TO PARTICIPATE IN SUCH PROCEEDING.
GUARANTOR REPRESENTS AND WARRANTS TO AGENT, WITH THE
KNOWLEDGE THAT AGENT IS RELYING UPON THE SAME, AS FOLLOWS:
GUARANTOR IS SOLVENT AND HAS FULL POWER AND LEGAL
RIGHT AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND TO
PERFORM ITS OBLIGATIONS UNDER THE TERMS HEREOF;
THERE IS NO ACTION, SUIT, PROCEEDING OR
INVESTIGATION PENDING OR, TO GUARANTOR'S ACTUAL KNOWLEDGE,
THREATENED AGAINST OR AFFECTING GUARANTOR AT LAW, IN EQUITY,
IN ADMIRALTY OR BEFORE ANY ARBITRATOR OR ANY GOVERNMENTAL
DEPARTMENT, COMMISSION, BOARD, BUREAU, AGENCY OR
INSTRUMENTALITY (DOMESTIC OR FOREIGN) THAT IS LIKELY TO RESULT
IN ANY MATERIAL ADVERSE CHANGE IN THE PROPERTY, ASSETS OR
CONDITION (FINANCIAL OR OTHERWISE) OF GUARANTOR OR THAT IS
LIKELY TO IMPAIR MATERIALLY THE ABILITY OF GUARANTOR TO
PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT; AND
ALL FINANCIAL STATEMENTS THAT HAVE HERETOFORE BEEN
FURNISHED BY GUARANTOR TO AGENT IN CONNECTION WITH THIS
AGREEMENT, AND ALL SUCH FINANCIAL STATEMENTS THAT HEREAFTER
MAY BE FURNISHED TO AGENT BY GUARANTOR, HAVE BEEN AND SHALL BE
AUDITED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
ACCEPTABLE TO AGENT IN ACCORDANCE WITH GAAP CONSISTENTLY
APPLIED AND SHALL BE CERTIFIED BY GUARANTOR (PROVIDED NO
DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING UNDER THE LOAN,
IN WHICH EVENT ANY SUCH STATEMENTS SHALL BE CERTIFIED BY SUCH
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT); ARE AND SHALL BE
TRUE, CORRECT AND COMPLETE; AND DO AND SHALL FAIRLY PRESENT
THE FINANCIAL CONDITION OF GUARANTOR, ALL AS OF THE RESPECTIVE
DATES THEREOF; AND
(d) Guarantor shall own the entire membership
interest in each entity that is a limited liability company or
the entire limited partnership interest in each entity that is
a limited partnership which executes a joinder to any Loan
Document.
5
<PAGE>
UNTIL THE FULL SATISFACTION OF GUARANTOR'S
OBLIGATIONS, GUARANTOR SHALL MAINTAIN (a) A MAXIMUM LEVERAGE RATIO OF NO GREATER
THAN 5 TO 1 AND (b) A TANGIBLE NET WORTH OF NO LESS THAN $200 MILLION, IN EACH
CASE AS MEASURED AT THE END OF EACH CALENDAR QUARTER. GUARANTOR'S MAXIMUM
LEVERAGE RATIO AND TANGIBLE NET WORTH SHALL BE DETERMINED BY REFERENCE TO THE
DEFINITIONS SET FORTH IN EXHIBIT A HERETO.
AS LONG AS THIS AGREEMENT SHALL BE OUTSTANDING,
GUARANTOR SHALL FURNISH TO AGENT (i) COPIES OF ALL FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION ("SEC") BY THE GUARANTOR AND (ii) COPIES OF ITS ANNUAL
REPORTS AND QUARTERLY REPORTS WITHIN 30 DAYS FOLLOWING EACH DATE ON WHICH THE
GUARANTOR IS (OR WOULD HAVE BEEN, IN THE EVENT GUARANTOR CEASES TO BE SUBJECT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) REQUIRED
TO FILE WITH THE SEC.
GUARANTOR AND AGENT ACKNOWLEDGE AND AGREE THAT THIS
AGREEMENT IS A GUARANTY OF PAYMENT AND NOT OF COLLECTION AND ENFORCEMENT IN
RESPECT OF ANY OF THE GUARANTOR'S OBLIGATIONS. NOTHING CONTAINED IN ANY OF THE
OTHER LOAN DOCUMENTS SHALL IN ANY EVENT OR UNDER ANY CIRCUMSTANCES MODIFY,
QUALIFY OR AFFECT THE PERSONAL RECOURSE OBLIGATIONS OF GUARANTOR HEREUNDER.
AGENT MAY FREELY ASSIGN ANY OR ALL OF ITS RIGHTS
UNDER THIS AGREEMENT, BUT ANY SUCH ASSIGNMENT SHALL BE MADE IN COMPLIANCE WITH
THE LOAN AGREEMENT AND NO SUCH ASSIGNMENT SHALL INCREASE GUARANTOR'S OBLIGATIONS
OR DIMINISH ITS RIGHTS HEREUNDER. IN THE EVENT OF ANY SUCH ASSIGNMENT, AGENT
SHALL GIVE GUARANTOR PROMPT NOTICE OF SAME, BUT THE CONSENT OF GUARANTOR SHALL
NOT BE REQUIRED FOR ANY SUCH ASSIGNMENT AND FAILURE TO GIVE SUCH NOTICE SHALL
NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY SUCH ASSIGNMENT OR SUBJECT
AGENT TO ANY LIABILITY AND GUARANTOR SHALL CONTINUE TO REMAIN BOUND BY AND
OBLIGATED TO PERFORM UNDER AND WITH RESPECT TO THIS AGREEMENT. GUARANTOR SHALL
NOT ASSIGN ANY OR ALL OF ITS RIGHTS UNDER THIS AGREEMENT.
THE REPRESENTATIONS, WARRANTIES AND OBLIGATIONS OF
GUARANTOR SET FORTH IN THIS AGREEMENT SHALL SURVIVE UNTIL THIS AGREEMENT SHALL
TERMINATE IN ACCORDANCE WITH THE TERMS HEREOF.
THIS AGREEMENT CONTAINS THE ENTIRE AGREEMENT BETWEEN
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL
PRIOR AGREEMENTS RELATING TO SUCH SUBJECT MATTER AND MAY NOT BE MODIFIED,
AMENDED, SUPPLEMENTED OR DISCHARGED EXCEPT BY A WRITTEN AGREEMENT SIGNED BY
GUARANTOR AND AGENT. THIS AGREEMENT ALSO MAY BE DISCHARGED BY FULL PERFORMANCE
OF THE GUARANTOR'S OBLIGATION IN ACCORDANCE WITH THE TERMS HEREOF, OR AS
OTHERWISE PROVIDED HEREIN.
IF ALL OR ANY PORTION OF ANY PROVISION CONTAINED IN
THIS AGREEMENT SHALL BE DETERMINED TO BE INVALID, ILLEGAL OR UNENFORCEABLE IN
ANY RESPECT FOR ANY REASON, SUCH PROVISION OR PORTION THEREOF SHALL BE DEEMED
STRICKEN AND SEVERED FROM THIS AGREEMENT AND THE REMAINING PROVISION AND
PORTIONS THEREOF SHALL CONTINUE IN FULL FORCE AND EFFECT.
ALL NOTICES, REQUESTS, DEMANDS AND OTHER COMMUNICATIONS
UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE
DEEMED TO HAVE BEEN GIVEN OR MADE FOR ALL PURPOSES WHEN DELIVERED IN PERSON TO
THE ADDRESSES SET FORTH BELOW OR THREE (3) BUSINESS DAYS AFTER SAME IS SENT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO THE
FOLLOWING ADDRESSES:
6
<PAGE>
If to Guarantor: Ocwen Partnership, L.P.
The Forum, Suite 1000
1675 Palm Beach Lakes Boulevard
West Palm Beach, Florida 33401
Attn: Andrew Pellman
With a copy to: Gibson, Dunn & Crutcher LLP
Jamboree Center
4 Park Plaza
Irvine, California 92614-8557
Attn: Karen H. Clark, Esq.
If to Agent: Salomon Brothers Realty Corp,
Seven World Trade Center
New York, New York 10048
Attn: David Vadon
With a copy to: Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Attn: Brian Krisberg, Esq.
The above addresses may be changed on written notice given as hereinabove
provided. Notices may be sent by a party hereto or on its behalf by its
attorney.
THIS AGREEMENT SHALL BE BINDING UPON GUARANTOR AND ITS
SUCCESSORS AND SHALL INURE TO THE BENEFIT OF AGENT AND ITS SUCCESSORS AND
ASSIGNS.
THE FAILURE OF AGENT TO ENFORCE ANY RIGHT OR REMEDY
HEREUNDER, OR PROMPTLY TO ENFORCE ANY SUCH RIGHT OR REMEDY, SHALL NOT CONSTITUTE
A WAIVER THEREOF, NOR GIVE RISE TO ANY ESTOPPEL AGAINST AGENT, NOR EXCUSE
GUARANTOR FROM ITS OBLIGATIONS HEREUNDER. ANY WAIVER OF ANY SUCH RIGHT OR REMEDY
TO BE ENFORCEABLE AGAINST AGENT MUST BE EXPRESSLY SET FORTH IN WRITING SIGNED BY
AGENT.
(a) ANY SUIT INITIATED BY AGENT AGAINST GUARANTOR OR IN
CONNECTION WITH OR ARISING, DIRECTLY OR INDIRECTLY, OUT OF OR RELATING TO, THIS
AGREEMENT (AN "ACTION") MAY, AT AGENT'S OPTION, BE BROUGHT IN ANY STATE OR
FEDERAL COURT IN THE STATE OF NEW YORK HAVING JURISDICTION OVER THE SUBJECT
MATTER HEREOF. GUARANTOR HEREBY SUBMITS ITSELF TO THE JURISDICTION OF ANY SUCH
COURT AND AGREES THAT SERVICE OF PROCESS AGAINST GUARANTOR IN ANY SUCH ACTION
MAY BE EFFECTED BY ANY MEANS PERMISSIBLE UNDER FEDERAL LAW OR UNDER THE LAWS OF
THE STATE IN WHICH SUCH ACTION IS BROUGHT. GUARANTOR HEREBY AGREES THAT INSOFAR
AS IS PERMITTED UNDER APPLICABLE LAW, THIS CONSENT TO PERSONAL JURISDICTION
SHALL BE SELF-OPERATIVE AND NO FURTHER INSTRUMENT OR ACTION, OTHER THAN SERVICE
OF PROCESS IN ONE OF THE MANNERS SPECIFIED IN THIS AGREEMENT, OR AS OTHERWISE
PERMITTED BY LAW, SHALL BE NECESSARY IN ORDER TO CONFER JURISDICTION UPON
GUARANTOR.
GUARANTOR AGREES THAT, PROVIDED THAT SERVICE OF PROCESS
IS EFFECTED UPON GUARANTOR IN ONE OF THE MANNERS HEREINAFTER SPECIFIED OR AS
OTHERWISE PERMITTED BY LAW, GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, (i) ANY OBJECTION THAT GUARANTOR MAY HAVE OR MAY HEREAFTER HAVE TO
7
<PAGE>
THE LAYING OF THE VENUE OF ANY ACTION BROUGHT IN ANY COURT AS PROVIDED FOR BY
THIS AGREEMENT, (ii) ANY CLAIM THAT ANY ACTION BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM, OR (iii) ANY CLAIM THAT GUARANTOR IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT. GUARANTOR AGREES THAT,
PROVIDED THAT SERVICE OF PROCESS IS EFFECTED UPON GUARANTOR IN ONE OF THE
MANNERS SPECIFIED IN THIS AGREEMENT OR AS OTHERWISE PERMITTED BY LAW, A FINAL
JUDGMENT FROM WHICH GUARANTOR HAS NOT APPEALED OR MAY NOT APPEAL IN ANY ACTION
BROUGHT IN ANY SUCH COURT SHALL BE CONCLUSIVE AND BINDING UPON GUARANTOR AND
MAY, SO FAR AS PERMITTED UNDER APPLICABLE LAW, BE ENFORCED IN THE COURTS OF ANY
STATE OR ANY FEDERAL COURT OR IN ANY OTHER COURTS TO THE JURISDICTION OF WHICH
IT IS SUBJECT, BY A SUIT UPON SUCH JUDGMENT AND THAT GUARANTOR SHALL NOT ASSERT
ANY DEFENSE, COUNTERCLAIM OR SET-OFF IN ANY SUCH SUIT UPON SUCH JUDGMENT.
GUARANTOR AGREES TO EXECUTE, DELIVER AND FILE ALL SUCH
FURTHER INSTRUMENTS OR DOCUMENTS AS MAY BE NECESSARY UNDER THE LAWS OF THE STATE
OF NEW YORK OR THE LAWS OF THE UNITED STATES IN ORDER TO MAKE EFFECTIVE
GUARANTOR'S CONSENT TO JURISDICTION AS PROVIDED FOR IN THIS AGREEMENT.
GUARANTOR HEREBY CONSENTS TO PROCESS BEING SERVED IN ANY
ACTION BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, RETURN RECEIPT REQUESTED, TO THE NOTICE ADDRESS FOR GUARANTOR AS SET
FORTH IN THIS AGREEMENT. GUARANTOR HEREBY AGREES THAT PROVIDED THAT SERVICE IS
MADE IN ACCORDANCE WITH THIS PARAGRAPH OR AS OTHERWISE PERMITTED BY LAW,
GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM
OF ERROR IN CONNECTION WITH ANY SUCH SERVICE AND AGREES THAT SUCH SERVICE (i)
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY
ACTION, AND (ii) SHALL, TO THE FULLEST EXTENT PERMITTED BY LAW, BE TAKEN AND
HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO GUARANTOR.
NOTHING IN THIS AGREEMENT SHALL LIMIT AGENT'S RIGHT TO
SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR LIMIT AGENT'S RIGHT OR THE RIGHT
OF ANY OF ITS SUCCESSORS OR ASSIGNS TO BRING PROCEEDINGS AGAINST GUARANTOR IN
THE COURTS OF ANY JURISDICTION(S).
TO THE EXTENT THAT GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT BEFORE JUDGMENT, ATTACHMENT IN AID OF
EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO GUARANTOR OR GUARANTOR'S
PROPERTY, GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.
AS A FURTHER INDUCEMENT TO AGENT'S MAKING OF THE LOAN TO
BORROWER, AND IN CONSIDERATION THEREOF, AGENT AND GUARANTOR EACH COVENANT AND
AGREE THAT IN ANY ACTION OR PROCEEDING BROUGHT ON, UNDER OR BY VIRTUE OF THIS
AGREEMENT, AGENT AND GUARANTOR EACH SHALL AND DO HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVE TRIAL BY JURY.
GUARANTOR DOES HEREBY FURTHER COVENANT AND AGREE TO AND
WITH AGENT THAT GUARANTOR MAY BE JOINED IN ANY ACTION AGAINST BORROWER IN
CONNECTION WITH THE NOTE, THE LOAN AGREEMENT, OR ANY OF THE OTHER LOAN
DOCUMENTS, SOLELY WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT.
8
<PAGE>
GUARANTOR COVENANTS AND AGREES TO INDEMNIFY AND SAVE
AGENT HARMLESS OF AND FROM, AND DEFEND IT AGAINST, ALL LOSSES, COSTS,
LIABILITIES, EXPENSES, DAMAGES OR CLAIMS SUFFERED BY REASON OF GUARANTOR'S
FAILURE TO PERFORM ITS OBLIGATIONS HEREUNDER.
ALL OF AGENT'S RIGHTS AND REMEDIES UNDER THE NOTE, THE
LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR UNDER THIS AGREEMENT ARE
INTENDED TO BE DISTINCT, SEPARATE AND CUMULATIVE AND NO SUCH RIGHT OR REMEDY
THEREIN OR HEREIN MENTIONED IS INTENDED TO BE IN EXCLUSION OF OR A WAIVER OF ANY
OTHER RIGHT OR REMEDY AVAILABLE TO AGENT.
GUARANTOR HEREBY CONSENTS THAT FROM TIME TO TIME, BEFORE
OR AFTER ANY DEFAULT BY BORROWER, WITH OR WITHOUT FURTHER NOTICE TO OR ASSENT
FROM GUARANTOR, ANY SECURITY AT ANY TIME HELD BY OR AVAILABLE TO AGENT FOR ANY
OBLIGATION OF BORROWER, OR ANY SECURITY AT ANY TIME HELD BY OR AVAILABLE TO
AGENT FOR ANY OBLIGATION OF ANY OTHER PERSON OR PARTY SECONDARILY OR OTHERWISE
LIABLE FOR ALL OR ANY PORTION OF THE LOAN, MAY BE EXCHANGED, SURRENDERED OR
RELEASED AND ANY OBLIGATION OF BORROWER, OR OF ANY SUCH OTHER PERSON OR PARTY,
MAY BE CHANGED, ALTERED, RENEWED, EXTENDED, CONTINUED, SURRENDERED, COMPROMISED,
WAIVED OR RELEASED IN WHOLE OR IN PART, OR ANY DEFAULT WITH RESPECT THERETO
WAIVED, AND AGENT MAY FAIL TO SET OFF AND MAY RELEASE, IN WHOLE OR IN PART, ANY
BALANCE OF ANY DEPOSIT ACCOUNT OR CREDIT ON ITS BOOKS IN FAVOR OF BORROWER, OR
OF ANY SUCH OTHER PERSON OR PARTY, AND MAY EXTEND FURTHER CREDIT IN ANY MANNER
WHATSOEVER TO BORROWER, AND GENERALLY DEAL WITH BORROWER OR ANY SUCH SECURITY OR
OTHER PERSON OR PARTY AS AGENT MAY SEE FIT; AND GUARANTOR SHALL REMAIN BOUND
UNDER THIS AGREEMENT NOTWITHSTANDING ANY SUCH EXCHANGE, SURRENDER, RELEASE,
CHANGE, ALTERATION, RENEWAL, EXTENSION, CONTINUANCE, COMPROMISE, WAIVER, ACTION,
INACTION, EXTENSION OF FURTHER CREDIT OR OTHER DEALING. THIS AGREEMENT IS
INDEPENDENT OF, AND IN ADDITION TO, ALL COLLATERAL GRANTED, PLEDGED OR ASSIGNED
UNDER THE LOAN DOCUMENTS.
THE TERMS OF THIS AGREEMENT HAVE BEEN NEGOTIATED, AND
THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK, AND IT IS THE
INTENTION OF THE PARTIES HERETO THAT THIS AGREEMENT BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE.
THIS AGREEMENT MAY NOT BE CHANGED ORALLY, BUT ONLY BY AN
AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT OF ANY WAIVER,
CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT.
THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, WHICH
TOGETHER SHALL CONSTITUTE THE SAME INSTRUMENT.
AS SECURITY FOR THE PAYMENT AND PERFORMANCE WHEN DUE
(WHETHER AT STATED MATURITY, BY ACCELERATION OR OTHERWISE) OF GUARANTOR'S
OBLIGATIONS HEREUNDER, INCLUDING WITHOUT LIMITATION GUARANTOR'S OBLIGATION,
GUARANTOR HEREBY ASSIGNS, TRANSFERS AND PLEDGES TO AGENT, AND HEREBY GRANTS TO
AGENT A SECURITY INTEREST IN, ALL OF GUARANTOR'S RIGHT, TITLE AND INTEREST IN,
TO AND UNDER (a) THAT CERTAIN PURCHASE MONEY PROMISSORY NOTE (THE "NOTE") DATED
AS OF NOVEMBER 17, 1997 MADE BY OAIC FLORIDA PARTNERSHIP, LIMITED PARTNERSHIP, A
FLORIDA LIMITED PARTNERSHIP ("OAIC FLORIDA"), TO GUARANTOR, (b) THAT CERTAIN
PURCHASE MONEY FEE AND LEASEHOLD FIRST MORTGAGE, SECURITY AGREEMENT, FINANCING
STATEMENT AND ASSIGNMENT OF LEASES, RENTS AND INCOME DATED AS OF NOVEMBER 17,
1997 MADE BY OAIC FLORIDA TO GUARANTOR, (c) THAT CERTAIN ASSIGNMENT OF
LANDLORD'S INTEREST IN LEASES AND GUARANTEES DATED AS OF NOVEMBER 17, 1997 MADE
BY OAIC FLORIDA TO GUARANTOR AND (d) ANY AND ALL AGREEMENTS, DOCUMENTS AND
INSTRUMENTS RELATED TO THE ABOVE. IN FURTHERANCE OF THE ABOVE, GUARANTOR SHALL
(x) DELIVER THE NOTE, ENDORSED IN BLANK, TO AGENT OR ITS DESIGNEE, (y) EXECUTE
AND DELIVER AN APPROPRIATE COLLATERAL ASSIGNMENT OF MORTGAGE AND AN APPROPRIATE
COLLATERAL ASSIGNMENT OF ASSIGNMENT OF LEASES IN FAVOR OF AGENT, IN A FORM
ACCEPTABLE TO AGENT AND (z) TAKE ANY AND ALL ACTIONS AND EXECUTE AND DELIVER ANY
AND ALL FURTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS, AS AGENT MAY REASONABLE
REQUEST.
[SIGNATURE PAGE FOLLOWS]
9
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed and delivered
this Guaranty of Payment as of the date and year first above written.
GUARANTOR
OCWEN PARTNERSHIP, L.P.,
a Virginia limited partnership,
By: Ocwen General, Inc.,
its general partner
By: ____________________________
Name:
Title:
<PAGE>
REGISTERED NOTE
$15,250,000 JUNE __, 1998
NO. _______________ NEW YORK, NEW YORK
FOR VALUE RECEIVED, OAIC FLORIDA PARTNERSHIP, LIMITED PARTNERSHIP, a
Florida limited partnership (collectively, "BORROWER"), hereby promises to pay
to the order of SALOMON BROTHERS REALTY CORP., a New York corporation
("SALOMON"; Salomon together with any subsequent holder of this registered note
being hereinafter referred to as the "HOLDER"), at its principal office at 7
World Trade Center, 29th Floor, New York, New York 10048, the sum of Fifteen
Million Two Hundred Fifty Thousand Dollars ($15,250,000.00) (or such portion
thereof as may be outstanding from time to time) in lawful money of the United
States of America and in immediately available funds, on the date provided in
the Loan Agreement (hereinafter defined), and to pay interest on the unpaid
Principal Indebtedness (as such term is defined in the Loan Agreement), at such
office, in like money and funds, for the period commencing on the initial
Advance Closing Date (as such term is defined in the Loan Agreement) until such
Principal Indebtedness shall be paid in full, at the rates per annum and on the
dates provided in the Loan Agreement.
The date and amount of each Advance (as such term is defined in the
Loan Agreement) on each Advance Closing Date and the date and amount of each
payment of interest, principal and other amoutns due under the Loan Documents
(as such term is defined in the Loan Agreement), shall be recorded by Agent (as
such term is hereinafter defined) on the schedule attached hereto; PROVIDED that
the failure of Agent to make any such recordation shall not affect the
obligations of the Borrower to make a payment when due of any amount owing under
the Loan Agreement or hereunder.
This Registered Note is a Registered Note referred to in the Amended
and Restated Loan Agreement and Restated Loan Agreement, dated as of June __,
1998 (as modified and supplemented and in effect from time to time, the "LOAN
AGREEMENT") among Borrower and others, as borrower, Salomon (as initial lender
and as agent for administration of the Loan ("AGENT")), and LaSalle National
Bank, as collateral agent for the Lenders, and evidences the Principal
Indebtedness loaned thereunder.
Reference to the Loan Agreement is hereby made for a statement of the
rights of the Agent and the duties and obligations of the Borrowers, but neither
this reference to the Loan Agreement nor any provision thereof shall affect or
impair the obligations of the Borrower to pay the principal, interest and other
amounts, if any, payable with respect to this Registered Note when due.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Loan Agreement.
This Registered Note is secured by the Mortgages and certain other Loan
Documents.
The principal sum evidenced by this Registered Note, together with
accrued interest and all other sums or amounts due hereunder, shall become
immediately due and payable at the option of the Holder upon the occurrence of
any Event of Default in accordance with the provision of the Loan Agreement.
With respect to the amounts due pursuant to this Registered Note,
Borrower hereby waives the following: (1) all rights of exemption of property
from levy or sale under execution or other process for the collection of debts
under the Constitution or laws of the United States or any state thereof; (2)
demand, presentment, protest, notice of dishonor, notice of nonpayment, suit
against any party, diligence in collection of this Registered Note, and all
other requirements necessary to enforce this Registered Note, except for notices
required by Governmental Authorities and notices required by the Loan Agreement;
and (3) any further receipt by or acknowledgement of any Collateral now or
hereafter deposited as security for the Loan.
<PAGE>
In no event shall the amount of interest (and any other sums or amounts
that are deemed to constitute interest under applicable Legal Requirements) due
or payable hereunder (including interest calculated at the Default Rate) exceed
the maximum rate of interest designated by applicable Legal Requirements (the
"MAXIMUM Amount"), and in the event such payment is inadvertently paid by the
Borrower or inadvertently received by the Holder, then such excess sum shall be
credited as a payment of principal, and if in excess of such balance, shall be
immediately returned to the Borrower upon such determination. It is the express
intent hereof that the Borrower not pay and the Holder not receive, directly or
indirectly, interest in excess of the Maximum Amount.
The Holder shall not by any act, delay, omission or otherwise be deemed
to have modified, amended, waived, extended, discharged or terminated any of its
rights or remedies, and no modification, amendment, waiver, extension, discharge
or termination of any kind shall be valid unless in writing and signed by the
Holder. All rights and remedies of the Holder under the terms of this Registered
Note and applicable Legal Requirements shall be cumulative, and may be exercised
successively or concurrently. Borrower agrees that as of the date hereof there
are no defenses, equities or setoffs with respect to the obligations set forth
herein, and to the extent any such defenses, equities, or setoffs may exist, the
same are hereby expressly released, forgiven, waived and forever discharged.
Wherever possible, each provision of this Registered Note shall be
interpreted in such manner as to be effective and valid under applicable Legal
Requirements, but if any provision of this Registered Note shall be prohibited
by or invalid under applicable Legal Requirements, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Registered Note.
The Holder may, at its option, release to the Borrower any Collateral
given to secure the Indebtedness evidenced hereby, and no such release shall
impair the obligations of any Borrower to the Holder.
This Registered Note was negotiated in New York, and made by the
Borrower and accepted by the Holder in the State of New York, and the proceeds
of this Registered Note were disbursed from New York, which state the parties
agree has a substantial relationship to the parties and to the underlying
transactions embodied hereby, and in all respects (including, without
limitation, matters of construction, validity, performance and maximum
permissible rates of interest), this Registered Note and the obligations arising
hereunder shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts made and performed in such state
and any applicable law of the United States of America.
Any legal suit, action or proceeding against the Holder by the Borrower
arising out of or relating to this Registered Note shall be instituted in any
federal or state court in New York, New York. Any legal suit, action or
proceeding against the Borrower by the Holder arising out of or related to this
Registered Note shall be instituted in any federal or state court in New York,
New York or the state where any Collateral is located. Borrower hereby (i)
irrevocably waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum,
and (ii) irrevocably submits to the jurisdiction of any such court in any such
court in any such suit, action or proceeding.
BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES
TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY
TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS REGISTERED NOTE
OR THE OTHER LOAN DOCUMENTS. BORROWER AGREES THAT THE HOLDER MAY FILE A COPY OF
THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED AGREEMENT OF THE BORROWER TO IRREVOCABLY WAIVE ITS RIGHT TO TRIAL BY
JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN BORROWER AND THE HOLDER SHALL INSTEAD BE TRIED IN
A COURT OF COMPENTENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
<PAGE>
The provisions of this Registered Note shall be subject to the
provisions of SECTION 8.24 of the Loan Agreement, which provisions are hereby
incorporated herein by reference as if set forth in full.
The Loan Agreement provides for the acceleration of the maturity of
this Registered Note upon the occurrence of certain events and for prepayment of
this Registered Note upon the terms and conditions specified therein.
This Registered Note is note exchangeable for interests in the Global
Note issued under the Loan Agreement in the name of Salomon.
This Registered Note is issued in renewal of the outstanding principal
indebtedness previously evidenced by a certain Purchase Money Promissory Note
dated as of November 17, 1997, made by Borrower and payable to the order of
Ocwen Partnership, L.P., in the original principal amount of $15,250,000.00 (the
"ORIGINAL NOTE"). The payment of this Registered Note is secured by, INTER ALIA,
a Purchase Money Fee and Leasehold First Mortgage, Security Agreement, Financing
Statement and Assignment of Leases, Rents and Income recorded in Official
Records Book 2221 at Page 780 of the Public Records of Manatee County, Florida
(the "ORIGINAL MORTGAGE"), as amended and restated pursuant to a certain
Mortgage Modification and Future Advance Agreement dated of even date herewith
between Borrower and Salomon. All State of Florida documentary stamp and
intangible taxes payable with respect to the Original Note and the Original
Mortgage were paid, and such payment was noted, on the Original Mortgage at the
time of its recordation in the Public Records of Manatee County, Florida.
NO FURTHER TEXT ON THIS PAGE.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Registered Note to be
properly executed on the date first above written and has authorized this
Registered Note to be dated as of the day and year first above written.
BORROWER:
OAIC FLORIDA PARTNERSHIP, LIMITED
PARTNERSHIP
a Florida limited partnership
BY: Ocwen Florida General, Inc.
a Florida corporation,
its general partner
BY:______________________
Name:
Title:
EXHIBIT 99
OCWEN ASSET INVESTMENT CORP.
INVESTMENT GUIDELINES
I. PREFACE
Ocwen Asset Investment Corp., a Virginia corporation (the "Company")
has elected to be taxed as a real estate investment trust ("REIT") pursuant to
the Internal Revenue Code of 1986, as amended. The day to day business and
investment affairs of the Company will be managed by Ocwen Capital Corporation,
a Florida corporation (the "Manager") in accordance with the terms of a
Management Agreement. The management of the Company shall at all times be
conducted pursuant to the supervision of the Board of Directors of the Company
and the Guidelines set forth here.
At a meeting duly called and held on May 12, 1997, these Guidelines
were duly adopted by the Company's Board of Directors. The Guidelines may be
amended from time to time at the discretion of the Board of Directors, and these
Guidelines will be reviewed periodically by the Board of Directors. Capitalized
terms used herein but not defined herein shall have the meanings assigned to
them in the Company's Prospectus, dated May 14, 1997, filed with the Securities
and Exchange Commission as part of the Company's Registration Statement (No.
333-21965) on Form S-11.
II. INTRODUCTION
The Company's objective is to build a diverse portfolio in Real Estate
Related Assets with a view to maximizing income for distribution to
shareholders, consistent with acceptable levels of risk. Pending investment in
Real Estate Related Assets, the Company shall invest in readily marketable
securities, consistent with maintaining the Company's REIT status, or
interest-bearing deposit accounts.
The Company intends to invest in Subordinated Interests and Distressed
Real Property when opportunities that the Company considers advantageous become
available. To invest in appropriate assets efficiently during approximately the
first year of the Company's operation, and from time to time thereafter, the
Company intends also to invest in Other Real Estate Assets, including Mortgage
Loans, MBS and other real property interests. Until appropriate real estate
related acquisitions are made, however, the net proceeds of the Common Stock
offering may be invested in readily marketable securities, consistent with
maintaining the Company's REIT qualification, or in interest bearing deposit
accounts. The Board of Directors acknowledge that it may take considerable time
for the Manager, and therefor the Company, to find appropriate investments,
during which time the Company's assets will be invested in relatively low yield
instruments.
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The Company at all times shall comply with the federal, state and local
statutes, rules and regulations applicable to it. The Company shall maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that transactions are executed in accordance with applicable
statutes, rules and regulations and these Guidelines. The Company at all times
shall act and make investments so that it shall not be deemed to be an
"investment company" under the Investment Company Act of 1940 (the "1940 Act").
The 1940 Act requires, among other activities, that the Company must invest
fifty-five percent (55%) of its assets in mortgages and other liens on and
interests in real estate, and an additional twenty-five percent (25%) in
Qualifying Interests or other real estate related assets within one year of
Closing, or May 19, 1998.
III. INVESTMENTS IN REAL ESTATE RELATED ASSETS
A. SUBORDINATED INTERESTS
The Company shall be permitted to purchase rated and unrated
Subordinated Interests that are subordinated to one or more other classes of
MBS, including Sub IOs and Subordinated Interests that are designated a REMIC
Residual Interest.
Before acquiring a Subordinated Interest, the Company performs a number
of due diligence tasks to evaluate the investment and to verify the information
and material provided by the seller to the Company. With respect to RMBS, the
Manager creates two sample pools: 1) a random sample and 2) an adverse sample,
with characteristics (such as high loan-to-value ratios or poor delinquency
histories) that make them likely to perform more poorly than the average loans
in the pool under consideration. The Manager will obtain broker's price opinions
("BPOs") from one of its approved brokers for each of the loans in the sample
pools. The Manager evaluates each BPO to verify its reasonableness, and, if
appropriate, additional information is obtained until the Manager is satisfied
that a reasonable determination of the value of the loan can be made. The
Manager also estimates the potential for increases or decreases in estimated
property values based on local real estate trends.
Losses on mortgage loans are measured in two ways, loss frequency and
loss severity. Loss frequency (the monthly percentage of the loan balances
projected to default during the life of the securitization) is estimated by
using industry standard predictive models, supplemented by Ocwen Financial's
historical data and experience.
Loss severity (the amount of loss expected to be realized on defaulted
loans) is estimated by projecting the net resolution proceeds expected to be
derived from the defaulted loans based upon Ocwen Financial's proprietary
in-house computer models. This net resolution analysis reviews all potential
forms of resolution, including full payoff, discounted payoff, reinstatement,
foreclosure and sale, deed-in-lieu and sale, and takes into account, among other
things, real estate value, carrying costs (that is, property taxes, insurance
and maintenance) and average months to foreclose in the particular state.
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With respect to CMBS, the Company determines on a loan-by-loan basis
which loans will undergo a full-scope review and which loans will undergo a more
streamlined "desktop analysis." Considerations that influence the choice for
scope of review are loan size, debt service coverage ratio, loan to value ratio,
loan maturity, lease rollover, property type and geographic location. A
full-scope review may include, among other factors, a property site inspection,
tenant-by-tenant rent roll analysis, review of historical income and expenses
for each property securing the loan, a review of major leases for each property
(if applicable); recent appraisals (if applicable), engineering and
environmental reports (if applicable), and a BPO review. For those loans that
are selected for the more streamlined desktop analysis, the Manager's evaluation
may include a review of the property operating statements, summary loan level
data, third party reports, and a BPO review, each as available. If the Manager's
review of such information does not reveal any unusual or unexpected
characteristics or factors, no further due diligence is performed. After
completing the review of the documentation and the property inspection, the
information compiled will be analyzed to determine collateral value for each
property securing the loans. Based on these factors, the Manager will determine
a resolution value for each loan for purposes of projecting future cash flows
after adjustments for estimated future losses.
After completing the foregoing evaluations, the Manager will model the
structure of the RMBS or CMBS securitization based on the disclosure documents
that reveal the payment structure of the MBS and the characteristics of the
underlying mortgage collateral. This modeling is done in order to estimate
future cash flows to be received by the Subordinated Interests, after
adjustments for estimated future losses. Using that information, the Manager
will determine the price at which it would effect the purchase of the
Subordinated Interest on behalf of the Company.
The Company also intends in many instances to acquire Special Servicing
rights with respect to the mortgage loans underlying MBS in which the Company
owns a Subordinated Interest. Such Special Servicing rights will give the
Company, among other things, some control over the timing of foreclosures on
such mortgage loans and, thus, may enable the Company to reduce losses on such
mortgage loans. The Board of Directors recognize that no assurances can be made,
however, that the Company will be able to acquire such Special Servicing rights
or that losses on the mortgage loans will not exceed the Company's expectations.
Although the Company's strategy is to purchase Subordinated Interests at a price
designed to return the Company's investment and generate a profit thereon, the
Board of Directors recognize that there can be no assurance that such goal will
be met or, indeed, that the Company's investment in a Subordinated Interest will
be returned in full or at all.
The Board has delegated to the Manager broad discretion in reaching its
investment determination with respect to Subordinated Interests. Factors to be
considered in deciding whether to invest in, and what price to pay for, a
Subordinated Interest will include the possibility of receipt of taxable income
from a Subordinated Interest that is in excess of the economic income therefrom,
the status of such investments under the 1940 Act; whether the Company can
obtain Special Servicing rights with respect to the underlying collateral; the
extent of the Company's portfolio then invested in Subordinated Interests; the
expected current yield and yield to maturity of the Subordinated Interests; the
yield character of the balance of the
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Company's portfolio; and the credit quality of the underlying collateral
(including, for a mortgage loan, the loan-to-value ratio, the purpose, the
principal amount, the terms, the geographic diversification and, in the case of
commercial loans, the credit-worthiness of the tenants).
B. OTHER MBS
The Company may invest not only in classes of Subordinated Interests
but also in other classes of MBS. For example, the Company may invest in IOs,
which are entitled to no (or only nominal) payments of principal, but only to
payments of interest If the mortgage loans underlying an IO prepay slowly, then
the weighted average life of the IO will be extended, which will increase the
yield to maturity on the IO. Conversely, faster prepayments have an adverse
effect on the yield to maturity of an IO. The Company also may invest in Inverse
IOs, which bear interest at a floating rate that varies inversely with (and
often at a multiple of) changes in a specified index. The yield to maturity of a
class of Inverse IOs is not only very sensitive to the rate of prepayments on
the underlying mortgage loans, but also changes in the related index.
The Manager may invest in other classes of MBS which are new issues or
are trading in the secondary market via primary and secondary dealers. Each of
the MBS classes will be screened and analyzed to determine if its structure fits
the Company's investment plan.
Utilizing the disclosed information, prior to settlement of the trade,
the Manager will reverse engineer the transaction, verify yield tables, cash
flows, and average life profiles under stress scenarios with existing models
such as Bloomberg and Salomon's Yield Book.
The Manager will typically run the entire current portfolio with and
without the potential purchase and view total rate of return and yield to
maturity profiles under various interest rate shocks. Typical interest rate
shock scenarios consist of up 300 basis points and down 300 basis points with
100 basis point increments for a one year horizon. Each of these scenarios use
prepayment assumptions that are generally based on the weighted average of
several dealers projections.
The Manager will evaluate the bond's default risk by reviewing
underlying collateral and/or by checking rating status of non-agency securities
for payment guarantee. The Manager will measure a bond's cash flow risk, call
and reinvestment risk by examining prepayment assumptions, cash flows and
weighted average life profiles under different interest rate shock scenarios.
The Manager will review previous and current market conditions to project
possible liquidity profiles in different interest rate scenarios. The Manager
will gauge current market conditions to review bid ask spread on the investment.
C. DISTRESSED REAL PROPERTIES
The Company will be permitted to invest in Distressed Real Properties.
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The Company's policy will be to conduct an investigation and evaluation
of the properties in a portfolio of Distressed Real Property before purchasing
such a portfolio. Prior to purchasing assets, the Manager will generally
identify and contact real estate brokers and/or appraisers in the market area of
the subject properties to obtain rent and sale comparables and BPOs for each
asset in a portfolio. This information is used to supplement due diligence that
is performed by the Manager's employees.
The Company's due diligence will generally include the review of market
studies for each market within a portfolio. The studies typically will include
area economic data, employment trends, absorption rates and market rental rates.
Due diligence will also include site inspections by the Manager's employees or
agents of most properties in a portfolio and a review of all available asset
files and documentation. To the extent possible those will include examinations
of available legal documents, litigation files, correspondence, title reports,
operating statements, appraisals and engineering and environmental reports. The
information compiled is then analyzed to determine a valuation for each
property.
The property valuation process utilizes a variety of tools which may
include various proprietary financial models that have been developed by Ocwen
Financial and will be available to the Company through a licensing agreement and
will be used and applied by the Manager. Sources of information examined to
determine value may include: (a) current and historical operating statements;
(b) existing appraisals; (c) BPOs; (d) rent and sales comparables; (e) industry
statistics and reports regarding operating expenses such as those compiled by
the Institute of Real Estate Management; (f) leases; and (g) deferred
maintenance observed during site inspections or described in structural reports,
and reports and correspondence found in the loan files.
The Manager develops projections of net operating income and cash flows
taking into account lease rollovers, tenant improvement costs and leasing
commissions. The Manager will compare its estimates of revenue and expenses to
historical operating statements and estimates provided in BPOs, appraisals and
general industry and regional statistics. Market capitalization rates and
discount rates are then applied to the cash flow projections to estimate values.
These values are then compared to available appraisals, BPOs and market sale
comparables to determine recommended bid prices for each asset. The bids take
into account projected holding periods, capital costs and projected profit
expectations. Recommended bid prices are then reviewed with senior management
and a decision whether to bid is made. The amount offered by the Company
generally will be the price that the Manager estimates is sufficient to generate
an acceptable risk-adjusted return on the Company's investment.
After the Company acquires Distressed Real Property, the Company's goal
will be to improve management of the property so as to increase the cash flow
from the property. Following increased cash flows and stabilization of the
property, the Company may begin to seek an opportunity to sell the property.
Although the period during which the Company will hold Distressed Real
Properties will vary considerably from asset to asset, the Company believes that
most such properties will be held in its portfolio more than four years and
generally fewer than ten years.
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If the Company is offered the opportunity to purchase a Distressed Real
Property that is likely to be held for fewer than four years, the Company
intends to establish a corporation in which the Operating Partnership will hold
a 95% non-voting ownership interest to make the purchase. Such a corporation
will not be eligible for taxation as a qualified REIT subsidiary, and any
profits that it earns on its activities will be subject to federal corporate
income tax before they are distributable to the Company. If the Company
purchases a Distressed Real Property with the intent to hold it in the Operating
Partnership for more than four years, but an opportunity arises to sell the
property sooner, the Company will consider certain strategies, such as a
like-kind exchange, to reduce any negative tax consequences relating to the
sale.
The Company will maintain comprehensive insurance on each of the
Distressed Real Properties, including liability insurance and fire and extended
coverage, in amounts sufficient to permit the replacement of the properties in
the event of a total loss, subject to applicable deductibles. The Company will
endeavor to obtain coverage of the type and in the amount customarily obtained
by owners of properties similar to the Distressed Real Properties. There are
certain types of losses, however, generally of a catastrophic nature, such as
earthquakes, floods and hurricanes, that may be uninsurable or not economically
insurable. Inflation, changes in building codes and ordinances, environmental
considerations, and other factors also might make it not feasible to use
insurance proceeds to replace a property if it is damaged or destroyed. Under
such circumstances, the insurance proceeds received by the Company might not be
adequate to restore its economic position with respect to the affected
Distressed Real Property.
D. REAL PROPERTIES WITH KNOWN ENVIRONMENTAL PROBLEMS
The Company may acquire or originate mortgage loans secured by real
estate with known environmental problems that materially impair the value of
such real estate. The Company may also purchase such real estate.
In each instance, the following procedures must be followed.
First, due diligence will be performed on the property as described
under "Distressed Real Properties" above. Second, the Manager will engage an
environmental engineering consultant to determine the scope of the risks
affecting the property, describe the remediation alternatives, and prepare an
estimate of the costs of such remediation alternatives and the time required to
effect such remediation alternatives.
The Company will not acquire title to the property (or mortgage) in its
own name or the name of Ocwen Partnership, L.P. Instead, the Company will
establish a single purpose entity to hold the property or mortgage (and any
other properties with known material environmental problems or mortgages on such
properties).
The Company will limit its investments in such real estate and
mortgages to no more than 10% of the Company's overall portfolio. If
fluctuations in the value of the Company's portfolio cause this percentage to
rise above 10%, the Company will (a) buy no additional environmentally
distressed real properties or mortgages until such time as the percentage has
been reduced and (b) if Manager determines that market conditions are not
adverse and if selling an environmentally
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distressed real property or mortgage would not jeopardize the Company's tax
status or subject the Company to taxation, then the Company will sell one or
more of its environmentally distressed properties or mortgages.
E. FOREIGN REAL PROPERTIES
The Company will be permitted to purchase real properties located
outside the United States or mortgages on such foreign real properties, if the
following procedures are followed.
First, the due diligence described above under "Distressed Real
Properties" will be performed. Second, a local law firm will be hired to advise
the Company concerning the applicable laws, including real property laws, of the
local jurisdiction and to provide a legal opinion about the Company's rights to
the property. Third, the Manager will consider ways to minimize the currency
conversion risks associated with the investment, such as the purchase of
currency swaps or the financing of the acquisition in the denominated currency.
The Company will limit its investments in such real estate and
mortgages to no more than 25% of the Company's overall portfolio. If
fluctuations in the value of the Company's portfolio cause this percentage to
rise above 25%, the Company will (a) buy no additional foreign real properties
or mortgages until such time as the percentage has been reduced and (b) if
Manager determines that market conditions are not adverse and if selling foreign
real property or mortgages would not jeopardize the Company's tax status or
subject the Company to taxation, then the Company will sell one or more of its
foreign real properties or mortgages. The Company may be subject to foreign
income tax with respect to its investments in foreign real estate. However, any
foreign tax credit that otherwise would be available to the company for US.
federal income tax purposes will not flow through to the Company's stockholders.
F. PERFORMING MORTGAGE LOANS
The Company will be permitted to purchase or originate single-family
residential mortgage loans, cooperative loans, multifamily residential mortgage
loans and commercial performing mortgage loans.
When deciding whether to purchase a large pool of single-family
mortgage loans or commercial (including multifamily) mortgage loans, the Manager
will perform due diligence tasks similar to those performed on RMBS and CMBS,
respectively, as described above under "Subordinated Interests."
Moreover, the Manager will negotiate the agreement pursuant to which
the loans are purchased, to include customary and usual representations and
warranties from the seller of the mortgage loans concerning and underwriting,
origination and characteristics of the mortgage loans.
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G. CONSTRUCTION LOANS AND MEZZANINE LOANS
The Company may take advantage of opportunities to provide construction
or rehabilitation financing on commercial property, lending generally 85% to 90%
of total project costs, and taking a first lien mortgage to secure the debt
("Construction Loans"). The Company also may invest in loans that are
subordinate to first lien mortgage loans on commercial real estate ("Mezzanine
Loans"). For example, on a commercial property subject to a first lien mortgage
loan with a principal balance equal to 70% of the value of the property, the
Company could lend the owner of the property (typically a partnership) an
additional 15% to 20% of the value of the property. Typically the loan would be
secured, either by the property subject to the first lien (giving the Company a
second lien position) or by a controlling equity interest in the owner. If the
equity interest is pledged, then the Company would be in a position to make
decisions with respect to the operation of the property in the event of a
default by the owner. These Construction and Mezzanine Loans generally would
provide the operating income or gross revenues from the property, payable to the
Company on an ongoing basis, and a percentage of any increase in value of the
property, payable upon maturity or refinancing of the loan, or otherwise would
allow the Company to charge an interest rate that would provide an attractive
risk-adjusted return.
The Due Diligence to be performed with respect to the Construction and
Mezzanine Loans will include many of the tasks and evaluations performed in
connection with Distressed Real Properties; however, such due diligence shall
further include an underwriting evaluation and analysis of each individual
borrower.
H. NONPERFORMING MORTGAGE LOANS
The Company will be permitted to invest in nonperforming commercial
mortgage loans. If purchased in pools, the due diligence to be performed before
purchasing such loans will be similar to that described for the purchase of
Distressed Properties, above.
I. SALE LEASEBACK TRANSACTIONS
The Company will be permitted to participate in sale leaseback
transactions in which the Company will purchase real estate (either improved or
unimproved) and then will lease the property back to the seller under a
long-term triple net lease. The Company also may provide financing necessary to
build commercial improvements on the land, to refinance existing debt on the
property or to provide additional funds to operate the business.
IV. RESTRICTIONS ON INVESTMENTS IN REAL ESTATE RELATED ASSETS
Except for the Initial Investments, Real Estate Related Assets shall
not be acquired from the Manager or an Affiliate of the Manager without the
prior approval of a majority of the Independent Directors and a Price Evaluation
in the case of securities or appraisals in the event of real estate loans.
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V. USE OF LEVERAGE
The Company will be permitted to leverage its portfolio through
borrowings, through the use of reverse repurchase agreements, bank credit
facilities (which may have fixed or adjustable interest rates and varying
maturities) and mortgage loans on real estate owned by the Company. In addition,
the Company will be permitted to purchase real estate, mortgage loans and other
mortgage collateral for purposes of securitization. Until the collateral is
securitized, the Company may enter into warehouse lines of credit or reverse
repurchase agreements on such pools of real estate, mortgage loans and other
mortgage collateral. The securitization transaction will be designed with the
REIT status of the Company in mind, generally as debt issued by a qualified REIT
subsidiary of the Company, or in another transaction structure, which will be
reviewed early in the process by a tax lawyer experienced in securitization. At
the closing of a securitization, the Company's assets will be leveraged by the
issuance of CMOs or MBS. The Company also is permitted to issue CMOs or MBS
collateralized by previously issued CMOs or MBS in transactions known as
"resecuritizations." Borrowings that are materially different from the foregoing
must be approved in advance by a majority of the Board of Directors.
The purposes of the Company's leverage will be to earn income,
facilitate portfolio management (including managing the effect of maturity or
interest rate sensitivity) and mitigate risk (such as the risk of changes in
interest rates). The Manager will have the ability to borrow for such purposes,
subject to periodic review by the Board of Directors. Moreover, even if interest
rates or market conditions are adverse, the Company may borrow to obtain
sufficient cash to make required distributions of dividends or to fund share
repurchases and tender offers if the Board of Directors deems such borrowing to
be in the best interest of the stockholders.
After most of the net proceeds of the Company's initial public offering
are invested in real estate related assets, the Company may increase its
Indebtedness, as defined below, such that the ratio of the Company's overall
Indebtedness to its Equity, as defined below, does not exceed four to one. For
these purposes "Indebtedness" includes only full recourse debt of the Company,
and not any debt issued in a securitization transaction or otherwise for which
recourse is limited to a fixed pool of assets. Likewise for these purposes
"Equity" excludes any assets pledged to secure limited recourse debt.
Notwithstanding the foregoing, if the Company's ratio of Indebtedness
to Equity is four to one, and the Company's equity declines, the Company will
not be required to reduce its Indebtedness immediately, but will not incur any
additional Indebtedness until such time as incurring such additional
Indebtedness will result in a ratio of four to one or less.
The Company will not borrow funds from the Manager or any of the
Manager's Affiliates.
VI. INTEREST RATE RISK MANAGEMENT GUIDELINES
The Company will seek to build a balance sheet and undertake an
interest rate risk management program which is likely, in management's view, to
enable the Company to generate positive earnings given a variety of potentially
adverse circumstances. To the extent consistent with its election to qualify as
a REIT, the Company intends to follow an interest rate risk management program
intended to protect against the effects of major interest rate changes.
Specifically, the Company's interest rate risk management program will be
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formulated with the intent to offset the potential adverse effects on net
interest income resulting from the mismatch between the time to repricing
between the interest rates on the Company's assets and the interest rates on its
liabilities.
Pursuant to the Company's overall business strategy, a substantial
portion of the Company's borrowings will be short-term or adjustable-rate. See
"V. Use of Leverage". The Company will attempt to mitigate the risk of the cost
of its variable rate liabilities increasing at a faster rate than the earnings
on its assets during periods of rising interest rates by purchasing from time to
time interest rate caps and interest rate swaps.
An interest rate cap agreement will be a legal contract between the
Company and a third party firm (the "counterparty"). The Company will make an
up-front cash payment to the counterparty and the counterparty will agree to
make payments to the Company in the future should the rate of a given index,
typically one or three month LIBOR, rise above the "strike" rate specified in
the contract. Each contract will have a specified notional face amount. Should
the index rise above the contractual strike rate, the Company will earn cap
income. Payments on an annualized basis will equal the product of the
contractual notional face amount times the difference between the actual index
and the strike rate.
An interest rate swap agreement will be a legal contract between the
Company and a counterparty wherein the Company will pay a specified fixed rate
to the counterparty and the counterparty will pay a floating rate to the
Company. The periodic payments between the Company and the counterparty will be
based on a notional amount. Payments will generally be made on a net settlement
basis and will be equal to the product of the contractual notional face amount
times the difference between the fixed rate and the floating index.
In all of its interest rate risk management transactions, the Company
will follow certain procedures designed to limit credit exposure to
counterparties, including counterparties whose financial strength meets the
Company's requirements.
No strategy can completely insulate the Company from interest rate
changes and defaults from counterparties. Further, certain of the Federal income
tax requirements that the Company must satisfy to qualify as a REIT will limit
the Company's ability to fully hedge its interest rate risk. The Company will
monitor, and may have to limit, its interest rate risk program to assure that it
does not realize excessive hedging income, or hold hedging assets having excess
value in relation to total assets, which would result in the Company's
disqualification as a REIT or, in the case of excess hedging income, the payment
of a penalty tax for failure to satisfy certain REIT income tests under the
Code, provided such failure was for reasonable cause. In addition, interest rate
risk management involves transaction costs which increase significantly as the
period covered by the hedging protection increases.
The Company may elect to conduct a portion of its hedging activities
through one or more subsidiary corporations if continuing to conduct such
activities by the Company would jeopardize the Company's status as a REIT. Such
10
<PAGE>
subsidiary would not be a Qualified REIT Subsidiary and would be subject to
Federal and state income taxes.
The Company intends generally to hedge as much of the interest rate
risk as management determines is in the best interests of the stockholders of
the Company, given the cost of such hedging transactions and the need to
maintain the Company's status as a REIT. This determination may result in
management electing to have the Company bear a level of interest rate risk that
could otherwise be hedged when management believes, based on all relevant facts,
that bearing such risk is advisable.
VII. 1940 COMPLIANCE
The Company shall conduct its operations so as not to become regulated
as an investment company under the Investment Company Act of 1940. The Company's
investment activities shall be directed such that the Company shall invest
fifty-five percent (55%) of its assets in mortgages and other lines of interests
in real estate, and an additional twenty-five percent (25%) in Qualifying
Interests or other real estate related assets within one year of Closing or May
19, 1998.
VIII. CONFLICTS OF INTEREST
The Company will acquire Subordinated Interests, Distressed Real
Properties or Other Real Estate Related Assets from the Manager or one of its
affiliates only if a majority of the Independent Directors approve the
transaction in advance. In making their decision, the Independent Directors will
consider information provided by the Manager and such other information as they
deem appropriate to determine whether the investment is consistent with the
Guidelines, whether the price is fair and whether the investment is otherwise in
the best interests of the Company. To determine whether the price of a
Distressed Real Property is fair, the Independent Directors may consider a
number of factors, including an appraisal of an MAI appraiser who is certified
or licensed in the state and whose compensation is not dependent on the
transaction. In approving the acquisition of Subordinated Interests or other
classes of MBS, the Independent Directors will consider data such as that
presented in the tables under "Initial Investments" and "Yield Considerations
Related to the Initial Investments" as well as price quotes from investment
bankers (such as the placement agents or underwriters of such MBS).
From time to time, mortgage lenders offer for sale large pools of
mortgage loans and REO Properties pursuant to a competitive bidding process. In
such a case, Ocwen Financial Corporation ("OFC") may choose an unaffiliated
entity with which to submit a joint bid for the pool, as long as OFC takes title
only to the mortgage loans and not to the real estate. In the alternative OFC
may, but is not required to, invite the Company to submit a joint bid for such
pool. If the Company and OFC are successful bidders on a pool of Mortgage Loans
and real estate, in general the Company would take title to the real estate and
OFC would take title to the Mortgage Loans.
11
<PAGE>
The Company may, but does not currently intend to, participate in
mortgage loans together as a co-participant with OFC or its affiliates. To the
extent that the Company does so participate, generally, the terms of the
participation would be structured so that OFC would service the loans for a
market servicing fee and after such servicing fee, the remaining proceeds from
the loan would be shared pari passu in accordance with their interests in the
loan. Any such co-participating transactions with OFC or its affiliates will be
reviewed by the Independent Directors as part of their quarterly review to
ensure compliance with the Guidelines.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OCWEN ASSET
INVESTMENT CORPORATION'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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 13,100,526 <F1>
<SECURITIES> 415,933,375
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 822,050,205
<CURRENT-LIABILITIES> 518,483,467
<BONDS> 0
0
0
<COMMON> 189,650
<OTHER-SE> 273,491,149
<TOTAL-LIABILITY-AND-EQUITY> 822,050,205
<SALES> 0
<TOTAL-REVENUES> 12,297,969 <F2>
<CGS> 0
<TOTAL-COSTS> 2,990,372 <F3>
<OTHER-EXPENSES> 576,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,240,584
<INCOME-PRETAX> (3,858,110) <F4>
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,858,110) <F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,858,110) <F4>
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
<FN>
<F1> Tag 10 includes cash and amounts due from depository institutions of
$11,764,015 and Interest bearing deposits of $1,336,511.
<F2> Tag 27 includes Interest income on Repurchase agreements and interest
bearing deposits of $295,648, Securities held for trading of
$(3,012,559), Securities available for sale of $16,183,217, Commercial
and Multifamily loans of $2,273,702, Residential loans of $2,613,031,
Discount loans of $1,326,198, Real estate-operaing income of $6,576,326
and loss on securities held for trading of $(13,957,594).
<F3> Tag 29 includes Provision for loan losses of $206,049, Management fee of
$2,533,632, Due diligence expenses of $367,644 and Foreign currency
(gain) loss of $(116,953).
<F4> Tag 33, 35, and 39 exclude minority interest in net loss of operating
partnership of $321,154.
</FN>
</TABLE>
