<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[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.
For the transition period from __________________ to __________________
Commission file number 0-23917
------------------------------
Chastain Capital Corporation
(Exact name of registrant as specified in its governing instrument)
<TABLE>
<CAPTION>
<S> <C>
Georgia 58-2354416
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
3424 Peachtree Road N.E., Suite 800, Atlanta, Georgia 30326
(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) (404) 848-8850
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 8,980,778 shares of
common stock outstanding as of August 10, 1998.
<PAGE> 2
CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1 - Financial Statements:
Consolidated Balance Sheets as of June 30, 1998 (Unaudited) and
December 31, 1997 (Unaudited)
Consolidated Statements of Income for the three and six months
ended June 30, 1998 (Unaudited)
Consolidated Statement of Changes in Shareholders' Equity
for the six months ended June 30, 1998 (Unaudited)
Consolidated Statement of Cash Flows for the six
months ended June 30, 1998 (Unaudited)
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3 - Quantitative and Qualitative Disclosure about Market Risk
PART II - OTHER INFORMATION
Items 1 through 6
Signatures
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHASTAIN CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 (Unaudited) AND
DECEMBER 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- -------------
<S> <C> <C>
ASSETS
Commercial mortgage-backed securities (CMBS) available-for-sale,
at market value $ 74,322,060
Mezzanine loan investments 25,780,000
Real estate investment, net 3,673,090
Cash and short-term investments 22,515,940 $ 1,000
Accrued interest receivable 655,057
Prepaid expenses and taxes 439,907
Other assets 69,028
------------- -------------
Total assets $ 127,455,082 $ 1,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accrued public offering costs $ 907,915
Dividends payable 808,270
Accrued management fees 220,986
Accounts payable and accrued expenses 131,123
Other liabilities 467,154
-------------
Total liabilities 2,535,448
-------------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value. Authorized 25,000,000 shares, no
shares issued
Common stock, $.01 par value. Authorized 200,000,000 shares,
8,980,778 and 100 shares issued and outstanding at June 30, 1998
and December 31, 1997, respectively 89,808 $ 1
Additional paid-in capital 124,874,384 999
Change in net unrealized gain on securities available-for-sale 661,076
Distributions in excess of earnings (705,634)
--------------- -------------
Total shareholders' equity 124,919,634 1,000
--------------- -------------
Total liabilities and shareholders' equity $ 127,455,082 $ 1,000
=============== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
CHASTAIN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, 1998 June 30, 1998
----------------- -----------------
<S> <C> <C>
REVENUE:
Interest income on CMBS $ 317,095 $ 317,095
Interest income on mezzanine loan investments 11,602 11,602
Rental income 7,979 7,979
Other interest income 1,009,314 1,009,314
----------------- ----------------
Total revenue 1,345,990 1,345,990
----------------- ----------------
OPERATING EXPENSES:
Stock compensation to Manager 877,917 877,917
Management fees 220,986 220,986
General and administrative 179,198 179,198
Depreciation and amortization 5,313 5,313
Real estate operating expenses 1,612 1,612
Real estate taxes 754 754
----------------- ----------------
Total operating expenses 1,285,780 1,285,780
----------------- ----------------
INCOME BEFORE GAIN ON SALE 60,210 60,210
GAIN ON SALE OF CMBS 42,426 42,426
----------------- ----------------
NET INCOME $ 102,636 $ 102,636
================= ================
NET INCOME PER COMMON SHARE:
Basic and Diluted $ .01 $ .01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and Diluted 8,980,778 8,980,778
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
CHASTAIN CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Number of Additional Other Distributions Total
Shares Common Paid-in Comprehensive in Excess of Comprehensive Shareholders'
Outstanding Stock Capital Income Earnings Income Equity
----------- ------- ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning 100 $ 1 $ 999 $ 1,000
of period
Net proceeds from 8,977,678 89,777 123,939,642 124,029,419
initial public
offering on April 23,
1998
Shares issued to 3,000 30 44,970 45,000
Board of Directors
Change in net
unrealized gain on
securities
available-for-sale $ 661,076 $ 661,076 661,076
Value of stock
options issued 888,773 888,773
Net income $ 102,636 102,636 102,636
Dividends declared
($0.09 per share) (808,270) (808,270)
--------------------------------------------------------------------------------------------------
Balance at end of
period 8,980,778 $ 89,808 $124,874,384 $ 661,076 $ (705,634) 763,712 $ 124,919,634
==================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
CHASTAIN CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 102,636
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of CMBS (42,426)
Depreciation and amortization 5,313
Amortization of discount/premium on CMBS available-for-sale (11,849)
Amortization of deferred financing costs 1,462
Stock options issued 888,773
Shares issued to Board of Directors 45,000
Net (increase) decrease in assets:
Accrued interest receivable (655,057)
Prepaid expenses and taxes (439,907)
Other assets (17,898)
Net increase (decrease) in liabilities:
Accounts payable and accrued expenses 131,123
Accrued management fees 220,986
Other liabilities 467,154
----------------
Net cash provided by operating activities 695,310
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of CMBS available-for-sale (77,084,208)
Proceeds from sale of CMBS available-for-sale 3,477,500
Purchases of mezzanine loan investments (25,780,000)
Purchase of real estate investment (3,678,346)
----------------
Net cash used by investing activities (103,065,054)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering 124,937,334
Deferred financing costs incurred (52,650)
----------------
Net cash provided by financing activities 124,884,684
----------------
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 22,514,940
Cash and short-term investments at beginning of period 1,000
----------------
Cash and short-term investments at end of period $ 22,515,940
----------------
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Accrued public offering costs $ 907,915
================
Common stock dividends declared but not paid $ 808,270
================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - ORGANIZATION
Chastain Capital Corporation (the "Company") was incorporated in Georgia on
December 16, 1997 and was initially capitalized on such date through the sale
of 100 shares of common stock, par value $.01 per share ("Common Stock") for an
aggregate purchase price of $1,000. On April 23, 1998, the Company consummated
an initial public offering ("IPO") of 7,380,000 shares of its Common Stock,
with gross proceeds of $110,700,000 and net proceeds to the Company of
$102,951,000. Additional public offering costs of $1,209,189 were incurred in
connection with the IPO.
The Company also issued, pursuant to two separate private placements, an
aggregate of 897,678 shares of Common Stock to Lend Lease Investments Holdings,
Inc. (formerly ERE Yarmouth Holdings, Inc.), an indirect wholly-owned
subsidiary of Lend Lease Corporation Limited ("Lend Lease"), and 700,000 shares
of Common Stock to FBR Asset Investment Corporation, an affiliate of Friedman,
Billings, Ramsey & Co., Inc., each of which closed concurrently with the
closing of the IPO, at $13.95 per share, with total proceeds to the Company of
$22,287,608.
Pursuant to the Company's Directors Stock Plan, each of the Company's three
independent directors received, as of the consummation of the offering, $15,000
worth of Common Stock equal to 1,000 shares at the IPO price of $15.00 per
share as part of their annual director's fee.
The Company will seek to originate commercial and multifamily mortgage loans
("Mortgage Loans") for the purpose of issuing collateralized mortgage
obligations ("CMOs") collateralized by its Mortgage Loans and retaining the
Mortgage Loans subject to the CMO debt. As a result of such transactions, the
Company will retain a "first loss" subordinated equity ownership interest in
the Mortgage Loans that has economic characteristics similar to those of
subordinated interests in commercial mortgage-backed securities ("CMBS"). The
Company also intends to acquire subordinated interests in CMBS, originate and
acquire investments in real property that are subordinated to first lien
Mortgage Loans ("Mezzanine Investments") and acquire real property and other
real estate related assets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments, which are of a
normal recurring nature, to present fairly the Company's financial position,
results of operations, changes in shareholders' equity and cash flows at the
dates and for the periods presented. Interim results of operations are not
necessarily indicative of results to be expected for the fiscal year.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of
the Company and its wholly owned subsidiaries. All material intercompany
accounts have been eliminated in consolidation.
Cash and Short-term Investments
All highly liquid investments with original maturities of three months or less
are considered to be short-term investments.
Income Recognition
Income and expenses are recorded on the accrual basis of accounting.
7
<PAGE> 8
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
Comprehensive Income
Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances, excluding those
resulting from investments by and distributions to owners. Comprehensive income
includes net income and changes in unrealized gains and losses on securities
classified as available-for-sale.
CMBS
The Company classifies its CMBS as available-for-sale based upon management's
intent. Available-for-sale securities are reported at market value with net
unrealized gains and losses reported as a separate component of shareholders'
equity. The Company recognizes income from CMBS under the effective interest
method, using the anticipated yield over the projected life of the investment.
Changes in anticipated yields are generally due to revisions in estimates of
future credit losses, actual losses incurred and actual prepayments. Changes in
anticipated yield resulting from prepayments are recognized over the remaining
life of the investment with recognition of a cumulative catch-up at the date of
change from the original investment date. The Company recognizes impairment on
its CMBS whenever it determines that the current estimate of expected future
credit losses exceeds credit losses as originally projected. Impairment losses
are determined by comparing the fair value of a CMBS to its current carrying
amount, the difference being recognized as a loss. If future credit loss
estimates are increased and the fair value of the related CMBS is in excess of
its carrying amount, the yield is adjusted accordingly on a prospective basis.
Reduced estimates of credit losses are recognized as an adjustment to the
estimated yield over the remaining life of the CMBS.
Mezzanine Loan Investments
The Company purchases and originates certain mezzanine loans to be held as
long-term investments. Loans held for investment are recorded at cost at the
date of purchase. Premiums and discounts related to these loans are amortized
over their estimated lives using the effective interest method. Any origination
fee income, application fee income and costs associated with originating or
purchasing mezzanine investments have been deferred and the net amount is added
to the basis of the loans on the balance sheet. The Company recognizes
impairment on the loans when it is probable that the Company will not be able to
collect all amounts due according to the contractual terms of the loan
agreement. The Company measures impairment based on the present value of
expected future cash flows discounted at the loans effective interest rate or
the fair value of the collateral if the loan is collateral dependent.
Interest Rate Protection Agreements
The Company has acquire interest rate protection agreements to reduce its
exposure to interest rate risk. The costs of such agreements, which qualify for
hedge accounting, are amortized over the interest rate agreement term. To
qualify for hedge accounting, the interest rate protection agreement must meet
two criteria: (1) the debt to be hedged exposes the Company to interest rate
risk and (2) the interest rate protection agreement reduces the Company's
exposure to interest rate risk. In the event that interest rate protection
agreements are terminated, the associated gain or loss is deferred over the
remaining term of the agreement, provided that the underlying hedged asset or
liability still exists. Additionally, in the event that interest rate protection
agreements do not qualify as hedges, such agreements are reclassified to be
investments accounted for at fair value, with any gain or loss included as a
component of income.
8
<PAGE> 9
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
Income Taxes
The Company plans to make an election to be taxed as a real estate investment
trust ("REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as
amended. As a REIT, the Company must distribute to its shareholders at least
95% of its taxable income and the Company is not subject to federal income tax
to the extent income is distributed.
Earnings Per Share
Basic earnings per share is computed on the basis of the weighted average
number of shares outstanding for the period. Diluted earnings per share is
computed on the basis of the weighted average number of shares and dilutive
common equivalent shares outstanding for the period. For purposes of diluted
earnings per share, the computation of the weighted average number of shares
outstanding includes the impact of the assumed exercise of the outstanding
dilutive options to purchase Common Stock and assumes that the proceeds from
such issuance are used to repurchase shares of Common Stock at the average
market price of the Company's Common Stock for the period. For the three and
six months ending June 30, 1998, all outstanding options to purchase Common
Stock were anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income, expenses and unrealized gains
(losses) during the reporting period. Actual results could differ from those
estimates.
New Accounting Pronouncements
In June 1997, FASB issued SFAS 131 "Disclosures about Segments of an Enterprise
and Related Information" ("FAS131"). FAS 131 establishes standards for the way
that public business enterprises to report information about operating segments
and related disclosures about products and services, geographical areas and
major customers. FAS 131 is effective for the Company's year ending December
31, 1998.
In June 1998, FASB issued SFAS 133 "Accounting for Derivative Instruments and
for Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and
reporting standards for derivative investments and for hedging activities. It
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 hedge. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative and the
resulting designation. FAS 133 is effective for the Company beginning January
1, 2000. The Company is evaluating its eventual impact on its financial
statements.
9
<PAGE> 10
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 3 - MANAGEMENT FEES
The Company entered into a Management Agreement (the "Management Agreement")
with ERE Yarmouth, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
Lend Lease Corporation Limited, under which the Manager 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. On July 13, 1998, the
name of ERE Yarmouth, Inc. was changed to Lend Lease Real Estate Investments,
Inc.
Pursuant to the Management Agreement, the Company will pay the Manager a
quarterly base management fee equal to the following:
<TABLE>
<CAPTION>
<S> <C>
For the first four fiscal quarters
commencing with the fiscal
quarter ended June 30, 1998.. 1.00% per annum of the Average Invested Assets(1) of the
Company
During each fiscal quarter
thereafter................... 0.85% per annum of the Average Invested Assets up to $1 billion
0.75% per annum of the Average Invested Assets from $1 billion to
$1.25 billion
0.50% per annum of the Average Invested Assets in excess of $1.25 billion
</TABLE>
The Management Agreement also provides for a quarterly incentive management fee
equal to the product of (A) 25% of the dollar amount by which (1) (a) Funds
From Operations 2 (before the incentive fee) of the Company for the applicable
quarter per weighted average number of shares of Common Stock outstanding plus
(b) gains (or minus losses) from debt restructuring or sales of assets not
included in Funds From Operations of the Company for such quarter per weighted
average number of shares of Common Stock outstanding, exceed (2) an amount
equal to (a) the weighted average of the price per share at initial offering
and the prices per share at any secondary offerings by the Company multiplied
by (b) 25% of the sum of the Ten-Year U.S. Treasury Rate plus four percent, and
(B) the weighted average number of shares of Common Stock outstanding.
In addition, the Management Agreement provides for a termination fee equal to
the sum of the base management fee and incentive management fee, if any, earned
during the immediately preceding four fiscal quarters.
- ---------------------
(1) The term "Average Invested Assets" for any period means the average of the
aggregate book value of the assets of the Company, including a proportionate
amount of the assets of all of its direct and indirect subsidiaries, before
reserves for depreciation or bad debts or other similar noncash reserves less
(i) uninvested cash balances and (ii) the book value of the Company's CMO
liabilities, computed by dividing (a) the sum of such values for each of the
three months during such quarter (based on the book value of such assets as of
the last day of each month) by (b) three.
(2) The term "Funds From Operations" as defined by the National Association of
Real Estate Investment Trusts, Inc. means net income (computed in accordance
with GAAP) excluding gains (or losses) from debt restructuring, sales of
property and any unusual or non-recurring transactions, plus depreciation and
amortization on real estate assets, and after deduction of preferred stock
dividends, if any, and similar adjustments for unconsolidated partnerships and
joint ventures. Funds From Operations does not represent cash generated from
operating activities in accordance with GAAP and should not be considered as an
alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity or ability to make distributions.
10
<PAGE> 11
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 4 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE
The amortized cost and estimated fair value of investments available-for-sale
at June 30, 1998 are summarized below. The net unamortized discount on
investment securities available-for-sale was $16,232,994 at June 30, 1998.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Security Rating Cost Gain Loss Value
- --------------------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
CMBS:
BBB- $ 24,439,335 $ 467,317 $ 24,906,652
BB+ 15,796,534 151,082 15,947,616
BB 10,453,611 40,922 10,494,533
BB- 4,341,718 7,451 4,349,169
B 13,089,465 49,584 13,139,049
B- 2,774,326 $ 11,559 2,762,767
Unrated 2,765,995 43,721 2,722,274
--------------- ---------------- ---------------- ---------------
$ 73,660,984 $ 716,356 $ 55,280 $ 74,322,060
Total =============== ================ ================ ===============
</TABLE>
The fair value of the CMBS investments is based on either (i) the price
obtained from the investment banking institutions, which sold the CMBS to the
Company, or (ii) an average of at least three quotes received on similarly
structured and rated CMBS. The use of different market assumptions, valuation
methodologies or both may have a material effect on the estimates of fair
value. The fair value estimates presented herein are based on pertinent
information available as of June 30, 1998.
<TABLE>
<CAPTION>
Anticipated Unleveraged
Pool Yield to Maturity
- ---- -----------------
<S> <C>
BS Comm Mtg Sec Inc. 1998-C1 (F) 7.68%
BS Comm Mtg Sec Inc. 1998-C1 (G) 7.98%
BS Comm Mtg Sec Inc. 1998-C1 (H) 8.33%
BS Comm Mtg Sec Inc. 1998-C1 (I) 9.48%
BS Comm Mtg Sec Inc. 1998-C1 (J) 11.98%
BS Comm Mtg Sec Inc. 1998-C1 (K) 15.70%
CMAC 1997-ML1 (F1) 8.41%
ASC 1997-D4 (A8) 7.91%
JPMC 1998-C6 (E) 7.52%
GMAC 1998-C1 (F) 7.62%
Weighted Average 8.63%
</TABLE>
As of June 30, 1998, the mortgage loans underlying the Company's CMBS portfolio
were secured by properties of the types and located in the regions identified
below:
<TABLE>
<CAPTION>
Property Type Percentage(1) Geographic Region(2) Percentage
- ------------- ------------- -------------------- ----------
<S> <C> <C> <C>
Retail 31.20% Northeast 39.18%
Office 17.95% West 32.19%
Multifamily 16.83% Southeast 19.51%
Hospitality 10.57% Midwest 9.12%
Industrial 8.88%
Other 14.57%
</TABLE>
(1) Based on a percentage of the total unpaid principal balance of the
underlying loans.
(2) Based on the Manager's regional breakdown.
11
<PAGE> 12
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
The CMBS tranches owned by the Company provide credit support to the more
senior tranches of the related commercial securitization. Cash flow from the
underlying mortgages is generally allocated first to the senior tranches, with
the most senior tranches having a priority right to cash flow. Then, any
remaining cash flow is generally allocated among the other tranches based on
their seniority. To the extent there are defaults and unrecoverable losses on
the underlying mortgages, resulting in reduced cash flows, the subordinate
tranche will bear this loss first. To the extent there are losses in excess of
the most subordinate tranches stated right to principal and interest, the
remaining tranches will bear such losses in order of their relative
subordination.
The Company's anticipated returns on its CMBS are based upon a number of
assumptions that are subject to certain business and economic risk. Examples of
these include the prevailing interest rates on that portion of the CMBS which
is anticipated to be financed with floating rate debt, interest payment
shortfalls due to delinquencies on the underlying mortgage loans, the ability
to renew repurchase agreements and the terms of any such renewed agreements and
the availability of alternative financing. Further examples include the timing
and magnitude of credit losses on the mortgage loans underlying the CMBS that
are a result of the general condition of the real estate market and changes in
market rental rates. As these risks are difficult to predict and are subject to
future events which may alter these assumptions, there can be no assurance that
the anticipated yields to maturity, discussed above and elsewhere in the
quarterly report, will be achieved.
NOTE 5 - MEZZANINE LOAN INVESTMENTS
As of June 30, 1998, the Company's investment in mezzanine loans consisted of
the following:
<TABLE>
<CAPTION>
Estimated
Interest Face Unamortized Carrying Fair
Underlying Security Rate Value Premium Value Value
-------------------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Commercial real estate:
Office 9.20% $ 21,000,000 $ 3,780,000 $ 24,780,000 $ 24,780,000
Other 10.57% 1,000,000 1,000,000 1,003,852
------------ ------------- ------------ ------------
Total $ 22,000,000 $ 3,780,000 $ 25,780,000 $ 25,783,852
============ ============= ============= =============
</TABLE>
The fair value of mezzanine loans is estimated based on discounted cash flow
analysis. The loans have either variable interest rate provisions, which are
based upon a margin over specified market indexes, or are currently fixed at
effective rates which approximate current market conditions.
NOTE 6 - MASTER LOAN AND SECURITY AGREEMENTS
On May 15, 1998, the Company entered into two Master Loan and Security
Agreements, which provide financing for the Company's investments. The
facilities require assets to be pledged as collateral. The first loan
agreement, which is with Morgan Stanley Mortgage Capital, Inc. permits the
Company to borrow up to $250,000,000 and terminates May 14, 1999. The facility
will finance first-mortgage loans originated by the Company. Outstanding
borrowings against this line of credit bear interest based on the LIBOR rate
plus a spread of .75%. The second agreement, which is with Morgan Guaranty
Trust Company of New York permits the Company to borrow up to $450,000,000 and
terminates May 14, 1999. This facility will finance first mortgage loans,
mezzanine investments, equity real estate and CMBS investments. Outstanding
borrowings against this line of credit bear interest based on the Company's
election at the time of borrowing. The Company can elect to borrow based on the
lender's prime rate or based on the LIBOR rate. The spread on borrowings is
based upon the type of asset and the amount of leverage requested. The range of
spreads is from .70% to .85%. As of June 30, 1998, there were no borrowings
outstanding under either loan agreement.
Subsequent to June 30, 1998, the Company borrowed $37,000,000 against the line
of credit with Morgan Guaranty Trust Company of New York secured by the
Company's investments.
12
<PAGE> 13
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 7 - STOCK OPTION PLAN
The Company adopted a stock option plan to provide incentive compensation for
the Company's executive officers and the Manager, whereby at the closing of the
IPO the Manager was granted a fully vested option to purchase 1,166,667 shares
of Common Stock of the Company exercisable at the IPO price. One-fourth of the
Manager's options will become exercisable on each of the first four
anniversaries of the closing date of the IPO. The fair value of the option
granted to the Manager was $877,917, which was recognized as expense for the
period ended June 30, 1998.
The underwriters sold 79,586 shares of Common Stock that were purchased in the
IPO to directors and officers of the Company and the Manager for $15.00 per
share. Pursuant to the Company's Directed Share Program, such individuals were
granted an option to purchase one share of Common Stock for each share of
Common Stock purchased in the IPO. One-fifth of the options became exercisable
immediately, and one-fifth of the options will become exercisable on each of
the first four anniversaries of the closing date of the IPO. The fair value of
the options granted under the Company's Directed Share Program was $54,279.
One-fifth of this value, $10,856, was recognized as expense for the period
ended June 30, 1998.
NOTE 8 - INTEREST RATE PROTECTION AGREEMENTS
In order to help mitigate the risk of a material change in interest rates that
would affect the Company's borrowing rate on its lines of credit and on
anticipated future long-term borrowings secured by the Company's investments,
the Company has entered into forward treasury lock agreements and an interest
rate cap. None of these agreements are held for trading purposes. The treasury
locks allow the Company to lock in a rate for anticipated financings that are
expected to close in April 1999. The settlement of a treasury lock at maturity
will create a gain or loss equal to the change in present value of the treasury
rate lock from the date purchased to the maturity date. Any gains or losses are
included with the related financing and amortized under the effective interest
method. The Company's policy is to purchase a forward treasury lock whenever a
fixed rate mortgage loan closes or when a borrower requests a rate lock under
an executed loan application. Depending on the size of fixed rate mortgage
loans, the Company in some cases will aggregate loans and purchase a single
treasury lock for a pool of small loans. Generally, borrowers are liable for
losses if they do not close the loan and there is a loss on the settlement of
the treasury lock. The Company is exposed to credit loss in the event of
nonperformance of parties. However, the Company does not anticipate
nonperformance.
The terms of the outstanding treasury locks and interest rate cap as of June
30, 1998 are as follows:
Treasury Locks
<TABLE>
<CAPTION>
Reference
Purchase Maturity Forward Rate Treasury Notional Amount Fair Value
- -------- -------- ------------ --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
5/20/98 4/30/99 5.69% 10 year $ 13,539,250 $ (180,000)
6/18/98 4/30/99 5.58% 10 year $ 11,898,031 $ (59,000)
6/30/98 4/30/99 5.54% 10 year $ 12,908,997 $ (25,000)
</TABLE>
Interest Rate Cap
<TABLE>
<CAPTION>
Purchase Maturity Notional Amount Floating Index Strike Fair Value
- -------- -------- --------------- -------------- ------ ----------
<S> <C> <C> <C> <C> <C>
6/05/98 6/01/01 $ 27,000,000 1 month LIBOR 7.0% $ 39,000
</TABLE>
The cost incurred to enter into the interest rate cap of $52,650 was deferred
and was being amortized over the life of the agreement. The interest rate cap
was subsequently sold in July 1998 and was replaced with an interest rate
collar and additional treasury locks.
13
<PAGE> 14
CHASTAIN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 9 - SUBSEQUENT EVENTS
On July 7, 1998, the Company purchased an $18,989,143 subordinate investment in
the "B" rated class of a CMBS issued in 1998 by GS Mortgage Securities
Corporation II.
On July 8, 1998, the Company closed on a $2,800,000 mezzanine loan originated
by the Company and secured by Jefferson at Treetops Apartments, a 240-unit
luxury Class A apartment complex located in Austin, Texas. The complex is 93%
occupied.
On July 17, 1998, the Company closed on a $16,000,000 first mortgage originated
by the Company and secured by White Station Tower, a 278,000-square-foot office
building located in Memphis, Tennessee that is 90% occupied.
On July 31, 1998, the Company closed on a $5,875,000 first mortgage originated
by the Company and secured by a 117 room Hampton Inn in Mars, Pennsylvania.
On August 3, 1998, the Company's Board of Directors authorized the repurchase
of up to 898,000 shares, which represents 10% of its Common Stock then
outstanding. Purchases in the stock repurchase program will be made from time
to time in the open market or in privately negotiated transactions at the
Company's discretion. No minimum number or value of shares to be purchased has
been set and there is no expiration date for the program. As of August 11,
1998, the Company has repurchased 135,000 shares at an average cost of $11.94
per share.
On August 6, 1998, the Company closed on a $10,157,813 subordinate investment
in the "BB" rated class of a CMBS issued by Asset Securitization Corporation,
Series 1996-MD VI.
14
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The Company was incorporated in Georgia on December 16, 1997 by Lend Lease Real
Estate Investments, Inc., formerly ERE Yarmouth, Inc., for the purpose of
investing in multifamily and commercial mortgage loans, CMBS interests,
Mezzanine Investments and real property. The Company expects to generate income
for distribution to its shareholders primarily from the net income derived from
its investments in real estate related assets. The Company intends to operate
in a manner that permits it to elect, and it intends to elect, to be subject to
tax as a REIT for federal income tax purposes. On April 23, 1998, the Company
commenced its operation upon consummation of a public offering of 7,380,000
shares of its Common Stock.
As of June 30, 1998, the Company closed on total transactions amounting to
$103,107,480. The transactions included CMBS interests, mezzanine loans, and a
direct real estate purchase.
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 Financial Statements and related Notes included in Item 1.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") is considered by many industry analysts to be a
useful supplement to reviewing the operating performance of a REIT. The numbers
are not, however, in accordance with GAAP and should be used accordingly. The
following table reconciles FFO and net income:
<TABLE>
<CAPTION>
For the Three and Six Months
Ended June 30, 1998
-------------------
(in thousands except for
per share data)
<S> <C>
Net income before gain on sale $ 60
Add: Real estate related depreciation 5
Stock compensation to Manager 878
-----------
FFO $ 943
===========
Diluted weighted average shares outstanding 8,981
FFO per diluted weighted average shares outstanding $ .10
</TABLE>
FFO does not represent cash generated from operating activities in accordance
with GAAP and is not necessarily indicative of cash available to fund the
Company's operations, which is disclosed in the Consolidated Statement of Cash
Flows for the applicable periods. FFO should not be considered as an
alternative to net income as an indicator of the Company's operating
performance, nor as an alternative to the Statement of Cash Flows as a measure
of liquidity. FFO, as defined by the National Association of Real Estate
Investment Trusts, represents net income (computed in accordance with GAAP)
applicable to common shares excluding gains or losses from debt restructuring,
sales of property and any unusual or non-recurring transactions, plus
depreciation and amortization, and after adjustments from unconsolidated
partnerships and joint ventures.
RESULTS OF OPERATIONS
Revenue. Revenue totaled $1,345,990 for the three and six months ended June 30,
1998 consisting primarily of including interest income of $1,009,314 that was
earned on the IPO proceeds before it was fully invested. The IPO proceeds were
fully invested on July 8, 1998. In addition, the Company earned interest on
CMBS, mezzanine investments and rental income from investment in real estate
totaling approximately $337,000. At June 30, 1998, real estate consisted of one
retail property located in Stockton, California.
Operating Expenses. Operating expenses consist of expenses incurred in
operating the Company and property and investment operations and totaled
$1,285,780 for the three and six months ended June 30, 1998. Included in the
amount was a one-time charge of $877,917 for stock options issued to the
Manager as part of the IPO. In addition, the Company incurred $220,986 of
management fees that were calculated at 1% per annum of the Average Invested
Assets for the period and $179,198 of general and administrative costs. These
costs consist of professional fees, insurance costs and other miscellaneous
expenses.
15
<PAGE> 16
Gain on Sale of CMBS. The $42,426 gain on the sale of CMBS for the three and
six months ended June 30, 1998, was due to a change in interest rates during
the period between the date the Company agreed to purchase a CMBS investment
and the actual settlement date. During the period, the Company decided to sell
a portion of the original investment resulting in the gain.
CHANGES IN FINANCIAL POSITION
Securities Available-for-Sale. The Company's investment in CMBS totaled
$74,322,060, including net unrealized gains of $661,076. The Company's
securities available for sale were comprised of the following:
<TABLE>
<CAPTION>
June 30,
1998
---------------------
(dollars in thousands)
<S> <C>
Commercial Mortgage Backed Securities
BBB- $ 24,907
BB+ 15,948
BB 10,494
BB- 4,349
B 13,139
B- 2,763
Unrated 2,722
--------------
$ 74,322
==============
</TABLE>
Mezzanine Loan Portfolio. The Company's investment in mezzanine loans amounted
to $25,780,000 at June 30, 1998. The following table sets forth the composition
of the Company's mezzanine portfolio by type of secured property.
<TABLE>
<CAPTION>
Face Interest
Value Rate Carrying Value
--------------- --------- ----------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C>
Commercial real estate:
Office $ 21,000 9.20 % $ 24,780
Other 1,000 10.57 % 1,000
------------ ---------
$ 22,000 $ 25,780
============ =========
</TABLE>
Real Estate Investment. The Company's net investment in real estate amounted to
$3,673,090 at June 30, 1998. The amount is comprised of the following
investment:
<TABLE>
<CAPTION>
Date Acquired Property Location Square Feet Property Type Occupancy Anchor
- ------------- -------------- ------------ ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
6/26/98 Lakeside Plaza Stockton, CA 73,000 Retail 86% Marshall's
</TABLE>
The Company's current strategy with respect to real estate investments is to
buy opportunistic real property that is currently underperforming due to its
property cycle, lack of professional management or need for infusion of
capital. The general goal with each property is to reposition the property by
creating a different market impression in the mind of the tenant or consumer,
eliminating a negative market impression for the property, or converting the
use of the property, to improve its cash flow by proper management or
refinancing in order to enjoy the increased cash flow and long term
appreciation of the asset.
Shareholders' Equity. Shareholders' equity increased by $124,918,634 to
$124,919,634 at June 30, 1998 from $1,000 at December 31, 1997. The increase is
due to the sale of shares of Common Stock in the IPO, which resulted in an
increase to shareholders' equity of $124,963,192. In addition, the Company had
a net unrealized gain on securities available-for-sale of $661,076 and accrued
dividends in excess of earning of ($705,634).
16
<PAGE> 17
CAPITAL RESOURCES AND LIQUIDITY
Liquidity is the ability for the Company to meet its cash requirements
including any ongoing commitments, borrowings, shareholder distributions,
lending and general business activities. The Company's source of liquidity
during the period ended June 30, 1998 consisted of net proceeds from the IPO.
The net proceeds from the IPO were $124,029,419. Of the IPO proceeds,
$103,107,480 was used for the purchase of CMBS, Mezzanine Investments and real
estate. From the date of the IPO until the funds were invested in real estate
assets, the IPO proceeds were held in a short-term investment account earning
an annualized yield of 6.15%. Once the IPO proceeds are fully invested, the
Company will utilize two Master Loan and Security Agreements that were
established with Morgan Guaranty Trust Company of New York in the amount of
$450,000,000 and Morgan Stanley Mortgage Capital in the amount of $250,000,000.
Additionally, the Company intends to utilize repurchase agreements and other
secured financing arrangements.
REIT STATUS
The Company plans to make an election to be taxed as a REIT under sections 856
through 860 of the Code, commencing with its first REIT taxable year ending on
December 31, 1998. If the Company qualifies under Sections 856 through 860 of
the Code for taxation as a REIT, it generally will not be subject to federal
corporate income tax on its net income that is distributed currently to its
shareholders. That treatment substantially eliminates the "double taxation"
(i.e., taxation at both the corporate and shareholder levels) that generally
results from an investment in a corporation. In order to satisfy the
requirements, the Company must meet certain criteria, including certain
requirements regarding the Company's record keeping, ownership, assets, income
and distributions of taxable income.
YEAR 2000 DISCLOSURES
The Manager has made Year 2000 compliance a high priority for replacement
applications and is in the process of updating and replacing other applications
that are not Year 2000 compliant. The Manager expects to complete the updating
of its critical systems no later than March 31, 1999, which will allow for nine
months of systems testing to resolve any remaining Year 2000 compliance issues.
However, if any of the vendors of the Manager's Year 2000 compliant software
fail to perform pursuant to their contracts with the Manager, the Manager's
Year 2000 compliance could be jeopardized, and could materially adversely
affect the Company. The Manger does not believe that the costs to remediate any
Year 2000 issues will materially affect its business, operations or financial
condition, or will have an adverse affect on its clients, including the
Company.
FORWARD LOOKING STATEMENTS
Certain statements contained herein are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Act
of 1934, as amended. These forward-looking statements may be identified by
reference to a future period(s) or by the use of forward-looking terminology,
such as "may", "will", "intend", "should", "expect", "anticipate", "estimate",
or "continue" or the negatives thereof or other comparable terminology. The
Company's actual results could differ materially from those anticipated in such
forward-looking statements due to a variety of factors, including, but not
limited to, changes in national, regional or local economic environments,
competitive products and pricing, government fiscal and monetary policies,
changes in prevailing interest rates, the course of negotiations, the
fulfillment of contractual conditions, factors inherent to the valuation and
pricing of interests in commercial mortgage-backed securities, credit risk
management, asset/liability management, the financial and securities markets,
the availability of and costs associated with the sources of liquidity, other
factors generally understood to affect the real estate acquisition, mortgage
and leasing markets and security investments, and other risks detailed in the
Company's registration statement on Form S-11, as amended, filed with the SEC,
the Company's quarterly report on Form 10-Q filed with the SEC, and other
filings made by the Company with the SEC. The Company does not undertake, and
specifically disclaims any obligation, to publicly release the results 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.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
17
<PAGE> 18
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
On April 23, 1998, the Securities and Exchange Commission (the "Commission")
declared effective the Company's Registration Statement on Form S-11 (File No.
333-42629) (the "Registration Statement") relating to the initial public
offering of 7,380,000 shares of its Common Stock at an initial public offering
price of $15.00 per share. In addition to the Company's initial public
offering, 897,687 shares of the Company's Common Stock were sold to Lend Lease
Investments Holdings, Inc. (formerly ERE Yarmouth Holdings, Inc.) and 700,000
shares of the Company's Common Stock were sold to FBR Asset Investment
Corporation, in each case for $13.95 per share in sales exempt from
registration under the Securities Act of 1933, as amended (the "Act"), pursuant
to Section 4(2) of the Act. Both Lend Lease Investments Holdings, Inc. and FBR
Asset Investment Corporation are "accredited investors" as that term is defined
in Rule 501(a) promulgated by the Commission under the Act. On April 28, 1998,
the Company completed (i) the offering of 7,380,000 shares of Common Stock,
with gross proceeds of $110,700,000 and net proceeds (after subtracting
underwriting discounts and commissions) to the Company of $102,951,000; (ii)
the sale of 897,687 shares of Common Stock to Lend Lease Investments Holdings,
Inc. with net proceeds to the Company of $12,522,608; and (iii) the sale of
700,000 shares of Common Stock to FBR Asset Investment Corporation with net
proceeds to the Company of $9,765,000. The managing underwriters of the initial
public offering were Friedman, Billings, Ramsey & Co., Inc. and EVEREN
Securities, Inc.
Item 3. Default Upon Senior Securities
None
Item 4. Submission of matters to a Vote of Security Holders
None.
Item 5. Other Information
On August 3, 1998, the Board of Directors of the Company authorized the
repurchase of up to 10% of the outstanding Common Stock (the "Stock Repurchase
Program"). Purchases in the Stock Repurchase Program will be made from time to
time in the open market or in privately negotiated transactions. No minimum
number or value of shares to be purchased has been set and there is no
expiration date for the Stock Repurchase Program.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.1 Master Loan and Security Agreement between Chastain Capital
Corporation and Morgan Trust Company of New York dated May 15,
1998.
10.2 Master Loan and Security Agreement between Chastain Capital
Corporation and Morgan Stanley Mortgage Capital dated May 15, 1998.
27.1 Financial Data Schedule (for SEC filing purposes only)
b) Reports
None
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Chastain Capital Corporation
By: /s/Steve Grubenhoff
-----------------------
Steve Grubenhoff
Chief Financial Officer
Date: August 14, 1998
19
<PAGE> 20
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Master Loan and Security Agreement between Chastain
Capital Corporation and Morgan Trust Company of New York
dated May 15, 1998.
10.2 Master Loan and Security Agreement between Chastain Capital
Corporation and Morgan Stanley Mortgage Capital dated
May 15, 1998.
27.1 Financial Data Schedule (for SEC filing purposes only)
20
<PAGE> 1
EXHIBIT 10.1
- -------------------------------------------------------------------------------
MASTER LOAN AND SECURITY AGREEMENT
-----------------------------
DATED AS OF MAY 15, 1998
------------------------------
CHASTAIN CAPITAL CORPORATION
AS BORROWER
AND
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AS LENDER
- -------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS......................................................................................................1
SECTION 1 Definitions and Accounting Matters................................................................1
1.01 Certain Defined Terms.............................................................................1
1.02 Accounting Terms and Determinations..............................................................16
SECTION 2 Advances, Note and Prepayments...................................................................16
2.01 Committed Advances...............................................................................16
2.02 Committed Advance Notes..........................................................................16
2.03 Uncommitted Advances.............................................................................17
2.04 Uncommitted Advance Notes........................................................................17
2.05 Procedure for Borrowing..........................................................................18
2.06 Repayment of Advances; Interest..................................................................20
2.07 Limitation on Types of Advances; Illegality......................................................20
2.08 Conversion and Continuation Options..............................................................20
2.09 Determination of Borrowing Base; Mandatory Prepayments or Pledge.................................21
2.10 Optional Prepayments.............................................................................21
2.11 Requirements of Law..............................................................................22
2.12 Purpose of Advances..............................................................................23
2.13 Taxes............................................................................................23
2.14 Extension of Termination Date....................................................................24
2.15 Processing Fees..................................................................................24
2.16 Class Conversion.................................................................................24
SECTION 3 Payments; Computations; Etc......................................................................25
3.01 Payments.........................................................................................25
3.02 Computations.....................................................................................25
SECTION 4 Collateral Security..............................................................................25
4.01 Collateral; Security Interest....................................................................25
4.02 Further Documentation............................................................................27
4.03 Changes in Locations, Name, etc..................................................................27
4.04 Lender's Appointment as Attorney-in-Fact.........................................................27
4.05 Performance by Lender of Borrower's Obligations..................................................28
4.06 Proceeds.........................................................................................28
4.07 Remedies.........................................................................................29
4.08 Limitation on Duties Regarding Presentation of Collateral........................................29
4.09 Powers Coupled with an Interest..................................................................30
4.10 Release of Security Interest.....................................................................30
SECTION 5 Conditions Precedent.............................................................................30
5.01 Initial Advance..................................................................................30
5.02 Initial and Subsequent Advances..................................................................32
SECTION 6 Representations and Warranties...................................................................34
6.01 Financial Condition..............................................................................34
6.02 No Change........................................................................................34
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
6.03 Corporate Existence; Compliance with Law.........................................................34
6.04 Corporate Power; Authorization; Enforceable Obligations..........................................34
6.05 No Legal Bar.....................................................................................35
6.06 No Material Litigation...........................................................................35
6.07 No Default.......................................................................................35
6.08 Collateral; Collateral Security..................................................................35
6.09 Chief Executive Office...........................................................................36
6.10 Location of Books and Records....................................................................36
6.11 No Burdensome Restrictions.......................................................................36
6.12 Taxes............................................................................................36
6.13 Margin Regulations...............................................................................36
6.14 Investment Company Act; Other Regulations........................................................36
6.15 Subsidiaries.....................................................................................37
6.16 Assets...........................................................................................37
6.17 No Adverse Selection.............................................................................37
6.18 Borrower Solvent; Fraudulent Conveyance..........................................................37
6.19 ERISA............................................................................................37
6.20 True and Complete Disclosure.....................................................................37
6.21 True Sales.......................................................................................37
6.22 Tangible Net Worth...............................................................................38
SECTION 7 Covenants of the Borrower........................................................................38
7.01 Financial Statements.............................................................................38
7.02 Existence, Etc...................................................................................38
7.03 Maintenance of Property; Insurance...............................................................39
7.04 Notices..........................................................................................39
7.05 Other Information................................................................................40
7.06 Further Identification of Collateral.............................................................40
7.07 Asset Determined to be Defective.................................................................40
7.08 Reports..........................................................................................40
7.09 Borrowing Base Certificates......................................................................40
7.10 Financial Condition Covenants....................................................................40
7.11 Borrowing Base Deficiency........................................................................41
7.12 Prohibition of Fundamental Changes...............................................................41
7.13 Limitation on Liens on Collateral................................................................41
7.14 Limitation on Sale or Other Disposition of Collateral............................................41
7.15 Limitation on Transactions with Affiliates.......................................................41
7.16 Underwriting Guidelines..........................................................................41
7.17 Limitations on Modifications, Waivers and Extensions of Asset Documents..........................41
7.18 Servicing........................................................................................42
7.19 Limitation on Distributions......................................................................42
7.20 Use of Proceeds..................................................................................42
7.21 Selection of Collateral..........................................................................42
SECTION 8 Events of Default................................................................................42
SECTION 9 Remedies Upon Default............................................................................45
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 10 No Duty of Lender...............................................................................45
SECTION 11 Miscellaneous...................................................................................46
11.01 Waiver..........................................................................................46
11.02 Notices.........................................................................................46
11.03 Indemnification and Expenses....................................................................46
11.04 Amendments......................................................................................47
11.05 Successors and Assigns..........................................................................47
11.06 Survival........................................................................................47
11.07 Captions........................................................................................47
11.08 Counterparts....................................................................................47
11.09 Governing Law; etc..............................................................................47
11.10 Submission to Jurisdiction; Waivers.............................................................47
11.11 Waiver of Jury Trial............................................................................48
11.12 Acknowledgments.................................................................................48
11.13 Hypothecation and Pledge of Collateral..........................................................48
11.14 Assignments.....................................................................................49
11.15 Servicing.......................................................................................49
11.16 Periodic Due Diligence Review...................................................................50
11.17 Set-Off.........................................................................................50
11.18 Confidentiality.................................................................................50
</TABLE>
SCHEDULES
SCHEDULE 1 Eligibility Criteria re: First Mortgage Loans
SCHEDULE 2 Eligibility Criteria re: Mezzanine Loans
SCHEDULE 3 Eligibility Criteria re: REO Property
SCHEDULE 4 Eligibility Criteria re: Second Mortgage Loans
SCHEDULE 5 Eligibility Criteria re: Securities
SCHEDULE 6 Filing Jurisdictions and Offices
SCHEDULE 7 Subsidiaries
EXHIBITS
EXHIBIT A-1 Form of Committed Advance Note
EXHIBIT A-2 Form of Uncommitted Advance Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Notice of Borrowing and Pledge
-iii-
<PAGE> 5
EXHIBIT E Underwriting Guidelines
EXHIBIT F Intentionally Omitted
EXHIBIT G Form of Borrowing Base Certificate
<PAGE> 6
EXECUTION COPY
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of May 15, 1998, between
CHASTAIN CAPITAL CORPORATION, a Georgia corporation (the "Borrower"), and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation (the
"Lender").
RECITALS
The Borrower wishes to obtain financing from time to time to provide
interim funding for the origination and acquisition of certain First Mortgage
Loans (as defined herein), Mezzanine Loans (as defined herein), REO Property
(as defined herein), Second Mortgage Loans (as defined herein) and Securities
(as defined herein) (each an "Asset", collectively, the "Assets"), some of
which Assets are to be sold or contributed by the Borrower to one or more
trusts or other entities to be sponsored by the Borrower or an Affiliate (as
defined herein) thereof, or to third-parties with the consent of the Lender,
and which Assets shall secure Advances (as defined herein) to be made by the
Lender hereunder.
The Lender has agreed, subject to the terms and conditions of this Loan
Agreement (as defined herein), to provide such financing to the Borrower, with
a portion of the proceeds of the sale of all mortgage-backed securities issued
by any such trust or other entity, together with a portion of the proceeds of
any permitted whole loan sales, together with other funds and assets of the
Borrower, if necessary, being used to repay any Advances made hereunder as more
particularly described herein.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
SECTION 1 Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Loan Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Accepted Servicing Practices" shall have the meaning assigned thereto in
Section 11.15(a) hereof.
"Advance" shall mean the collective reference of the Committed Advances
and the Uncommitted Advances of any Type.
"Advisory Agreement" shall mean the existing advisory agreement between
the Borrower and ERE Yarmouth, Inc.
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" (together with the
correlative meanings of "controlled by" and "under common control with") means
possession, directly or indirectly, of the power (a) to vote 10% or more of the
securities (on a fully diluted basis) having ordinary voting power for the
directors or managing general partners (or their equivalent) of such Person, or
(b) to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by contract, or
otherwise.
<PAGE> 7
"Applicable Collateral Percentage" shall mean:
(a) for each First Mortgage Loan, the corresponding percentage set forth
below:
<TABLE>
<CAPTION>
Class of Advance Percentage
------------------ ----------
<S> <C>
Class M-1 80%
Class M-2 90%
Class M-3 95%
</TABLE>
(b) for each Security, the corresponding percentage set forth below:
<TABLE>
<CAPTION>
Rating Percentage
<S> <C>
------------------------------------ ----------
BB Rated 80%
B Rated 65%
Unrated 0%
IO Securities (Rated BBB- or higher) 70%
</TABLE>
(c) for each Mezzanine Loan and Second Mortgage Loan, 60%; and
(d) for REO Property, 75%.
"Applicable Margin" shall mean, for each Type of Advance, the
corresponding percentage set forth below:
<TABLE>
<CAPTION>
Class of Advance LIBOR Advance Base Rate Advance
------------------ ------------- ---------------------------------------------
<S> <C> <C>
Class M-1 Advance .70% 0%(.70% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
Class M-2 Advance .80% 0%(.80% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
Class M-3 Advance .85% 0%(.85% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
Class ML Advance .80% 0%(.80% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
Class RE Advance .80% 0%(.80% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
Class S-B Advance .80% 0%(.80% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
</TABLE>
-2-
<PAGE> 8
<TABLE>
<S> <C> <C>
Class S-BB Advance .80% 0%(.80% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
Class S-IO Advance .80% 0%(.80% if Base Rate is determined by
reference to clause (ii) of the definition
thereof)
</TABLE>
"Appraised Value" shall mean the value set forth in the appraisal obtained
by the Borrower in connection with the origination of the related Mortgage Loan
as the value of the Mortgaged Property.
"Asset" shall have the meaning provided in the recitals hereof.
"Asset Documents" shall mean, with respect to an Asset, the documents
comprising the Asset File for such Asset.
"Asset File" shall have the meaning assigned thereto in the Custodial
Agreement.
"Asset Schedule" shall have the meaning assigned thereto in the Custodial
Agreement.
"Asset Schedule and Exception Report" shall mean the asset schedule and
exception report prepared by the Custodian pursuant to the Custodial Agreement.
"Asset Tape" shall mean a computer-readable magnetic tape containing the
information with respect to each Asset, to be delivered by the Borrower to the
Lender pursuant to the Asset Schedule.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean the higher of (i) the Lender's Prime Rate and (ii)
the Federal Funds Rate plus .50%.
"Base Rate Advance" shall mean any Advance designated to accrue interest
at the Base Rate.
"Borrower" shall have the meaning provided in the heading hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of all Eligible
Assets, provided that:
(i) the aggregate principal amount of all Advances relating to
Securities may not at any one time exceed $115,000,000;
(ii) if more than $50,000,000 of Advances relating to Securities are
outstanding, the aggregate principal amount of all Advances relating to
Securities may not at any one time exceed 50% of the aggregate
outstanding amount of Advances;
(iii) the aggregate principal amount of all Advances relating to
Mezzanine Loans and Second Mortgage Loans may not at any one time exceed
$85,000,000;
-3-
<PAGE> 9
(iv) the aggregate principal amount of all Advances relating to REO
Property may not at any one time exceed $150,000,000;
(v) the aggregate principal amount of all Advances relating to
Mezzanine Loans, REO Property, Securities and Second Mortgage Loans may
not at any one time exceed $300,000,000;
(vi) no more than 20% of the Borrowing Base may consist of First
Mortgage Loans with either an LTV in excess of 80% or a Debt Service
Coverage Ratio less than 1.15 to 1.00;
(vii) no more than 15% of the First Mortgage Loans may be located in
any one zip code area and no more than 25% of the First Mortgage Loans
many be located in any one state, with the exception of California, in
which case no more than 25% of the First Mortgage Loans may be located in
each of northern and southern California, respectively;
(viii) no single First Mortgage Loan balance may exceed $25,000,000;
(ix) no single Asset may have a Market Value in excess of 30% of
the Borrowing Base; and
(x) the Collateral Value shall be zero for each Eligible Asset
(but only so long as such condition set forth below shall be continuing
unless waived by the Lender):
(A) in respect of which the eligibility criteria set forth on
Schedules 1 through 5 (as corresponds to the Asset) are not
satisfied in all material respects;
(B) in respect of which there is a delinquency in the payment
of principal and/or interest which continues for a period in excess
of 30 days (without regard to any applicable grace periods);
(C) which has been released from the possession of the
Custodian under the Custodial Agreement to any Person other than
the Lender or its bailee for a period in excess of fourteen (14)
days;
(D) in the case of a First Mortgage Loan, which has an LTV
greater than 90% or a Debt Service Coverage Ratio of less than
1.05; or
(E) in the case of a Wet-Ink Mortgage Loan, for which the
Lender has not received a Trust Receipt and an Asset Schedule and
Exception Report without any Material Exceptions from the Custodian
within four (4) Business Days following the Funding Date.
"Borrowing Base Certificate" shall mean a certificate substantially in the
form of Exhibit G, containing, from time to time, the Borrowing Base of the
Borrower.
"Borrowing Base Deficiency" shall have the meaning provided in Section
2.09 hereof.
"Business Day" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of
New York or the Custodian is authorized or obligated by law or executive order
to be closed.
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<PAGE> 10
"Class M-1 Advance" shall mean an Advance secured by a pledge of Eligible
First Mortgage Loans designated by the Borrower to apply the Applicable
Collateral Percentage and Applicable Margin for category M-1.
"Class M-2 Advance" shall mean an Advance secured by a pledge of Eligible
First Mortgage Loans designated by the Borrower to apply the Applicable
Collateral Percentage and Applicable Margin for category M-2.
"Class M-3 Advance" shall mean an Advance secured by a pledge of Eligible
First Mortgage Loans designated by the Borrower to apply the Applicable
Collateral Percentage and Applicable Margin for category M-3.
"Class ML Advance" shall mean an Advance secured by a pledge of Eligible
Mezzanine Loans or Eligible Second Mortgage Loans.
"Class RE Advance" shall mean an Advance secured by Eligible REO Property.
"Class S-B Advance" shall mean an Advance secured by Eligible Securities
having a rating of B.
"Class S-BB Advance" shall mean an Advance secured by Eligible Securities
having a rating of BB.
"Class S-IO Advance" shall mean an Advance secured by Eligible Securities
that bear interest only.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall have the meaning provided in Section 4.01(b) hereof.
"Collateral Value" shall mean, with respect to each Eligible Asset, the
Applicable Collateral Percentage of the lesser of (a) the face amount of such
Asset and (b) the Market Value of such Asset (in the case of REO Property,
giving effect to the value of any improvements thereto) (in the case of an
Asset for which a related Interest Rate Protection Agreement is also pledged to
the Lender, giving effect to the value of such Interest Rate Protection
Agreement).
"Commercial Mortgage-Backed Securities" or "CMBS" shall mean securities
issued pursuant to a securitization of commercial Mortgage Loans and/or
Mezzanine Loans.
"Committed Advance" shall have the meaning assigned to such term in
Section 2.01 hereof.
"Committed Advance Note" shall have the meaning assigned to such term in
Section 2.02 hereof.
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
-5-
<PAGE> 11
"Continue", "Continuation" and "Continued" shall refer to the continuation
of a LIBOR Advance from one Interest Period to the next Interest Period.
"Contractual Obligation" shall mean as to any Person, any provision of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound or any provision of any security
issued by such Person.
"Convert", Conversion" and "Converted" shall refer to a conversion of Base
Rate Advances into LIBOR Advances or of LIBOR Advances into Base Rate Advances.
"Custodial Agreement" shall mean the Custodial Agreement, dated as of the
date hereof, among the Borrower, the Custodian and the Lender, substantially in
the form of Exhibit B hereto, as the same shall be modified and supplemented
and in effect from time to time.
"Custodian" shall mean LaSalle National Bank, as custodian under the
Custodial Agreement, and its successors and permitted assigns thereunder.
"Debt Service Coverage Ratio" shall mean, for any Asset, at any date of
determination for any period, the ratio of (i) the cash flow available for the
payment of Debt Service Charges for such Asset for such period to (ii) the Debt
Service Charges relating to such Asset for such period.
"Debt Service Charges" shall mean, with respect to any Person, for any
period, the sum (without duplication) of:
(a) Interest Expense of such Person for such period; and
(b) Required amortization of Indebtedness of such Person for such
period and discount or premium relating to any such Indebtedness for such
period, whether expensed or capitalized.
"Default" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Due Diligence Review" shall mean the performance by the Lender of any
or all of the reviews permitted under Section 11.16 hereof with respect to any
or all of the Mortgage Loans, as desired by the Lender from time to time.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co. or any
successor thereto.
"EBITDA": shall mean, as to any Person, for any period, the sum of Net
Income of such Person for such period plus, to the extent any of the following
were deducted in determining Net Income of such Person for such period, the sum
of (i) Interest Expense of such Person for such period, (ii) income taxes paid
or accrued by such Person during such period, (iii) depreciation of fixed or
capital assets of such Person during such period, (iv) amortization of
intangible assets of such Person during such period and (v) any other noncash
charges or expenses to the extent deducted from Net Income.
"Effective Date" shall mean the date upon which the conditions
precedent set forth in Section 5.01 shall have been satisfied.
-6-
<PAGE> 12
"Eligible Assets" shall mean the collective reference to Eligible First
Mortgage Loans, Eligible Mezzanine Loans, Eligible REO Property, Eligible
Second Mortgage Loans and Eligible Securities.
"Eligible First Mortgage Loan" shall mean a First Mortgage Loan which
satisfies the eligibility characteristics set forth on Schedule 1 hereto on and
as of the applicable Funding Date and which continues to satisfy such
eligibility characteristics at all times thereafter while such First Mortgage
Loan is included in the Borrowing Base.
"Eligible Mezzanine Loan" shall mean a Mezzanine Loan which satisfies the
eligibility characteristics set forth on Schedule 2 hereto on and as of the
applicable Funding Date and which continues to satisfy such eligibility
characteristics at all times thereafter while such Mezzanine Loan is included
in the Borrowing Base.
"Eligible REO Property" shall mean REO Property which satisfies the
eligibility characteristics set forth on Schedule 3 hereto on and as of the
applicable Funding Date and which continues to satisfy such eligibility
characteristics at all times thereafter while such REO Property is included in
the Borrowing Base.
"Eligible Second Mortgage Loan" shall mean a Second Mortgage Loan which
satisfies the eligibility characteristics set forth on Schedule 4 hereto on and
as of the applicable Funding Date and which continues to satisfy such
eligibility characteristics at all times thereafter while such Second Mortgage
Loan is included in the Borrowing Base.
"Eligible Security" shall mean a Security which satisfies the eligibility
characteristics set forth on Schedule 5 hereto on and as of the applicable
Funding Date and which continues to satisfy such eligibility characteristics at
all times thereafter while such Security is included in the Borrowing Base.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(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" shall have the meaning provided in Section 8 hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for the day of such transactions received by the Lender from
three federal funds brokers of recognized standing selected by it.
"Fee Letter" shall have the meaning given to such term in Section 5.01(i).
"Fitch" shall mean Fitch Investor's Service or any successor thereto.
-7-
<PAGE> 13
"First Mortgage Loan" shall mean a first mortgage loan on one or more
multi-family or commercial real estate properties which is originated or
purchased by the Borrower and which first mortgage loan includes, without
limitation (i) a Mortgage Note and related Mortgage and (ii) a pledge by the
Borrower of all right, title and interest of the Borrower in and to the
Mortgaged Property covered by such Mortgage (two (2) or more Mortgage Loans to
the same Obligor and/or its Affiliates that are not cross-collateralized shall
not be aggregated but shall instead be treated as separate Mortgage Loans
hereunder).
"Funding Date" shall mean the date on which an Advance is made hereunder,
or if later (solely in the case of Wet-Ink Advances), the date on which the
proceeds of such Advance are used to fund a Wet-Ink Mortgage Loan.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America.
"Governing Documents": shall mean as to any Person, its articles or
certificate of incorporation and by-laws, its partnership agreement, its
certificate of formation and operating agreement, and/or the other
organizational or governing documents of such Person.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over the
Borrower, any of its Subsidiaries or any of its properties.
"Guarantee Obligation" shall mean, as to any Person, any obligation of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, by agreement to keep-well,
to purchase assets, goods, securities or services, or to take-or-pay or
otherwise); provided that the term "Guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business, or
(ii) obligations to make servicing advances for delinquent taxes and insurance
or other obligations in respect of a Mortgaged Property, to the extent required
by the Lender. The amount of any Guarantee of a Person shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith. The terms "Guarantee" and "Guaranteed" used as verbs
shall have correlative meanings.
"Indebtedness" shall mean, for any Person at any date, without
duplication, (a) all then outstanding indebtedness of such Person for borrowed
money (whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other then outstanding
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all then outstanding obligations of such Person
under financing leases, (d) all then outstanding obligations of such Person in
respect of letters of credit, acceptances or similar instruments issued or
created for the account of such Person and (e) all then outstanding liabilities
secured by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment thereof.
"Indemnified Party" shall have the meaning provided in Section 11.03
hereof.
-8-
<PAGE> 14
"Interest Coverage Ratio" shall mean, at any date of determination
for any period, the ratio of (i) the EBITDA of the Borrower for such period to
(ii) the Interest Expense of the Borrower for such period.
"Interest Expense" shall mean with respect to any Person, for any
period, the amount of interest expense, both expensed and capitalized, of such
Person, determined in accordance with GAAP, for such period on the aggregate
principal amount of its Indebtedness.
"Interest Period" shall mean, with respect to any LIBOR Advance:
(i) initially, the period commencing on the borrowing or
Conversion Date, as the case may be, with respect to such LIBOR
Advance and ending one, two or three months thereafter, as selected
by the Borrower in its notice of borrowing or notice of Conversion,
as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such LIBOR Advance and
ending one, two or three months thereafter, as selected by the
Borrower by irrevocable notice to the Lender not less than three
Business Days prior to the last day of the then current Interest
Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a LIBOR Advance would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date or such date of
final payment, as the case may be;
(3) any Interest Period pertaining to a LIBOR Advance that
begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any LIBOR Advance during an
Interest Period for such Loan.
"Interest Rate Protection Agreement" shall mean, with respect to any
or all of the Mortgage Loans, any interest rate swap, cap or collar agreement or
similar arrangements providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by the Borrower for hedging, and not
speculative, purposes.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
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<PAGE> 15
"IO" shall mean with respect to any Security, a bond, debenture, note,
certificate, certificate of participation or other certified security or
uncertified security that entitles the holder to payments based only or
disproportionately on the interest portion of payments on the underlying
assets.
"IPO" shall mean the initial public offering of the equity securities of
Borrower.
"IPO Date" shall mean the date on which the IPO occurs.
"Lender" shall have the meaning provided in the heading hereof.
"LIBO Base Rate" shall mean, with respect to any LIBOR Advance for any
Interest Period therefor, the rate per annum equal to the rate appearing at
page 3750 of the Telerate Screen as one-month LIBOR, two-month LIBOR or
three-month LIBOR (as corresponds to the Interest Period designated by the
Borrower in the Notice of Borrowing and Pledge) on the second Business Day
immediately preceding such Interest Period, and if such rate shall not be so
quoted, the rate per annum at which the Lender is offered Dollar deposits at or
about 11:00 a.m., New York City time, on such date by prime banks in the
interbank eurodollar market where the eurodollar and foreign currency exchange
operations in respect of its Advances are then being conducted for delivery on
such day for a period of one month, two months or three months (as corresponds
to the Interest Period designated by the Borrower in the Notice of Borrowing
and Pledge), and in an amount comparable to the amount of the Advances to be
outstanding on such day.
"LIBOR Advance" shall mean any Advance designated to accrue interest at
the LIBO Rate.
"LIBO Rate" shall mean with respect to each day during each Interest
Period pertaining to an Advance, a rate per annum determined by the Lender in
accordance with the following formula (rounded upwards to the nearest 1/100th
of one percent), which rate as determined by the Lender shall be conclusive
absent manifest error by the Lender:
LIBO Base Rate
----------------------------------------
1.00 - LIBO Reserve Requirements
"LIBO Reserve Requirements" shall mean for any Interest Period for any
Advance, the aggregate (without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in effect on such day or during such
Interest Period, as applicable (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto), dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such Governmental Authority, and which are applicable to the
Lender's funding of LIBOR Advances hereunder.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest or
similar encumbrance.
"Loan Agreement" shall mean this Master Loan and Security Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.
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<PAGE> 16
"Loan Documents" shall mean, collectively, this Loan Agreement, the Notes
and the Custodial Agreement.
"LTV" shall mean with respect to any Mortgage Loan, the ratio of the Par
Amount of the Mortgage Loan as of the date of origination (unless otherwise
indicated) to the Appraised Value of the Mortgaged Property.
"Market Value" shall mean, with respect to any Asset, the price at which
such Asset could be sold to a third-party, as determined by the Lender in its
sole discretion (exercised in good faith), which Market Value may be determined
to be zero.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
business, assets, property, business, condition (financial or otherwise) or
prospects of the Borrower and its consolidated Subsidiaries, taken as a whole,
(b) the ability of the Borrower to perform its obligations under any of the
Loan Documents to which it is a party, (c) the validity or enforceability of
any of the Loan Documents, (d) the rights and remedies of the Lender under any
of the Loan Documents, (e) the timely payment of the principal of or interest
on the Advances or other amounts payable in connection therewith or (f) the
Collateral, taken as a whole (excluding changes in the Market Value or
delinquency status of Assets pledged to the Lender).
"Material Exception" shall mean, with respect to any Asset, any Exception
listed on the Asset Schedule and Exception Report consisting of the absence
from the Asset File, or deficiency in respect of, any of the Asset Documents
set forth in Section 2(a)(i), 2(a)(iii), 2(a)(iv), 2(a)(v), 2(a)(vi),
2(a)(vii), 2(b)(i), 2(b)(iii), 2(b)(iv), 2(c)(i), 2(c)(ii), 2(c)(iii), 2(d)(i)
or 2(d)(ii) of the Custodial Agreement.
"Maximum Committed Credit" shall mean $450,000,000
"Maximum Uncommitted Credit" shall mean $200,000,000.
"Mezzanine Loan" shall mean a loan that is secured by (i) a pledge of the
equity interests in a special purpose entity which owns, directly or through
one or more special purpose entities, one or more income producing multi-family
or commercial properties, which multi-family or commercial properties are
subject to a first lien relating to a financing by the property owner.
"Mezzanine Note" shall mean the original executed promissory note or other
evidence of the indebtedness of an Obligor with respect to a Mezzanine Loan.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
"Moody's" shall mean Moody's Investors Service Inc. or any successor
entity thereto.
"Mortgage" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first lien on the fee in real
property securing the Mortgage Note.
"Mortgage Interest Rate" means the annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
-11-
<PAGE> 17
"Mortgage Loan" shall mean a First Mortgage Loan or a Second Mortgage
Loan.
"Mortgage Note" shall mean the original executed promissory note or other
evidence of the indebtedness of an Obligor with respect to a Mortgage Loan.
"Mortgaged Property" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon securing repayment of a Mortgage Loan and all additions, alterations
and replacements made at any time with respect to the foregoing) and all other
collateral securing repayment of such Mortgage Loan.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, with respect to any Person, for any period, net
income of such Person, determined in accordance with GAAP, for such period (the
amortization or non-amortization of any underwriting fees to be determined in
accordance with GAAP).
"Non-Excluded Taxes" shall have the meaning provided in Section 2.13
hereof.
"Notes" shall mean the collective reference to the Committed Advance Note,
the Uncommitted Advance Note and any promissory note delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.
"Notice of Borrowing and Pledge" shall have the meaning provided in
Section 2.05(a) hereof.
"Obligor" shall mean the obligor under a Mortgage Note or a Mezzanine Note
or other Asset Document.
"Par Amount" shall mean, in respect of a Mortgage Loan at any time, the
outstanding principal balance of such Mortgage Loan at such time.
"Payoff" shall mean, with respect to any Mortgage Loan or Mezzanine Loan,
repayment by the applicable Obligor of all outstanding principal thereunder
together with all interest accrued thereon to the date of such repayment and
any penalty or premium thereon.
"Payoff Proceeds" shall mean, with respect to any Mortgage Loan or
Mezzanine Loan, all funds received from the applicable Obligor in connection
with a Payoff.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Property Liens" shall mean, for each Asset, Liens: (a)
permitted pursuant to the Asset Documents of a type customarily permitted for
such Asset (as determined by the Lender in good faith and (subject in any event
to the eligibility criteria of Schedules 1 through 5)), (b) permitted pursuant
to the Loan Documents or any REO Property Mortgages, or (c) otherwise
specifically identified to the Lender and permitted by the Lender hereunder.
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<PAGE> 18
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association, government (or any agency, instrumentality or
political subdivision thereof) or any other entity of whatever nature.
"Plan" shall mean at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Post-Default Rate" shall mean, in respect of any principal of any Advance
or any other amount under this Loan Agreement, the Notes or any other Loan
Document that is not paid when due to the Lender (whether at stated maturity,
by acceleration, by optional or mandatory prepayment or otherwise), a rate per
annum during the period from and including the due date to but excluding the
date on which such amount is paid in full equal to 2% per annum plus (a) the
interest rate otherwise applicable to such Advance or other amount, or (b) if
no interest rate is otherwise applicable, the LIBO Rate.
"Prime Rate" shall mean, for any day, the rate of interest established by
the Lender from time to time as its reference rate for short term commercial
loans to domestic corporate borrowers denominated in Dollars (the Borrower
acknowledging that the reference rate of the Lender is not intended to be the
lowest rate of interest charged by the Lender in connection with extensions of
credit to debtors), in each case as in effect at 5:00 p.m., New York City time,
on such day.
"Principal Paydowns" shall mean, with respect to any Mortgage Loan or
Mezzanine Loan, any payment or other recovery of principal on such Mortgage
Loan or Mezzanine Loan (other than Payoff Proceeds), which is received by or on
behalf of the Borrower, including any penalty or premium thereon.
"Property" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Rated" shall mean (a) in the case of any Security, (i) the rating
assigned to such security by S&P, Moody's, Fitch or Duff & Phelps, and (ii) in
the case of a Security to which a rating has not been assigned by S&P, Moody's,
Fitch or Duff & Phelps, the long-term rating that has been assigned by either
S&P, Moody's, Fitch or Duff & Phelps generally to the most junior of the rated
debt securities of the issuer of such Security and (b) in the case of an
issuer, the long-term rating assigned to the most junior of the rated debt
securities of such issuer,
"REO Property" shall mean income producing real estate owned by the
Borrower or a special purpose entity controlled by the Borrower.
"REO Property Mortgage" shall mean a mortgage, deed of trust or other
instrument from the Borrower (or its Affiliate) to the Lender encumbering an REO
Property and securing Advances hereunder, which REO Property Mortgage meets the
requirements of applicable state law and is otherwise in form and substance
reasonably acceptable to the Lender.
"REO Subsidiary" shall mean a Subsidiary or other Affiliate of the
Borrower that holds REO Property.
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"Regulations G, T, U and X" shall mean Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the
same may be modified and supplemented and in effect from time to time.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
"Responsible Officer" shall mean, as to any Person, the president, the
chief executive officer or, with respect to financial matters, the chief
financial officer of such Person; provided, that in the event any such officer
is unavailable at any time he or she is required to take any action hereunder,
Responsible Officer shall mean any officer authorized to act on such officer's
behalf as demonstrated to the Lender to its reasonable satisfaction.
"Requirement of Law" shall mean as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"S&P" shall mean Standard & Poor's Corporation and any successor entity
thereto.
"Second Mortgage Loan" shall mean a performing second mortgage loan on,
one or more multi-family or commercial properties which is originated or
purchased by the Borrower, and which Second Mortgage Loan includes, without
limitation, (i) a Mortgage Note and related Mortgage and (ii) all right, title
and interest of the Borrower in and to the Mortgaged Property covered by such
Mortgage.
"Secured Obligations" shall mean the unpaid principal amount of, and
interest on, the Advances, and all other obligations and liabilities of the
Borrower to the Lender, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, which may arise under,
out of or in connection with this Loan Agreement, the Notes, any other Loan
Document and any other document made, delivered or given in connection herewith
or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without limitation,
all fees and disbursements of counsel to the Lender that are required to be
paid by the Borrower pursuant to the terms hereof or thereof) or otherwise. For
purposes hereof, "interest" shall include, without limitation, interest
accruing after the maturity of the Advances and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding.
"Security" or "Securities" shall mean a Commercial Mortgage-Backed
Security or Commercial Mortgage-Backed Securities retained or purchased by the
Borrower or an Affiliate of the Borrower in connection with the related
securitization.
"Servicer" shall mean ERE Yarmouth, Inc., a Delaware corporation.
"Servicing Agreement" shall have the meaning provided in Section 11.15(c).
"Servicing Records" shall have the meaning provided in Section 11.15(b)
hereof.
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"Single Employer Plan" shall mean any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, with respect to any Person, any other Person of
which at least a majority of the securities or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership or other entity (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
"Tangible Net Worth" shall mean, as of a particular date,
(a) all amounts which would be included under shareholders' equity on a
balance sheet of the Borrower at such date, determined in accordance with GAAP,
less
(b) (i) amounts owing to the Borrower from Affiliates and (ii) intangible
assets, determined in accordance with GAAP.
"Termination Date" shall mean May 15, 1999 or such earlier date on which
this Loan Agreement shall terminate in accordance with the provisions hereof or
by operation of law, as same may be extended in accordance with Section 2.14
hereof.
"Tranche" shall mean the collective reference to LIBOR Advances the then
current Interest Periods with respect to all of which begin on the same date
and end on the same later date (whether or not such LIBOR Advances shall
originally have been made on the same day).
"Trust Receipt" shall have the meaning assigned to such term in the
Custodial Agreement.
"Type" shall mean a Base Rate Advance or a LIBOR Advance, each
constituting a Type.
"Uncommitted Advance" shall have the meaning assigned to such term in
Section 2.03 hereof.
"Uncommitted Advance Note" shall have the meaning assigned to such term in
Section 2.04 hereof.
"Underwriting Guidelines" shall mean the underwriting guidelines of the
Borrower for Mortgage Loans, a copy of which is attached as Exhibit E hereto.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
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"Wet-Ink Advance" shall mean an Advance secured by a Wet-Ink Mortgage
Loan. A Wet-Ink Advance shall cease to be a Wet-Ink Advance on the date that
the underlying Wet-Ink Mortgage Loan ceases to be a Wet-Ink Mortgage Loan (in
accordance with the definition thereof).
"Wet-Ink Mortgage Loan" shall mean a Mortgage Loan originated by the
Borrower in a transaction table-funded by the Borrower, which is pledged to the
Lender simultaneously with the origination or table-funding thereof by the
Borrower, which origination or table funding is financed in part or in whole
with proceeds of Advances and as to which the Custodian has not yet received
the related Asset File. A Mortgage Loan shall cease to be a Wet-Ink Mortgage
Loan on the date on which the Lender has received a Trust Receipt from the
Custodian with respect to such Mortgage Loan confirming that the Custodian has
physical possession of the related Asset File, which Trust Receipt indicates
the presence of no Material Exceptions in the related Asset File.
1.02 Accounting Terms and Determinations. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared, in
accordance with GAAP.
SECTION 2 Advances, Notes and Prepayments.
2.01 Committed Advances.
(a) Subject to the terms and conditions of this Loan Agreement, the Lender
agrees to make loans (individually, a "Committed Advance"; collectively, the
"Committed Advances") to the Borrower, from time to time on any Business Day
from and including the Effective Date to but excluding the Termination Date, in
an aggregate principal amount at any one time outstanding up to but not
exceeding the lesser of (i) the Maximum Committed Credit, and (ii) the
Borrowing Base at such time.
(b) Subject to the terms and conditions of this Loan Agreement, during
such period the Borrower may borrow, repay and reborrow hereunder.
(c) In no event shall a Committed Advance be made when any Default or
Event of Default has occurred and is continuing.
(d) The Committed Advances may from time to time be (i) LIBOR Advances,
(ii) Base Rate Advances or (iii) a combination thereof, as determined by the
Borrower and notified to the Lender, provided that no Committed Advance may be
made as a LIBOR Advance after the date that is one month prior to the
Termination Date.
(e) The Committed Advances may from time to time be any one of the
following: Class M-1 Advance, Class M-2 Advance, Class M-3 Advance, Class ML
Advance, Class RE Advance, Class S-B Advance, Class S-BB Advance, Class S-IO
Advance or any combination thereof, as determined by the Borrower and notified
to the Lender.
2.02 Committed Advance Notes.
(a) The Committed Advances made by the Lender shall be evidenced by a
single promissory note of the Borrower substantially in the form of Exhibit A-1
hereto (the "Committed Advance Note"), dated the date hereof, payable to the
Lender in a principal amount equal to the
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amount of the Maximum Committed Credit and otherwise duly completed. The Lender
shall have the right to have its Committed Advance Note subdivided, by exchange
for promissory notes of lesser denominations or otherwise, each substantially in
the form of Exhibit A-1.
(b) The date, amount, Type and interest rate, and with respect to LIBOR
Advances, the Interest Period with respect thereof, of each Committed Advance
made or Converted by the Lender to the Borrower, and each payment made on
account of the principal and interest thereof, shall be recorded by the Lender
on its books and, prior to any transfer of the Committed Advance Note, endorsed
by the Lender on the schedule attached to the Committed Advance Note or any
continuation thereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing hereunder or under the Committed
Advance Note in respect of the Committed Advances.
2.03 Uncommitted Advances.
(a) In addition to the Committed Advances, the Lender agrees to consider
from time to time the Borrower's requests that the Lender make, on the terms
and conditions of this Loan Agreement, loans (individually, an "Uncommitted
Advance"; collectively, the "Uncommitted Advances") to the Borrower in Dollars,
from and including the Effective Date to and including the Termination Date in
an aggregate principal amount at any one time outstanding up to but not
exceeding the lesser of (i) the Maximum Uncommitted Credit, and (ii) the
Borrowing Base at such time. The Lender will not make any Uncommitted Advance
unless the Borrower has first made Committed Advances then outstanding in an
aggregate amount equal to the Maximum Committed Credit. This Loan Agreement
does not constitute a commitment to lend Uncommitted Advances but rather sets
forth the procedures to be used in connection with periodic requests for
Uncommitted Advances. The Borrower hereby acknowledges that the Lender is under
no obligation to agree to make, or to make, any Uncommitted Advance pursuant to
this Loan Agreement.
(b) Subject to the terms and conditions of this Loan Agreement, during
such period the Borrower may borrow, repay and reborrow hereunder.
(c) In no event shall an Uncommitted Advance be made when any Default or
Event of Default has occurred and is continuing.
(d) The Uncommitted Advances may from time to time be (i) LIBOR Advances,
(ii) Base Rate Advances or (iii) a combination thereof, as determined by the
Borrower and notified to the Lender, provided that no Uncommitted Advance may
be made as a LIBOR Advance after the date that is one month prior to the
Termination Date.
(e) The Uncommitted Advances may from time to time be any one of the
following: Class M-1 Advance, Class M-2 Advance, Class M-3 Advance, Class ML
Advance, Class RE Advance, Class S-B Advance, Class S-BB Advance, Class S-IO
Advance or any combination thereof, as determined by the Borrower and notified
to the Lender.
204 Uncommitted Advance Notes.
(a) The Uncommitted Advances made by the Lender shall be evidenced by a
single promissory note of the Borrower substantially in the form of Exhibit A-2
hereto (the "Uncommitted
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Advance Note"), dated the date hereof, payable to the Lender in a principal
amount equal to the amount of the Maximum Uncommitted Credit and otherwise duly
completed. The Lender shall have the right to have its Uncommitted Advance Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise, each substantially in the form of Exhibit A-2.
(b) The date, amount, Type and interest rate, and with respect to LIBOR
Advances, the Interest Period with respect thereof, of each Uncommitted Advance
made or Converted by the Lender to the Borrower, and each payment made on
account of the principal and interest thereof, shall be recorded by the Lender
on its books and, prior to any transfer of the Uncommitted Advance Note,
endorsed by the Lender on the schedule attached to the Uncommitted Advance Note
or any continuation thereof; provided that the failure of the Lender to make
any such recordation or endorsement shall not affect the obligations of the
Borrower to make a payment when due of any amount owing hereunder or under the
Uncommitted Advance Note in respect of the Uncommitted Advances.
2.05 Procedure for Borrowing.
(a) The Borrower may request an Advance hereunder, on any Business Day
during the period from and including the Effective Date to and including the
Termination Date, by delivering to the Lender, with a copy to the Custodian, an
irrevocable written Notice of Borrowing and Pledge substantially in the form of
Exhibit D hereto (a "Notice of Borrowing and Pledge"), appropriately completed
which Notice of Borrowing and Pledge must be received by the Lender, with a
copy to the Custodian, prior to 10 a.m., New York City time, three (3) Business
Days prior to the requested Funding Date in the case of LIBOR Advances, and one
(1) day prior to the requested Funding Date in the case of Base Rate Advances.
Such Notice of Borrowing and Pledge shall (i) attach a schedule identifying the
Eligible Assets that the Borrower proposes to pledge to the Lender and to be
included in the Borrowing Base in connection with such Advance, (ii) contain
the amount of the requested Advance, which shall in all events be at least
equal to $1,500,000, to be made on such Funding Date (setting forth the amount
of the Advance allocable to each Asset set forth on the attached schedule),
(iii) specify the requested Funding Date, (iv) designate the Advance as either
a LIBOR Advance (with designation of a one, two or three-month Interest
Period), a Base Rate Advance or a combination thereof, (v) designate the
Advance (or the relevant portions thereof) as one of the following: Class M-1
Advance, Class M-2 Advance, Class M-3 Advance, Class ML Advance, Class RE
Advance, Class S-BB Advance, Class S-B Advance or Class S-IO Advance, (vi)
designate the Advance as either a Committed Advance or an Uncommitted Advance,
(vii) attach an officer's certificate signed by a Responsible Officer of the
Borrower as required by Section 5.02(b) hereof, (viii) designate any Advances
as Wet-Ink Advances, and (ix) contain (by attachment) such other information
reasonably requested by the Lender from time to time. In addition, prior to
12:00 noon, New York City time, on the Funding Date, the Borrower may, with
respect to Wet-Ink Advances, deliver to the Lender, with a copy to the
Custodian, (A) a revised copy of such Notice of Borrowing and Pledge for
purposes of amending the requested Advance amount and/or to remove Wet-Ink
Mortgage Loans which are no longer to be funded on such Funding Date from the
Mortgage Loan Schedule (it being understood that any such revised copy fully
supersedes the Notice of Borrowing and Pledge previously delivered with respect
to such Funding Date), and (B) an additional Notice of Borrowing and Pledge
requesting Wet-Ink Advances to be made on such Funding Date against additional
Wet-Ink Mortgage Loans of which the Borrower was unaware on the prior Business
Day; provided, that in the event that the Borrower cancels a Wet-Ink Advance,
the Borrower agrees to pay any loss of the Lender pursuant to Section 2.10(b) as
a result of such cancellation.
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(b) The Borrower shall deliver (or cause to be delivered) and release to
the Custodian no later than 1:00 p.m., New York City time, two (2) Business
Days prior to the requested Funding Date, a complete Asset File pertaining to
each Eligible Asset (other than Wet-Ink Mortgage Loans) to be pledged to the
Lender and included in the Borrowing Base on such requested Funding Date, in
accordance with the terms and conditions of the Custodial Agreement.
(c) Pursuant to the Custodial Agreement, the Custodian shall deliver to
the Lender and the Borrower, no later than 1:00 p.m., New York City time, one
(1) Business Day prior to the requested Funding Date, a Trust Receipt in
respect of all Assets (other than Wet-Ink Mortgage Loans) pledged to the Lender
on such Funding Date and an Asset Schedule and Exception Report in respect of
all Assets so pledged to the Lender.
(d) Subject to Section 5 hereof and, in the case of an Uncommitted
Advance, the decision of the Lender to make such Uncommitted Advance, the
requested Advance will then be made available to the Borrower by the Lender
transferring, via wire transfer (pursuant to wire transfer instructions
provided by the Borrower on or prior to such Funding Date) the aggregate amount
of such Advance in immediately available funds.
(e) The Borrower may request a maximum of five Advances per month;
provided that there shall be no limit to the number of Advances made per month
in connection with the initial pledge to the Lender of an Asset having a Par
Amount (or in the case of an REO Property, a Market Value) of $10 million or
more.
(f) The Borrower shall fax (or cause to be faxed) to the Custodian a fully
executed copy of the Mortgage Note relating to each Wet-Ink Mortgage Loan
pledged to the Lender hereunder promptly upon receipt thereof by the Borrower,
but in any event no later than 4:00 p.m., New York City time, on the applicable
Funding Date. Upon the Custodian's receipt thereof, the Custodian shall
promptly deliver to the Lender, via facsimile, no later than 5:00 p.m. on such
Funding Date, a Custodial Identification Certificate (as defined in the
Custodial Agreement) with respect thereto.
(g) After the funding of a Wet-Ink Mortgage Loan on any Funding Date, the
Borrower shall deliver (or cause to be delivered) and release to the Custodian
a complete Asset File pertaining to each Wet-Ink Mortgage Loan pledged to the
Lender hereunder no later than three (3) Business Days following the applicable
Funding Date in accordance with the terms and conditions of the Custodial
Agreement.
(h) No later than 1:00 p.m., New York City time, one (1) Business Day
after its receipt of the Asset File in respect of any Wet-Ink Mortgage Loan(s),
the Custodian shall deliver to the Lender and the Borrower a Trust Receipt and
an Asset Schedule and Exception Report in respect of such Wet-Ink Mortgage
Loan(s) in accordance with the terms and conditions of the Custodial Agreement.
(i) The aggregate of all Wet-Ink Advances outstanding at one any time
shall not exceed $20,000,000.
(j) No more than six (6) LIBOR Tranches may be outstanding at any one
time.
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2.06 Repayment of Advances; Interest.
(a) The Borrower hereby promises to repay in full on the Termination Date
the then aggregate outstanding principal amount of the Advances.
(b) The Borrower hereby promises to pay to the Lender interest on the
unpaid principal amount of each Advance for the period from and including the
Funding Date of such Advance to but excluding the date such Advance shall be
paid in full, at a rate per annum equal to:
(i) in the case of LIBOR Advances, the LIBO Rate plus the Applicable
Margin; or
(ii) in the case of Base Rate Advances, the Base Rate plus the Applicable
Margin.
Notwithstanding the foregoing, the Borrower hereby promises to pay to the
Lender interest at the applicable Post-Default Rate on any principal of any
Advance and on any other amount payable by the Borrower hereunder or under the
Notes that shall not be paid in full when due (whether at stated maturity, by
acceleration or by mandatory prepayment or otherwise) for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Accrued interest on each Advance shall be payable monthly on the first
Business Day of each month and on the Termination Date. Notwithstanding the
foregoing, interest accruing at the Post-Default Rate shall be payable to the
Lender on demand. Promptly after the determination of any interest rate
provided for herein or any change therein, the Lender shall give notice thereof
to the Borrower.
2.07 Limitation on Types of Advances; Illegality. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any LIBO Base
Rate:
(a) the Lender determines in good faith, which determination shall
be conclusive, that quotations of interest rates for the relevant
deposits referred to in the definition of "LIBO Base Rate" in Section
1.01 hereof are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for
LIBOR Advances as provided herein; or
(b) it becomes unlawful for the Lender to honor its obligation to
make or maintain LIBOR Advances hereunder using a LIBO Rate;
then the Lender shall give the Borrower prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional LIBOR Advances, Continue LIBOR Advances or Convert Base Rate
Advances into LIBOR Advances, and the Borrower shall, at its option, either
prepay all such LIBOR Advances as may be outstanding or convert such LIBOR
Advances to Base Rate Advances. If such Conversion or prepayment of a LIBOR
Advance occurs on a day that is not the last day of the relevant Interest
Period, the Borrower shall pay the Lender such amounts, if any, as may be
required pursuant to Section 2.10(b); provided, that unless contrary to law or
the Lender otherwise determines in good faith that it would be adverse to the
Lender, the Borrower shall have the right to defer repayment or Conversion
until the end of the relevant Interest Period.
2.08 Conversion and Continuation Options. (a) The Borrower may elect from
time to time to Convert LIBOR Advances to Base Rate Advances by giving the
Lender at least two Business Days' prior irrevocable notice of such election,
provided that any such Conversion of LIBOR Advances may only occur on the last
day of an Interest Period with respect thereto. The Borrower may elect from
time to time to Convert Base Rate Advances to LIBOR Advances by giving the
Lender
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at least three Business Days' prior irrevocable notice of such election. Any
such notice of Conversion to LIBOR Advances shall specify the length of the
initial Interest Period or Interest Periods therefor. All or any part of
outstanding LIBOR Advances and Base Rate Advances may be Converted as provided
herein, provided that (i) no Advance may be Converted into a LIBOR Advance when
any Event of Default has occurred and is continuing and the Lender has
determined that such a Conversion is not appropriate and (ii) no Base Rate
Advance may be converted into a LIBOR Advance after the date that is one month
or 30 days prior to the Termination Date.
(b) Any LIBOR Advances may be Continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving notice
to the Lender of the length of the next Interest Period to be applicable to
such Advances, provided that no LIBOR Advance may be Continued as such (i) when
any Event of Default has occurred and is continuing and the Lender has
determined that such a Continuation is not appropriate or (ii) after the date
that is one month or 30 days prior to the Termination Date and provided,
further, that if the Borrower shall fail to give such notice or if such
Continuation is not permitted such Advances shall be automatically converted to
Base Rate Advances on the last day of such then expiring Interest Period.
2.09 Determination of Borrowing Base; Mandatory Prepayments or Pledge.
If at any time the aggregate outstanding principal amount of Advances
exceeds the Borrowing Base by at least $500,000 (a "Borrowing Base
Deficiency"), as determined by the Lender and notified to the Borrower on or
before 11:00 a.m. on any Business Day, the Borrower shall, no later than three
(3) Business Days after receipt of such notice, at the option of the Borrower,
either (a) prepay the Advances in part or in whole, or (b) pledge additional
Eligible Assets to the Lender or (c) designate Advances (or a portion thereof)
for reclassification as a Class of Advance having a higher Applicable
Collateral Percentage than the Class of Advance then in effect, such that after
giving effect to such prepayment, pledge or reclassification, the aggregate
outstanding principal amount of the Advances does not exceed the Borrowing
Base. Notwithstanding the foregoing, if a prepayment would result in breakage
costs to the Borrower, the Borrower shall have the right to defer any such
prepayment (so long as no Event of Default has occurred and is continuing)
until the end of the relevant Interest Period, so long as the Borrower pledges
to the Lender cash collateral in the amount of such prepayment on terms and
pursuant to documentation acceptable to the Lender.
2.10 Optional Prepayments.
(a) The Borrower may prepay, in whole or in part, Base Rate Advances at
any time and LIBOR Advances on the last day of any Interest Period with respect
thereto, without premium or penalty. The Borrower may prepay LIBOR Advances
prior to the last day of an Interest Period, provided that the Borrower shall
be responsible for all breakage costs pursuant to Section 2.10(b). Any amounts
prepaid shall be applied to repay the outstanding principal amount of any
Advances (together with interest thereon) until paid in full. Amounts repaid
may be reborrowed in accordance with the terms of this Loan Agreement. If the
Borrower intends to prepay an Advance in whole or in part from any source, the
Borrower shall give two (2) Business Days' prior written notice thereof to the
Lender, specifying the date amount of prepayment and whether the prepayment is
of LIBOR Advances, Base Rate Advances or a combination thereof, and if of a
combination thereof, the amount allocable to each. If such notice is given, the
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to such date on the amount prepaid.
Partial prepayments shall be in an aggregate principal amount of at least
$100,000.
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(b) If the Borrower makes a prepayment of LIBOR Advances on any day which
is not the last day of the Interest Period, the Borrower shall indemnify the
Lender and hold the Lender harmless from any actual loss or expense which the
Lender may sustain or incur equal to the greater of: (i) zero and (ii) the
product of (A) the amount of the prepayment and (B) the product of (I) the
excess, if any, of the LIBO Base Rate applicable to such Advance over the rate
on a LIBOR deposit commencing on the date of the prepayment and ending on the
last day of the Interest Period for such Advance and (II) the fraction of a
year commencing on the prepayment date and ending on the last day of the
Interest Period for such Advance (using an actual/360 day count). Lender shall,
at the request of the Borrower, notify the Borrower of an estimate of the
approximate amounts of costs to be paid by the Borrower if a LIBOR Advance is
prepaid, such estimate shall not be conclusive and may in no way limit the
amount of costs determined at the time that such Advance is prepaid. This
Section 2.10 shall survive termination of this Loan Agreement and payment of
the Notes.
2.11 Requirements of Law.
(a) If any Requirement of Law or any change in the interpretation or
application thereof or compliance by the Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject the Lender to any tax of any kind whatsoever
with respect to this Loan Agreement, the Notes or any Advance made by
it (excluding net income taxes) or change the basis of taxation of
payments to the Lender in respect thereof;
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory Advance or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances,
Advances or other extensions of credit by, or any other acquisition of
funds by, any office of the Lender which is not otherwise included in the
determination of the LIBO Base Rate or the Base Rate hereunder;
(iii) shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender,
by an amount which the Lender deems to be material, of making, Converting into,
Continuing or maintaining any Advance or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall, upon
receipt of prior written notice of such fact and a reasonably detailed
description of the circumstances, promptly pay the Lender such additional
amount or amounts as will compensate the Lender for such increased cost or
reduced amount receivable; provided, that Borrower shall only be liable for
such additional amounts incurred on or after the date that is thirty (30) days
prior to the date of receipt of such notice by the Borrower.
(b) If the Lender shall have determined that the adoption of or any change
in any Requirement of Law regarding capital adequacy or in the interpretation
or application thereof or compliance by the Lender or any corporation
controlling the Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the date hereof shall have the effect of reducing the rate of
return on the Lender's or such corporation's capital as a consequence of its
obligations hereunder by an amount deemed by the Lender to be material (taking
into consideration the Lender's or such corporation's policies with respect to
capital adequacy), then from time to time, the Borrower shall promptly, upon
notice from
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the Lender, pay to the Lender such additional amount or amounts as will
compensate the Lender for such reduction.
(c) If the Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower of the event
by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection submitted by the Lender
to the Borrower shall be conclusive in the absence of manifest error.
2.12 Purpose of Advances. Each Advance shall be used to finance the
origination or acquisition of Eligible Assets identified to the Lender in
writing on each Asset Schedule, as such Asset Schedule may be amended from time
to time.
2.13 Taxes.
(a) All payments made by the Borrower under this Loan Agreement and the
Notes 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,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Lender as a result of a present or former connection
between the Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Loan Agreement or any Note). If any such non-excluded taxes,
levies, imposts, duties, charges, fees deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable to
the Lender hereunder or under the Notes, the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Loan Agreement;
provided, however, that the Borrower shall not be required to increase any such
amounts payable to the Lender that is not organized under the laws of the
United States of America or a state thereof if the Lender fails to comply with
the requirements of clause (b) of this Section. Whenever any Non-Excluded Taxes
are payable by the Borrower, as promptly as possible thereafter the Borrower
shall send to the Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental taxes, interest or penalties that may become payable by the Lender
as a result of any such failure. The agreements in this Section shall survive
the termination of this Loan Agreement and the payment of the Advances and all
other amounts payable hereunder.
(b) If the Lender hereunder (or an assignee that acquires an interest
hereunder in accordance with Section 11.14 hereof) that is not incorporated
under the laws of the United States of America or a state thereof shall:
(i) deliver to the Borrower (A) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, and (B) an Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may be;
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(ii) deliver to the Borrower two further copies of any such form or
certification on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously delivered by it to
the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower. Such Lender
shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to
receive payments under this Loan Agreement without deduction or withholding of
any United States federal income taxes and (ii) in the case of a Form W-8 or
W-9, that it is entitled to an exemption from United States backup withholding
tax. Each Person that shall become a Lender pursuant to Section 11.14 hereof
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this Section.
2.14 Extension of Termination Date. At the request of the Borrower, at
least one hundred and twenty (120) days prior to the then current Termination
Date, the Lender may in its sole discretion extend the Termination Date for a
period of 364 days, dating from the date one hundred and twenty (120) days
prior to the Termination Date, by giving written notice of such extension to
the Borrower no later than ninety (90) days prior to the then current
Termination Date.
2.15 Processing Fees. In connection with any Advance, the Borrower shall
pay to the Lender a processing fee equal to the sum of:
(a) $3,000 for each Mortgage Loan, Mezzanine Loan or parcel of REO
Property pledged as collateral, provided that there will be no fee for a
Mezzanine Loan if its associated First Mortgage Loan is also pledged;
(b) in the case of Securities pledged as Collateral, (i) $10,000 for all
Securities issued in connection with a single securitization transaction
involving a single asset; (ii) $20,000 for all Securities issued in connection
with a single securitization transaction involving less than 100 loans; (iii)
$30,000 for all Securities issued in connection with a single securitization
transaction involving 100 to 200 loans and (iv) $40,000 for all Securities
issued in connection with a single securitization transaction involving more
than 200 loans; provided that no such processing fee shall be payable in
respect of Securities where the underlying Mortgage Loans are pledged
hereunder;
(c) the processing fees for all Assets shall in no event exceed $150,000
for each one-year period beginning with the period beginning on the Effective
Date.
2.16 Class Conversion. The Borrower may at any time, upon three (3) days
prior written notice to the Lender, elect to convert any Class M-1 Advance,
Class M-2 Advance or Class M-3 Advance (a "Class M Advance") to a different
Class M Advance.
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SECTION 3 Payments; Computations; Etc.
3.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this
Loan Agreement and the Notes, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender at
the following account maintained by the Lender: Account No. 999-99-090, for the
A/C of Morgan Guaranty Trust Company of New York, ABA# 021-000-238, Attention:
Robert Nichols: (302) 634-4208, Reference: Chastain-Warehouse, not later than
1:00 p.m., New York City time, on the date on which such payment shall become
due (and each such payment made after such time on such due date shall be
deemed to have been made on the next succeeding Business Day). The Borrower
acknowledges that it has no rights of withdrawal from the foregoing account.
(b) Except to the extent otherwise expressly provided herein, if the due
date of any payment under this Loan Agreement or the Notes would otherwise fall
on a day that is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
3.02 Computations. Interest on the Advances shall be computed on the basis
of a 360-day year for the actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
SECTION 4 Collateral Security.
4.01 Collateral; Security Interest.
(a) Pursuant to the Custodial Agreement, the Custodian shall hold the
Asset Documents as exclusive bailee and agent for the Lender pursuant to terms
of the Custodial Agreement and shall deliver Trust Receipts to the Lender each
to the effect that it has reviewed such Asset Documents in the manner and to the
extent required by the Custodial Agreement and identifying any exceptions in
such Asset Documents as so reviewed in the Asset Schedule and Exception Reports.
(b) Each of the following items of property is hereinafter referred to as
the "Collateral":
(i) all Mezzanine Loans identified on a Notice of Borrowing and
Pledge delivered by the Borrower to the Lender and the
Custodian from time to time;
(ii) all Mortgage Loans identified on a Notice of Borrowing and
Pledge delivered by the Borrower to the Lender and the
Custodian from time to time;
(iii) all Securities identified on a Notice of Borrowing and Pledge
delivered by the Borrower to the Lender and the Custodian from
time to time;
(iv) all REO Property identified on a Notice of Borrowing and
Pledge delivered by the Borrower to the Lender and the
Custodian from time to time;
(v) all Asset Documents relating to the foregoing,
including without limitation all promissory notes, and all
Servicing Records, Servicing Agreements, servicing
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rights, pledge agreements and any other collateral pledged or
otherwise relating to such Assets, together with all files,
documents, instruments, surveys, certificates, correspondence,
appraisals, computer programs, computer storage media, accounting
records and other books and records relating thereto;
(vi) all mortgage guaranties and insurance relating to such
Mortgage Loans (issued by governmental agencies or otherwise)
and any mortgage insurance certificate or other document
evidencing such mortgage guaranties or insurance relating to
such Mortgage Loans and all claims and payments thereunder;
(vii) all other insurance policies and insurance proceeds relating
to any such Mortgage Loan or the related Mortgaged Property;
(viii) all purchase or take-out commitments relating to or
constituting any or all of the foregoing;
(ix) all Interest Rate Protection Agreements, if any, relating to
such Assets;
(x) all collateral, however defined, under any other agreement
between the Borrower or any of its Affiliates on the one hand
and the Lender or any of its Affiliates on the other hand;
(xi) all "securities accounts", as defined in the Uniform
Commercial Code, relating to any of the foregoing and each
"financial asset", as defined in the Uniform Commercial Code,
contained therein;
(xii) all "accounts", "chattel paper" and "general intangibles" as
defined in the Uniform Commercial Code relating to or constituting
any and all of the foregoing; and
(xiii) any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
(c) The Borrower hereby pledges to the Lender, and grants a security
interest in favor of the Lender in, all of the Borrower's right, title and
interest in, to and under the Collateral, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, to secure the
Secured Obligations. The Borrower agrees to mark its computer records and tapes
to evidence the interests granted to the Lender hereunder.
(d) In the case of Mezzanine Loan pledged equity interests, the Borrower
shall deliver to the Lender certificates evidencing such equity interests (if
such equity interests are certificated), together with stock powers endorsed in
blank, or take such other action as shall be necessary or advisable for the
security interest of the Lender in such equity interests to be a fully
perfected first priority security interest on which the Lender may foreclose
without further action by the Borrower.
(e) In the case of REO Property, the Borrower shall cause to be delivered
to the Lender such REO Property Mortgages and other instruments and documents
necessary or advisable, in the reasonable opinion of the Lender, to grant the
Lender a mortgage Lien on such REO Property, together with, if requested by the
Lender, such title insurance, surveys, appraisals satisfying the
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requirements of FIRREA and, to the extent available, other information,
documents, agreement or instruments as the Lender deems reasonably advisable.
4.02 Further Documentation. At any time and from time to time, upon the
written request of the Lender, and at the sole expense of the Borrower, the
Borrower will promptly and duly execute and deliver, or will promptly cause to
be executed and delivered, such further instruments and documents and take such
further action as the Lender may reasonably request for the purpose of
obtaining or preserving the full benefits of this Loan Agreement and of the
rights and powers herein granted, including, without limitation, the filing of
any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the Liens created hereby. The
Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of the Borrower to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Loan Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
4.03 Changes in Locations, Name, etc. The Borrower shall not (i) change
the location of its chief executive office/chief place of business from that
specified in Section 6 hereof or (ii) change its name, identity or corporate
structure (or the equivalent) or change the location where it maintains its
records with respect to the Collateral unless it shall have given the Lender at
least 30 days prior written notice thereof and shall have delivered to the
Lender all Uniform Commercial Code financing statements and amendments thereto
as the Lender shall request and taken all other actions deemed necessary by the
Lender to continue its perfected status in the Collateral with the same or
better priority.
4.04 Lender's Appointment as Attorney-in-Fact.
(a) The Borrower hereby irrevocably constitutes and appoints the Lender
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Borrower and in the name of the Borrower or in its own
name, from time to time in the Lender's discretion, for the purpose of carrying
out the terms of this Loan Agreement, if an Event of Default shall have
occurred and be continuing, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Loan Agreement, and, without
limiting the generality of the foregoing, the Borrower hereby gives the Lender
the power and right, on behalf of the Borrower, without assent by, but with
notice to, the Borrower, to do the following if an Event of Default shall have
occurred and be continuing:
(i) in the name of the Borrower or its own name, or otherwise, to take
possession of and endorse and collect any checks, drafts, notes, acceptances
or other instruments for the payment of moneys due under any mortgage
insurance or with respect to any other Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Lender for the purpose of collecting any
and all such moneys due under any such mortgage insurance or with respect to
any other Collateral whenever payable;
(ii) to pay or discharge delinquent taxes and Liens levied or placed
on or threatened against the Collateral other than Permitted Property
Liens; and
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(iii) (A) to direct any party liable for any payment under any Collateral
to make payment of any and all moneys due or to become due thereunder
directly to the Lender or as the Lender shall direct; (B) to ask or demand
for, collect, receive payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect of or arising
out of any Collateral; (C) to sign and endorse any invoices, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (D) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against the
Borrower with respect to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases as the Lender may
deem appropriate; and (G) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Lender were the absolute owner thereof for
all purposes, and to do, at the Lender's option and the Borrower's expense,
at any time, and from time to time, all acts and things which the Lender
deems necessary to protect, preserve or realize upon the Collateral and the
Lender's Liens thereon and to effect the intent of this Loan Agreement, all
as fully and effectively as the Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) The Borrower also authorizes the Lender, at any time and from time to
time, to execute, in connection with any sale provided for in Section 4.07
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect the Lender's
interests in the Collateral and shall not impose any duty upon the Lender to
exercise any such powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither
the Lender nor any of its officers, directors, or employees shall be
responsible to the Borrower for any act or failure to act hereunder, except for
its own gross negligence or willful misconduct.
4.05 Performance by Lender of Borrower's Obligations. If the Borrower
fails to perform or comply with any of its agreements contained in the Loan
Documents after the giving of any required notice and the expiration of any
applicable cure period and the Lender may itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the reasonable
out-of-pocket expenses of the Lender incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
equal to the Post-Default Rate, shall be payable by the Borrower to the Lender
on demand and shall constitute Secured Obligations.
4.06 Proceeds. If an Event of Default shall occur and be continuing, (a)
all proceeds of Collateral received by the Borrower consisting of cash, checks
and other near-cash items shall be held by the Borrower in trust for the
Lender, segregated from other funds of the Borrower, and shall forthwith upon
receipt by the Borrower be turned over to the Lender in the exact form received
by the Borrower (duly endorsed by the Borrower to the Lender, if required) and
(b) any and all such proceeds received by the Lender (whether from the Borrower
or otherwise) may, in the sole discretion of the Lender, but subject to the
terms and conditions of the Asset Documents, be held by the Lender as
collateral security for, and/or then or at any time thereafter may be applied
by the
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Lender against, the Secured Obligations (whether matured or unmatured),
such application to be in such order as the Lender shall elect. Any balance of
such proceeds remaining after the Secured Obligations shall have been paid in
full and this Loan Agreement shall have been terminated shall be paid over to
the Borrower or to whomsoever may be lawfully entitled to receive the same. For
purposes hereof, proceeds shall include, but not be limited to, all principal
and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other
income and all other amounts received with respect to the Collateral.
4.07 Remedies. If an Event of Default shall occur and be continuing, the
Lender may exercise, in addition to all other rights and remedies granted to it
in this Loan Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the Uniform Commercial Code. Without limiting the
generality of the foregoing, the Lender without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Borrower or any other
Person (each and all of which demands, presentments, protests, advertisements
and notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell (on a servicing released basis, at the Lender's
option), lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing), in one or more parcels or as an entirety at public or
private sale or sales, at any exchange, broker's board or office of the Lender
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Lender shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in the Borrower, which right or equity is
hereby waived or released. The Borrower further agrees, at the Lender's request,
to assemble the Collateral and make it available to the Lender at places which
the Lender shall reasonably select, whether at the Borrower's premises or
elsewhere. The Lender shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Lender hereunder, including without limitation
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Secured Obligations, in such order as the Lender may elect, and only
after such application and after the payment by the Lender of any other amount
required or permitted by any provision of law, including without limitation
Section 9-504(1)(c) of the Uniform Commercial Code, need the Lender account for
the surplus, if any, to the Borrower. To the extent permitted by applicable law,
the Borrower waives all claims, damages and demands it may acquire against the
Lender arising out of the exercise by the Lender of any of its rights hereunder,
other than those claims, damages and demands arising from the gross negligence
or willful misconduct of the Lender. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Borrower shall remain liable for any deficiency (plus accrued
interest thereon as contemplated pursuant to Section 2.06(b) hereof) if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Secured Obligations and the reasonable fees and disbursements of any
attorneys employed by the Lender to collect such deficiency.
4.08 Limitation on Duties Regarding Presentation of Collateral. The
Lender's duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
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manner as the Lender deals with similar property for its own account. Neither
the Lender nor any of its directors, officers or employees shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Borrower or otherwise.
4.09 Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
4.10 Release of Security Interest. (a) Upon termination of this Loan
Agreement and repayment to the Lender of all Secured Obligations and the
performance of all obligations under the Loan Documents, the Lender shall
release its security interest in any remaining Collateral; provided that if any
payment, or any part thereof, of any of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower, or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or a trustee or similar officer for, the Borrower or any substantial part of
its Property, or otherwise, this Loan Agreement, all rights hereunder and the
Liens created hereby shall continue to be effective, or be reinstated, as
though such payments had not been made until such time as such payments have
been indefeasibly made. Upon the release of the security interest in the Assets
pursuant to this Section, the Lender shall cause the Custodian to release to the
Borrower the Asset Files and to execute, acknowledge and deliver to the Borrower
any and all documents, instruments and agreements necessary to release all
security interests in such Assets. Upon repayment to the Lender of any Advance
pursuant to Section 2.10 hereof, so long as no Event of Default has occurred and
is continuing or would result therefrom, the Lender shall cause the Custodian to
release to the Borrower the Asset Files relating to the Assets pledged in
connection with such Advance and to execute, acknowledge and deliver to the
Borrower any and all documents, instruments and agreements necessary to release
all security interests in the Assets securing such Advance in accordance with
the Custodial Agreement.
(b) In the event that the Collateral Value assigned to any pledged Asset
shall be reduced to zero for the purposes of calculating the Borrowing Base,
the Lender shall, upon the Borrower's request, cause the Custodian to release
to the Borrower the Asset File relating to such Asset and to execute,
acknowledge and deliver to the Borrower any and all documents, instruments and
agreements necessary to release all security interests in such Asset, so long
as, at the time of such release and after giving effect thereto, no Default or
Event of Default will have occurred and be continuing.
SECTION 5 Conditions Precedent.
5.01 Initial Advance. The agreement of the Lender to make the initial
Advance requested to be made by it hereunder is subject to the satisfaction,
immediately prior to or concurrently with the making of such Advance, of the
following conditions precedent:
(a) Loan Agreement. The Lender shall have received this Loan Agreement,
executed and delivered by a duly authorized officer of the Borrower.
(b) Notes. The Lender shall have received the Notes, conforming to the
requirements hereof and executed by a duly authorized officer of the Borrower.
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(c) Custodial Agreement. The Lender shall have received the Custodial
Agreement, conforming to the requirements hereof and executed by a duly
authorized officer of the Borrower and the Custodian.
(d) Servicing Agreement(s). The Lender shall have received any Servicing
Agreement(s), each certified as a true, correct and complete copy of the
original, with a letter of the applicable Servicer attached thereto in which
such Servicer consents to terminate such Servicing Agreement upon notification
by the Lender of the occurrence of an Event of Default.
(e) Filings, Registrations, Recordings. Any documents (including, without
limitation, financing statements) required to be filed, registered or
recorded in order to create, in favor of the Lender, a perfected,
first-priority security interest in the Collateral, subject to no Liens
other than those created hereunder, shall have been properly prepared and
executed for filing (including the applicable county(ies) if the Lender
determines such filings are necessary in its sole discretion), registration
or recording in each office in each jurisdiction in which such filings,
registrations and recordations are required to perfect such first-priority
security interest.
(f) Closing Certificates. The Lender shall have received a certificate of
the Secretary or Assistant Secretary of the Borrower, dated as of the date
hereof, and certifying (A) that attached thereto is a true, complete and
correct copy of (i) the articles of incorporation of the Borrower, (ii) the
by-laws of the Borrower, and (iii) resolutions duly adopted by the Board of
Directors of the Borrower authorizing the execution, delivery and performance
of this Loan Agreement, the Notes and the other Loan Documents to which it is
a party, and the borrowings contemplated hereunder, and that such resolutions
have not been amended, modified, revoked or rescinded, and (B) as to the
incumbency and specimen signature of each officer executing any Loan
Documents on behalf of the Borrower and authorized to execute any Notice of
Borrowing, and such certificate and the resolutions attached thereto shall be
in form and substance reasonably satisfactory to the Lender.
(g) Good Standing Certificates. The Lender shall have received copies of
certificates evidencing the good standing of the Borrower, dated as of a
recent date, from the Secretary of State (or other appropriate authority) of
the jurisdiction under which the Borrower is organized and of each other
jurisdiction where the ownership, lease or operation of property, or the
conduct of business, requires the Borrower to qualify as a foreign
corporation, except where the failure to qualify would not have a Material
Adverse Effect.
(h) Legal Opinions. The Lender shall have received the executed legal
opinions of Paul, Hastings, Janofsky & Walker, LLP, legal counsel of the
Borrower, and in-house counsel to the Borrower, together addressing the
matters set forth in the form attached hereto as Exhibit C, dated the initial
Funding Date and otherwise in form and substance acceptable to the Lender and
covering such other matters incident to the transactions contemplated by this
Loan Agreement as the Lender shall reasonably request.
(i) Fees and Expenses. The Lender shall have received all fees and
expenses required to be paid by the Borrower on or prior to the initial
Funding Date pursuant to Section 11.03(b) and a separate fee letter relating
to attorney's fees (the "Fee Letter").
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(j) Financial Statements. The Lender shall have received the financial
statements referenced in Section 6.01(a).
(k) Underwriting Guidelines. The Lender shall have received a certified
copy of the Borrower's current Underwriting Guidelines for Mortgage Loans,
which shall be reasonably satisfactory to the Lender.
(l) Consents, Licenses, Approvals, etc. The Lender shall have received
copies certified by the Borrower of all consents, licenses and approvals, if
any, required in connection with the execution, delivery and performance by
the Borrower of, and the validity and enforceability of, the Loan Documents,
which consents, licenses and approvals shall be in full force and effect.
(m) Insurance. The Lender shall have received evidence in form and
substance satisfactory to the Lender showing compliance by the Borrower as of
such initial Funding Date with Section 7.03 hereof.
(n) Termination Letter. The Lender shall have received a letter from the
Borrower consenting to the termination of the Servicer as servicer of the
Assets in the event that an Event of Default shall have occurred and be
continuing.
(o) IPO. The IPO shall have occurred, and the Borrower shall have received
net proceeds therefrom of not less than $100 million.
(p) Other Documents. The Lender shall have received such other documents
as the Lender or its counsel may reasonably request.
5.02 Initial and Subsequent Advances. The making of each Advance to the
Borrower (including the initial Advance) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Advance:
(a) No Default. No Default or Event of Default shall have occurred and be
continuing.
(b) Representations and Warranties. Each representation and warranty made
by the Borrower in Section 6 hereof and elsewhere in each of the Loan
Documents, shall be true and correct in all material respects on and as of
the date of the making of such Advance (in the case of the representations
and warranties in Schedules 1 through 5, solely with respect to the pledged
Assets included in the Borrowing Base on such date) with the same force and
effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of
such specific date).
(c) Borrowing Base. The aggregate outstanding principal amount of the
Advances shall not exceed the Borrowing Base.
(d) Borrowing Base Certificate. The Lender shall have received a Borrowing
Base Certificate, substantially in the form of Exhibit G, reflecting the
assets to be pledged in connection with the requested Advance.
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(e) Notice of Borrowing and Pledge. The Lender shall have received a
Notice of Borrowing and Pledge and Asset Schedule in accordance with
Section 2.05(a) hereof, appropriately completed.
(f) Trust Receipt; Asset Schedule and Exception Report. The
Custodian shall have received all Asset Files relating to the pledged
Assets (other than in connection with Wet-Ink Advances) and the Lender
shall have received from the Custodian a Trust Receipt in respect of all
Assets to be pledged hereunder (other than in connection with Wet-Ink
Advances) on such Business Day and a corresponding Asset Schedule and
Exception Report, with Exceptions (as defined in the Custodial Agreement)
in respect of such Asset acceptable to the Lender in its sole discretion,
in each case dated such Business Day and duly completed.
(g) Interest Rate Protection Agreements. The Lender shall have
received fully-executed copies of any Interest Rate Protection
Agreements, if any, each certified as a true, correct and complete copy
of the original.
(h) [Intentionally left blank.].
(i) Additional Documents. The Lender shall have received, in the case
of Mezzanine Loans, certificates and stock powers endorsed in blank
relating to the pledged equity interests (to the extent such equity
interests are certificated) or, in the case of Second Mortgage Loans,
assignments of second Mortgages on real property securing such Second
Mortgage Loans, in the case of REO Property, an REO Property Mortgage, and
with regard to all Assets, such title insurance, surveys, appraisals
satisfying the requirements of FIRREA and, to the extent available, other
information, documents, agreement or instruments as the Lender deems
reasonably advisable with respect to Assets to be pledged hereunder on
such Business Day, each in form and substance reasonably satisfactory to
the Lender.
(j) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Loan Agreement and the other Loan
Documents shall be reasonably satisfactory in form and substance to the
Lender, and the Lender shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
(k) No Material Adverse Effect. There shall not have occurred one or
more events that, in the reasonable judgment of the Lender, constitutes
or should reasonably be expected to constitute a Material Adverse Effect.
(l) Due Diligence Review. Subject to the Lender's right to perform
one or more Due Diligence Reviews pursuant to Section 11.16 hereof, the
Lender shall have completed its due diligence review of the Asset
Documents for each Advance and such other documents, records, agreements,
instruments, mortgaged properties or information relating to such
Advances as the Lender in its sole discretion exercised in good faith
deems appropriate to review and such review shall be satisfactory to the
Lender in its sole discretion exercised in good faith.
(m) True Sale Opinion. With respect to any Mortgage Loan or
Mezzanine Loan that was originated by an originator, other than the
Borrower, the Lender may, in its sole
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discretion, require the Borrower to provide evidence sufficient to satisfy
the Lender that such Mortgage Loan or Mezzanine Loan was acquired in a
legal sale, including without limitation, an opinion, in form and
substance and from an attorney, in both cases, acceptable to the Lender in
its sole discretion, exercised in good faith, that such Mortgage Loan or
Mezzanine Loan was acquired in a legal sale.
SECTION 6 Representations and Warranties. The Borrower represents and
warrants to the Lender as follows:
6.01 Financial Condition.
(a) The consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the IPO Date, reported by the Borrower in public disclosure
documents made in connection with the IPO, a copy of which shall have been
furnished to the Lender, on the IPO Date is complete and correct and presents
fairly the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at the IPO Date.
(b) Such financial statement, including the related schedules and notes
thereto, has been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein).
(c) Neither the Borrower nor any of its consolidated Subsidiaries had, at
the IPO Date, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign
currency swap or exchange transaction, or other financial derivative, which is
not reflected in the foregoing statements or in the notes thereto.
6.02 No Change. From and after the IPO Date, there has been no development
or event nor any prospective development or event which has had or should
reasonably be expected to have a Material Adverse Effect.
6.03 Corporate Existence; Compliance with Law. The Borrower (a) is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, (b) has the corporate power and
authority, and has all governmental licenses, authorizations, consents and
approvals necessary, to own and operate its property, to lease the property it
operates as lessee and to carry on its business as now being or as proposed to
be conducted, (c) is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify should be reasonably expected (either individually or in the aggregate)
to have a Material Adverse Effect, and (d) is in compliance in all material
respects with all Requirements of Law and obligations under the Governing
Documents.
6.04 Corporate Power; Authorization; Enforceable Obligations.
(a) The Borrower has the corporate power and authority, and the legal
right, to make, deliver and perform this Loan Agreement, the Notes, and each
other Loan Document, and to borrow and to grant Liens hereunder, and has taken
all necessary corporate action to authorize the borrowings and the granting of
Liens on the terms and conditions of this Loan Agreement, the Notes,
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and each other Loan Document to which it is a party, and the execution, delivery
and performance of this Loan Agreement, the Notes, and each other Loan Document.
(b) No consent or authorization of, approval by, notice to, filing with or
other act by or in respect of, any Governmental Authority or any other Person
is required or necessary in connection with the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of this Loan
Agreement or the Notes or any other Loan Document, except (i) for filings and
recordings in respect of the Liens created pursuant to this Loan Agreement, and
(ii) as previously obtained and currently in full force and effect.
(c) Each Loan Document has been duly and validly executed and delivered by
the Borrower and constitutes, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.05 No Legal Bar. The execution, delivery and performance of this Loan
Agreement and the Notes, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law, any provision of the Governing
Documents or Contractual Obligation of the Borrower or of any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien (other than the Liens created hereunder) on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
6.06 No Material Litigation. There are no actions, suits, arbitrations,
investigations or proceedings of or before any arbitrator or Governmental
Authority pending or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries or against any of its or their respective
properties or revenues of which should reasonably be expected to have a
Material Adverse Effect.
6.07 No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which should reasonably be expected to have a Material Adverse Effect,
non-recourse debt of a Subsidiary that is a special purpose entity, which
non-recourse debt is not guaranteed by the Borrower (other than with respect to
environmental indemnities and normal carve-outs from non-recourse status such
as fraud, misappropriation of funds, and the like). No Default or Event of
Default has occurred and is continuing.
6.08 Collateral; Collateral Security.
(a) The Borrower has not assigned, pledged, or otherwise conveyed or
encumbered any of the Collateral to any Person other than the Lender, and
immediately prior to the pledge of such Collateral, the Borrower was the sole
owner of the Collateral and had good and marketable title thereto, free and
clear of all Liens, in each case except for Liens that have been released or
are to be released simultaneously with the Liens granted in favor of the Lender
hereunder and except for Permitted Property Liens.
(b) The provisions of this Loan Agreement are effective to create in favor
of the Lender a valid security interest in all right, title and interest of the
Borrower in, to and under the
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Collateral, other than REO Property, and each REO Property Mortgage is effective
to create in favor of the Lender a valid mortgage Lien on all right, title and
interest of the Borrower in, to and under the REO Property subject thereto.
(c) Upon (i) receipt by the Custodian of each Mortgage Note and each
assignment of a Mortgage Loan, endorsed or assigned as appropriate, (ii) the
filing (to the extent such interest can be perfected by filing under the
Uniform Commercial Code) of financing statements on Form UCC-1 naming the
Lender as "Secured Party" and the Borrower as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on Schedule 6
attached hereto, (iii) the recording of each REO Property Mortgage in the
recording office and jurisdiction from time to time represented by the Borrower
as the recording office and jurisdiction where such recording is to be made,
(iv) the taking of possession of the certificates representing any pledged
equity interests under a Mezzanine Loan and any certificates representing any
Security, and (v) the taking of such other actions with respect to the Assets
as the Borrower shall have notified the Lender to be necessary for perfection
of the security interests and Liens granted hereunder (including without
limitation, the taking of such actions as may be required to obtain and maintain
"control" (as defined in Article 8 of the Georgia Uniform Commercial Code) over
any Collateral constituting uncertificated securities), the security interests
and Liens granted hereunder and in such REO Property Mortgages in the Collateral
will constitute fully perfected first-priority security interests under the
Uniform Commercial Code (to the extent security interests in such Collateral may
be perfected under the UCC by filing) or applicable state real property law, as
the case may be, in all right, title and interest of the Borrower in, to and
under such Collateral.
6.09 Chief Executive Office. The Borrower's chief executive office on the
Effective Date is located at 3424 Peachtree Road, N.E., Atlanta, Georgia 30326.
6.10 Location of Books and Records. The location where the Borrower keeps
its books and records, including all computer tapes and records relating to the
Collateral is its chief executive office.
6.11 No Burdensome Restrictions. No Requirement of Law or Contractual
Obligation of the Borrower or any of its Subsidiaries has a Material Adverse
Effect.
6.12 Taxes. Each of the Borrower and its Subsidiaries has filed all
Federal and state income tax returns and all other material tax returns that
are required to be filed by them and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by any of them, except for any
such taxes or assessments, if any, that are being appropriately contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves in conformity with GAAP have been provided. No tax Lien
has been filed, and, to the knowledge of the Borrower, no claim is being
asserted, with respect to any such tax or assessment.
6.13 Margin Regulations. No part of the proceeds of any Advances will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under, or for any other purpose which
violates or would be inconsistent with the provisions of, Regulation G, T, U or
X.
6.14 Investment Company Act; Other Regulations. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or state statute or
regulation which limits its ability to incur Indebtedness.
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6.15 Subsidiaries. All of the Subsidiaries of the Borrower at the date of
this Loan Agreement are listed on Schedule 7 to this Loan Agreement.
6.16 Assets. At the time pledged, each Asset initially included in the
Borrowing Base was an Eligible Asset.
6.17 No Adverse Selection. The Borrower has not selected Assets to be
pledged to the Lender through a process that is adverse to the Lender or which
results in the Lender receiving pledged Assets that are of lesser quality,
determined in the sole discretion of the Lender exercised in good faith, than
Assets substantially similar to the Assets pledged to other lenders pursuant to
any other facility to which the Borrower may be a party.
6.18 Borrower Solvent; Fraudulent Conveyance. As of the date hereof and
immediately after giving effect to each Advance, the fair value of the assets
of the Borrower is and shall be greater than the fair value of the liabilities
(including, without limitation, contingent liabilities if and to the extent
required to be recorded as a liability on the financial statements of the
Borrower in accordance with GAAP) of the Borrower and the Borrower is and will
be solvent, is and will be able to pay its debts as they mature and does not
and will not have an unreasonably small capital to engage in the business in
which it is engaged and proposes to engage. Borrower does not intend to incur,
or believe that it has incurred, debts beyond its ability to pay such debts as
they mature. Borrower is not contemplating the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in respect of
Borrower or any of its assets. Borrower is not transferring any Assets with any
intent to hinder, delay or defraud any of its creditors.
6.19 ERISA. Each Plan to which the Borrower or its Subsidiaries make
direct contributions, and, to the knowledge of the Borrower, each other Plan
and each Multiemployer Plan, is in compliance in all material respects with,
and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other Federal or state law.
6.20 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules (excluding projections, which have been
proposed in good faith) furnished in writing by the Borrower (or ERE Yarmouth,
Inc.) to the Lender in connection with the negotiation, preparation or delivery
of this Loan Agreement and the other Loan Documents or included herein or
therein or delivered pursuant hereto or thereto, do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein not misleading. All written information
furnished after the date hereof by the Borrower (or ERE Yarmouth, Inc.) to the
Lender in connection with this Loan Agreement and the other Loan Documents and
the transactions contemplated hereby and thereby will be true, correct and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to a Responsible Officer of the Borrower
that, after due inquiry, should reasonably be expected to have a Material
Adverse Effect that has not been disclosed herein, in the other Loan Documents
or in a report, financial statement, exhibit, schedule, disclosure letter or
other writing furnished to the Lender for use in connection with the
transactions contemplated hereby or thereby.
6.21 True Sales. Any Mortgage Loan or Mezzanine Loan originated by an
originator other than the Borrower has been conveyed to the Borrower pursuant
to a true and legal sale
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and, to the extent required by the Lender pursuant to Section 5(l), is covered
by an opinion of counsel to that effect in form and substance reasonably
acceptable to the Lender.
6.22 Tangible Net Worth.
(a) On the Effective Date, the Tangible Net Worth of the Borrower is not
less than $1,000.
(b) From and after the date of the initial Advance, the Tangible Net Worth
of the Borrower shall be not less than $100,000,000.
SECTION 7 Covenants of the Borrower. The Borrower covenants and agrees
with the Lender that, so long as any Advance is outstanding and until the later
to occur of the payment in full of all Secured Obligations and the termination
of this Loan Agreement:
7.01 Financial Statements. The Borrower shall deliver to the Lender:
(a) as soon as available and in any event within fifty (50) days after the
end of each of the first three quarterly fiscal periods of each fiscal year of
the Borrower, the consolidated and consolidating balance sheets of the Borrower
and its consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated and consolidating statements of income and of cash flows
for the Borrower and its consolidated Subsidiaries for such period and the
portion of the fiscal year through the end of such period, if applicable,
setting forth in each case in comparative form the figures for the previous
year, accompanied by a certificate of a Responsible Officer of the Borrower,
which certificate shall state that said consolidated financial statements
fairly present the consolidated and consolidating financial condition and
results of operations of the Borrower and its Subsidiaries in accordance with
GAAP, consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within one hundred (100) days
after the end of each fiscal year of the Borrower, the audited consolidated and
consolidating balance sheets of the Borrower and its consolidated Subsidiaries
as at the end of such fiscal year and the related consolidated and
consolidating statements of income and retained earnings and of cash flows for
the Borrower and its consolidated Subsidiaries for such year, if applicable,
setting forth in each case in comparative form the figures for the previous
year, accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall not be
qualified as to scope of audit or going concern and shall state that said
consolidated and consolidating financial statements fairly present the
consolidated and consolidating financial condition and results of operations of
the Borrower and its consolidated Subsidiaries as at the end of, and for, such
fiscal year in accordance with GAAP; and
(c) promptly and in any event within five (5) Business Days following
request therefor by the Lender directed to the persons to whom notice is to be
given pursuant to Section 11.02, from time to time such other information
regarding the financial condition, operations, or business of the Borrower and
its Subsidiaries as the Lender may reasonably request.
7.02 Existence, Etc. The Borrower will:
(a) preserve and maintain its legal existence as a real estate
investment trust;
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(b) preserve and maintain all of its material rights, privileges,
licenses and franchises;
(c) comply with the requirements of all applicable Requirements of
Law (including, without limitation, the Truth in Lending Act, the Real
Estate Settlement Procedures Act and all environmental laws) if failure
to comply with such requirements should reasonably be expected (either
individually or in the aggregate) to have a Material Adverse Effect; and
(d) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied.
7.03 Maintenance of Property; Insurance. The Borrower shall keep all
property useful and necessary in its business in good working order and
condition. The Borrower shall maintain errors and omissions insurance and/or
mortgage impairment insurance and blanket bond coverage in such amounts as are
in effect on the Effective Date (as disclosed to Lender in writing) and shall
not reduce such coverage without the written consent of the Lender, and shall
also maintain such other insurance with financially sound and reputable
insurance companies, and with respect to property and risks of a character
usually maintained by entities engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such entities.
7.04 Notices.
(a) The Borrower shall give notice to the Lender promptly:
(i) upon the Borrower becoming aware of and in any event within two
(2) Business Days after, the occurrence of any Default or Event of
Default or any Event of Default or Default under any other material
agreement of the Borrower;
(ii) upon, and in any event within three (3) Business Days after,
service of process on the Borrower or any of its Subsidiaries, or any
agent thereof for service of process, in respect of any legal or
arbitrable proceedings affecting the Borrower or any of its Subsidiaries
(a) that questions or challenges the validity or enforceability of any of
the Loan Documents or (b) in which the amount in controversy exceeds
$1,000,000;
(iii) upon the Borrower becoming aware of any default beyond
applicable grace periods under the Asset Documents related to any
Collateral which should reasonably be expected to materially and
adversely affect the Collateral Value of such Asset, any Material Adverse
Effect and any other event or change in circumstances which should
reasonably be expected to have a Material Adverse Effect;
(iv) upon the Borrower becoming aware that the Mortgaged Property in
respect of any Mortgage Loan has been damaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, or
otherwise damaged, in any case so as to materially and adversely affect
the Collateral Value of such Mortgage Loan;
(v) upon the Borrower's receipt of any Payoff Proceeds of any
Mortgage Loan or Mezzanine Loan, and in any event within one (1) Business
Day after receipt thereof, unless a request for release with respect to
such Mortgage Loan or Mezzanine Loan has been delivered to the Custodian
under the Custodial Agreement;
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(vi) of entry of a judgment or decree in an amount in excess of
$1,000,000.
Each notice pursuant to this Section 7.04(a) (other than 7.04(a)(v)) shall be
accompanied by a statement of a Responsible Officer of the Borrower setting
forth details of the occurrence referred to therein and stating what action the
Borrower has taken or proposes to take with respect thereto.
7.05 Other Information. The Borrower shall furnish to the Lender, as
soon as available, copies of any and all proxy statements, financial statements
and reports which the Borrower sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements filed
with the Securities and Exchange Commission, any Governmental Authority which
supervises the issuance of securities by the Borrower.
7.06 Further Identification of Collateral. The Borrower will furnish
to the Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable detail, to be
provided to the Lender promptly and in any event within five (5) Business Days
following request therefor by the Lender directed to the persons to whom notice
is to be given pursuant to Section 11.02.
7.07 Asset Determined to be Defective. Upon discovery by the Borrower
or the Lender that a pledged Asset no longer meets the eligibility criteria
listed on Schedules 1 through 4 hereto applicable to such Asset, the party
discovering such breach shall promptly give notice of such discovery to the
other.
7.08 Reports.
(a) The Borrower shall deliver or cause to be delivered to the
Lender, no later than the last day of each month, a servicing report and Asset
Tape in a computer-readable format reasonably acceptable to the Lender, listing
and setting forth such information in respect of, all Assets as the Lender may
reasonably request, including, without limitation, the outstanding principal
balance and delinquency status of each Mortgage Loan and Mezzanine Loan.
(b) Promptly and in any event within five (5) Business Days following
request therefor by the Lender directed to the persons to whom notice is to be
given pursuant to Section 11.02, the Borrower shall make available at the
Borrower's offices to the Lender and/or permit the Lender to inspect any
property, books, valuations, records, audits or other information as the Lender
may reasonably request.
7.09 Borrowing Base Certificates. . The Borrower shall provide to the
Lender a Borrowing Base Certificate (i) at the time of delivery of the
Borrower's quarterly financial reports and (ii) at the time of delivery of any
Notice of Borrowing and Pledge.
7.10 Financial Condition Covenants.
(a) Maintenance of Tangible Net Worth. From and after the Initial
Funding Date, the Borrower shall not permit Tangible Net Worth at any time to be
less than $100,000,000.
(b) Maintenance of Ratio of Indebtedness to Tangible Net Worth. The
Borrower shall not permit the ratio of recourse Indebtedness of the Borrower and
its consolidated Subsidiaries to Tangible Net Worth at any time to be greater
than 5.0 to 1.0.
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(c) Maintenance of Interest Coverage Ratio. The Borrower shall not
permit the Interest Coverage Ratio of the Borrower for any fiscal quarter to be
less than 1.45 to 1.00; provided that there shall be excluded from the
determination of EBITDA and Interest Expense used in the calculation of the
Interest Coverage Ratio the assets and liabilities and income and losses of each
consolidated subsidiary of the Borrower that is a special purpose entity created
in connection with the issuance of a collateralized mortgage obligation (except,
in the case of the income of such special purpose entity, to the extent of an
actual distribution thereof in cash to the Borrower).
7.11 Borrowing Base Deficiency. If at any time there exists a
Borrowing Base Deficiency, the Borrower shall cure same in accordance with
Section 2.09 hereof.
7.12 Prohibition of Fundamental Changes. Without the Lender's prior
written consent, neither the Borrower nor any of its Subsidiaries shall enter
into any transaction of merger or consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell all or substantially all of its assets, without the prior
written consent of the Lender.
7.13 Limitation on Liens on Collateral. The Borrower will defend the
Collateral against, and will take such other action as is necessary to remove,
by payment, bonding or otherwise, within twenty (20) days of the filing, of any
Lien, security interest or claim on or to the Collateral, other than the
security interests created under this Loan Agreement and Permitted Property
Liens, and the Borrower will defend the right, title and interest of the Lender
in and to any of the Collateral against the claims and demands of all Persons
whomsoever, other than Persons claiming through the Lender; provided, that if
such Lien, security interest or claim relates to all or a substantial portion of
the Collateral, the Borrower shall remove such encumbrance immediately.
7.14 Limitation on Sale or Other Disposition of Collateral. The
Borrower will not lease, transfer, assign, sell or otherwise dispose of any
Collateral without the prior written consent of the Lender, unless after giving
effect to such transaction, any Advances then outstanding do not exceed the
Borrowing Base.
7.15 Limitation on Transactions with Affiliates. Neither the Borrower
nor any of its Subsidiaries shall enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) not otherwise
prohibited or otherwise permitted under this Loan Agreement, (b) in the ordinary
course of the Borrower's business and (c) upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person which is not an
Affiliate.
7.16 Underwriting Guidelines. Without prior written consent of the
Lender, such consent not to be unreasonably withheld or delayed, the Borrower
shall not amend or otherwise modify its Underwriting Guidelines in any material
respect.
7.17 Limitations on Modifications, Waivers and Extensions of Asset
Documents. Except as otherwise expressly permitted under this Loan Agreement or
the Custodial Agreement, the Borrower will not, nor will it permit or allow
others to, amend, modify, terminate or waive any provision of any Asset Document
to which the Borrower is a party in any manner which should reasonably be
expected to materially and adversely affect the value of such Asset as
Collateral unless the Collateral Value of such Asset has been reduced to zero.
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7.18 Servicing. The Borrower shall not permit any Person other than the
Servicer to service Mortgage Loans (the Servicer to service Mortgage Loans
pursuant to the Servicing Agreement) without the prior written consent of the
Lender.
7.19 Limitation on Distributions. After the occurrence and during the
continuation of any Event of Default under Sections 8(a) or (b), the Borrower
shall not make any payment on account of, or set apart assets for, a sinking or
other analogous fund for the purchase, redemption, defeasance, retirement or
other acquisition of any equity or partnership interest of the Borrower,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower; provided, however, that the foregoing shall not
limit or prohibit the Borrower's payment of dividends or distributions as
required by the Code in connection with the Borrower's status as a REIT.
7.20 Use of Proceeds. The Borrower will use the proceeds of the Advances
solely to originate, acquire, fund, manage and service Assets.
7.21 Selection of Collateral. (a) The Borrower shall not select Assets to
be pledged to the Lender through a process that is adverse to the Lender or
which results in the Lender receiving pledged Assets that are of lesser
quality, determined in the sole discretion of the Lender exercised in good
faith, than Assets substantially similar to the Assets pledged to other
warehouse lenders pursuant to any other facility to which the Borrower may be a
party.
(b) Until such time as an aggregate of $150,000,000 of Advances relating
to First Mortgage Loans have been made, no less than 40% of the First Mortgage
Loans financed by the Borrower shall be pledged to the Lender hereunder.
SECTION 8 Events of Default. Each of the following events shall constitute
an event of default (an "Event of Default") hereunder:
(a) Borrower Default in the Payment of Principal of any Advance. The
Borrower shall default in the payment of any principal of any Advance when due
(whether at stated maturity, upon acceleration or at mandatory or optional
prepayment); or
(b) Borrower Default in the Payment of Interest on any Advance. The
Borrower shall default in the payment of any interest on any Advance when due
(whether at stated maturity, upon acceleration or at mandatory or optional
prepayment) and such default shall have continued unremedied for three (3)
Business Days; or
(c) Borrower Default in the Payment of Other Amount. the Borrower shall
default in the payment of any other amount payable by it hereunder or under any
other Loan Document, and such default shall have continued unremedied for three
(3) Business Days after notice from the Lender; or
(d) Failure of Representation or Warranty. Any representation, warranty or
certification made or deemed made by the Borrower herein or by the Borrower in
any other Loan Document or any certificate furnished to the Lender by the
Borrower pursuant to the provisions thereof, shall prove to have been false or
misleading in any material respect as of the time made or furnished; or
(e) Default of Covenant. The Borrower shall:
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(i) fail to comply with the requirements of Section 7 hereof (other
than Sections 7.01, 7.02(b), 7.02(d), 7.03, 7.05, 7.06, 7.07, 7.08 or
7.09),
(ii) fail to comply with the requirements of Sections 7.01, 7.02(b),
7.02(d), 7.03, 7.05, 7.06, 7.07, 7.08 or 7.09 and such default shall
continue unremedied for a period of five (5) Business Days, or
(iii) fail to observe or perform any other covenant, condition or
agreement contained in this Loan Agreement or any other Loan Document and
such failure to observe or perform shall continue unremedied for a period
of seven (7) Business Days; or
(f) Cross Default. The Borrower or any of its Subsidiaries shall:
(i) default in any payment of principal of or interest on any
Indebtedness (other than the Advances or non-recourse Indebtedness) or in
the payment of any Guarantee Obligation, beyond the period of grace (not
to exceed 30 days), if any, provided in the instrument or agreement under
which such Indebtedness or Guarantee Obligation was created, if the
aggregate amount of the Indebtedness and/or Guarantee Obligations in
respect of which such default or defaults shall have occurred is
$1,000,000 or more; or
(ii) default in the observance or performance of any other agreement
or condition relating to any Indebtedness (other than the Advances or
non-recourse Indebtedness) or Guarantee Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, in each
case beyond the period of grace (not to exceed 30 days), if any, provided
in the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created, if the aggregate amount of the Indebtedness
and/or Guarantee Obligation is $1,000,000 or more; or
(iii) a default, after notice and beyond the expiration of
applicable grace periods, under any other Loan Document between Borrower,
on the one hand, and Lender on the other hand, which has not been waived
by the Lender,
the effect of which default or other event or condition is to cause, or give the
holder or holders of such Indebtedness or the beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) the immediate right to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable; or
(g) Unsatisfied Judgment. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of $1,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(h) Inability to Pay Debts. The Borrower shall admit in writing its
inability to pay its debts as such debts become due; or
(i) Voluntary Bankruptcy Event. The Borrower or any of its Subsidiaries
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner or liquidator of itself
or of all or a substantial part of its property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code,
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(iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce
in writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or (vi) take any corporate or other action for the purpose of
effecting any of the foregoing; or
(j) Involuntary Bankruptcy Event. A proceeding or case shall be commenced,
without the application or consent of the Borrower or any of its Subsidiaries,
in any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of the Borrower or any such
Subsidiary or of all or any substantial part of its property, or (iii) similar
relief in respect of the Borrower or any such Subsidiary under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Borrower or any such Subsidiary shall
be entered in an involuntary case under the Bankruptcy Code; or
(k) Termination of Loan Documents. The Custodial Agreement, or any other
Loan Document, shall for whatever reason (other than by agreement of the
parties thereto) be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by the Borrower or any of its
Affiliates; or
(l) ERISA Default. (i) any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of
the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Lenders, likely
to result in the termination of such Plan for purposes of Title IV of ERISA,
(iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Lenders is likely to, incur any liability in connection with a
withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect; or
(m) Material Adverse Effect. Any other event shall occur which, in the
sole good faith discretion of the Lender, should reasonably be expected to have
a Material Adverse Effect; or
(n) Change of Advisor. ERE Yarmouth, Inc., or its Affiliate ceases to act
as REIT advisor to the Borrower pursuant to the Investment Advisory Agreement,
or the Investment Advisory Agreement is materially amended, in each case
without the prior written consent of the Lender, such consent not to be
unreasonably withheld or delayed; or
(o) Pre-Existing Condition. The discovery by the Lender during its
continuing due diligence of the Borrower of a condition or event which existed
at or prior to the execution hereof and which
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the Lender, in its sole reasonable discretion, determines could reasonably be
expected to result in a Material Adverse Effect; or
(p) Other Liens. The Borrower shall grant, or suffer to exist, any Lien on
any Collateral beyond the period specified for discharge of such Liens pursuant
to Section 7.13, except the Liens contemplated hereby and Permitted Property
Liens; or the Lender shall cease to have a valid, fully perfected and
enforceable first priority security interest in the Collateral; or
(q) Failure to Answer. The Lender shall reasonably request, specifying the
reasons for such request, information, and/or written responses to such
requests, regarding the financial well-being of the Borrower and such
information and/or responses shall not have been provided within five (5)
Business Days of such request or such longer period of time as may be
reasonably necessary for the Borrower to provide such information (as
determined by the Lender in good faith).
SECTION 9 Remedies Upon Default.
(a) Upon the occurrence and during the continuance of one or more Events
of Default other than those referred to in Sections 8(i) or (j), and in
addition to the remedies provided in Section 4.07 hereof and otherwise provided
in this Loan Agreement, the Lender may immediately declare the principal amount
of the Advances then outstanding under the Notes to be immediately due and
payable, together with all interest thereon and fees and expenses accruing
under this Loan Agreement. Upon the occurrence of an Event of Default referred
to in Sections 8(i) or (j), and in addition to the remedies provided in Section
4.07 hereof and otherwise provided in this Loan Agreement, such amounts shall
immediately and automatically become due and payable without any further action
by any Person. Upon such declaration or such automatic acceleration, the
balance then outstanding on the Notes shall become immediately due and payable,
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Borrower.
(b) Upon the occurrence and the continuance of one or more Events of
Default, and in addition to the remedies provided in Section 4.07 hereof and
otherwise provided in this Loan Agreement, the Lender shall have the right to
obtain physical possession of the Servicing Records and all other files of the
Borrower relating to the Collateral and all documents relating to the
Collateral which are then or may thereafter come in to the possession of the
Borrower or any third party acting for the Borrower and the Borrower shall
deliver to the Lender such assignments as the Lender shall request. The
Borrower shall be responsible for paying any fees of any Servicer resulting
from the termination of a Servicer due to an Event of Default. The Lender shall
have the right to demand transfer of all servicing rights and obligations to a
new servicer acceptable to the Lender (such new servicer shall receive a
minimum servicing fee of .50% of the outstanding loan amount or any other
amounts necessary to ensure the ability of the Lender to find an appropriate
successor servicer). The Lender shall be entitled to specific performance of
all agreements of the Borrower contained in this Loan Agreement.
SECTION 10 No Duty of Lender. The powers conferred on the Lender hereunder
are solely to protect the Lender's interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Lender shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrower for any act or failure
to act hereunder, except for its or their own gross negligence or willful
misconduct.
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SECTION 11 Miscellaneous.
11.01 Waiver. No failure on the part of either party to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
11.02 Notices. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telecopy
with confirmation of "good" transmission) delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or thereof); or, as to any party, at such other address as shall be
designated by such party in a written notice to each other party. Except as
otherwise provided in this Loan Agreement and except for notices given under
Section 2 (which shall be effective only on receipt), all such communications
shall be deemed to have been duly given when transmitted by telecopy or
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
11.03 Indemnification and Expenses.
(a) The Borrower agrees to hold the Lender and each of its officers,
directors, agents and employees (each, an "Indemnified Party") harmless from
and indemnify each Indemnified Party against all liabilities, losses, damages,
judgments, reasonable costs and expenses of any kind which may be imposed on,
incurred by or asserted against such Indemnified Party in any suit, action,
claim or proceeding relating to or arising out of this Loan Agreement, the
Notes, any other Loan Document or any transaction contemplated hereby or
thereby, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Loan Agreement, the Notes, any other Loan
Document or any transaction contemplated hereby or thereby, except, in each
case, to the extent arising from such Indemnified Party's gross negligence or
willful misconduct. In any suit, proceeding or action brought by the Lender in
connection with any Mortgage Loan for any sum owing thereunder, or to enforce
any provisions of any such Mortgage Loan, the Borrower will save, indemnify and
hold the Lender harmless from and against all expense, loss or damage suffered
by reason of any defense, set-off, counterclaim, recoupment or reduction or
liability whatsoever of the account debtor or obligor thereunder, arising out
of a breach by the Borrower of any obligation of the Borrower thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such account debtor or obligor or its successors from the
Borrower. The Borrower also agrees to reimburse the Lender as and when billed
by the Lender for all the Lender's reasonable out-of-pocket costs and expenses
incurred in connection with the enforcement or the preservation of the Lender's
rights under this Loan Agreement, the Notes, any other Loan Document or any
transaction contemplated hereby or thereby, including without limitation the
fees and disbursements of its counsel (including all fees and disbursements
incurred in any action or proceeding between the Borrower and an Indemnified
Party or between an Indemnified Party and any third party relating hereto). The
Borrower hereby acknowledges that, notwithstanding the fact that the Notes are
secured by the Collateral, the obligation of the Borrower under the Notes is a
recourse obligation of the Borrower.
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(b) The Borrower agrees to pay as and when billed by the Lender all of the
reasonable out-of-pocket costs and expenses incurred by the Lender in
connection with the negotiation, preparation and execution of, and any
amendment, supplement or modification to, this Loan Agreement, the Notes, any
other Loan Document or any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including without limitation (i) all the
reasonable fees, disbursements and expenses of counsel to the Lender, in
accordance with the Fee Letter (which shall govern the Borrower's liability
with respect to Lender's counsel fees and disbursements in connection with the
preparation, execution and delivery of the Loan Documents), (ii) all the due
diligence, inspection, testing and review costs and expenses incurred by the
Lender with respect to Collateral under this Loan Agreement, in accordance with
Section 2.15 hereof, (iii) fees relating to the filing of UCC financing
statements, and (iv) fees relating to UCC searches for the Borrower in
jurisdictions listed on Schedule 6.
11.04 Amendments. Except as otherwise expressly provided in this Loan
Agreement, any provision of this Loan Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrower and the Lender and any
provision of this Loan Agreement may be waived by the Lender.
11.05 Successors and Assigns. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Survival. The obligations of the Borrower under Section 11.03 hereof
shall survive the repayment of the Advances and the termination of this Loan
Agreement. In addition, each representation and warranty made or deemed to be
made by a request for a borrowing herein or pursuant hereto shall survive the
making of such representation and warranty, and the Lender shall not be deemed
to have waived, by reason of making any Advance, any Default that may arise
because any such representation or warranty shall have proved to be false or
misleading, notwithstanding that the Lender may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such Advance was made.
11.07 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Loan Agreement.
11.08 Counterparts. This Loan Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.
11.09 GOVERNING LAW; ETC. THIS LOAN AGREEMENT SHALL BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE (BUT WITH
REFERENCE TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY
ITS TERMS APPLIES TO THIS LOAN AGREEMENT), AND SHALL CONSTITUTE A SECURITY
AGREEMENT WITHIN THE MEANING OF THE UNIFORM COMMERCIAL CODE.
11.10 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
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(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF
WHICH THE LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
11.12 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Loan Agreement, the Notes and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and
the relationship between the Borrower and the Lender is solely that of
debtor and creditor; and
(c) no joint venture exists between the Lender and the Borrower.
11.13 Hypothecation and Pledge of Collateral. Subject to the rights
of Obligors under the Asset Documents and the rights of the Borrower hereunder
and in any other Loan Document, the Lender shall have free and unrestricted use
of all Collateral and nothing in this Loan Agreement shall preclude the Lender
from engaging in repurchase transactions with the Collateral or otherwise
pledging, repledging, transferring, hypothecating, or rehypothecating the
Collateral. Nothing
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contained in this Loan Agreement shall obligate the Lender to segregate any
Collateral delivered to the Lender by the Borrower.
11.14 Assignments.
(a) The Borrower may assign any of its rights or obligations hereunder or
under the Notes with the prior written consent of the Lender. The Lender may
assign or transfer to any bank or other financial institution that makes or
invests in loans or any Affiliate of the Lender all of its rights or
obligations under this Loan Agreement and the other Loan Documents with the
prior written consent of the Borrower, provided, that such consent shall not be
required in the case of an assignment by the Lender to an Affiliate or to a
successor entity resulting from a merger or any other fundamental transaction
or if an Event of Default has occurred and is continuing.
(b) The Lender may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Lender from time to time to
assignees (including prospective assignees).
(c) The Borrower agrees to cooperate with the Lender in connection with
any such assignment, to execute and deliver such replacement notes, and to
enter into such restatements of, and amendments, supplements and other
modifications to, this Loan Agreement and the other Loan Documents in order to
give effect to such assignment.
(d) Notwithstanding anything to the contrary contained herein, no
assignment by the Lender shall increase the amount of the Borrower's
obligations or expenses or reduce the rights of the Borrower hereunder.
11.15 Servicing.
(a) The Borrower covenants to maintain or cause the servicing of the
Assets to be maintained in conformity with accepted customary and prudent
servicing practices in the industry for the same type of assets as the Assets
and in a manner at least equal in quality to the servicing the Borrower
provides for Assets which it owns ("Accepted Servicing Practices"). In the
event that the preceding language is interpreted as constituting one or more
servicing contracts, each such servicing contract shall terminate automatically
upon the earlier of (i) an Event of Default, or (ii) the Termination Date.
(b) The Borrower agrees that the Lender is the collateral assignee of all
servicing records, including but not limited to any and all servicing
agreements, files, documents, records, data bases, computer tapes, copies of
computer tapes, proof of insurance coverage, insurance policies, appraisals,
other closing documentation, payment history records, and any other records
relating to or evidencing the servicing of Assets (the "Servicing Records"),
and (ii) the Borrower grants the Lender a security interest in all of the
Borrower's rights relating to the Assets and all Servicing Records to secure
the obligation of the Borrower or its designee to service in conformity with
this Section and any other obligation of the Borrower to the Lender. The
Borrower covenants to safeguard such Servicing Records and, during the
existence of an Event of Default, to deliver them promptly to the Lender or its
designee (including the Custodian) at the Lender's request.
(c) After the Funding Date, until the pledge of any Asset is relinquished
by the Custodian, the Borrower will have no right to materially modify or alter
the terms of such Asset
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Documents except with the prior written consent of the Lender in its
discretion, to be exercised in good faith, and the Borrower will have no
obligation or right to repossess such Asset or substitute another Asset, except
as provided in the Custodial Agreement; provided, that the Borrower may enter
into forbearance agreements or plans with Obligors consistent with its
collection activities as servicer of the Assets and in conformity with Accepted
Servicing Practices or take such other actions as are permitted under the
Servicing Agreement.
(d) The Borrower shall permit the Lender to inspect the Borrower's or its
Affiliate's servicing facilities, as the case may be, for the purpose of
satisfying the Lender that the Borrower or its Affiliate, as the case may be,
has the ability to service the Assets as provided in this Loan Agreement.
11.16 Periodic Due Diligence Review. The Borrower acknowledges that the
Lender has the right, if the Lender believes in good faith that Assets included
in the Borrowing Base as Eligible Assets are no longer Eligible Assets or have a
Collateral Value of zero, to perform one or more due diligence reviews with
respect to the Assets, for purposes of verifying eligibility and compliance with
the representations, warranties and specifications made hereunder, and the
Borrower agrees that upon reasonable (but no less than one (1) Business Day's)
prior notice to the Borrower (which prior notice shall not be required after the
occurrence and during the continuation of a Default), the Lender or its
authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of, the Asset Files and any and
all documents, records, agreements, instruments or information relating to such
Assets in the possession or under the control of the Borrower and/or the
Custodian at their respective normal locations. The Borrower also shall make
available to the Lender a knowledgeable financial or accounting officer for the
purpose of answering questions respecting the Asset Files and the Assets. In
those circumstances, the Lender, at its option, has the right to conduct a
partial or complete due diligence review on some or all of the Assets, including
without limitation ordering new credit reports and new appraisals on the related
Mortgaged Properties and otherwise re-generating the information used to
originate such Assets. The Borrower further agrees that the Borrower shall
reimburse the Lender for all reasonable out-of-pocket costs and expenses
incurred by the Lender in connection with the Lender's activities pursuant to
this Section 11.16. The Lender agrees it shall use best efforts not to disrupt
the normal course of business of the Borrower while exercising its rights under
this Section 11.16.
11.17 Set-Off. In addition to any rights and remedies of the Lender
provided by this Loan Agreement and by law, the Lender shall have the right,
without prior notice to the Borrower, any such notice being expressly waived by
the Borrower to the extent permitted by applicable law, upon the occurrence and
during the continuance of an Event of Default, any amount becoming due and
payable by the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Lender or any Affiliate
thereof to or for the credit or the account of the Borrower. The Lender agrees
promptly to notify the Borrower after any such set-off and application made by
the Lender; provided that the failure to give such notice shall not affect the
validity of such set-off and application.
11.18 Confidentiality. The Lender agrees to keep confidential any and all
non-public financial and other confidential information provided by the
Borrower pursuant to this Agreement and identified as confidential; provided,
that the Lender shall have the right to disseminate such
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<PAGE> 56
information (i) to the Custodian, the Servicer, any outside accounting firm
performing analyses in connection with this Loan Agreement or the transactions
contemplated hereunder which agrees to comply with the provisions of this
Section 11.18 (ii) to any proposed assignee of the Lender which agrees to
comply with the provisions of this Section 11.18, (iii) to its employees,
directors, agents, attorneys, accountants and other professional advisors who
agree to comply with the provisions of this Section 11.18, (iv) upon the
request or demand of any examiner or other Governmental Authority having
jurisdiction over the Lender, (v) in response to any order of any court or
other Governmental Authority, (vi) as may otherwise be required pursuant to any
Requirement of Law, (vii) which has been publicly disclosed other than in
breach of this Agreement, (viii) in connection with the exercise of any remedy
hereunder, and (viii) to any other Person which agrees to comply with the
provisions of this Section 11.18 if such dissemination is necessary in
connection with this Loan Agreement or the transactions contemplated hereunder,
in the good faith determination of the Lender; provided, that in the case of
clause (v) of this Section 11.18, the Lender agrees to give the Borrower notice
and an opportunity to refute the requirement of disclosure, so long as the
Lender incurs no liability as a result of such actions.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed and delivered as of the day and year first above written.
BORROWER
CHASTAIN CAPITAL CORPORATION
By:_______________________
Name
Title:
Address for Notices:
Chastain Capital Corporation
3424 Peachtree Road, NE, Suite 800
Atlanta, Georgia 30326
Attention: Mr. Rufus Chambers
Telecopier No.: (404) 848-8929
Telephone No.: (404) 848-8664
With a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue
New York, New York 10022
Attention: Kevin O'Shea
Telecopier No.: (212) 319-4090
Telephone No.: (212) 318-6012
<PAGE> 58
LENDER
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:_______________________
Name:
Title:
Address for Notices:
60 Wall Street, 18th Floor
New York, New York 10260
Attention: Clive Bull
Telecopier No.: (212) 648-5138
Telephone No.: (212) 648-9496
With a copy to:
Attention: General Counsel
Telecopier No.: (212) 648-5968
Telephone No.: (212) 648-9344
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SCHEDULE 1
ELIGIBILITY CRITERIA RE: FIRST MORTGAGE LOANS
Part I. Eligible First Mortgage Loans
To be an Eligible First Mortgage Loan, a First Mortgage Loan (and the
related Asset Documents and related Mortgaged Property) must satisfy, and
maintain at all times, the following eligibility characteristics, subject to
any exceptions thereto approved in writing by the Lender in its sole
discretion:
(a) The information set forth in the Asset Schedule as to the First
Mortgage Loan is complete, true and correct in all material
respects;
(b) The Borrower is the sole owner and holder of the First Mortgage
Loan and has good and marketable title thereto, has full right,
power and authority to sell and assign such First Mortgage Loan
free and clear of any interest or claim of a third party;
(c) The First Mortgage Loan has not been since the date of
origination by the applicable Qualified Originator, and
currently is not, thirty (30) or more days delinquent, and the
Obligor is not in default thereunder beyond any applicable grace
period for the payment of any obligation to pay principal and
interest, taxes, insurance premiums and required reserves;
(d) The Borrower has not advanced funds, or knowingly received any
advance of funds from a party other than the Obligor subject to
the related Mortgage, directly or indirectly, for the payment of
any amount required by the First Mortgage Loan;
(e) The Asset Documents have been duly and properly executed, and
the Asset Documents are legal, valid and binding obligations of
the Obligor, and their terms are enforceable against the
Obligor, subject only to bankruptcy, insolvency, moratorium,
fraudulent transfer, fraudulent conveyance and similar laws
affecting rights of creditors generally and to the application
of general principles of equity;
(f) The lien of each Mortgage is insured by an ALTA lender's title
insurance policy or its equivalent as adopted in the applicable
jurisdiction issued by one or more nationally recognized title
insurance companies, insuring the Qualified Originator, its
successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the First Mortgage
Loan after all advances of principal, subject only to (i) the
lien of current real property taxes, ground rents, water charges,
sewer rents and assessments not yet due and payable, (ii)
covenants, conditions and restrictions, rights of way, easements
and other matters of public record, none of which, individually
or in the aggregate, in the reasonable judgment of the Borrower,
materially interferes with the current use of the related
Mortgaged Property or the security intended to be provided by
such Mortgage or with the Obligor's ability to pay its
obligations when they become due or the value of the related
Mortgaged Property and (iii) the exceptions (general and
specific) set forth in such policy, none of which, individually
or in the
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aggregate, in the reasonable judgment of the Borrower,
materially interferes with the current use of the related
Mortgaged Property or security intended to be provided by such
Mortgage, with the Obligor's ability to pay its obligations when
they become due or the value of the related Mortgaged Property
(or if a title insurance policy has not yet been issued in
respect of the First Mortgage Loan, a policy meeting the
foregoing description is evidenced by a commitment for title
insurance "marked-up" at the closing of the First Mortgage
Loan). To the actual knowledge of the Borrower, no material
claims have been made under such title policy;
(g) As of the date of origination of the First Mortgage
Loan there were no, and to the best knowledge of the Borrower
there are no, mechanics', materialman's or other similar liens
or claims which have been filed for work, labor or materials
affecting the Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the Mortgage,
unless such lien is insured against under the related title
insurance policy;
(h) Each building or other improvement located on any
Mortgaged Property was insured by a fire and extended perils
insurance policy, issued by an insurer or reinsured by an
insurer meeting the requirements of the Asset Documents, in an
amount not less than the replacement cost of the Mortgaged
Property; each Mortgaged Property was also covered by business
interruption insurance and comprehensive general liability
insurance in amounts generally required by institutional lenders
for similar properties; all premiums on such insurance policies
required to be paid as of the date hereof have been paid; such
insurance policies require prior notice to the insured of
termination or cancellation, and no such notice has been
received; and the Asset Documents obligate the Obligor to
maintain all such insurance and, upon the Obligor's failure to
do so, authorize the mortgagee to maintain such insurance at the
Obligor's cost and expense and to seek reimbursement therefor
from such Obligor;
(i) As of the most recent date of inspection of each
Mortgaged Property by the Borrower, based solely on the
Borrower's review of the report prepared by the engineer who
inspected the structure, exterior walls, roofing, interior
construction, mechanical and electrical systems and general
conditions of the site, buildings and other improvements with
respect to the First Mortgage Loan (which report indicated,
where appropriate, a variety of deferred maintenance items and
recommended capital improvements with respect to such Mortgaged
Property, as well as the estimated cost of such items and
improvements and the most recent visual inspection (as described
in (r) below) of the Mortgaged Property), no building or other
improvement on any Mortgaged Property has been affected in any
material manner or suffered any material loss as a result of any
fire, wind, explosion, accident, riot, war, or act of God or the
public enemy, and each Mortgaged Property is free of any
material damage that would affect materially and adversely the
value of the Mortgaged Property as security for the First
Mortgage Loan and is in good repair. The Borrower has neither
received notice, nor is otherwise actually aware, of any
proceedings pending for the total condemnation of any Mortgaged
Property or a partial condemnation of any portion
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material to the Obligor's ability to perform its obligations
under its related First Mortgage Loan;
(j) To the Borrower's best knowledge, after review of
compliance confirmations from applicable municipalities, surveys
and/or title insurance endorsements, none of the improvements
included for the purpose of determining the Appraised Value of
each Mortgaged Property (except Mortgaged Properties which are
legal non-conforming uses and except for immaterial
encroachments or where the same is covered by title insurance
policy endorsement) at the time of the origination of the First
Mortgage Loan lies outside of the boundaries and building
restriction lines of the Mortgaged Property, and no improvements
on adjoining properties materially encroach upon the Mortgaged
Property except those which are insured against by the title
insurance policy (including endorsements thereto) issued in
connection with the First Mortgage Loan and all improvements on
the Mortgaged Property comply with the applicable zoning laws
and/or set-back ordinances in force when improvements were added
(except legal non-conforming uses);
(k) The First Mortgage Loan does not violate applicable usury laws;
(l) Since the date of origination of the First Mortgage Loan, the
terms of the First Mortgage Loan have not been impaired, waived,
altered, satisfied, canceled, subordinated or modified in any
respect (except with respect to modifications the economic terms
of which are reflected in the Asset Schedule and which are
evidenced by documents in the Asset File delivered to the
Custodian) and no portion of the Mortgaged Property has been
released from the lien of the Mortgage in any manner;
(m) All applicable Mortgage recording taxes and other filing fees
have been paid in full or deposited with the issuer of the title
insurance policy issued in connection with the First Mortgage
Loan for payment upon recordation of the relevant documents;
(n) Each assignment of leases and rents, if any, creates
a valid assignment of, or a valid security interest in, certain
rights under the related leases, subject only to a license
granted to the relevant Obligor to exercise certain rights and
to perform certain obligations of the lessor under such leases,
including the right to operate the related Mortgaged Property,
subject only to those exceptions described in clause (f) above.
To the best of the Borrower's knowledge and without affirmative
investigation, no person other than the relevant Obligor owns
any interest in any payments due under such leases that is
superior to or of equal priority with the mortgagee's interest
therein, subject only to those exceptions described in clause
(f) above;
(o) Each Mortgage, upon due recordation, is a valid and enforceable
first lien on the related Mortgaged Property, subject only to
those exceptions described in clause (f) above;
(p) The Borrower has not taken any action, nor does the Borrower
have any knowledge that the Obligor has taken any action, that
would cause the
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representations and warranties made by the Obligor in the Asset
Documents not to be true;
(q) The proceeds of the First Mortgage Loan have been fully
disbursed and there is no requirement for future advances
thereunder and the Borrower covenants that it will not make any
future advances under the First Mortgage Loan to the Obligor.
Except for the escrows and disbursements therefrom as
contemplated by the Asset Documents, any Obligor requirements
for on or off-site improvements as to disbursement of any escrow
funds therefor have been complied with; provided, that First
Mortgage Loans with earn-out provisions shall be permitted upon
the prior consent and approval of the Lender;
(r) The Borrower has inspected or caused to be inspected each
Mortgaged Property within the past twelve months preceding the
date hereof;
(s) The First Mortgage Loan does not have a shared appreciation
feature, other contingent interest feature or negative
amortization, except with respect to those First Mortgage Loans
that provide for deferred interest;
(t) The First Mortgage Loan is a whole loan and contains no equity
participation by the lender;
(u) To the best knowledge of the Borrower, no fraudulent acts were
committed by the Borrower in connection with the origination
process of the First Mortgage Loan;
(v) All taxes and governmental assessments that prior to the date of
origination of the First Mortgage Loan became due and owing in
respect of each Mortgaged Property have been paid, or an escrow
of funds in an amount sufficient to cover such payments has been
established or are insured against by the title insurance policy
issued in connection with the origination of the First Mortgage
Loan;
(w) To the extent required under applicable law, the Borrower was
authorized to transact and do business in each jurisdiction in
which a Mortgaged Property is located at all times when it held
the First Mortgage Loan;
(x) To the best knowledge of the Borrower, there is no material
default, breach, violation or event of acceleration existing
under any of the Asset Documents and the Borrower has not
received actual notice of any 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 and
does constitute a default, breach, violation or event of
acceleration; no waiver of the foregoing exists and no person
other than the holder of the Note may declare any of the
foregoing;
(y) Each Mortgage contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof
adequate for the realization against each related Mortgaged
Property of the material benefits of the security, including
realization by judicial or, if applicable, non-judicial
foreclosure, and there is no exemption available to the Obligor
which would materially interfere with such right to foreclosure;
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(z) With respect to each Mortgaged Property, a Phase I environmental
report and, in certain cases where warranted, a Phase II
environmental report or an update to such Phase I report was
conducted by a licensed qualified engineer. The Borrower has
reviewed each such report and update. The Borrower, having made
no independent inquiry other than reviewing the environmental
reports and updates referenced herein and without other
investigation or inquiry, has no knowledge of any material and
adverse environmental condition or circumstance affecting the
related Mortgaged Property that was not disclosed in the related
report and/or update. The Borrower has not received any actual
notice of a material violation of CERCLA or any applicable
federal, state or local environmental law with respect to any
Mortgaged Property that was not disclosed in the related report
and/or update. The Borrower has not taken any actions which
would cause any Mortgaged Property not to be in compliance with
all federal, state and local laws pertaining to environmental
hazards;
(aa) The Asset Documents contain provisions for the acceleration of
the payment of the unpaid principal balance of the First
Mortgage Loan if (i) the Obligor voluntarily transfers or
encumbers all or any portion of any related Mortgaged Property,
or (ii) any direct or indirect interest in Obligor is
voluntarily transferred or assigned, other than, in each case,
as permitted under the terms and conditions of the Asset
Documents;
(bb) To the best of the Borrower's knowledge and without affirmative
investigation or inquiry, there is no pending action, suit or
proceeding, arbitration or governmental investigation against
the Obligor or any Mortgaged Property, the adverse outcome of
which could materially and adversely affect the Obligor's
performance of its obligations under the Asset Documents;
(cc) The servicing and collection practices used by any Servicer, and
to the best of the Borrower's knowledge, the origination
practices of the related Qualified Originator, have been in all
respects legal, proper and prudent and have met customary
industry standards except to the extent that, in connection with
its origination, such standards were modified by the applicable
Qualified Originator in its reasonable discretion;
(dd) In connection with the assignment, transfer or conveyance of any
individual Mortgage, the Mortgage Note and Mortgage contain no
provision limiting the right or ability of the applicable
Qualified Originator to assign, transfer and convey the Mortgage
to any other person or entity;
(ee) If any Mortgaged Property is subject to any leases (other than
any Ground Lease referred to in (ii) below), to the best of the
Borrower's knowledge, the Obligor is the owner and holder of the
landlord's interest under any leases, and the related Mortgage
and Assignment of Leases, Rents and Profits, if any, provides
for the appointment of a receiver for rents or allows the
mortgagee to enter into possession to collect rent or provide
for rents to be paid directly to mortgagee in the event of a
default, subject to the exceptions described in clause (f)
hereof;
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(ff) If a Mortgage is a deed of trust, a trustee, duly qualified
under applicable law to serve as such, has been properly
designated and currently so serves and is named in the deed of
trust, and no fees or expenses are or will become payable to the
trustee under the deed of trust, except in connection with the
sale or release of the Mortgaged Property following default or
payment of the First Mortgage Loan;
(gg) Any insurance proceeds in respect of a casualty loss or taking
(other than business interruption/rental interruption proceeds)
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 (provided that such proceeds exceed the threshold
amount described in the Asset Documents) as the repair or
restoration progresses, or to the payment of the outstanding
principal balance of the First Mortgage Loan together with any
accrued interest thereon, except to the extent of any excess
proceeds after restoration;
(hh) Either (a) no improvements located on a Mortgaged Property are
located in a federally-designated special flood hazard area as
defined by the Federal Insurance Administration or, (b) the
Obligor is required to maintain, or the Borrower maintains,
flood insurance with respect to such improvements in an amount
representing coverage not less than the least of (1) the
outstanding principal balance of the First Mortgage Loan, (2)
the full insurable value of the Mortgaged Property, and (3) the
maximum amount of insurance available under the National Flood
Insurance Act of 1968, as amended;
(ii) With respect to any Mortgage which is secured in whole or in
part by the interest of a Obligor as a lessee under a Ground
Lease and based upon the terms of the Ground Lease or an
estoppel letter from the ground lessor the following apply to
such Ground Lease:
(A) The Ground Lease or a memorandum thereof has been duly
recorded, the Ground Lease permits the interest of the lessee
thereunder to be encumbered by the related Mortgage, does not
restrict the use of the Mortgaged Property by the lessee or its
successors and assigns in a manner that would adversely affect
the security provided by the related Mortgage, and there has not
been a material change in the terms of the Ground Lease since
its recordation, with the exception of written instruments which
are part of the related Asset Documents delivered to the
Custodian.
(B) The Ground Lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related Mortgage,
other than the related ground lessor's related fee interest and
any exceptions described in clause (f) hereof.
(C) The Borrower's interest in the Ground Lease is assignable to
the holder of the Mortgage upon notice to, but without the
consent of, the lessor thereunder and, in the event that it is
so assigned, it is further assignable by the trustee and its
successors and assigns upon notice to, but without a need to
obtain the consent of, such lessor.
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(D) To the best of the Borrower's knowledge, as of the
Origination Date of the First Mortgage Loan, the Ground Lease
was in full force and effect and no material default had
occurred under the ground lease and there was no existing
condition which, but for the passage of time or the giving of
notice, would result in a default under the terms of the ground
lease. No notice of default under the Ground Lease has been
received by the Borrower.
(E) The Ground Lease requires the lessor thereunder to give
notice of any default by the lessee to the mortgagee; and the
Ground Lease, or an estoppel letter received by the mortgagee
from the lessor, further provides that notice of termination
given under the Ground Lease is not effective against the
mortgagee unless a copy of the notice has been delivered to the
mortgagee in the manner described in such Ground Lease or
estoppel letter.
(F) The mortgagee is permitted a reasonable opportunity
(including, where necessary, sufficient time to gain possession
of the interest of the lessee under the Ground Lease) to cure
any default under the Ground Lease which is curable after the
receipt of notice of any default, before the lessor thereunder
may terminate the Ground Lease.
(G) The Ground Lease either (i) has a term which extends not
less than ten (10) years beyond the maturity date of the related
First Mortgage Loan or (ii) grants the lessee the option to
extend the term of the lease for a period (in the aggregate)
which exceeds not less than ten (10) years beyond the maturity
date of the related First Mortgage Loan.
(H) The ground lease requires the lessor to enter into a new
lease with the mortgagee having substantially similar terms as
the old lease upon termination of the Ground Lease for any
reason, including rejection of the Ground Lease in a bankruptcy
proceeding, provided the mortgagee cures the lessee's defaults
to the extent they are curable and succeeds to the interest of
the Obligor.
(I) Under the terms of the Ground Lease and the related
Mortgage, taken together, any related insurance proceeds 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 the
proceeds as the repair or restoration progresses, or to the
payment of the outstanding principal balance of the First
Mortgage Loan together with any accrued interest thereon.
(J) Such Ground Lease does not impose any material restrictions
on subletting that would be viewed as commercially unreasonable
by an institutional investor.
(K) Either the Ground Lease or the related Mortgage contains the
Borrower's covenant that such Ground Lease shall not be amended,
canceled, or terminated without the prior written consent of the
mortgagee.
(L) Either the Ground Lease or an estoppel letter contains a
covenant that the lessor thereunder is not permitted in the
absence of an uncured default under
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the Ground Lease, to disturb the possession, interest or quiet
enjoyment of any lessee in the relevant portion of the Mortgaged
Property subject to such Ground Lease for any reason, or in any
manner, which would materially adversely affect the security
provided by the related Mortgage;
(jj) (i) the First Mortgage Loan is directly secured by a Mortgage on
a commercial real property, and (ii) the fair market value of
such real property, as evidenced by an appraisal conducted
within 12 months of the origination of the First Mortgage Loan,
or as determined by the Borrower based on market studies and
pursuant to its underwriting standards, was at least equal to
80% of the principal amount of the First Mortgage Loan (A) at
origination (or if the First Mortgage Loan has been modified in
a manner that constituted a deemed exchange under Section 1001
of the Code at a time when the First Mortgage Loan was not in
default or default with respect thereto was not reasonably
foreseeable, the date of the last such modification) or (B) at
the related Funding Date; provided that the fair market value of
the real property interest must first be reduced by (1) the
amount of any lien on the real property interest that is senior
to the First Mortgage Loan (unless such senior lien also secures
a First Mortgage Loan, in which event the computation described
in (A) and (B) shall be made on an aggregated basis) and (2) a
proportionate amount of any lien that is in parity with the
First Mortgage Loan (unless such other lien secures a First
Mortgage Loan that is cross-collateralized with such First
Mortgage Loan, in which event the computation described in (A)
and (B) shall be made on an aggregate basis);
(kk) To the best knowledge of the Borrower, certificates of occupancy
and building permits, as applicable, have been issued with
respect to the Mortgaged Property;
(ll) Any escrow accounts for taxes or other reserves required to be
funded on the date of origination of the First Mortgage Loan
pursuant to the Asset Documents have been funded and all such
escrow accounts required to have been funded as of the Funding
Date (taking into account any applicable notice and grace
period) have been funded;
(mm) The related Assignment of Mortgage constitutes a legal, valid
and binding assignment of the related Mortgage to the Lender,
and the related Reassignment of Assignment of Leases, Rents and
Profits, if any, constitutes a legal, valid and binding
assignment thereof to the Lender;
(nn) The related Note is not, and has not been since the date of
origination of the First Mortgage Loan, secured by any
collateral except the lien of the related Mortgage, any related
Assignment of Leases, Rents and Profits and any related security
agreement and escrow agreement and any other collateral being
transferred to the Lender hereunder; the security for the First
Mortgage Loan consists only of the related Mortgaged Property or
Properties, any leases (including without limitation any credit
leases) thereof, and any appurtenances, fixtures and other
property located thereon and any other collateral pledged or
given as part of the Asset Documents being assigned to the
Lender hereunder; and such Mortgaged Property or Properties do
not secure any First Mortgage Loan other than the First Mortgage
Loan being transferred and assigned to the Lender hereunder
(except for First
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Mortgage Loans, if any, which are cross-collateralized with
other First Mortgage Loans being conveyed to the Lender or
subsequent transferee hereunder and identified on the Asset
Schedule);
(oo) To the Borrower's knowledge, based on due diligence that it
customarily performs in the origination of comparable Mortgage
Loans, as of the date of origination of each Mortgage Loan, the
related Obligor was in possession of all material licenses,
permits and franchises required by applicable law for the
ownership and operation of the related Mortgaged Property as it
was then operated;
(pp) With respect to each First Mortgage Loan with a principal
balance greater than or equal to $5,000,000: (A) The Obligor is
an entity whose organizational documents provide that it is, and
at least so long as the First Mortgage Loan is outstanding will
continue to be, a single-purpose entity. (For this purpose,
"single-purpose entity" shall mean a person, other than an
individual, which is formed or organized solely for the purpose
of owning and operating a single property, does not engage in
any business unrelated to such property and its financing, does
not have any assets other than those related to its interest in
the property or its financing, or any indebtedness other than as
permitted by the related Mortgage or the other Asset Documents,
has its own books and records and accounts separate and apart
from any other person, and holds itself out as being a legal
entity, separate and apart from any other person);
(B) A non-consolidation opinion was obtained for the Obligor or
affiliated group of the Obligor of First Mortgage Loans or
groups of First Mortgage Loans with an original principal
balance in excess of $20,000,000.
(C) The general partners or managing members of the Obligor or
Affiliates of the Obligor of First Mortgage Loans or groups of
First Mortgage Loans having an original principal balance in
excess of $20,000,000 have an independent director.
(qq) No Lien securing Indebtedness (other than said First Mortgage
Loan) encumbers the related Mortgaged Property.
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Part II Defined Terms
In addition to terms defined elsewhere in the Loan Agreement, the
following terms shall have the following meanings when used in this Schedule 2:
"ALTA" means the American Land Title Association.
"Appraised Value" shall mean the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
"Best's" means Best's Key Rating Guide, as the same shall be amended from
time to time.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any successor
thereto.
"FNMA" means the Federal National Mortgage Association, or any successor
thereto.
"Ground Lease" means a lease for all or any portion of the real property
comprising the Mortgaged Property, the lessee's interest in which is held by
the Obligor of the related Mortgage Loan.
"Origination Date" shall mean, with respect to each Mortgage Loan, the
date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by the Borrower with respect to such Mortgage Loan,
in which case the Origination Date shall be deemed to be the date that is 40
days prior to the date of the first payment under the Mortgage Note relating to
such Mortgage Loan.
"Qualified Originator" means the Borrower or an originator of Mortgage
Loans reasonably acceptable to the Lender.
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SCHEDULE 2
ELIGIBILITY CRITERIA RE: MEZZANINE LOANS
To be an Eligible Mezzanine Loan, a Mezzanine Loan (and the related
Mezzanine Loan documents, Mortgaged Property and pledged equity interests) must
satisfy, and maintain at all times, the following eligibility characteristics,
subject to any exceptions thereto approved in writing by the Lender in its sole
discretion:
(a) The LTV of the Mezzanine Loan is not greater than 90%.
(b) The combined Debt Service Coverage Ratio of the Mezzanine Loan and the
related First Mortgage Loan is not less than 1.05 to 1.00.
(c) The Mezzanine Loan borrower is a special purpose entity that is not
permitted to have any indebtedness other than the debt associated with the
Mezzanine Loan (and the related First Mortgage Loan) and obligations pursuant
to its ownership of subsidiaries, meeting all such criteria as is typically
associated with special purpose entities in loans of this type.
(d) The Mezzanine Loan contains a pledge of controlling equity interests
of the Mezzanine Loan borrower's Subsidiary.
(e) The Mezzanine Loan contains the rights of the Mezzanine Lender to
consent to the budget of the borrower's Subsidiary whose equity interests are
pledged.
(f) The maturity date on the Mezzanine Loan shall not be later than the
earlier of (i) the maturity date of the Mortgage Loan attaching to the property
of the Mezzanine borrower's subsidiary and (ii) the date on which such Mortgage
Loan's amortization increases to a higher payment rate.
(g) The Mezzanine Loan shall satisfy all other reasonable conditions that
the Lender, in its sole discretion, shall impose.
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SCHEDULE 3
ELIGIBILITY CRITERIA RE: REO PROPERTY
To be an Eligible REO Property, an REO Property must satisfy, and maintain
at all times, the following eligibility characteristics, subject to any
exceptions thereto approved in writing by the Lender in its sole discretion:
(a) REO Properties as Described. The information set forth in the Asset
Schedule with respect to the REO Property is complete, true and correct in all
material respects.
(b) Hazard Insurance. Unless otherwise approved by the Lender, the REO
Property is insured by a fire and extended perils insurance policy, and such
other hazards as are customary in the area where the REO Property is located,
in an amount not less than the greater of (i) 100% of the replacement cost of
all improvements to the REO Property, or (ii) the amount necessary to avoid the
operation of any co-insurance provisions with respect to the REO Property. If
any portion of the REO Property is in an area identified by any federal
Governmental Authority as having special flood hazards, and flood insurance is
available, a flood insurance policy meeting the 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 lesser
of (1) the full insurable value of the REO Property, and (2) the maximum amount
of insurance available under the Flood Disaster Protection Act of 1973, as
amended. All premiums on such insurance policy which have become due and
payable have been paid. The hazard insurance policy is the valid and binding
obligation of the insurer and is in full force and effect. The Borrower has not
engaged in any act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the validity
and binding effect of either including, without limitation, no unlawful fee,
commission, kickback or other unlawful compensation or value of any kind has
been or will be received, retained or realized by any attorney, firm or other
Person, and no such unlawful items have been received, retained or realized by
the Borrower.
(c) No Lien. The REO Property is not subject to any Liens except:
(1) the lien of current real property taxes and assessments not yet
due and payable or due and payable and approved by the Lender;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to prudent mortgage lending institutions
generally and specifically referred to in the owner's title
insurance policy delivered to the owner of the REO Property and
referred to or otherwise considered in the appraisal made for the
REO Property;
(3) except as disclosed in the due diligence materials provided by
the related Obligor;
(4) the Lien of any REO Property Mortgage; and
(5) if the REO Property is a leasehold estate, the Lien of the
related ground lease.
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(d) Ownership. The Borrower or applicable REO Subsidiary are the
sole owners and holders of the REO Property. The Borrower or applicable REO
Subsidiary have good, indefeasible and marketable fee (or, if applicable,
leasehold) title to the REO Property, and have full right to transfer, and
pledge the REO Property to the Lender free and clear of any encumbrance,
equity, participation interest, lien (except any lien set forth in subsection
(c) above), pledge, charge, claim or security interest.
(e) Title Insurance. Except as disclosed to the Lender, the REO Property
is covered by either (i) an attorney's opinion of title and abstract of title,
the form and substance of which is acceptable to prudent mortgage lending
institutions making mortgage loans in the area wherein the REO Property is
located or (ii) an ALTA owner's title insurance policy or other generally
acceptable form of policy or insurance and each such title insurance policy is
issued by a generally acceptable title insurer qualified to do business in the
jurisdiction where the REO Property is located, insuring the Borrower or the
applicable REO Subsidiary, their successors and assigns, as to the fee (or if
applicable, leasehold) ownership of the REO Property.
(f) No Mechanics' Liens. Unless approved by the Lender, there are no
mechanics' or similar liens or claims which have been filed for work, labor or
material affecting the REO Property which are or may become liens against the
REO Property.
(g) REO Property Undamaged. The REO Property is undamaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other casualty so as
to affect adversely the value of the REO Property and each REO Property is in
good repair. There have not been any condemnation proceedings with respect to
the REO Property and the Borrower has no knowledge of any such proceedings.
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SCHEDULE 4
ELIGIBILITY CRITERIA FOR SECOND MORTGAGE LOANS
Part I. Eligible Second Mortgage Loans
To be an Eligible Second Mortgage Loan, a Second Mortgage Loan (and the
related Asset Documents and related Mortgaged Property) must satisfy, and
maintain at all times, the following eligibility characteristics, subject to
any exceptions thereto approved in writing by the Lender in its sole
discretion:
(a) The information set forth in the Asset Schedule as to the Second
Mortgage Loan is complete, true and correct in all material
respects;
(b) The Borrower is the sole owner and holder of the Second Mortgage
Loan and has good and marketable title thereto, has full right,
power and authority to sell and assign such Second Mortgage Loan
free and clear of any interest or claim of a third party;
(c) The Second Mortgage Loan has not been since the date of
origination by the applicable Qualified Originator, and
currently is not, thirty (30) or more days delinquent, and the
Obligor is not in default thereunder beyond any applicable grace
period for the payment of any obligation to pay principal and
interest, taxes, insurance premiums and required reserves;
(d) The Borrower has not advanced funds, or knowingly received any
advance of funds from a party other than the Obligor subject to
the related Mortgage, directly or indirectly, for the payment of
any amount required by the Second Mortgage Loan;
(e) The Asset Documents have been duly and properly executed, and
the Asset Documents are legal, valid and binding obligations of
the Obligor, and their terms are enforceable against the
Obligor, subject only to bankruptcy, insolvency, moratorium,
fraudulent transfer, fraudulent conveyance and similar laws
affecting rights of creditors generally and to the application
of general principles of equity;
(f) The lien of each Mortgage is insured by an ALTA
lender's title insurance policy or its equivalent as adopted in
the applicable jurisdiction issued by one or more nationally
recognized title insurance companies, insuring the Qualified
Originator, its successors and assigns, as to the second
priority lien of the Mortgage in the original principal amount
of the Second Mortgage Loan after all advances of principal,
subject only to (i) the lien of current real property taxes,
ground rents, water charges, sewer rents and assessments not yet
due and payable, (ii) covenants, conditions and restrictions,
rights of way, easements and other matters of public record,
none of which, individually or in the aggregate, in the
reasonable judgment of the Borrower, materially interferes with
the current use of the related Mortgaged Property or the
security intended to be provided by such Mortgage or with the
Obligor's ability to pay its obligations when they become due or
the value of the related Mortgaged Property and (iii) the
exceptions (general
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and specific) set forth in such policy, none of which,
individually or in the aggregate, in the reasonable judgment of
the Borrower, materially interferes with the current use of the
related Mortgaged Property or security intended to be provided
by such Mortgage, with the Obligor's ability to pay its
obligations when they become due or the value of the related
Mortgaged Property (or if a title insurance policy has not yet
been issued in respect of the Second Mortgage Loan, a policy
meeting the foregoing description is evidenced by a commitment
for title insurance "marked-up" at the closing of the Second
Mortgage Loan). To the actual knowledge of the Borrower, no
material claims have been made under such title policy;
(g) As of the date of origination of the Second Mortgage
Loan there were no, and to the best knowledge of the Borrower
there are no, mechanics', materialman's or other similar liens
or claims which have been filed for work, labor or materials
affecting the Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the Mortgage,
unless such lien is insured against under the related title
insurance policy;
(h) Each building or other improvement located on any
Mortgaged Property was insured by a fire and extended perils
insurance policy, issued by an insurer or reinsured by an
insurer meeting the requirements of the Asset Documents, in an
amount not less than the replacement cost of the Mortgaged
Property; each Mortgaged Property was also covered by business
interruption insurance and comprehensive general liability
insurance in amounts generally required by institutional lenders
for similar properties; all premiums on such insurance policies
required to be paid as of the date hereof have been paid; such
insurance policies require prior notice to the insured of
termination or cancellation, and no such notice has been
received; and the Asset Documents obligate the Obligor to
maintain all such insurance and, upon the Obligor's failure to
do so, authorize the mortgagee to maintain such insurance at the
Obligor's cost and expense and to seek reimbursement therefor
from such Obligor;
(i) As of the most recent date of inspection of each
Mortgaged Property by the Borrower, based solely on the
Borrower's review of the report prepared by the engineer who
inspected the structure, exterior walls, roofing, interior
construction, mechanical and electrical systems and general
conditions of the site, buildings and other improvements with
respect to the Second Mortgage Loan (which report indicated,
where appropriate, a variety of deferred maintenance items and
recommended capital improvements with respect to such Mortgaged
Property, as well as the estimated cost of such items and
improvements and the most recent visual inspection (as described
in (r) below) of the Mortgaged Property), no building or other
improvement on any Mortgaged Property has been affected in any
material manner or suffered any material loss as a result of any
fire, wind, explosion, accident, riot, war, or act of God or the
public enemy, and each Mortgaged Property is free of any
material damage that would affect materially and adversely the
value of the Mortgaged Property as security for the Second
Mortgage Loan and is in good repair. The Borrower has neither
received notice, nor is otherwise actually aware, of any
proceedings pending for the total condemnation of any Mortgaged
Property or a partial condemnation of any portion
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material to the Obligor's ability to perform its obligations
under its related Second Mortgage Loan;
(j) To the Borrower's best knowledge, after review of
compliance confirmations from applicable municipalities, surveys
and/or title insurance endorsements, none of the improvements
included for the purpose of determining the Appraised Value of
each Mortgaged Property (except Mortgaged Properties which are
legal non-conforming uses and except for immaterial
encroachments or where the same is covered by title insurance
policy endorsement) at the time of the origination of the Second
Mortgage Loan lies outside of the boundaries and building
restriction lines of the Mortgaged Property, and no improvements
on adjoining properties materially encroach upon the Mortgaged
Property except those which are insured against by the title
insurance policy (including endorsements thereto) issued in
connection with the Second Mortgage Loan and all improvements on
the Mortgaged Property comply with the applicable zoning laws
and/or set-back ordinances in force when improvements were added
(except legal non-conforming uses);
(k) The Second Mortgage Loan does not violate applicable usury laws;
(l) Since the date of origination of the Second Mortgage Loan, the
terms of the Second Mortgage Loan have not been impaired, waived,
altered, satisfied, canceled, subordinated or modified in any
respect (except with respect to modifications the economic terms
of which are reflected in the Asset Schedule and which are
evidenced by documents in the Asset File delivered to the
Custodian) and no portion of the Mortgaged Property has been
released from the lien of the Mortgage in any manner;
(m) All applicable Mortgage recording taxes and other filing fees
have been paid in full or deposited with the issuer of the title
insurance policy issued in connection with the Second Mortgage
Loan for payment upon recordation of the relevant documents;
(n) Each assignment of leases and rents, if any, creates a valid
assignment of, or a valid security interest in, certain rights
under the related leases, subject only to a license granted to
the relevant Obligor to exercise certain rights and to perform
certain obligations of the lessor under such leases, including
the right to operate the related Mortgaged Property, subject only
to those exceptions described in clause (f) above. To the best of
the Borrower's knowledge and without affirmative investigation,
no person other than the relevant Obligor owns any interest in
any payments due under such leases that is superior to or of
equal priority with the mortgagee's interest therein, subject
only to those exceptions described in clause (f) above;
(o) Each Mortgage, upon due recordation, is a valid and enforceable
second lien on the related Mortgaged Property, subject only to
those exceptions described in clause (f) above;
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(p) The Borrower has not taken any action, nor does the Borrower
have any knowledge that the Obligor has taken any action, that
would cause the representations and warranties made by the
Obligor in the Asset Documents not to be true;
(q) The proceeds of the Second Mortgage Loan have been fully
disbursed and there is no requirement for future advances
thereunder and the Borrower covenants that it will not make any
future advances under the Second Mortgage Loan to the Obligor.
Except for the escrows and disbursements therefrom as
contemplated by the Asset Documents, any Obligor requirements for
on or off-site improvements as to disbursement of any escrow
funds therefor have been complied with; provided, that First
Mortgage Loans with earn-out provisions shall be permitted upon
the prior consent and approval of the Lender;
(r) The Borrower has inspected or caused to be inspected each
Mortgaged Property within the past twelve months preceding the
date hereof;
(s) The Second Mortgage Loan does not have a shared appreciation
feature, other contingent interest feature or negative
amortization, except with respect to those Second Mortgage Loans
that provide for deferred interest;
(t) The Second Mortgage Loan is a whole loan and contains no equity
participation by the lender;
(u) To the best knowledge of the Borrower, no fraudulent acts were
committed by the Borrower in connection with the origination
process of the Second Mortgage Loan;
(v) All taxes and governmental assessments that prior to the date of
origination of the Second Mortgage Loan became due and owing in
respect of each Mortgaged Property have been paid, or an escrow
of funds in an amount sufficient to cover such payments has been
established or are insured against by the title insurance policy
issued in connection with the origination of the Second Mortgage
Loan;
(w) To the extent required under applicable law, the Borrower was
authorized to transact and do business in each jurisdiction in
which a Mortgaged Property is located at all times when it held
the Second Mortgage Loan;
(x) To the best knowledge of the Borrower, there is no
material default, breach, violation or event of acceleration
existing under any of the Asset Documents and the Borrower has
not received actual notice of any 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 and
does constitute a default, breach, violation or event of
acceleration; no waiver of the foregoing exists and no person
other than the holder of the Note may declare any of the
foregoing;
(y) Each Mortgage contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof
adequate for the realization against each related Mortgaged
Property of the material benefits of the security, including
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realization by judicial or, if applicable, non-judicial
foreclosure, and there is no exemption available to the Obligor
which would materially interfere with such right to foreclosure;
(z) With respect to each Mortgaged Property, a Phase I
environmental report and, in certain cases where warranted, a
Phase II environmental report or an update to such Phase I
report was conducted by a licensed qualified engineer. The
Borrower has reviewed each such report and update. The
Borrower, having made no independent inquiry other than
reviewing the environmental reports and updates referenced
herein and without other investigation or inquiry, has no
knowledge of any material and adverse environmental condition or
circumstance affecting the related Mortgaged Property that was
not disclosed in the related report and/or update. The Borrower
has not received any actual notice of a material violation of
CERCLA or any applicable federal, state or local environmental
law with respect to any Mortgaged Property that was not
disclosed in the related report and/or update. The Borrower has
not taken any actions which would cause any Mortgaged Property
not to be in compliance with all federal, state and local laws
pertaining to environmental hazards;
(aa) The Asset Documents contain provisions for the acceleration of
the payment of the unpaid principal balance of the Second
Mortgage Loan if (i) the Obligor voluntarily transfers or
encumbers all or any portion of any related Mortgaged Property,
or (ii) any direct or indirect interest in Obligor is
voluntarily transferred or assigned, other than, in each case,
as permitted under the terms and conditions of the Asset
Documents;
(bb) To the best of the Borrower's knowledge and without affirmative
investigation or inquiry, there is no pending action, suit or
proceeding, arbitration or governmental investigation against
the Obligor or any Mortgaged Property, the adverse outcome of
which could materially and adversely affect the Obligor's
performance of its obligations under the Asset Documents;
(cc) The servicing and collection practices used by any Servicer, and
to the best of the Borrower's knowledge, the origination
practices of the related Qualified Originator, have been in all
respects legal, proper and prudent and have met customary
industry standards except to the extent that, in connection with
its origination, such standards were modified by the applicable
Qualified Originator in its reasonable discretion;
(dd) In connection with the assignment, transfer or conveyance of any
individual Mortgage, the Mortgage Note and Mortgage contain no
provision limiting the right or ability of the applicable
Qualified Originator to assign, transfer and convey the Mortgage
to any other person or entity;
(ee) If any Mortgaged Property is subject to any leases (other than
any Ground Lease referred to in (ii) below), to the best of the
Borrower's knowledge, the Obligor is the owner and holder of the
landlord's interest under any leases, and the related Mortgage
and Assignment of Leases, Rents and Profits, if any, provides
for the appointment of a receiver for rents or allows the
mortgagee to enter into
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possession to collect rent or provide for rents to be paid
directly to mortgagee in the event of a default, subject to the
exceptions described in clause (f) hereof;
(ff) If a Mortgage is a deed of trust, a trustee, duly qualified
under applicable law to serve as such, has been properly
designated and currently so serves and is named in the deed of
trust, and no fees or expenses are or will become payable to the
trustee under the deed of trust, except in connection with the
sale or release of the Mortgaged Property following default or
payment of the Second Mortgage Loan;
(gg) Any insurance proceeds in respect of a casualty loss or taking
(other than business interruption/rental interruption proceeds)
will be applied either to the repair or restoration of all or
part of the related Mortgaged Property, with the first mortgagee
or with the mortgagee or a trustee appointed by them having the
right to hold and disburse such proceeds (provided that such
proceeds exceed the threshold amount described in the Asset
Documents) as the repair or restoration progresses, or to the
payment of the outstanding principal balance of the first
Mortgage Loan and then the Second Mortgage Loan together with
any accrued interest thereon, except to the extent of any excess
proceeds after restoration;
(hh) Either (a) no improvements located on a Mortgaged Property are
located in a federally-designated special flood hazard area as
defined by the Federal Insurance Administration or, (b) the
Obligor is required to maintain, or the Borrower maintains,
flood insurance with respect to such improvements in an amount
representing coverage not less than the least of (1) the
outstanding principal balance of the first Mortgage Loan and the
Second Mortgage Loan, (2) the full insurable value of the
Mortgaged Property, and (3) the maximum amount of insurance
available under the National Flood Insurance Act of 1968, as
amended;
(ii) With respect to any Mortgage which is secured in whole or in
part by the interest of an Obligor as a lessee under a Ground
Lease and based upon the terms of the Ground Lease or an
estoppel letter from the ground lessor the following apply to
such Ground Lease:
(A) The Ground Lease or a memorandum thereof has been duly
recorded, the Ground Lease permits the interest of the lessee
thereunder to be encumbered by the related Mortgage, does not
restrict the use of the Mortgaged Property by the lessee or its
successors and assigns in a manner that would adversely affect
the security provided by the related Mortgage, and there has not
been a material change in the terms of the Ground Lease since
its recordation, with the exception of written instruments which
are part of the related Asset Documents delivered to the
Custodian.
(B) The Ground Lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related Mortgage,
other than the related ground lessor's related fee interest and
any exceptions described in clause (f) hereof.
(C) The Borrower's interest in the Ground Lease is, subject to
the prior rights of the holder of the first Mortgage Loan,
assignable to the holder of the Mortgage upon notice to, but
without the consent of, the lessor thereunder and, in
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the event that it is so assigned, it is further assignable by
the trustee and its successors and assigns upon notice to, but
without a need to obtain the consent of, such lessor.
(D) To the best of the Borrower's knowledge, as of the
Origination Date of the Second Mortgage Loan, the Ground Lease
was in full force and effect and no material default had
occurred under the ground lease and there was no existing
condition which, but for the passage of time or the giving of
notice, would result in a default under the terms of the ground
lease. No notice of default under the Ground Lease has been
received by the Borrower.
(E) The Ground Lease requires the lessor thereunder to give
notice of any default by the lessee to the mortgagee; and the
Ground Lease, or an estoppel letter received by the mortgagee
from the lessor, further provides that notice of termination
given under the Ground Lease is not effective against the
mortgagee unless a copy of the notice has been delivered to the
mortgagee in the manner described in such Ground Lease or
estoppel letter.
(F) The mortgagee is permitted a reasonable opportunity
(including, where necessary, sufficient time to gain possession
of the interest of the lessee under the Ground Lease) to cure
any default under the Ground Lease which is curable after the
receipt of notice of any default, before the lessor thereunder
may terminate the Ground Lease.
(G) The Ground Lease either (i) has a term which extends not
less than ten (10) years beyond the maturity date of the related
Second Mortgage Loan or (ii) grants the lessee the option to
extend the term of the lease for a period (in the aggregate)
which exceeds not less than ten (10) years beyond the maturity
date of the related Second Mortgage Loan.
(H) The ground lease requires the lessor to enter into a new
lease with the mortgagee having substantially similar terms as
the old lease, subject to the prior rights of the holder of the
first Mortgage Loan, upon termination of the Ground Lease for
any reason, including rejection of the Ground Lease in a
bankruptcy proceeding, provided the mortgagee cures the lessee's
defaults to the extent they are curable and succeeds to the
interest of the Obligor.
(I) Under the terms of the Ground Lease and the related
Mortgage, taken together, any related insurance proceeds will be
applied either to the repair or restoration of all or part of
the related Mortgaged Property, with the first mortgagee or the
mortgagee or a trustee appointed by them having the right to
hold and disburse the proceeds as the repair or restoration
progresses, or to the payment of the outstanding principal
balance of the first Mortgage Loan and then the Second Mortgage
Loan together with any accrued interest thereon.
(J) Such Ground Lease does not impose any material restrictions
on subletting that would be viewed as commercially unreasonable
by an institutional investor.
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(K) Either the Ground Lease or the related Mortgage contains the
Borrower's covenant that such Ground Lease shall not be amended,
canceled, or terminated without the prior written consent of the
mortgagee.
(L) Either the Ground Lease or an estoppel letter contains a
covenant that the lessor thereunder is not permitted in the
absence of an uncured default under the Ground Lease, to disturb
the possession, interest or quiet enjoyment of any lessee in the
relevant portion of the Mortgaged Property subject to such
Ground Lease for any reason, or in any manner, which would
materially adversely affect the security provided by the related
Mortgage;
(jj) (i) the Second Mortgage Loan is directly secured by a Mortgage
on a multi-family or commercial real property, and (ii) the fair
market value of such real property, as evidenced by an appraisal
conducted within 12 months of the origination of the Second
Mortgage Loan, or as determined by the Borrower based on market
studies and pursuant to its underwriting standards, was at least
equal to 80% of the principal amount of the Second Mortgage Loan
(A) at origination of the Second Mortgage Loan (or if the Second
Mortgage Loan has been modified in a manner that constituted a
deemed exchange under Section 1001 of the Code at a time when
the Second Mortgage Loan was not in default or default with
respect thereto was not reasonably foreseeable, the date of the
last such modification) or (B) at the related Funding Date;
provided that the fair market value of the real property
interest must first be reduced by (1) the amount of any lien on
the real property interest that is senior to the Second Mortgage
Loan and the related first Mortgage Loan and (2) a proportionate
amount of any lien that is in parity with the Second Mortgage
Loan (unless such other lien secures a Second Mortgage Loan that
is cross-collateralized with such Second Mortgage Loan, in which
event the computation described in (A) and (B) shall be made on
an aggregate basis);
(kk) To the best knowledge of the Borrower, certificates of occupancy
and building permits, as applicable, have been issued with
respect to the Mortgaged Property;
(ll) Any escrow accounts for taxes or other reserves required to be
funded on the date of origination of the Second Mortgage Loan
pursuant to the Asset Documents have been funded and all such
escrow accounts required to have been funded as of the Funding
Date (taking into account any applicable notice and grace
period) have been funded;
(mm) The related Assignment of Mortgage constitutes a legal, valid
and binding assignment of the related Mortgage to the Lender,
and the related Reassignment of Assignment of Leases, Rents and
Profits, if any, constitutes a legal, valid and binding
assignment thereof to the Lender;
(nn) The related Note is not, and has not been since the date of
origination of the Second Mortgage Loan, secured by any
collateral except the lien of the related Mortgage, any related
Assignment of Leases, Rents and Profits and any related security
agreement and escrow agreement and any other collateral being
transferred to the Lender hereunder; the security for the Second
Mortgage Loan consists only of the related Mortgaged Property or
Properties, any leases
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(including without limitation any credit leases) thereof, and
any appurtenances, fixtures and other property located thereon
and any other collateral pledged or given as part of the Asset
Documents being assigned to the Lender hereunder; and such
Mortgaged Property or Properties do not secure any Mortgage Loan
other than the related first Mortgage Loan and the Second
Mortgage Loan being transferred and assigned to the Lender
hereunder (except for Mortgage Loans, if any, which are
cross-collateralized with other Mortgage Loans being conveyed to
the Lender or subsequent transferee hereunder and identified on
the Asset Schedule);
(oo) To the Borrower's knowledge, based on due diligence that it
customarily performs in the origination of comparable Second
Mortgage Loans, as of the date of origination of each Second
Mortgage Loan, the related Obligor was in possession of all
material licenses, permits and franchises required by applicable
law for the ownership and operation of the related Mortgaged
Property as it was then operated;
(pp) With respect to each Second Mortgage Loan with a principal
balance greater than or equal to $5,000,000: (A) The Obligor is
an entity whose organizational documents provide that it is, and
at least so long as the Second Mortgage Loan is outstanding will
continue to be, a single-purpose entity. (For this purpose,
"single-purpose entity" shall mean a person, other than an
individual, which is formed or organized solely for the purpose
of owning and operating a single property, does not engage in
any business unrelated to such property and its financing, does
not have any assets other than those related to its interest in
the property or its financing, or any indebtedness other than as
permitted by the related Mortgage or the other Asset Documents,
has its own books and records and accounts separate and apart
from any other person, and holds itself out as being a legal
entity, separate and apart from any other person);
(B) A non-consolidation opinion was obtained for the Obligor or
affiliated group of the Obligor of Second Mortgage Loans or
groups of Second Mortgage Loans with an original principal
balance in excess of $20,000,000.
(C) The general partners or managing members of the Obligor or
Affiliates of the Obligor of Second Mortgage Loans or groups of
Second Mortgage Loans having an original principal balance in
excess of $20,000,000 have an independent director.
(qq) No Lien securing Indebtedness (other than said Second Mortgage
Loan and the related First Mortgage Loan) encumbers the related
Mortgaged Property.
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SCHEDULE 5
ELIGIBILITY CRITERIA RE: SECURITIES
To be an Eligible Security, a Security (and the related documents) must
satisfy, and maintain at all times, the following eligibility characteristics,
subject to any exceptions thereto approved in writing by the Lender in its sole
discretion:
(a) All of the Securities have been validly issued, and are fully paid and
non-assessable, and the Securities have been offered, issued and sold in
compliance with all applicable laws and (i) there are no outstanding rights,
options, warrants or agreements for the purchase from, or sale or issuance, in
connection with the Securities; (ii) there are no agreements on the part of the
Borrower to issue, sell or distribute the Securities; and (iii) except as
provided in this Agreement, the Borrower have no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any securities or any
interest therein or to pay any dividend or make any distribution in respect of
the Securities.
(b) The Borrower is, or will be upon issuance of the Securities, the
record and beneficial owner of, and has, or will have upon issuance, good title
to, the Securities, free of any and all Liens or options in favor of, or claims
of, any other Person, except the interest created by this Loan Agreement.
(c) The Securities, when pledged to the Lender, shall be unencumbered, and
this Loan Agreement, together with delivery to the Lender or the Custodian of
the Securities and with respect to any uncertificated Securities, the execution
and delivery of a "control" agreement and the taking of such other actions as
may be necessary for the Lender to obtain "control" (as defined in Article 8 of
the Georgia Uniform Commercial Code) over such securities and the filing of a
financing statement on Form UCC-1 with the Clerk of Superior Court of any
county in the State of Georgia naming the Borrower as "debtor" and the Lender
as "secured party" and describing such Collateral as the "collateral", and if
requested by the Lender, the execution of a Letter of Instruction by the
parties thereto or the re-registration of the Securities in the name of the
Lender, will create a valid first priority perfected security interest in such
Collateral and a valid securities entitlement in the related Securities in
favor of the Lender in accordance with its terms against all creditors of the
Borrower and any Persons purporting to purchase such Securities from the
Borrower.
(d) The Borrower has obtained from any and all concerned creditors, any
waivers, amendments, releases or acknowledgments necessary to create and
perfect in favor of the Lender the first priority security interests provided
herein.
(e) All of the representations and warranties in any applicable Pooling
and Servicing Agreement or similar agreement pursuant to which Securities are
issued, as amended, supplemented or otherwise modified from time to time are
true and correct in all material respects as of the date hereof as if made on
such date and are incorporated herein by reference mutatis mutandis. No "Event
of Default" or similar event has occurred and is continuing under any Pooling
and Servicing Agreement.
<PAGE> 82
SCHEDULE 6
FILING JURISDICTIONS AND OFFICES
Office of the Clerk of Superior Court of Fulton County, Georgia
<PAGE> 83
SCHEDULE 7
SUBSIDIARIES
<PAGE> 84
EXHIBIT A-1
[FORM OF COMMITTED ADVANCE NOTE]
$450,000,000 May 15, 1998
New York, New York
FOR VALUE RECEIVED, CHASTAIN CAPITAL CORPORATION, a Georgia corporation
(the "Borrower"), hereby promises to pay to the order of MORGAN GUARANTY TRUST
COMPANY OF NEW YORK a New York banking corporation (the "Lender"), at the
principal office of the Lender at 60 Wall Street, New York, New York, in lawful
money of the United States, and in immediately available funds, the principal
sum of FOUR HUNDRED FIFTY MILLION DOLLARS ($450,000,000) (or such lesser amount
as shall equal the aggregate unpaid principal amount of the Advances made by
the Lender to the Borrower under the Loan Agreement as defined below), on the
dates and in the principal amounts provided in the Loan Agreement, and to pay
interest on the unpaid principal amount of each such Advance, at such office,
in like money and funds, for the period commencing on the date of such Advance
until such Advance shall be paid in full, at the rates per annum and on the
dates provided in the Loan Agreement.
The date, amount and interest rate of each Advance made by the Lender to
the Borrower, and each payment made on account of the principal and interest
thereof, shall be recorded by the Lender on its books and, prior to any
transfer of this Note, endorsed by the Lender on the schedule attached hereto
or any continuation thereof; provided, that the failure of the Lender to make
any such recordation or endorsement shall not affect the obligations of the
Borrower to make a payment when due of any amount owing under the Loan
Agreement or hereunder in respect of the Advances made by the Lender.
This Note is the Note referred to in the Master Loan and Security
Agreement dated as of May 15, 1998 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Loan Agreement") between the
Borrower and the Lender, and evidences Advances made by the Lender thereunder.
Terms used but not defined in this Note have the respective meanings assigned
to them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of collection and
enforcement (including attorneys' fees and disbursements of Lender's counsel)
in respect of this Note when incurred, including, without limitation,
attorneys' fees through appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrower hereby
acknowledges, admits and agrees that the Borrower's obligations under this Note
are recourse obligations of the Borrower to which the Borrower pledges its full
faith and credit.
The Borrower, and any endorsers hereof, (a) severally waive diligence,
presentment, protest and demand and also notice of protest, demand, dishonor
and nonpayments of this Note, (b) expressly agree that this Note, or any
payment hereunder, may be extended from time to time, and consent to the
acceptance of further Collateral, the release of any Collateral for this Note,
the release of any party primarily or secondarily liable hereon, and (c)
expressly agree that it will not be necessary for the Lender, in order to
enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrower or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by agreement by
<PAGE> 85
the Lender with any person now or hereafter liable for the payment of this
Note, shall affect the liability under this Note of the Borrower, even if the
Borrower is not a party to such agreement; provided, however, that the Lender
and the Borrower, by written agreement between them, may affect the liability
of the Borrower.
Any reference herein to the Lender shall be deemed to include and apply to
every subsequent holder of this Note. Reference is made to the Loan Agreement
for provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.
Any enforcement action relating to this Note may be brought by motion for
summary judgment in lieu of a complaint pursuant to Section 3213 of the New
York Civil Practice Law and Rules. The Borrower hereby submits to New York
jurisdiction with respect to any action brought with respect to this Note and
waives any right with respect to the doctrine of forum non conveniens with
respect to such transactions.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE
OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE BUT WITH REFERENCE TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS
APPLIES TO THIS NOTE) WHOSE LAWS THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS
NOTE. THE BORROWER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR
ARISING OUT OF THIS NOTE MAY BE COMMENCED IN THE SUPREME COURT OF THE STATE OF
NEW YORK, BOROUGH OF MANHATTAN, OR IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK.
CHASTAIN CAPITAL CORPORATION
By:_______________________
Title:
Title:
-2-
<PAGE> 86
SCHEDULE OF ADVANCES
This Note evidences Advances made under the within-described Loan
Agreement to the Borrower, on the dates, in the principal amounts and bearing
interest at the rates set forth below, and subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
LIBOR OR BASE PRINCIPAL INTEREST AMOUNT PAID UNPAID NOTATION
DATE RATE ADVANCE AMOUNT OF RATE OR PREPAID PRINCIPAL MADE BY
MADE ADVANCE AMOUNT
- --------- ------------------ ------------------- -------- ----------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 87
EXHIBIT A-2
[FORM OF UNCOMMITTED ADVANCE NOTE]
$200,000,000 May 15, 1998
New York, New York
FOR VALUE RECEIVED, CHASTAIN CAPITAL CORPORATION, a Georgia corporation
(the "Borrower"), hereby promises to pay to the order of MORGAN GUARANTY TRUST
COMPANY OF NEW YORK a New York banking (the "Lender"), at the principal office
of the Lender at 60 Wall Street, New York, NY, in lawful money of the United
States, and in immediately available funds, the principal sum of TWO HUNDRED
MILLION DOLLARS ($200,000,000) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Advances made by the Lender to the
Borrower under the Loan Agreement as defined below), on the dates and in the
principal amounts provided in the Loan Agreement, and to pay interest on the
unpaid principal amount of each such Advance, at such office, in like money and
funds, for the period commencing on the date of such Advance until such Advance
shall be paid in full, at the rates per annum and on the dates provided in the
Loan Agreement.
The date, amount and interest rate of each Advance made by the Lender to
the Borrower, and each payment made on account of the principal and interest
thereof, shall be recorded by the Lender on its books and, prior to any
transfer of this Note, endorsed by the Lender on the schedule attached hereto
or any continuation thereof; provided, that the failure of the Lender to make
any such recordation or endorsement shall not affect the obligations of the
Borrower to make a payment when due of any amount owing under the Loan
Agreement or hereunder in respect of the Advances made by the Lender.
This Note is the Note referred to in the Master Loan and Security
Agreement dated as of May 15, 1998 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Loan Agreement") between the
Borrower and the Lender, and evidences Advances made by the Lender thereunder.
Terms used but not defined in this Note have the respective meanings assigned
to them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of collection and
enforcement (including attorneys' fees and disbursements of Lender's counsel)
in respect of this Note when incurred, including, without limitation,
attorneys' fees through appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrower hereby
acknowledges, admits and agrees that the Borrower's obligations under this Note
are recourse obligations of the Borrower to which the Borrower pledges its full
faith and credit.
The Borrower, and any endorsers hereof, (a) severally waive diligence,
presentment, protest and demand and also notice of protest, demand, dishonor
and nonpayments of this Note, (b) expressly agree that this Note, or any
payment hereunder, may be extended from time to time, and consent to the
acceptance of further Collateral, the release of any Collateral for this Note,
the release of any party primarily or secondarily liable hereon, and (c)
expressly agree that it will not be necessary for the Lender, in order to
enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrower or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by agreement by
<PAGE> 88
the Lender with any person now or hereafter liable for the payment of this
Note, shall affect the liability under this Note of the Borrower, even if the
Borrower is not a party to such agreement; provided, however, that the Lender
and the Borrower, by written agreement between them, may affect the liability
of the Borrower.
Any reference herein to the Lender shall be deemed to include and apply to
every subsequent holder of this Note. Reference is made to the Loan Agreement
for provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.
Any enforcement action relating to this Note may be brought by motion for
summary judgment in lieu of a complaint pursuant to Section 3213 of the New
York Civil Practice Law and Rules. The Borrower hereby submits to New York
jurisdiction with respect to any action brought with respect to this Note and
waives any right with respect to the doctrine of forum non conveniens with
respect to such transactions.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE
OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE BUT WITH REFERENCE TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS
APPLIES TO THIS NOTE) WHOSE LAWS THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS
NOTE. THE BORROWER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR
ARISING OUT OF THIS NOTE MAY BE COMMENCED IN THE SUPREME COURT OF THE STATE OF
NEW YORK, BOROUGH OF MANHATTAN, OR IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK.
CHASTAIN CAPITAL CORPORATION
By:_______________________
Title:
Title:
-2-
<PAGE> 89
SCHEDULE OF ADVANCES
This Note evidences Advances made under the within-described Loan
Agreement to the Borrower, on the dates, in the principal amounts and bearing
interest at the rates set forth below, and subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
LIBOR OR BASE PRINCIPAL INTEREST AMOUNT PAID UNPAID NOTATION
DATE RATE ADVANCE AMOUNT OF RATE OR PREPAID PRINCIPAL MADE BY
MADE ADVANCE AMOUNT
- ---------- --------------- ----------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 90
EXHIBIT B
[FORM OF CUSTODIAL AGREEMENT]
[distributed separately]
/
<PAGE> 91
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO BORROWER]
(date)
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
Dear Sirs and Mesdames:
You have requested [our] [my] opinion, as counsel to CHASTAIN CAPITAL
CORPORATION, a Georgia corporation (the "Borrower"), with respect to certain
matters in connection with that certain Master Loan and Security Agreement,
dated as of May 15, 1998 (the "Loan and Security Agreement"), by and between
the Borrower and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (the "Lender"),
being executed contemporaneously with a Committed Advance Note dated May 15,
1998 from the Borrower to the Lender (the "Committed Advance Note"), an
Uncommitted Advance Note dated May 15, 1998 from the Borrower to the Lender
(the "Uncommitted Advance Note"; together with the Committed Advance Note, the
"Notes"), a Custodial Agreement, dated as of May 15, 1998 (the "Custodial
Agreement"), by and among the Borrower, LaSalle National Bank (the
"Custodian"), and the Lender. Capitalized terms not otherwise defined herein
have the meanings set forth in the Loan and Security Agreement.
[We] [I] have examined the following documents:
1. the Loan and Security Agreement;
2. the Notes;
3. Custodial Agreement;
4. unfiled copies of the financing statements listed on Schedule 1
(collectively, the "Financing Statements") naming the Borrower
as Debtor and the Lender as Secured Party and describing the
Collateral (as defined in the Loan and Security Agreement) as
to which security interests may be perfected by filing under
the Uniform Commercial Code of the States listed on Schedule 1
(the "Filing Collateral"), which I understand will be filed in
the filing offices listed on Schedule 1 (the "Filing Offices");
5. the reports listed on Schedule 2 as to UCC financing
statements (collectively, the "UCC Search Report"); and
6. such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
To the extent [we] [I] have deemed necessary and proper, [we] [I] have
relied upon the representations and warranties of the Borrower contained in the
Loan and Security Agreement. [We]
<PAGE> 92
[I] have assumed the authenticity of all documents submitted to me as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents.
Based upon the foregoing, it is [our] [my] opinion that:
1. The Borrower is a Georgia corporation duly organized, validly existing
and in good standing under the laws of Georgia and is qualified to transact
business in, and is in good standing under, the laws of the state of Georgia.
2. The Borrower has the corporate power to engage in the transactions
contemplated by the Loan and Security Agreement, the Notes, and the Custodial
Agreement and all requisite corporate power, authority and legal right to
execute and deliver the Loan and Security Agreement, the Notes, and the
Custodial Agreement and observe the terms and conditions of such instruments.
The Borrower has all requisite corporate power to borrow under the Loan and
Security Agreement and to grant a security interest in the Collateral pursuant
to the Loan and Security Agreement.
3. The execution, delivery and performance by the Borrower of the Loan and
Security Agreement, the Notes, and the Custodial Agreement, and the borrowings
by the Borrower and the pledge of the Collateral under the Loan and Security
Agreement have been duly authorized by all necessary corporate action on the
part of the Borrower. Each of the Loan and Security Agreement, the Notes and
the Custodial Agreement have been executed and delivered by the Borrower and
are legal, valid and binding agreements enforceable in accordance with their
respective terms against the Borrower, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject
to the application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder or with the Lender's
security interest in the Assets.
4. No consent, approval, authorization or order of, and no filing or
registration with, any court or governmental agency or regulatory body is
required on the part of the Borrower for the execution, delivery or performance
by the Borrower of the Loan and Security Agreement, the Notes and the Custodial
Agreement or for the borrowings by the Borrower under the Loan and Security
Agreement or the granting of a security interest to the Lender in the
Collateral, pursuant to the Loan and Security Agreement.
5. The execution, delivery and performance by the Borrower of, and the
consummation of the transactions contemplated by, the Loan and Security
Agreement, the Notes and the Custodial Agreement do not and will not (a)
violate any provision of the Borrower's charter or by-laws, (b) violate any
applicable law, rule or regulation, (c) violate any order, writ, injunction or
decree of any court or governmental authority or agency or any arbitral award
applicable to the Borrower of which I have knowledge (after due inquiry) or (d)
result in a breach of, constitute a default under, require any consent under,
or result in the acceleration or required prepayment of any indebtedness
pursuant to the terms of, any agreement or instrument of which I have knowledge
(after due inquiry) to which the Borrower is a party or by which it is bound or
to which it is subject, or (except for the Liens created pursuant to the Loan
and Security Agreement) result in the creation or imposition of any Lien upon
any Property of the Borrower pursuant to the terms of any such agreement or
instrument.
6. There is no action, suit, proceeding or investigation pending or, to
the best of [our] [my] knowledge, threatened against the Borrower which, in
[our] [my] judgment, either in any
-2-
<PAGE> 93
one instance or in the aggregate, would be reasonably likely to result in any
material adverse change in the properties, business or financial condition, or
prospects of the Borrower or in any material impairment of the right or ability
of the Borrower to carry on its business substantially as now conducted or in
any material liability on the part of the Borrower or which would draw into
question the validity of the Loan and Security Agreement, the Notes, the
Custodial Agreement or the Assets or of any action taken or to be taken in
connection with the transactions contemplated thereby, or which would be
reasonably likely to impair materially the ability of the Borrower to perform
under the terms of the Loan and Security Agreement, the Notes, the Custodial
Agreement or the Assets.
7. The Loan and Security Agreement is effective to create, in favor of the
Lender, a valid security interest under the Uniform Commercial Code in all of
the right, title and interest of the Borrower in, to and under the Collateral
as collateral security for the payment of the Secured Obligations (as defined
in the Loan and Security Agreement), except that (a) such security interests
will continue in Collateral after its sale, exchange or other disposition only
to the extent provided in Section 9-306 of the Uniform Commercial Code, (b) the
security interests in Collateral in which the Borrower acquires rights after
the commencement of a case under the Bankruptcy Code in respect of the Borrower
may be limited by Section 552 of the Bankruptcy Code.
8. When the Asset Documents are delivered to the Custodian, endorsed in
blank by a duly authorized officer of the Borrower, the security interest
referred to in paragraph 7 above in the Asset Documents will constitute a fully
perfected first priority security interest in all right, title and interest of
the Borrower therein, in the Assets evidenced thereby and in the Borrower's
interest in the related Mortgaged Property.
9. (a) Upon the filing of financing statements on Form UCC-1 naming the
Lender as "Secured Party" and the Borrower as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on Schedule 1
attached hereto, the security interests referred to in paragraph 8 above will
constitute fully perfected security interests under the Uniform Commercial Code
in all right, title and interest of the Borrower in, to and under such
Collateral, which can be perfected by filing under the Uniform Commercial Code.
(b) The UCC Search Report sets forth the proper filing offices and the
proper debtors necessary to identify those Persons who have on file in the
jurisdictions listed on Schedule 1 financing statements covering the Filing
Collateral as of the dates and times specified on Schedule 2. Except for the
matters listed on Schedule 2, the UCC Search Report identifies no Person who has
filed in any Filing Office a financing statement describing the Filing
Collateral prior to the effective dates of the UCC Search Report.
10. The Assignments of Mortgage are in recordable form, except for the
insertion of the name of the assignee, and upon the name of the assignee being
inserted, are acceptable for recording under the laws of the state where each
related Mortgaged Property is located.
11. The Borrower is duly registered as a mortgage lender in each state in
which Mortgage Loans or Mezzanine Loans were originated to the extent such
registration is required by applicable law, and has obtained all other licenses
and governmental approvals in each jurisdiction to the extent that the failure
to obtain such licenses and approvals would render any Mortgage Loan or
Mezzanine Loan unenforceable or would materially and adversely affect the
ability of the Borrower to perform any of its obligations under, or the
enforceability of, the Loan Documents.
-3-
<PAGE> 94
12. Assuming that all other elements necessary to render an Asset legal,
valid, binding and enforceable were present in connection with the execution,
delivery and performance of each Asset Document (including completion of all
Asset Documents fully, accurately and in compliance with all applicable laws,
rules and regulations) and assuming further that no action was taken in
connection with the execution, delivery and performance of each Asset
(including in connection with the sale of the related Mortgaged Property) that
would give rise to a defense to the legality, validity, binding effect and
enforceability of such Asset, nothing in the forms of such Asset Documents, as
attached hereto as Exhibit A, would render such Asset other than legal, valid,
binding and enforceable.
13. Assuming their validity, binding effect and enforceability in all
other respects (including completion of all Asset Documents fully, accurately
and in compliance with all applicable laws, rules and regulations), the forms
of Asset Documents attached hereto as Exhibit A are in sufficient compliance
with ________ law and Federal consumer protection laws so as not to be rendered
void or voidable at the election of the Obligor thereunder.
Very truly yours,
-4-
<PAGE> 95
EXHIBIT D
FORM OF NOTICE OF BORROWING AND PLEDGE
[insert date]
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
Attention: Mr. Clive Bull
Notice of Borrowing and Pledge No.:_____________________
Ladies/Gentlemen:
Reference is made to the Master Loan and Security Agreement, dated as of
May 15, 1998 (the "Loan Agreement"; capitalized terms used but not otherwise
defined herein shall have the meaning given them in the Loan Agreement),
between Chastain Capital Corporation (the "Borrower") and Morgan Guaranty Trust
Company of New York (the "Lender").
In accordance with Section 2.05(a) of the Loan Agreement, the undersigned
Borrower hereby requests that you, the Lender, make Advances to us based on the
following criteria:
1) Commitment Designation (Check one):
_____ Committed Advance
_____ Uncommitted Advance
2) Requested Advance Amount: $_____________________
3) Requested Funding Date: _________________, 199__
4) Type of Advance (Check one):
_____ LIBOR Advance
_____ Base Rate Advance
5) Interest Period (LIBOR Advances only) (Check one):
_____ one-month
_____ two-month
_____ three-month
<PAGE> 96
6) Class of Advance (Check one):
_____ Class M-1 Advance
_____ Class M-2 Advance
_____ Class M-3 Advance
_____ Class ML Advance
_____ Class RE Advance
_____ Class S-B Advance
_____ Class S-BB Advance
_____ Class S-IO Advance
7) Wet-Ink Advance: Yes _____; No _____.
8) In connection with this Advance we shall pledge to you as
Collateral the Assets set forth on the Asset Schedule attached hereto,
designating which Assets, if any, shall be Wet-Ink Mortgage Loans.
The Borrower hereby certifies, as of such Funding Date, that:
(a) no Default or Event of Default has occurred and is continuing on
the date hereof nor will occur after giving effect to such Advance as a
result of such Advance;
(b) each of the representations and warranties made by the Borrower
in or pursuant to the Loan Documents is true and correct in all material
respects on and as of such date (in the case of the representations and
warranties in respect of Mortgage Loans, solely with respect to Mortgage
Loans being included the Borrowing Base on the Funding Date) as if made
on and as of the date hereof (or, if any such representation or warranty
is expressly stated to have been made as of a specific date, as of such
specific date); and
(c) the Borrower is in compliance with all governmental licenses and
authorizations and is qualified to do business and is in good standing in
all required jurisdictions.
Very truly yours,
CHASTAIN CAPITAL CORPORATION
By:_______________________
Title:
Title:
-2-
<PAGE> 97
SCHEDULE I
TO NOTICE OF BORROWING AND PLEDGE
ASSETS PROPOSED TO BE PLEDGED
TO LENDER ON FUNDING DATE
[attach Asset Schedule]
-3-
<PAGE> 98
EXHIBIT E
UNDERWRITING GUIDELINES
<PAGE> 99
EXHIBIT F
Intentionally omitted
<PAGE> 100
EXHIBIT G
FORM OF BORROWING BASE CERTIFICATE
[TO BE PROVIDED BY LENDER ]
<PAGE> 1
EXHIBIT 10.2
================================================================================
MASTER LOAN AND SECURITY AGREEMENT
-----------------------------
DATED AS OF MAY 15, 1998
------------------------------
CHASTAIN CAPITAL CORPORATION
AS BORROWER
AND
MORGAN STANLEY MORTGAGE CAPITAL INC.
AS LENDER
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Recitals...........................................................................1
Section 1. Definitions and Accounting Matters.....................................1
1.01 Certain Defined Terms...............................................1
1.02 Accounting Terms and Determinations................................11
Section 2. Loans, Note and Prepayments...........................................11
2.01 Loans..............................................................11
2.02 Notes..............................................................12
2.03 Procedure for Borrowing............................................12
2.04 Limitation on Types of Loans; Illegality...........................14
2.05 Repayment of Loans; Interest.......................................15
2.06 Mandatory Prepayments or Pledge....................................15
2.07 Optional Prepayments...............................................15
2.08 Indemnity..........................................................16
2.09 Extension of Termination Date......................................16
Section 3. Payments; Computations; Etc...........................................16
3.01 Payments...........................................................16
3.02 Computations.......................................................16
3.03 Interest Periods...................................................16
3.04 U.S. Taxes.........................................................17
Section 4. Collateral Security...................................................17
4.01 Collateral; Security Interest......................................17
4.02 Further Documentation..............................................18
4.03 Changes in Locations, Name, etc....................................19
4.04 Lender's Appointment as Attorney-in-Fact...........................19
4.05 Performance by Lender of Borrower's Obligations....................20
4.06 Proceeds...........................................................20
4.07 Remedies...........................................................21
4.08 Limitation on Duties Regarding Presentation of Collateral..........21
4.09 Powers Coupled with an Interest....................................22
4.10 Release of Security Interest.......................................22
Section 5. Conditions Precedent..................................................22
5.01 Initial Loan.......................................................22
5.02 Initial and Subsequent Loans.......................................22
Section 6. Representations and Warranties........................................24
6.01 Existence..........................................................24
6.02 Financial Condition................................................24
6.03 Litigation.........................................................24
6.04 No Breach..........................................................24
6.05 Action.............................................................25
6.06 Approvals..........................................................25
</TABLE>
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<TABLE>
<S> <C> <C>
6.07 Margin Regulations.................................................25
6.08 Taxes..............................................................25
6.09 Investment Company Act.............................................25
6.10 Collateral; Collateral Security....................................25
6.11 Chief Executive Office.............................................26
6.12 Location of Books and Records......................................26
6.13 Hedging............................................................26
6.14 True and Complete Disclosure.......................................26
6.15 Tangible Net Worth.................................................26
6.16 ERISA..............................................................26
Section 7. Covenants of the Borrower.............................................27
7.01 Financial Statements...............................................27
7.02 Litigation.........................................................28
7.03 Existence, etc.....................................................28
7.04 Prohibition of Fundamental Changes.................................29
7.05 Borrowing Base Deficiency..........................................29
7.06 Notices............................................................29
7.07 Hedging............................................................30
7.08 Reports............................................................30
7.09 Underwriting Guidelines............................................30
7.10 Transactions with Affiliates.......................................30
7.11 Limitation on Liens................................................30
7.12 Limitation on Guarantees...........................................31
7.13 Limitation on Distributions........................................31
7.14 Maintenance of Tangible Net Worth..................................31
7.15 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth...31
7.16 Maintenance of Profitability.......................................31
7.17 Servicing Tape.....................................................31
7.18 Servicer...........................................................31
7.19 Selection of Collateral............................................31
7.20 Maintenance of Property; Insurance.................................31
Section 8. Events of Default.....................................................32
Section 9. Remedies Upon Default.................................................34
Section 10. No Duty of Lender....................................................34
Section 11. Miscellaneous........................................................34
11.01 Waiver............................................................34
11.02 Notices...........................................................34
11.03 Indemnification and Expenses......................................35
11.04 Amendments........................................................36
11.05 Successors and Assigns............................................36
11.06 Survival..........................................................36
11.07 Captions..........................................................36
11.08 Counterparts......................................................36
11.09 Loan Agreement Constitutes Security Agreement; Governing Law......36
</TABLE>
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<TABLE>
<S> <C> <C>
11.10 Submission to Jurisdiction; Waivers...............................36
11.11 Waiver of Jury Trial..............................................37
11.12 Acknowledgments...................................................37
11.13 Hypothecation or Pledge of Loans..................................37
11.14 Servicing.........................................................37
11.15 Periodic Due Diligence Review.....................................38
11.16 Intent............................................................39
11.17 Confidential Information..........................................39
</TABLE>
SCHEDULES
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SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
EXHIBITS
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EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
EXHIBIT G Form of Blocked Account Agreement
EXHIBIT H Form of Bailee Agreement
EXHIBIT I Form of Insured Closing Letter
EXHIBIT J Settlement Agent Approval Request
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<PAGE> 5
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of May 15, 1998
between CHASTAIN CAPITAL CORPORATION, a Georgia corporation (the "Borrower"),
and MORGAN STANLEY MORTGAGE CAPITAL INC., a New York corporation (the "Lender").
RECITALS
The Borrower has requested that the Lender from time to time
make revolving credit loans to it to finance certain multifamily and commercial
mortgage loans owned or to be originated by the Borrower, and the Lender is
prepared to make such loans upon the terms and conditions hereof. Accordingly,
the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.01
or in other provisions of this Loan Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Affiliate" shall mean (i) with respect to the Lender, MS &
Co. and Morgan Stanley, Dean Witter & Co., and (ii) with respect to the
Borrower, any Person who controls, is controlled by or is under common control
with the Borrower, or any director, officer, partner or employee of the Borrower
or such Person.
"Applicable Collateral Percentage" shall mean 95%.
"Applicable Margin" shall mean 0.75%.
"Approved Non-Recourse Indebtedness" shall mean any
Indebtedness incurred by an Approved SPV, provided that such Indebtedness is
non-recourse (other than for environmental liability, fraud and willful
misconduct) to any shareholder or equity owner of such Approved SPV, and
provided further that the Lender shall have: (i) received, reviewed, and
approved all organizational documents of such Approved SPV; (ii) received,
reviewed, and approved a non-consolidation opinion in form and substance, and
from counsel, acceptable to the Lender in its sole good faith discretion, which
opinion shall state that in the event of an insolvency of the Approved SPV, any
shareholder or equity owner of such Approved SPV would not be consolidated into
any proceedings with respect to such insolvency; (iii) received and reviewed all
Governing Agreements, and approved the scope of the liability and indemnity
which might attach to any shareholder or equity owner thereunder (which approval
shall be consistent with the permitted non-recourse carve-outs set forth above);
(iv) received, reviewed, and approved a list of the SPV Assets, which list shall
be certified by the Approved SPV as a true, correct and complete list thereof;
and (v) received proof in form and substance acceptable to the Lender, including
but not limited to engineering reports and reports of the appropriate
Governmental Authorities, with respect to SPV Assets which constitute real
property, either that (i) (A) a Phase I environmental assessment with respect to
the SPV Assets has been conducted, which concluded that no Phase II
environmental assessment was necessary, or (B) if such Phase I environmental
assessment concluded that further investigation of such SPV Assets was
necessary, a Phase II environmental assessment was conducted which evidenced
that no remediation or further remedial action was required with respect
thereto, or, if remediation was deemed necessary, the cost of such remediation
does not exceed two percent (2%) of the Purchase Price of such SPV Asset, or
(ii) the Approved SPV has
<PAGE> 6
obtained an Environmental Insurance Policy covering all liabilities that may
arise from such SPV Assets. The Borrower will provide the Lender with such
evidence as the Lender deems satisfactory to establish the Purchase Price for
each SPV Asset for which remediation is required. No Indebtedness shall be
deemed Approved Non-Recourse Indebtedness unless and until all conditions of
this definition have been satisfied.
"Approved SPV" shall mean a Person, other than an individual,
which is formed or organized solely for the purpose of holding, directly or
indirectly, an ownership interest in the SPV Assets, does not engage in any
business unrelated to the SPV Assets, does not have any assets other than those
related to its interest in the SPV Assets, or any Indebtedness other than
Approved Non-Recourse Indebtedness, has its own separate books and records and
has its own accounts in each case which are separate and apart from the books
and records and accounts of any other Person, and holds itself out as being a
Person separate and apart from any other Person.
"Bankruptcy Code" shall mean the United States Bankruptcy Code
of 1978, as amended from time to time.
"Bailee Agreement" shall mean a Bailee Agreement, among the
Borrower, the Lender and a Settlement Agent, substantially in the form of
Exhibit H as the same shall be modified and supplemented and in effect from time
to time.
"Blocked Account Agreement" shall mean an agreement between
the Servicer and the Lender, substantially in the form of Exhibit G hereto, as
the same may be amended, supplemented or otherwise modified from time to time,
in which the Servicer acknowledges the Lender's lien on the Collection Account,
and agrees that, in the event that it receives notice that an Event of Default
hereunder has occurred and until such notice is rescinded by the Lender, the
Servicer shall only withdraw funds from the Collection Account on instruction
from the Lender.
"Borrower" shall have the meaning provided in the heading
hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of
all Eligible Mortgage Loans.
"Borrowing Base Deficiency" shall have the meaning provided in
Section 2.06 hereof.
"Breakage Fee" shall mean, as of any date a prepayment is made
with respect to a Loan (other than a Daily Reset Loan), the excess, if any, of
(a)(i) the amount prepaid multiplied by (ii) the Remaining Term divided by 360,
multiplied by (iii) the Interest Rate for the related Loan, minus (b) (i) the
Eurodollar Rate as of the date of prepayment, interpolated by using the
Eurodollar Rates (as they appear on page 5 of the Telerate Screen) for a term
closest to, but less than and greater than, respectively, the Remaining Term,
multiplied by (ii) the amount prepaid, multiplied by (iii) the Remaining Term
divided by 360.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day on which the New York Stock Exchange, the Federal Reserve
Bank of New York or the Custodian is authorized or obligated by law or executive
order to be closed.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a
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<PAGE> 7
balance sheet of such Person under GAAP, and, for purposes of this Loan
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall have the meaning provided in Section
4.01(b) hereof.
"Collateral Value" shall mean, with respect to each Eligible
Mortgage Loan, the Applicable Collateral Percentage of the lesser of (a) the
Market Value of such Mortgage Loan, and (b) the outstanding principal balance of
such Mortgage Loan; provided, that, the Collateral Value shall be deemed to be
zero with respect to each Mortgage Loan (1) in respect of which there is a
breach of a representation and warranty set forth on Schedule 1 which has a
material adverse effect on the value of such Mortgage Loan (assuming each
representation and warranty is made as of the date Collateral Value is
determined), (2) in respect of which there is a delinquency in the payment of
principal and/or interest which continues for a period in excess of 30 days
(without regard to any applicable grace periods), (3) which remains pledged to
the Lender hereunder later than 364 days after the date on which it is first
included in the Collateral, (4) which is a Table Funded Mortgage Loan which the
Custodian has failed to receive the related Mortgage Loan Documents on the third
Business Day following the applicable Funding Date and such failure exists on
the date Collateral Value is determined, or (5) which has been released from the
possession of the Custodian under the Custodial Agreement to the Borrower for a
period in excess of fourteen (14) days, unless a longer period has been
expressly permitted by the Lender in writing.
"Collection Account" shall mean one or more accounts
established by the Servicer subject to a security interest in favor of the
Lender and to the Blocked Account Agreement, into which all Collections shall be
deposited by the Servicer.
"Collections" shall mean, collectively, all collections and
proceeds on or in respect of the Mortgage Loans, excluding collections required
to be paid to the Servicer or a mortgagor on the Mortgage Loans and excluding
escrow accounts, reserve accounts and holdbacks established in connection with
the origination of the Mortgage Loans.
"Committed Loan" shall have the meaning assigned thereto in
Section 2.01(a) hereof.
"Custodial Agreement" shall mean the Custodial Agreement,
dated as of the date hereof, among the Borrower, the Custodian and the Lender,
substantially in the form of Exhibit B hereto, as the same shall be modified and
supplemented and in effect from time to time.
"Custodian" shall mean LaSalle National Bank, as custodian
under the Custodial Agreement, and its successors and permitted assigns
thereunder.
"Daily Reset Loans" shall mean Loans that bear interest at
rates based on the rate referred to as the rate for Daily Reset Loans in the
definition of Eurodollar Base Rate.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States
of America.
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<PAGE> 8
"Due Diligence Review" shall mean the performance by the
Lender of any or all of the reviews permitted under Section 11.15 hereof with
respect to any or all of the Mortgage Loans, as desired by the Lender from time
to time.
"Effective Date" shall mean the date upon which the conditions
precedent set forth in Section 5.01 shall have been satisfied.
"Eligible Mortgage Loan" shall mean a Mortgage Loan secured by
a first mortgage lien on a retail, office, hotel or other commercial property or
on a multi-family residential property which (i) conforms to the Underwriting
Guidelines, (ii) which generally has a principal balance equal to or greater
than $1,500,000 at origination and which is either a fixed rate or adjustable
rate mortgage loan, and (iii) as to which the representations and warranties in
Section 6.10 and Part I of Schedule 1 hereof are correct.
"Environmental Insurance Policy" shall mean a secured creditor
impaired property policy insuring against losses caused by the presence of
hazardous substances on or the migration of hazardous substances from the
related property, or such other insurance policy, together with any endorsements
thereto, acceptable to the Lender in its sole good faith discretion.
"ERE Yarmouth" shall mean ERE Yarmouth, Inc., a Delaware
corporation.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in Section
414(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.
"Eurocurrency Reserve Requirements" shall mean for any day as
applied to a Daily Reset Loan, and for any Interest Period for any Loan other
than a Daily Reset Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
or during such Interest Period, as applicable (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto), dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member
bank of such Governmental Authority.
"Eurodollar Base Rate" shall mean:
(a) for any Daily Reset Loan, with respect to each day
such Loan is outstanding (or if such day is not a Business Day, the next
succeeding Business Day), the rate per annum equal to the rate appearing at page
5 of the Telerate Screen as one-month LIBOR on such date, and if such rate shall
not be so quoted, the rate per annum at which the Lender is offered Dollar
deposits at or about 10:00 A.M., New York City time, on such date by prime banks
in the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Loans are then
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<PAGE> 9
being conducted for delivery on such day for a period of one month and in an
amount comparable to the amount of the Loans to be outstanding on such day; and
(b) for any Loan other than a Daily Reset Loan, with
respect to each day during each Interest Period pertaining to such Loan, the
rate per annum equal to the rate appearing at page 5 of the Telerate Screen, on
the first day of such Interest Period, for the two-month or three-month LIBOR,
as applicable, corresponding to such Interest Period, and if such rate shall not
be so quoted, the rate per annum at which the Lender is offered Dollar deposits
at or about 10:00 A.M., New York City time, on the first day of such Interest
Period, by prime banks in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations in respect of its Loans are then
being conducted for delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to the amount of
the Loans to be outstanding during such Interest Period.
"Eurodollar Rate" shall mean (a) with respect to each day a
Daily Reset Loan is outstanding, and (b) with respect to each day during each
Interest Period pertaining to a Loan other than a Daily Reset Loan, a rate per
annum determined by the Lender in its discretion in accordance with the
following formula (rounded upwards to the nearest 1/100th of one percent), which
rate as determined by the Lender shall be conclusive absent manifest error by
the Lender:
Eurodollar Base Rate
---------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Existing Advisory Agreement" shall mean that certain advisory
agreement between the Borrower and ERE Yarmouth with respect to the Mortgage
Loans.
"Existing Servicing Agreement" shall mean that certain
servicing agreement between the Borrower and ERE Yarmouth with respect to the
Mortgage Loans.
"Event of Default" shall have the meaning provided in Section
8 hereof.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the Lender from
three federal funds brokers of recognized standing selected by it.
"Funding Date" shall mean the date on which a Loan is made
hereunder.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time in the United States.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
the Borrower, any of its Subsidiaries or any of its properties.
"Governing Agreements" shall mean any and all agreements
evidencing the obligations of an Approved SPV with respect to any Indebtedness
incurred by such Approved SPV.
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<PAGE> 10
"Guarantee" shall mean, as to any Person, any obligation of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, by agreement to keep-well,
purchase assets, goods, securities or services, take-or-pay or otherwise);
provided that the term "Guarantee" shall not include (i) endorsements for
collection or deposit in the ordinary course of business, or (ii) obligations to
make servicing advances for delinquent taxes and insurance or other obligations
in respect of a Mortgaged Property, to the extent required by the Lender. The
amount of any Guarantee of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms "Guarantee" and "Guaranteed" used as verbs shall have
correlative meanings.
"Indebtedness" shall mean, for any Person: (a) then
outstanding obligations created, issued or incurred by such Person for borrowed
money (whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) then
outstanding obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered; (c) then outstanding Indebtedness of others secured by a
Lien on the Property of such Person, whether or not the respective Indebtedness
so secured has been assumed by such Person; (d) obligations (contingent or
otherwise) of such Person in respect of letters of credit or similar instruments
issued or accepted by banks and other financial institutions for account of such
Person; (e) then outstanding Capital Lease Obligations of such Person; (f) then
outstanding obligations of such Person under repurchase agreements or like
arrangements; (g) then outstanding Indebtedness of others Guaranteed by such
Person; (h) all then outstanding obligations of such Person incurred in
connection with the acquisition or carrying of fixed assets by such Person; and
(i) then outstanding Indebtedness of general partnerships of which such Person
is a general partner.
"Insured Closing Letter" shall mean a letter addressed to the
Borrower and the Lender from the title insurance underwriter for which the
Settlement Agent is serving as an agent for each Table Funded Mortgage Loan,
which letter shall be substantially in the form of the letter attached hereto as
Exhibit I, or in form and substance reasonably acceptable to the Borrower and
the Lender.
"Interest Period" shall mean, with respect to any Loan, each
period commencing on the date such Loan is made and ending on the date two
months or three months thereafter, as the Borrower may select as provided in
Section 3.03 hereof, except that, in the case of any Interest Period for any
Loan of two or three months, each Interest Period that commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may begin before and end
after the Termination Date; (ii) each Interest Period that would otherwise end
on a day that is not a Business Day shall end on the next succeeding Business
Day (or, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); and (iii) notwithstanding
clause (i) above, no Interest Period for any Loan of one month shall have a
duration of less than one month and, if the Interest Period for any Loan would
otherwise be a shorter period, such Loan shall only be available as a Daily
Reset Loan.
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<PAGE> 11
"Interest Rate" shall have the meaning provided in Section
2.05 (b) hereof.
"Interest Rate Protection Agreement" shall mean, with respect
to any or all of the Mortgage Loans, any short sale of US Treasury Security, or
futures contract, or mortgage related security, or Eurodollar futures contract,
or options related contract, or interest rate swap, cap or collar agreement or
similar arrangements providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by the Borrower and an Affiliate of the
Lender.
"Large Balance Mortgage Loans" shall mean Eligible Mortgage
Loans which have an outstanding principal balance equal to or greater than
$20,000,000.
"Lender" shall have the meaning provided in the heading
hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security
interest or similar encumbrance.
"Loan" shall mean any Committed Loan or Uncommitted Loan, as
applicable, and collectively "Loans" shall mean the sum of all Committed Loans
and Uncommitted Loans.
"Loan Agreement" shall mean this Master Loan and Security
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
"Loan Documents" shall mean, collectively, this Loan
Agreement, the Note, the Custodial Agreement, and the Blocked Account Agreement.
"Market Value" shall mean, as of any date in respect of an
Eligible Mortgage Loan, the price at which such Eligible Mortgage Loan could
readily be sold as determined in good faith by the Lender, which price may be
determined to be zero. In determining the Market Value of each Eligible Mortgage
Loan the Lender shall consider any Interest Rate Protection Agreement covering
such Eligible Mortgage Loan and may also consider all information which it deems
relevant. The Lender's determination of Market Value shall be conclusive upon
the parties absent manifest error on the part of the Lender.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property taken as a whole, business, operations, financial condition
or prospects of the Borrower, (b) the ability of the Borrower to perform its
obligations under any of the Loan Documents to which it is a party, (c) the
validity or enforceability of any of the Loan Documents, (d) the rights and
remedies of the Lender under any of the Loan Documents, (e) the timely payment
of the principal of or interest on the Loans or other amounts payable in
connection therewith or (f) the Collateral, taking into account the effect of
any cash payment actually made by the Borrower on account of a Borrowing Base
Deficiency pursuant to Section 2.06.
"Maximum Committed Amount" shall mean $250,000,000.
"Maximum Credit" shall mean the sum of the Maximum Committed
Amount and the Maximum Uncommitted Amount, which shall equal $500,000,000.
"Maximum Uncommitted Amount" shall mean $250,000,000.
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<PAGE> 12
"Mortgage" shall mean the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a first lien on the fee or
leasehold in real property securing the Mortgage Note and the assignment of
rents and leases related thereto.
"Mortgage File" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan" shall mean a mortgage loan which the Custodian
has been instructed to hold for the Lender pursuant to the Custodial Agreement,
and which Mortgage Loan includes, without limitation, (i) a Mortgage Note and
related Mortgage and (ii) all right, title and interest of the Borrower in and
to the Mortgaged Property covered by such Mortgage.
"Mortgage Loan Documents" shall mean, with respect to a
Mortgage Loan, the documents comprising the Mortgage File for such Mortgage
Loan.
"Mortgage Loan Schedule" shall have the meaning assigned
thereto in the Custodial Agreement.
"Mortgage Loan Schedule and Exception Report" shall mean the
mortgage loan schedule and exception report prepared by the Custodian pursuant
to the Custodial Agreement.
"Mortgage Loan Lender Tape" shall mean a computer-readable
magnetic tape containing the following information with respect to each Mortgage
Loan, to be delivered by the Borrower to the Lender pursuant to Section 2.03(b)
hereof: tape fields as are set forth in the attached Schedule 5A.
"Mortgage Loan Custodian Tape" shall mean a computer-readable
magnetic tape containing the following information with respect to each Mortgage
Loan, to be delivered by the Borrower to the Lender pursuant to Section 2.03(b)
hereof: tape fields as are set forth in the attached Schedule 5B.
"Mortgage Note" shall mean the original executed promissory
note or other evidence of the indebtedness of a Mortgagor with respect to a
Mortgage Loan.
"Mortgaged Property" shall mean the real property (including
all improvements, buildings, fixtures, building equipment and personal property
thereon securing repayment of the Mortgage Loan and all additions, alterations
and replacements made at any time with respect to the foregoing) and all other
collateral securing repayment of the debt evidenced by a Mortgage Note.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"MS & Co." shall mean Morgan Stanley & Co. Incorporated, a
registered broker-dealer.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been or are
required to be made by the Borrower or any ERISA Affiliate and that is covered
by Title IV of ERISA.
"Net Income" shall mean, for any period, the net income of the
Borrower for such period as determined in accordance with GAAP.
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<PAGE> 13
"Note" shall mean the promissory note provided for by Section
2.02(a) hereof for Loans and any promissory note delivered in substitution or
exchange therefor, in each case as the same may be modified and supplemented and
as the same shall be in effect from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, limited liability company,
trust, unincorporated association or government (or any agency, instrumentality
or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by the Borrower or any ERISA Affiliate and covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of
any Loan or any other amount under this Loan Agreement, the Note or any other
Loan Document that is not paid when due to the Lender (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 2% per annum
plus the Prime Rate.
"Purchase Agreement" shall mean, in the case of real property
acquired by the Borrower, the purchase agreement providing for the acquisition
of such real property.
"Purchase Price" shall mean the purchase price allocable to
the subject real property paid by the Borrower, pursuant to the Purchase
Agreement under which such Borrower acquired such real property.
"Prime Rate" shall mean the prime rate announced to be in
effect from time to time, as published as the average rate in The Wall Street
Journal.
"Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Regulations G, T, U and X" shall mean Regulations G, T, U and
X of the Board of Governors of the Federal Reserve System (or any successor), as
the same may be modified and supplemented and in effect from time to time.
"Remaining Term" shall mean, with respect to any Loan (other
than a Daily Reset Loan) prepaid in advance of the last day of an Interest
Period, the number of days remaining from the date so prepaid through the last
day of such Interest Period, inclusive.
"Responsible Officer" shall mean, as to any Person, the chief
executive officer or, with respect to financial matters, the chief financial
officer of such Person.
"Secured Obligations" shall have the meaning provided in
Section 4.01(c) hereof.
"Servicer" shall have the meaning provided in Section 11.14(c)
hereof.
"Servicing Agreement" shall have the meaning provided in
Section 11.14(c) hereof.
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"Servicing Records" shall have the meaning provided in Section
11.14(b) hereof.
"Settlement Agent" shall mean, with respect to any Loan, an
entity satisfactory to the Lender in its sole discretion, which the Lender has
authorized and identified on Annex 12 of the Custodial Agreement or subsequently
authorized by the Lender pursuant to a Settlement Agent Approval Request (which
may be a title company, escrow company or attorney in accordance with local law
and practice in the jurisdiction where the related Table Funded Mortgage Loan is
being originated) to which the proceeds of such Loan are to be wired by the
Custodian pursuant to the instructions of the Lender.
"Settlement Agent Approval Request" shall mean the request for
approval of an additional Settlement Agent submitted in the form of Exhibit J
hereto, as described in Section 2.03(b) hereof.
"Single Employer Plan" shall mean any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"SPV Assets" shall mean any and all assets owned by an
Approved SPV.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"Table Funded Mortgage Loan" shall mean a Mortgage Loan which
is pledged to the Lender simultaneously with the origination thereof by the
Borrower, which origination is financed in part or in whole with proceeds of
Loans advanced directly to the Settlement Agent and held in escrow as set forth
in Section 2.03(b) hereof.
"Tangible Net Worth" shall mean, as of a particular date,
(a) all amounts which would be included under equity on a
balance sheet of the Borrower at such date, determined in accordance with GAAP,
less
(b) (i) amounts owing to the Borrower from Affiliates and (ii)
intangible assets.
"Termination Date" shall mean July 15, 1999, or such earlier
date on which this Loan Agreement shall terminate in accordance with the
provisions hereof or by operation of law.
"Test Period" shall have the meaning provided in Section 7.16
hereof.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of the Borrower during such period less the amount of any
nonspecific balance sheet reserves maintained in accordance with GAAP.
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"Uncommitted Loan" shall have the meaning assigned thereto in
Section 2.01(b) hereof.
"Underwriting Guidelines" shall mean the underwriting
guidelines attached as Exhibit F hereto.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect on the date hereof in the State of New York; provided that if
by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.
1.02 Accounting Terms and Determinations. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lender hereunder shall be
prepared, in accordance with GAAP.
Section 2. Loans, Note and Prepayments.
2.01 Loans.
(a) Subject to fulfillment of the conditions precedent set
forth in Sections 5.01 and 5.02 hereof, and provided that no Default shall have
occurred and be continuing hereunder, the Lender agrees from time to time, on
the terms and conditions of this Agreement, to make loans (individually, a
"Committed Loan"; collectively, the "Committed Loans") to the Borrower in
Dollars, from and including the Effective Date to and including the Termination
Date in an aggregate principal amount at any one time outstanding (i.e. if the
Borrower repays a portion of the Maximum Committed Amount, such portion may be
reborrowed) up to but not exceeding the Maximum Committed Amount as in effect
from time to time.
(b) In addition to the foregoing, in the event that Loans
outstanding would exceed the Maximum Committed Amount, the Lender may from time
to time in its sole discretion, on the terms and conditions of this Agreement,
make loans (individually, an "Uncommitted Loan"; collectively, the "Uncommitted
Loans") to the Borrower in Dollars during the period from and including the
Effective Date to and including the Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the Maximum
Uncommitted Amount as in effect from time to time.
(c) In determining whether Loans outstanding secured by
Eligible Mortgage Loans are Committed Loans or Uncommitted Loans, such Loans
shall first be deemed Committed Loans up to the Maximum Committed Amount, and
then the remainder shall be deemed Uncommitted Loans.
(d) Subject to the terms and conditions of this Agreement,
during such period the Borrower may borrow, repay and reborrow hereunder.
(e) In no event shall a Loan be made when any Default or
Event of Default has occurred and is continuing.
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2.02 Notes.
(a) The Loans made by the Lender shall be evidenced by a
single promissory note of the Borrower substantially in the form of Exhibit A
hereto (the "Note"), dated the date hereof, payable to the Lender in a principal
amount equal to the amount of the Maximum Credit as originally in effect and
otherwise duly completed. The Lender shall have the right to have its Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise.
(b) The date, amount, interest rate and duration of the
Interest Period (if applicable) of each Loan made by the Lender to the Borrower,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of the Note, endorsed by the
Lender on the schedule attached to the Note or any continuation thereof;
provided that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a payment
when due of any amount owing hereunder or under the Note in respect of the
Loans.
2.03 Procedure for Borrowing.
(a) Mortgage Loans other than Table Funded Mortgage Loans:
(i) In addition to such other items as are specified
in this Section 2.03, including (without limitation) the required
Request for Borrowing (as defined below), the timely delivery by the
Borrower or such other designated party to the Lender or its designee
of those items related to a given Eligible Mortgage Loan as are set
forth in Schedule 4 will be conditions precedent to the obligations of
Lender to fund the corresponding Loan.
(ii) The Borrower may request a borrowing hereunder,
on any Business Day during the period from and including the Effective
Date to and including the Termination Date, by delivering to the
Lender, with a copy to the Custodian, an irrevocable written request
for borrowing, substantially in the form of Exhibit D attached hereto
(a "Request for Borrowing"), which request must be received by the
Lender prior to 1:00 p.m., New York City time, one (l) Business Day
prior to the requested Funding Date. Such Request for Borrowing shall
(i) attach a schedule identifying the Eligible Mortgage Loans that the
Borrower proposes to pledge to the Lender and to be included in the
Borrowing Base in connection with such borrowing, (ii) specify the
requested Funding Date and, subject to Section 3.03 hereof, the
Interest Period, if any, (iii) include a Mortgage Loan Lender Tape for
the Eligible Mortgage Loans that Borrower proposes to pledge to the
Lender and to be included in the Borrowing Base in connection with such
borrowing, and (iv) attach an officer's certificate signed by a
Responsible Officer of the Borrower as required by Section 5.02(b)
hereof.
(iii) Upon the Borrower's request for a borrowing
pursuant to Section 2.03(a)(ii), the Lender shall, assuming all
conditions precedent set forth in Section 5.01 and 5.02 have been met
and provided no Default shall have occurred and be continuing, make a
Committed Loan to the Borrower on the requested Funding Date, in the
amount so requested to an account designated in the Request for
Borrowing; provided, however, that with respect to Table Funded
Mortgage Loans, the Lender shall not be required to wire funds to any
party other than the Settlement Agent.
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(iv) Upon the Borrower's request for a borrowing
pursuant to Section 2.03(a)(ii) and after the Maximum Committed Amount
shall have been advanced to the Borrower and is then outstanding, the
Lender may, at its sole option, assuming all conditions precedent set
forth in Section 5.01 and 5.02 have been met and provided no Default
shall have occurred and be continuing, make an Uncommitted Loan to the
Borrower on the requested Funding Date, in the amount so requested to
an account designated in the Request for Borrowing; provided, however,
that with respect to Table Funded Mortgage Loans, the Lender shall not
be required to wire funds to any party other than the Settlement Agent.
(v) (i) The Borrower shall release to the Custodian
no later than 10:00 a.m., New York City time, one (1) Business Day
prior to the requested Funding Date, the Mortgage File pertaining to
each Eligible Mortgage Loan (other than a Table Funded Mortgage Loan,
for which the procedures for funding are set forth in section 2.03(b)
hereof) to be pledged to the Lender and included in the Borrowing Base
on such requested Funding Date, in accordance with the terms and
conditions of the Custodial Agreement.
(b) Table Funded Mortgage Loans:
(i) The Borrower shall deliver an identification
certificate to the Bailee pursuant to the related Bailee Agreement
("Identification Certificate") and on or prior to the Funding Date
indicated on the Identification Certificate delivered by the Borrower,
the Borrower shall have caused to be delivered to the Bailee the
documents required pursuant to the Bailee Agreement, upon which the
Settlement Agent shall be required, pursuant to the terms of the
related closing escrow agreement executed among the Settlement Agent,
the Borrower and the Mortgagor, to (A) hold any funds received from the
Lender until such time as they are disbursed in accordance with the
escrow instructions, and (B) return the funds received from the Lender
to the Lender in the event that the Table Funded Mortgage Loan is not
originated in accordance with the escrow instructions, and the Bailee
shall be required, pursuant to terms of the related Bailee Agreement,
to (1) hold the Mortgage Loan Documents in connection with such Table
Funded Mortgage as bailee and agent for the Lender and (2) forward the
Mortgage Loan Documents in connection with such Table Funded Mortgage
Loan to the Custodian for receipt no later than the third Business Day
following the date of origination of such Table Funded Mortgage Loan.
(ii) No settlement agent may be used other than one
authorized as such as set forth in (A) Annex 12 attached to the
Custodial Agreement, or (B) a "Settlement Agent Approval Request"
signed by the Lender, as described below (such approved settlement
agent, a "Settlement Agent"). The Borrower may request the Lender's
approval (which approval shall be granted in the Lender's sole
discretion) of proposed Settlement Agents not identified on Annex 12 of
the Custodian Agreement by completing such request in the form of
Exhibit J hereto, which request shall include the name, address, and
the errors and omissions policy of each proposed Settlement Agent.
(iii) Each Settlement Agent shall establish and
maintain a segregated escrow account (the "Escrow Account") for and on
behalf of the Lender. All amounts remitted on account of Loans made or
to be made by the Lender to the Borrower, which the Borrower instructs
the Lender to remit, shall be deposited in such Escrow Account by the
Lender. The
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Lender shall not be required to remit any funds to the Escrow Account,
unless and until all conditions precedent set forth in the Loan
Agreement for the making of such Loan have been satisfied. All related
fees and expenses for the Escrow Account shall be borne by the
Borrower. Upon request, Borrower shall provide the Lender with the
federal wire reference number for a particular payment. The Escrow
Account shall be under the exclusive dominion and control of the
Lender. Neither the Borrower nor any other Person claiming on behalf of
or through the Borrower shall have any right or authority, whether
express or implied, to close or make use of, or withdraw any funds
from, the Escrow Account except as expressly provided to the contrary
herein. The Lender hereby authorizes the Settlement Agent, unless the
Settlement Agent shall receive notice in writing from the Lender to the
contrary, to apply all funds received from the Lender which are
deposited to the Escrow Account as directed by the Borrower (subject to
clause (iv) below). Funds retained in the Escrow Account shall remain
uninvested.
(iv) On each Funding Date, unless otherwise
instructed by the Lender, the Settlement Agent shall disburse all funds
standing to the credit of the Escrow Account in accordance with the
settlement statement and the disbursement instructions contained in the
Closing Escrow Agreement approved by the Lender. The Settlement Agent
will immediately disburse such funds provided, that (A) sufficient
funds exist in the Escrow Account; (B) such instructions do not include
Borrower as payee, unless otherwise authorized by the Lender in writing
to the Settlement Agent; (C) the Custodian has received a fully
executed Bailee Agreement and a Table Funded Trust Receipt issued
thereunder; and (D) if a conflict exists between the instructions of
the Lender and the instructions of the Borrower, the Settlement Agent
shall follow the Lender's instructions.
(c) All Mortgage Loans:
(i) Pursuant to the Custodial Agreement, the
Custodian shall deliver to the Lender and the Borrower, no later than
3:00 p.m. on a Funding Date (and, with respect to Table Funded Mortgage
Loans, on the first Business day following the date of receipt of the
Mortgage Loan Documents), a Trust Receipt (as defined in the Custodial
Agreement) in respect of all Mortgage Loans pledged to the Lender on
such Funding Date, and a Mortgage Loan Schedule and Exception Report.
(ii) Subject to Section 5 hereof, such borrowing will
then be made available to the Borrower by the Lender transferring, via
wire transfer, to the following account of the Borrower (or, with
respect to each Table Funded Mortgage Loan, such other account as set
forth in the applicable Bailee Agreement): Chase Manhattan, for the A/C
of Chastain Capital Corporation, A/C# 304222828, ABA# 021000021, or
Settlement Agent, as the case may be, as specified in the Request for
Borrowing, in the aggregate amount of such borrowing in funds
immediately available to the Borrower.
2.04 Limitation on Types of Loans; Illegality. Anything herein
to the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Base Rate:
(a) the Lender determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Loans as provided herein; or
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(b) it becomes unlawful for the Lender to honor its
obligation to make or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrower prompt notice thereof
and, so long as such condition remains in effect, the Lender shall be under no
obligation to make additional Loans, and the Borrower shall, at its election,
either prepay all such Loans as may be outstanding or pay interest on such Loans
at a rate per annum equal to the Federal Funds Rate plus 1%.
2.05 Repayment of Loans; Interest.
(a) The Borrower hereby promises to repay in full on the
Termination Date the then aggregate outstanding principal amount of the Loans.
(b) The Borrower hereby promises to pay to the Lender
interest on the unpaid principal amount of each Loan for the period from and
including the date such Loan is advanced to but excluding the date such Loan
shall be paid in full, at a rate per annum (the "Interest Rate") equal to the
Eurodollar Rate plus the Applicable Margin. Notwithstanding the foregoing, the
Borrower hereby promises to pay to the Lender interest at the applicable
Post-Default Rate on the principal amount of any Loan outstanding and on any
other amount payable by the Borrower hereunder or under the Note that shall not
be paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable monthly on the first Business Day of each
month and for the last month of the Loan Agreement on the first Business Day of
such last month and on the Termination Date, except that interest payable at the
Post-Default Rate shall accrue daily and shall be payable upon such accrual.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Lender shall give notice thereof to the Borrower. The Lender
shall, prior to each due date hereunder, deliver notice to the Borrower of the
amount due on such due date together with the Lender's calculation thereof.
(c) It is understood and agreed that, unless and until an
Event of Default shall have occurred and be continuing, the Borrower shall be
entitled to the proceeds of the Mortgage Loans pledged to the Lender hereunder.
2.06 Mandatory Prepayments or Pledge.
If at any time the aggregate outstanding principal amount of
Loans exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined
by the Lender and notified to the Borrower on any Business Day, the Borrower
shall no later than one Business Day after receipt of such notice, either prepay
the Loans in part (the Borrower to determine which Loans to prepay in part) or
in whole or pledge additional Eligible Mortgage Loans (which Collateral shall be
in all respects acceptable to the Lender) to the Lender, such that after giving
effect to such prepayment or pledge the aggregate outstanding principal amount
of the Loans does not exceed the Borrowing Base.
2.07 Optional Prepayments. The Loans are prepayable on the
last day of each Interest Period without premium or penalty, in whole or in
part, and may be prepaid on any other date subject to Section 2.08 hereof. Any
amounts prepaid shall be applied to repay the outstanding principal amount of
any Loans (together with interest thereon) designated by the Borrower for
prepayment (so long as no Event of Default then exists) until paid in full.
Amounts repaid may be reborrowed in accordance with the terms of this Loan
Agreement. If such notice is given, the amount
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specified in such notice shall be due and payable on the date specified therein,
together with accrued interest to such date on the amount prepaid. Partial
prepayments shall be in a minimum aggregate principal amount of $1,000,000.
2.08 Indemnity If the Borrower makes a prepayment of the Loans
(other than Daily Reset Loans) on any day which is not the last day of the
applicable Interest Period, the Borrower shall indemnify the Lender and hold the
Lender harmless from any Breakage Fee. This Section 2.08 shall survive
termination of the Loan Agreement and payment of the Note.
2.09 Extension of Termination Date. At the request of the
Borrower made at least thirty (30) days, but in no event earlier than ninety
(90) days, prior to the then current Termination Date, the Lender may in its
sole discretion extend the Termination Date for a period of 364 days by giving
written notice of such extension to the Borrower no later than twenty (20) days,
but in no event earlier than thirty (30) days, prior to the then current
Termination Date. Any failure by the Lender to deliver such notice of extension
shall be deemed to be the Lender's determination not to extend the then current
Termination Date.
Section 3. Payments; Computations; Etc.
3.01 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrower
under this Loan Agreement and the Note, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender at
the following account maintained by the Lender: Account No. 40615114, For the
A/C of MSMCI, Citibank, N.A.ABA# 021000089, Attn: Mr. Marc Flamino, not later
than 1:00 p.m., New York City time, on the date on which such payment shall
become due (and each such payment made after such time on such due date shall be
deemed to have been made on the next succeeding Business Day). The Borrower
acknowledges that it has no rights of withdrawal from the foregoing account.
(b) Except to the extent otherwise expressly provided herein
(including, without limitation, by application of the definition of "Interest
Period"), if the due date of any payment under this Agreement or the Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
3.02 Computations. Interest on the Loans shall be computed on
the basis of a 360-day year for the actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
3.03 Interest Periods. The Borrower may request a 60- or 90-
day Interest Period for any Loans at least equal to $50,000,000 in the
aggregate, not later than 3:00 p.m., New York City time, one (1) Business Day
prior to the first day of such Interest Period, by delivery of an irrevocable
written notice to the Lender of the desired Interest Period and a list of the
Loans to which such Interest Period is to relate. If the Borrower fails to so
request a 60- or 90-day Interest Period for any Loan, such Loan shall be a Daily
Reset Loan unless and until the Borrower shall make a subsequent request.
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3.04 U.S. Taxes.
(a) The Borrower agrees to pay to the Lender such additional
amounts as are necessary in order that the net payment of any amount due to the
Lender hereunder after deduction for or withholding in respect of any U.S. Tax
(as defined below) imposed after the date hereof with respect to such payment
(or in lieu thereof, payment of such U.S. Tax by the Lender), will not be less
than the amount stated herein to be then due and payable; provided that the
foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to the Lender hereunder unless the Lender
is entitled to submit a Form 1001 (relating to the Lender and entitling
it to a complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or Form 4224
(relating to all interest to be received by the Lender hereunder in
respect of the Loans), or
(ii) to any U.S. Tax imposed solely by reason of the failure
by the Lender to comply with applicable certification, information,
documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United States
of America of the Lender if such compliance is required by statute or
regulation of the United States of America as a precondition to relief
or exemption from such U.S. Tax.
For the purposes of this Section 3.04, (x) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (y) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related form or forms as may from time to time be adopted by
the relevant taxing authorities of the United States of America to document a
claim to which such Form relates), and (z) "U.S. Taxes" shall mean any present
or future tax, assessment or other charge or levy imposed by or on behalf of the
United States of America or any taxing authority thereof or therein.
(b) Within 30 days after paying any such amount to the
Lender, and within 30 days after it is required by law to remit such deduction
or withholding to any relevant taxing or other authority, the Borrower shall
deliver to the Lender evidence satisfactory to the Lender of such deduction,
withholding or payment (as the case may be).
(c) The Lender represents and warrants to the Borrower that
on the date hereof the Lender is either incorporated under the laws of the
United States or a State thereof or is entitled to submit a Form 1001 (relating
to the Lender and entitling it to a complete exemption from withholding on all
interest to be received by it hereunder in respect of the Loans) or Form 4224
(relating to all interest to be received by the Lender hereunder in respect of
the Loans).
Section 4. Collateral Security.
4.01 Collateral; Security Interest.
(a) Pursuant to the Custodial Agreement, the Custodian shall
hold the Mortgage Loan Documents as exclusive bailee and agent for the Lender
pursuant to the terms of the Custodial Agreement and shall deliver to the Lender
Trust Receipts (as defined in the Custodial Agreement) each to the effect that
it has reviewed such Mortgage Loan Documents in the manner and to the extent
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required by the Custodial Agreement and it has identified any deficiencies in
such Mortgage Loan Documents as so reviewed.
(b) All of the Borrower's right, title and interest in, to
and under each of the following items of property, whether now owned or
hereafter acquired, now existing or hereafter created and wherever located, is
hereinafter referred to as the "Collateral":
(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents, including without
limitation all promissory notes, and all Servicing Records (as defined
in Section 11.14(b) below), servicing agreements and any other
collateral pledged to the Borrower or otherwise relating to such
Mortgage Loans, together with all files, documents, instruments,
surveys, certificates, correspondence, appraisals, computer programs,
computer storage media, accounting records and other books and records
of the Borrower relating thereto;
(iii) all mortgage guaranties and insurance (issued by
governmental agencies or otherwise) and any mortgage insurance
certificate or other document evidencing such mortgage guaranties or
insurance relating to any Mortgage Loan and all claims and payments
thereunder;
(iv) all other insurance policies and insurance proceeds
relating to any Mortgage Loan or the related Mortgaged Property;
(v) all Interest Rate Protection Agreements;
(vi) all Insured Closing Letters covering any or all of the
Mortgage Loans;
(vii) the Collection Account and all monies from time to time
on deposit in the Collection Account;
(viii) all "general intangibles" as defined in the Uniform
Commercial Code relating to or constituting any and all of the
foregoing; and
(ix) any and all replacements, substitutions, distributions
on or proceeds of any and all of the foregoing.
(c) The Borrower hereby assigns, pledges and grants a
security interest in all of its right, title and interest in, to and under the
Collateral to the Lender to secure the repayment of principal of and interest on
all Loans and all other amounts owing to the Lender hereunder, under the Note
and under the other Loan Documents (collectively, the "Secured Obligations").
The Borrower agrees to mark its computer records and tapes to evidence the
interests granted to the Lender hereunder.
4.02 Further Documentation. At any time and from time to
time, upon the written request of the Lender, and at the sole expense of the
Borrower, the Borrower will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as the Lender may reasonably request for
the purpose of obtaining or preserving the full benefits of this Loan Agreement
and of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the Liens created hereby. The
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Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of the Borrower to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Loan Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
4.03 Changes in Locations, Name, etc. The Borrower shall
not (i) change the location of its chief executive office/chief place of
business from that specified in Section 6 hereof or (ii) change its name,
identity or corporate structure (or the equivalent) or change the location where
it maintains its records with respect to the Collateral unless it shall have
given the Lender at least 30 days prior written notice thereof and shall have
delivered to the Lender all Uniform Commercial Code financing statements and
amendments thereto as the Lender shall request and taken all other actions
deemed necessary by the Lender to continue its perfected status in the
Collateral with the same or better priority.
4.04. Lender's Appointment as Attorney-in-Fact.
(a) The Borrower hereby irrevocably constitutes and
appoints the Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Borrower and in the name of
the Borrower or in its own name, from time to time in the Lender's discretion,
for the purpose of carrying out the terms of this Loan Agreement, upon the
Borrower's failure to do so within ten (10) days after the Lender's written
request (provided, however, that if the Lender determines in good faith that
waiting ten (10) days prior to carrying out the terms of this Loan Agreement
could have an adverse effect on the Lender's rights or the value of the
Collateral, the Lender shall have the right to act following any shorter period
of time which the Lender deems appropriate) to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Loan Agreement, and,
without limiting the generality of the foregoing, the Borrower hereby gives the
Lender the power and right, on behalf of the Borrower, without assent by, but
with notice to, the Borrower, if an Event of Default shall have occurred and be
continuing, to do the following:
(i) in the name of the Borrower or its own name, or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any mortgage insurance or with respect to any other
Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Lender for the purpose of collecting any and all
such moneys due under any such mortgage insurance or with respect to
any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under
any Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Lender or as the Lender shall direct;
(B) to ask or demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at
any time in respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of
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<PAGE> 24
competent jurisdiction to collect the Collateral or any thereof and to
enforce any other right in respect of any Collateral; (E) to defend any
suit, action or proceeding brought against the Borrower with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and, in connection therewith,
to give such discharges or releases as the Lender may deem appropriate;
and (G) generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Lender were the absolute owner thereof for
all purposes, and to do, at the Lender's option and the Borrower's
expense, at any time, and from time to time, all acts and things which
the Lender deems necessary to protect, preserve or realize upon the
Collateral and the Lender's Liens thereon and to effect the intent of
this Loan Agreement, all as fully and effectively as the Borrower might
do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) The Borrower also authorizes the Lender, at any time
and from time to time, to execute, in connection with any sale provided for in
Section 4.07 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to
protect the Lender's interests in the Collateral and shall not impose any duty
upon the Lender to exercise any such powers. The Lender shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither the Lender nor any of its officers, directors, or employees
shall be responsible to the Borrower for any act or failure to act hereunder,
except for its own gross negligence or willful misconduct.
(d) In the event the Lender takes action without prior
notice to the Borrower in accordance with clause (a) above, the Lender shall
provide the Borrower with subsequent written notice of any actions taken by the
Lender pursuant to this Section 4.04.
4.05. Performance by Lender of Borrower's Obligations. If the
Borrower fails to perform or comply with any of its agreements contained in the
Loan Documents, and the Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, as provided herein, the expenses
of the Lender incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the Post-Default
Rate, shall be payable by the Borrower to the Lender on demand and shall
constitute Secured Obligations.
4.06. Proceeds. If an Event of Default shall occur and be
continuing, (a) all proceeds of Collateral received by the Borrower consisting
of cash, checks and other near-cash items shall be held by the Borrower in trust
for the Lender, segregated from other funds of the Borrower, and shall forthwith
upon receipt by the Borrower be turned over to the Lender in the exact form
received by the Borrower (duly endorsed by the Borrower to the Lender, if
required) and (b) any and all such proceeds received by the Lender (whether from
the Borrower or otherwise) may, in the sole discretion of the Lender, but
subject to the terms and conditions of the Mortgage Loan Documents, be held by
the Lender as collateral security for, and/or then or at any time thereafter may
be applied by the Lender against, the Secured Obligations (whether matured or
unmatured), such application to be in such order as the Lender shall elect. Any
balance of such proceeds remaining after the Secured Obligations shall have been
paid in full and this Loan Agreement shall have been terminated shall be paid
over to the Borrower or to whomsoever may be lawfully entitled to receive the
same. For
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<PAGE> 25
purposes hereof, proceeds shall include, but not be limited to, all principal
and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.
4.07. Remedies. If an Event of Default shall occur and be
continuing, the Lender may exercise, in addition to all other rights and
remedies granted to it in this Loan Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Lender without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrower or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Lender shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrower, which right or equity is hereby waived or released.
The Borrower further agrees, at the Lender's request, to assemble the Collateral
and make it available to the Lender at places which the Lender shall reasonably
select, whether at the Borrower's premises or elsewhere. The Lender shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Lender
hereunder, including without limitation reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Lender may elect, and only after such application and after
the payment by the Lender of any other amount required or permitted by any
provision of law, including without limitation Section 9-504(1)(c) of the
Uniform Commercial Code, need the Lender account for the surplus, if any, to the
Borrower. To the extent permitted by applicable law, the Borrower waives all
claims, damages and demands it may acquire against the Lender arising out of the
exercise by the Lender of any of its rights hereunder, other than those claims,
damages and demands arising from the gross negligence or willful misconduct of
the Lender. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Borrower shall
remain liable for any deficiency (plus accrued interest thereon as contemplated
pursuant to Section 2.05(b) hereof) if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorneys employed by the Lender to
collect such deficiency.
4.08. Limitation on Duties Regarding Presentation of
Collateral. The Lender's duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code or otherwise, shall be to deal with it in the
same manner as the Lender deals with similar property for its own account.
Neither the Lender nor any of its directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrower or
otherwise.
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<PAGE> 26
4.09. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
4.10 Release of Security Interest. Upon termination of this
Loan Agreement and repayment to the Lender of all Secured Obligations, the
Lender shall release its security interest in any remaining Collateral.
Section 5. Conditions Precedent.
5.01 Initial Loan. The obligation of the Lender to make its
initial Loan hereunder is subject to the satisfaction, immediately prior to or
concurrently with the making of such Loan, of the condition precedent that the
Lender shall have received all of the following documents, each of which shall
be satisfactory to the Lender and its counsel in form and substance:
(a) Loan Documents. The Loan Documents, duly completed and
executed.
(i) Note. The Note, duly completed and executed;
(ii) Custodial Agreement. The Custodial Agreement, duly
executed and delivered by the Borrower and the Custodian. In addition,
the Borrower shall have taken such other action as the Lender shall
have reasonably requested in order to perfect the security interests
created pursuant to the Loan Agreement;
(iii) Blocked Account Agreement. A Blocked Account Agreement,
duly executed by the parties thereto;
(b) Organizational Documents. A good standing certificate
and certified copies of the charter and by-laws (or equivalent documents) of the
Borrower and of all corporate or other authority for the Borrower with respect
to the execution, delivery and performance of the Loan Documents and each other
document to be delivered by the Borrower from time to time in connection
herewith (and the Lender may conclusively rely on such certificate until it
receives notice in writing from the Borrower to the contrary);
(c) Legal Opinion. A legal opinion of counsel to the
Borrower, substantially in the form attached hereto as Exhibit C;
(d) Mortgage Loan Schedule and Exception Report. A Mortgage
Loan Schedule and Exception Report, dated the Effective Date, from the
Custodian, duly completed;
(e) Servicing Agreement(s). Any Servicing Agreement,
certified as a true, correct and complete copy of the original, with the letter
of the applicable Servicer consenting to termination of such Servicing Agreement
upon the occurrence of an Event of Default attached; and
(f) Other Documents. Such other documents as the Lender may
reasonably request.
5.02 Initial and Subsequent Loans. The making of each Loan
to the Borrower (including the initial Loan) on any Business Day is subject to
the satisfaction of the following further conditions precedent, both immediately
prior to the making of such Loan and also after giving effect thereto:
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<PAGE> 27
(a) no Default or Event of Default shall have occurred and
be continuing;
(b) the representations and warranties made by the Borrower
in Section 6 and Schedule 1 hereof shall be true and complete on and as of the
date of the making of such Loan in all material respects (in the case of the
representations and warranties in Section 6.10 and Schedule 1, solely with
respect to Mortgage Loans included in the Borrowing Base) with the same force
and effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date). The Lender shall have received an officer's certificate signed
by a Responsible Officer of the Borrower certifying as to the truth and accuracy
of the above, which certificate shall specifically include a statement that the
Borrower is in compliance with all governmental licenses and authorizations and
is qualified to do business and in good standing in all required jurisdictions.
(c) the aggregate outstanding principal amount of the Loans
shall not exceed the Borrowing Base;
(d) subject to the Lender's right to perform one or more
Due Diligence Reviews (and subject also to the limitations on such Due Diligence
Reviews) pursuant to Section 11.15 hereof, the Lender shall have completed its
due diligence review of the Mortgage Loan Documents for each Loan and such other
documents, records, agreements, instruments, mortgaged properties or information
relating to such Loans as the Lender in its sole discretion deems appropriate to
review and such review shall be satisfactory to the Lender in its sole
discretion;
(e) the Lender shall have received from the Custodian a
Mortgage Loan Schedule and Exception Report with exceptions as are acceptable to
the Lender in its sole discretion in respect of Eligible Mortgage Loans to be
pledged hereunder on such Business Day dated such Business Day and duly
completed;
(f) the Lender shall have received from the Borrower a
Warehouse Lender's Release Letter substantially in the form of Exhibit E-2
hereto (or such other form reasonably acceptable to the Lender) or a Seller's
Release Letter substantially in the form of Exhibit E-1 hereto (or such other
form reasonably acceptable to the Lender) covering each Mortgage Loan to be
pledged to the Lender;
(g) for each Table Funded Mortgage Loan, the Lender shall
have received from the Settlement Agent an Insured Closing Letter;
(h) none of the following shall have occurred and/or be
continuing:
(i) an event or events shall have occurred resulting in the
effective absence of a "repo market" or comparable "lending market" for
financing debt obligations secured by mortgage loans or securities for
a period of (or reasonably expected to be) at least 30 consecutive days
or an event or events shall have occurred resulting in the Lender not
being able to finance any Loans through the "repo market" or "lending
market" with traditional counterparties at rates which would have been
commercially reasonable prior to the occurrence of such event or
events; or
(ii) an event or events shall have occurred resulting in the
effective absence of a "securities market" for securities backed by
mortgage loans for a period of (or reasonably
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<PAGE> 28
expected to be) at least 30 consecutive days or an event or events
shall have occurred resulting in the Lender not being able to sell
securities backed by mortgage loans at prices which would have been
reasonable prior to such event or events.
(i) the Lender shall approve, in its sole discretion, any
material amendment or modification to the Underwriting Guidelines to
the extent the Mortgage Loans to be pledged to the Lender in connection
with the Lender have been originated in accordance with such amended
Underwriting Guidelines;
Each request for a borrowing by the Borrower hereunder shall constitute a
certification by the Borrower that all the conditions set forth in this Section
5 have been satisfied (both as of the date of such notice, request or
confirmation and as of the date of such borrowing).
Section 6. Representations and Warranties. The Borrower
represents and warrants to the Lender as of the date hereof (or as of any other
date expressly set forth below) and throughout the term of this Loan Agreement:
6.01 Existence. The Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has all requisite corporate or other
power, and has all governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted, except where the lack of such licenses,
authorizations, consents and approvals would not be reasonably likely to have a
Material Adverse Effect; and (c) is qualified to do business and is in good
standing in all other jurisdictions in which the nature of the business
conducted by it makes such qualification necessary, except where failure so to
qualify would not be reasonably likely (either individually or in the aggregate)
to have a Material Adverse Effect.
6.02 Financial Condition. The Borrower has heretofore
furnished to the Lender a copy of a recent Registration Statement on Form S-11
for Registration of certain of the Borrower's securities under the Securities
Act of 1933, including all relevant financial information filed therewith. Since
the date of such Form S-11 Registration Statement, there has been no material
adverse change in the consolidated business, operations or financial condition
of the Borrower and its consolidated Subsidiaries taken as a whole from that set
forth in said Registration Statement.
6.03 Litigation. There are no actions, suits, arbitrations,
investigations or proceedings pending or, to its knowledge, threatened against
the Borrower or any of its Subsidiaries or affecting any of the Property of any
of them before any Governmental Authority (i) as to which individually or in the
aggregate there is a reasonable likelihood of an adverse decision which would be
reasonably likely to have a Material Adverse Effect or (ii) which questions the
validity or enforceability of any of the Loan Documents or any action to be
taken in connection with the transactions contemplated hereby.
6.04 No Breach. Neither (a) the execution and delivery of
the Loan Documents nor (b) the consummation of the transactions therein
contemplated in compliance with the terms and provisions thereof will conflict
with or result in a breach of the charter or by-laws of the Borrower, or any
applicable law, rule or regulation, or any order, writ, injunction or decree of
any Governmental Authority, or any Servicing Agreement or other material
agreement or instrument to which the Borrower or any of its Subsidiaries is a
party or by which any of them or any of their Property is bound or to which any
of them is subject, or constitute a default under any such material agreement or
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<PAGE> 29
instrument or result in the creation or imposition of any Lien (except for the
Liens created pursuant to this Loan Agreement) upon any Property of the Borrower
or any of its Subsidiaries pursuant to the terms of any such agreement or
instrument.
6.05 Action. The Borrower has all necessary corporate or
other power, authority and legal right to execute, deliver and perform its
obligations under each of the Loan Documents; the execution, delivery and
performance by the Borrower of each of the Loan Documents have been duly
authorized by all necessary corporate or other action on its part; and each Loan
Document has been duly and validly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, subject to bankruptcy laws
and other similar laws of general application affecting rights of creditors and
subject to the application of the rules of equity, including those respecting
the availability of specific performance.
6.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority or any
securities exchange are necessary for the execution, delivery or performance by
the Borrower of the Loan Documents or for the legality, validity or
enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to this Loan Agreement.
6.07 Margin Regulations. Neither the making of any Loan
hereunder, nor the use of the proceeds thereof, will violate or be inconsistent
with the provisions of Regulation G, T, U or X.
6.08 Taxes. The Borrower and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them it and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any of them it, except for any such taxes
as are being appropriately contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves have been
provided. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Borrower, adequate.
6.09 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.10 Collateral; Collateral Security.
(a) The Borrower has not assigned, pledged, or otherwise
conveyed or encumbered any Mortgage Loan to any other Person, and immediately
prior to the pledge of such Mortgage Loan to the Lender, the Borrower was the
sole owner of such Mortgage Loan and had good and marketable title thereto, free
and clear of all Liens on the Mortgage Loan (without taking into account the
Lien of the Mortgage on the Mortgaged Property), in each case except for Liens
to be released simultaneously with the Liens granted in favor of the Lender
hereunder. No Mortgage Loan pledged to the Lender hereunder was acquired by the
Borrower from an Affiliate of the Borrower.
(b) The provisions of this Loan Agreement are effective to
create in favor of the Lender a valid security interest in all right, title and
interest of the Borrower in, to and under the Collateral.
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<PAGE> 30
(c) Upon receipt by the Custodian of each Mortgage Note
endorsed in blank by a duly authorized officer of the Borrower, the Lender shall
have a fully perfected first priority security interest therein.
(d) Upon the filing of financing statements on Form UCC-1
naming the Lender as "Secured Party" and the Borrower as "Debtor", and
describing the Collateral, in the jurisdictions and recording offices listed on
Schedule 2 attached hereto, the security interests granted hereunder in the
Collateral (to the extent security interests in such Collateral may be perfected
under the UCC by filing) will constitute fully perfected first priority security
interests under the Uniform Commercial Code in all right, title and interest of
the Borrower in, to and under such Collateral which can be perfected by filing
under the Uniform Commercial Code.
6.11 Chief Executive Office. The Borrower's chief executive
office on the Effective Date is located at 3424 Peachtree Road, N.E., Atlanta,
Georgia 30326.
6.12 Location of Books and Records. The location where the
Borrower keeps its books and records, including all computer tapes and records
relating to the Collateral is its chief executive office.
6.13 Hedging. Any Interest Rate Protection Agreements
entered into with respect to the Mortgage Loans have been pledged to the Lender.
6.14 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Borrower to the Lender in connection with the negotiation,
preparation or delivery of this Loan Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. All
written information furnished after the date hereof by or on behalf of the
Borrower to the Lender in connection with this Loan Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of projections)
based on reasonable estimates, on the date as of which such information is
stated or certified. There is no fact known to a Responsible Officer of the
Borrower, after due inquiry, that could reasonably be expected to have a
Material Adverse Effect that has not been disclosed herein, in the other Loan
Documents or in a report, financial statement, exhibit, schedule, disclosure
letter or other writing furnished to the Lender for use in connection with the
transactions contemplated hereby or thereby.
6.15 Tangible Net Worth. On the Effective Date, the Tangible
Net Worth is not less than $120,000,000.
6.16 ERISA. Each Plan to which the Borrower or its
Subsidiaries make direct contributions, and, to the knowledge of the Borrower,
each other Plan and each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
State law. No event or condition has occurred and is continuing as to which the
Borrower would be under an obligation to furnish a report to the Lender under
Section 7.01(d) hereof.
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<PAGE> 31
Section 7. Covenants of the Borrower. The Borrower covenants
and agrees with the Lender that, so long as any Loan is outstanding and until
payment in full of all Secured Obligations:
7.01 Financial Statements. The Borrower shall deliver to the
Lender:
(a) as soon as available and in any event within sixty (60)
days after the end of each of the first three quarterly fiscal periods of each
fiscal year of the Borrower, the unaudited consolidated balance sheets of the
Borrower and its consolidated Subsidiaries as at the end of such period and the
related unaudited consolidated statements of income and retained earnings and of
cash flows for the Borrower and its consolidated Subsidiaries for such period
and the portion of the fiscal year through the end of such period, setting forth
in each case in comparative form the figures for the previous year, accompanied
by a certificate of a Responsible Officer of the Borrower, which certificate
shall state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the Borrower and
its consolidated Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within one
hundred (100) days after the end of each fiscal year of the Borrower, the
consolidated balance sheets of the Borrower and its consolidated Subsidiaries as
at the end of such fiscal year and the related consolidated statements of income
and retained earnings and of cash flows for the Borrower and its consolidated
Subsidiaries for such year, setting forth in each case in comparative form the
figures for the previous year, accompanied by an opinion thereon of independent
certified public accountants of recognized national standing, which opinion
shall not be qualified as to scope of audit or going concern, and a certificate
of a Responsible Officer of the Borrower, which certificate shall state that
said consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries in accordance with GAAP, consistently applied, as at the end of,
and for, such period (subject to normal year-end audit adjustments);
(c) from time to time such other information regarding the
financial condition, operations, or business of the Borrower as the Lender may
reasonably request; and
(d) as soon as reasonably possible, and in any event within
thirty (30) days after a Responsible Officer of the Borrower knows, or with
respect to any Plan or Multiemployer Plan to which the Borrower or any of its
Subsidiaries makes direct contributions, has reason to believe, that any of the
events or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a senior financial officer of
the Borrower 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
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<PAGE> 32
in accordance with Section 412(d) of the Code); and any request for a
waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) 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 receipt by the Borrower or any ERISA
Affiliate 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 that results in 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 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 of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(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 fails to provide timely
security to such Plan in accordance with the provisions of said
Sections.
The Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a) and (b) above, a certificate of
a Responsible Officer of the Borrower to the effect that, to the best of such
Responsible Officer's knowledge, the Borrower during such fiscal period or year
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate (and, if any Default or Event of Default
has occurred and is continuing, describing the same in reasonable detail and
describing the action the Borrower has taken or proposes to take with respect
thereto).
7.02 Litigation. The Borrower will promptly, and in any
event within 10 days after service of process on any of the following, give to
the Lender notice of all legal or arbitrable proceedings affecting the Borrower
or any of its Subsidiaries that questions or challenges the validity or
enforceability of any of the Loan Documents or as to which there is a reasonable
likelihood of adverse determination which would result in a Material Adverse
Effect.
7.03 Existence, etc. The Borrower will:
(a) preserve and maintain its legal existence as a real
estate investment trust;
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(b) preserve and maintain all of its material rights,
privileges, licenses and franchises (provided that nothing in this Section
7.03(a) shall prohibit any transaction expressly permitted under Section 7.04
hereof);
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of Governmental Authorities (including, without
limitation, the Truth in Lending Act, the Real Estate Settlement Procedures Act
and all environmental laws) if failure to comply with such requirements would be
reasonably likely (either individually or in the aggregate) to have a Material
Adverse Effect;
(c) keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied;
(d) not move its chief executive office from the address
referred to in Section 6.11 unless it shall have provided the Lender 30 days'
prior written notice of such change;
(e) pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained; and
(f) permit representatives of the Lender, during normal
business hours and upon reasonable prior notice from the Lender, to examine,
copy and make extracts from its books and records, to inspect any of its
Properties, and to discuss its business and affairs with its officers, all to
the extent reasonably requested by the Lender; provided, however, that in the
event a Default shall have occurred and be continuing, no prior notice shall be
required hereunder.
7.04 Prohibition of Fundamental Changes. The Borrower shall
not enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell all or substantially all of its assets; provided, that the
Borrower may merge or consolidate with (a) any wholly owned subsidiary of the
Borrower, or (b) any other Person if the Borrower is the surviving corporation
so long as, after giving effect thereto, no Default would exist hereunder and
the Borrower may sell substantially all of its assets in connection with a
securitization of the Mortgage Loans in the ordinary course of its business.
7.05 Borrowing Base Deficiency. If at any time there exists
a Borrowing Base Deficiency the Borrower shall cure same in accordance with
Section 2.06 hereof.
7.06 Notices. The Borrower shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the
occurrence of any Default or Event of Default;
(b) with respect to any Mortgage Loan pledged to the Lender
hereunder, promptly upon receipt of any principal prepayment (in full or part)
of such pledged Mortgage Loan;
(c) with respect to any Mortgage Loan pledged to the Lender
hereunder, promptly upon receipt of notice or actual knowledge that the
underlying Mortgaged Property has been damaged by waste, fire, earthquake or
earth movement, windstorm, flood, tornado or other casualty, or
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otherwise damaged so as to materially and adversely affect the Collateral Value
of such pledged Mortgage Loan; and
(d) promptly upon receipt of notice or actual knowledge of
(i) any Event of Default (as defined in the Loan Documents) or any material
default under any other agreement related to any Collateral, (ii) any Lien or
security interest (other than security interests created hereby or by the other
Loan Documents) on, or claim asserted against, any of the Collateral (other than
the Lien of the Mortgage on the related Mortgaged Property) or (iii) any event
or change in circumstances which could reasonably be expected to have a Material
Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower has taken or
proposes to take with respect thereto.
7.07 Hedging. The Borrower shall at all times maintain its
pledge to the Lender of any Interest Rate Protection Agreements relating to the
Mortgage Loans. The Borrower shall deliver to the Lender monthly a written
summary of the notional amount of all outstanding Interest Rate Protection
Agreements.
7.08 Reports. The Borrower shall provide the Lender with a
quarterly report, which report shall include, among other items, (a) a summary
of the Borrower's delinquency and loss experience with respect to Mortgage Loans
serviced by the Borrower, any Servicer or any designee of either, plus any such
additional reports as the Lender may reasonably request with respect to the
Borrower's or any Servicer's servicing portfolio or pending originations of
mortgage loans and (b) a mark to market summary of any residual securities held
by the Borrower. The Borrower shall provide the Lender with information,
promptly upon the Borrower's receipt, with respect to each Mortgaged Property
related to each Mortgage Loan pledged to the Lender hereunder, including without
limitation, the operating statements, rent roll (if applicable and which may be
provided on a quarterly basis if not available on a monthly basis) and occupancy
status of such Mortgaged Property and property level information.
7.09 Underwriting Guidelines. The Borrower may amend or
otherwise modify the Underwriting Guidelines; provided, however, that the
Borrower shall promptly provide the Lender with written evidence of any
amendment or modification of the Underwriting Guidelines.
7.10 Transactions with Affiliates. The Borrower will not
enter into any transaction, including without limitation any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is (a) otherwise permitted or not prohibited
under this Loan Agreement, (b) in the ordinary course of the Borrower's business
and (c) upon fair and reasonable terms no less favorable to the Borrower than it
would obtain in a comparable arm's length transaction with a Person which is not
an Affiliate, or make a payment that is not otherwise permitted by this
Agreement to any Affiliate. In no event shall the Borrower pledge to the Lender
hereunder any Mortgage Loan acquired by the Borrower from an Affiliate of the
Borrower.
7.11 Limitation on Liens. The Borrower will defend the
Collateral against, and will take such other action as is necessary to remove,
any Lien on the Mortgage Loans (other than the Lien of the Mortgage on the
Mortgaged Properties), security interest or claim on or to the Collateral, other
than the security interests created under this Loan Agreement, and the Borrower
will defend the right,
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title and interest of the Lenders in and to any of the Collateral against the
claims and demands of all persons whomsoever other than persons claiming through
the Lender.
7.12 Information Regarding Guarantees. Promptly after the
making thereof, the Borrower shall deliver to the Lender any and all information
regarding any Guarantees not reflected on Borrower's financial statements in
order to permit the Lender to determine the dollar amount of all Guarantees made
by the Borrower. For any Guarantee reflected on Borrower's financial statements,
Borrower shall deliver to Lender such additional information as the Lender may
request in its sole discretion to ascertain the scope of such Guarantee.
7.13 Limitation on Distributions. After the occurrence and
during the continuation of any Event of Default, the Borrower shall not make any
payment on account of, or set apart assets for, a sinking or other analogous
fund for the purchase, redemption, defeasance, retirement or other acquisition
of any equity or partnership interest of the Borrower, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower,
except as required by the Internal Revenue Code of 1986 (as amended from time to
time) to preserve such Borrower's "REIT" status.
7.14 Maintenance of Tangible Net Worth. The Borrower shall
not permit Tangible Net Worth at any time to be less than $100,000,000.
7.15 Maintenance of Ratio of Total Indebtedness to Tangible
Net Worth The Borrower shall not permit the ratio of Total Indebtedness to
Tangible Net Worth at any time to be greater than 12:1.
7.16 Maintenance of Profitability. The Borrower shall not
permit, for any period of three consecutive fiscal quarters (each such period, a
"Test Period"), Net Income for such Test Period, before income taxes for such
Test Period and distributions made during such Test Period, to be less than
$1.00.
7.17 Servicing Tape. The Borrower shall provide to the
Lender on a monthly basis a computer readable magnetic tape containing servicing
information, including without limitation those fields reasonably specified by
the Lender from time to time, on a loan-by-loan basis and in the aggregate, with
respect to the Mortgage Loans serviced hereunder by the Borrower or any
Servicer.
7.18 Servicer. The Borrower shall not cause the Mortgage
Loans to be serviced by any servicer other than a servicer expressly approved in
writing by the Lender; provided that, the Lender's execution of this Loan
Agreement shall constitute the Lender's written approval of ERE Yarmouth as a
servicer of the Mortgage Loans.
7.19 Selection of Collateral. The Borrower shall not select
Mortgage Loans to be pledged to the Lender through a process that is adverse to
the Lender or which results in the Lender receiving pledged Mortgage Loans that
are of lesser quality, determined in the sole discretion of the Lender exercised
in good faith, than Mortgage Loans substantially similar to the Mortgage Loans
pledged to other lenders pursuant to any other facility to which the Borrower
may be a party.
7.20 Maintenance of Property; Insurance. The Borrower shall
keep all property useful and necessary in its business in good working order and
condition. The Borrower shall maintain errors and omissions insurance and/or
mortgage impairment insurance and blanket bond
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coverage in such amounts as are in effect on the Effective Date (as disclosed to
the Lender in writing) and shall not reduce such coverage without the written
consent of the Lender, and shall also maintain such other insurance with
financially sound and reputable insurance companies, and with respect to
property and risks of a character usually maintained by entities engaged in the
same or similar business similarly situated, against loss, damage and liability
of the kinds and in the amounts customarily maintained by such entities.
Section 8. Events of Default. Each of the following events
shall constitute an event of default (an "Event of Default") hereunder:
(a) the Borrower shall default in the payment of any
principal of or interest on any Loan when due (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment); or
(b) the Borrower shall default in the payment of any other
amount payable by it hereunder or under any other Loan Document, and such
default shall have continued unremedied for five (5) Business Days; or
(c) any representation, warranty or certification made or
deemed made herein or in any other Loan Document by the Borrower or any
certificate furnished to the Lender pursuant to the provisions hereof or thereof
shall prove to have been false or misleading in any material respect as of the
time made or furnished (other than (i) the representations and warranties set
forth in Schedule 1, which shall be considered solely for the purpose of
determining the Collateral Value of the Mortgage Loans; unless the Borrower
shall have made any such representations and warranties with actual knowledge
that they were materially false or misleading at the time made); or
(d) the Borrower shall fail to comply with the requirements
of Section 7.03(a), Section 7.04, Section 7.05, Section 7.06, and Sections 7.09
through 7.19 hereof; or the Borrower shall fail to comply with the requirements
of Section 7.17 hereof and such default shall continue unremedied for a period
of three (3) Business Days; or the Borrower shall otherwise fail to comply with
the requirements of Section 7.03 or Section 7.20 hereof and such default shall
continue unremedied for a period of five (5) Business Days; or the Borrower
shall fail to observe or perform any other covenant, condition, or agreement
contained in this Loan Agreement or any other Loan Document and such failure to
observe or perform shall continue unremedied for a period of seven Business
Days; or
(e) other than with respect to Approved Non-Recourse
Indebtedness, a final judgment or judgments for the payment of money in excess
of $5,000,000.00 in the aggregate shall be rendered against the Borrower or any
of its Subsidiaries by one or more courts, administrative tribunals or other
bodies having jurisdiction and the same shall not be discharged (or provision
shall not be made for such discharge) or bonded, or a stay of execution thereof
shall not be procured, within 60 days from the date of entry thereof, and the
Borrower or any such Subsidiary shall not, within said period of 60 days, or
such longer period during which execution of the same shall have been stayed or
bonded, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(f) the Borrower shall admit in writing its inability to
pay its debts as such debts become due; or
(g) other than with respect to Approved Non-Recourse
Indebtedness, the Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of
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possession by, a receiver, custodian, trustee, examiner or liquidator or the
like of itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Bankruptcy Code, (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any corporate or other
action for the purpose of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without
the application or consent of the Borrower or any of its Subsidiaries, in any
court of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner, liquidator or the like of the Borrower or any such
Subsidiary or of all or any substantial part of its property, or (iii) similar
relief in respect of the Borrower or any such Subsidiary under any law relating
to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement
or winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days; or an order for relief against the
Borrower or any such Subsidiary shall be entered in an involuntary case under
the Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for
whatever reason (other than by agreement of the parties therein, including the
Lender) be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by the Borrower; or
(j) the Borrower shall grant, or suffer to exist, any Lien
on any Collateral except the Liens contemplated or permitted hereby; or the
Liens contemplated hereby shall cease to be first priority perfected Liens on
the Collateral in favor of the Lender or shall be Liens in favor of any Person
other than the Lender; or
(k) other than with respect to Approved Non-Recourse
Indebtedness, the Borrower or any of the Borrower's Affiliates shall be in
default (after the giving of any required notice and the expiration of any
required cure period) under any note, indenture, loan agreement, guaranty, swap
agreement or any other contract to which it is a party, which default (i)
involves the failure to pay a matured obligation, or (ii) permits the
acceleration of the maturity of obligations by any other party to or beneficiary
of such note, indenture, loan agreement, guaranty, swap agreement or other
contract; or
(l) the occurrence of a Material Adverse Effect, as
determined in the Lender's sole good faith discretion; or
(m) ERE Yarmouth, Inc., or its Affiliate, ceases to act as
REIT advisor to the Borrower pursuant to the Existing Advisory Agreement, or the
Existing Advisory Agreement is materially amended without the prior written
consent of the Lender; or
(n) the Lender shall reasonably request, specifying the
reasons for such request, information, and/or written responses to such
requests, regarding the financial well-being of the Borrower and such
information and/or responses shall not have been provided within five (5)
Business
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Days of such request or such longer period of time as may be reasonably
necessary for the Borrower to provide such information.
Section 9. Remedies Upon Default.
(a) Upon the occurrence of one or more Events of Default
other than those referred to in Section 8(g) or (h), the Lender may immediately
declare the principal amount of the Loans then outstanding under the Note to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under this Loan Agreement. Upon the occurrence of an Event of
Default referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then
outstanding on the Note shall become immediately due and payable, without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) Upon the occurrence of one or more Events of Default,
the Lender shall have the right to obtain physical possession of the Servicing
Records and all other files of the Borrower relating to the Collateral and all
documents relating to the Collateral which are then or may thereafter come in to
the possession of the Borrower or any third party acting for the Borrower and
the Borrower shall deliver to the Lender such assignments as the Lender shall
request. The Lender shall be entitled to specific performance of all agreements
of the Borrower contained in this Loan Agreement.
Section 10. No Duty of Lender. The powers conferred on the
Lender hereunder are solely to protect the Lender's interests in the Collateral
and shall not impose any duty upon it to exercise any such powers. The Lender
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrower for any act or failure
to act hereunder, except for its or their own gross negligence or willful
misconduct.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of either party to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any Loan Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
11.02 Notices. Except as otherwise expressly permitted by
this Loan Agreement, all notices, requests and other communications provided for
herein and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telecopy with
confirmation of "good" transmission) delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof or
thereof); or, as to any party, at such other address as shall be designated by
such party in a written notice to each other party. Except as otherwise provided
in this Loan Agreement and except for notices given under Section 2 (which shall
be effective only on receipt), all such communications shall be deemed to have
been duly given when transmitted by telecopy or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
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11.03 Indemnification and Expenses.
(a) The Borrower agrees to hold the Lender harmless from
and indemnify the Lender against all liabilities, losses, damages, judgments,
reasonable out-of-pocket costs and expenses of any kind which may be imposed on,
incurred by or asserted against the Lender (collectively, the "Costs") relating
to or arising out of this Loan Agreement, the Note, any other Loan Document or
any transaction contemplated hereby or thereby, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this Loan
Agreement, the Note, any other Loan Document or any transaction contemplated
hereby or thereby, that, in each case, results from anything other than (i) the
Lender's gross negligence or willful misconduct (ii) in-house administrative,
servicing or "set up" costs, and (iii) any hedging losses incurred by the Lender
under any Interest Rate Protection Agreement entered into by the Lender in
connection with the Mortgage Loans or the Note; provided, however, that to the
extent any provision of this Loan Agreement or any other Loan Document expressly
provides for the payment of the Lender's expenses or reimbursement of the
Lender's costs subject to express qualifications or limitations, such other
provisions shall be controlling over the indemnification provisions contained in
this Section 11.03. Without limiting the generality of the foregoing the
Borrower agrees to hold the Lender harmless from and indemnify the Lender
against all Costs with respect to all Mortgage Loans relating to or arising out
of any violation or alleged violation of any environmental law, rule or
regulation that, in each case, results from anything other than the Lender's
gross negligence or willful misconduct or relating to or arising out of any
breach, violation or alleged breach or violation of any consumer credit laws,
including without limitation the Truth in Lending Act and/or the Real Estate
Settlement Procedures Act. In any suit, proceeding or action brought by the
Lender in connection with any Mortgage Loan for any sum owing thereunder, or to
enforce any provisions of any Mortgage Loan, the Borrower will save, indemnify
and hold the Lender harmless from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Borrower of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Borrower. The
Borrower also agrees to reimburse the Lender as and when billed by the Lender
for all the Lender's costs and expenses incurred in good faith in connection
with the enforcement or the preservation of the Lender's rights under this Loan
Agreement, the Note, any other Loan Document or any transaction contemplated
hereby or thereby, including without limitation the reasonable fees and
disbursements of its counsel. The Borrower hereby acknowledges that,
notwithstanding the fact that the Note is secured by the Collateral, the
obligation of the Borrower under the Note is a recourse obligation of the
Borrower.
(b) The Borrower agrees to pay as and when billed by the
Lender all of the reasonable out-of-pocket costs and expenses incurred by the
Lender in connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Loan Agreement, the Note, any
other Loan Document or any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby including without limitation (i) all the
reasonable fees, disbursements and expenses of counsel to the Lender not to
exceed $100,000, (ii) all the due diligence, inspection, testing and review
costs and expenses incurred by the Lender with respect to Collateral under this
Loan Agreement, including, but not limited to, those costs and expenses incurred
by the Lender pursuant to Sections 11.03(a), 11.14 and 11.15 hereof, subject to
the Due Diligence Cap, incurred by the Lender, (iii) in-house administrative,
servicing or "set up" costs, and (iv) any hedging losses incurred by the Lender
under any Interest Rate Protection Agreement entered into by the Lender in
connection with the Mortgage Loans or the Note; provided, however, that to the
extent any provision of this Loan
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Agreement or any other Loan Document expressly provides for the payment of the
Lender's expenses or reimbursement of the Lender's costs subject to express
qualifications or limitations, such other provisions shall be controlling over
the indemnification provisions contained in this Section 11.03.
11.04 Amendments. Except as otherwise expressly provided in
this Loan Agreement, any provision of this Loan Agreement may be modified or
supplemented only by an instrument in writing signed by the Borrower and the
Lender and any provision of this Loan Agreement may be waived by the Lender.
11.05 Successors and Assigns . This Loan Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.06 Survival. The obligations of the Borrower under
Sections 3.03 and 11.03 hereof shall survive the repayment of the Loans and the
termination of this Loan Agreement. In addition, each representation and
warranty made or deemed to be made by a request for a borrowing, herein or
pursuant hereto shall survive the making of such representation and warranty,
and the Lender shall not be deemed to have waived, by reason of making any Loan,
any Default that may arise because any such representation or warranty shall
have proved to be false or misleading, notwithstanding that the Lender may have
had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
11.07 Captions. The table of contents and captions and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Loan Agreement.
11.08 Counterparts. This Loan Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Loan
Agreement by signing any such counterpart.
11.09 Loan Agreement Constitutes Security Agreement;
Governing Law. This Loan Agreement shall be governed by New York law without
reference to choice of law doctrine, and shall constitute a security agreement
within the meaning of the Uniform Commercial Code.
11.10 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR
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PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH
THE LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE
LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
11.12 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Loan Agreement, the Note and the other Loan
Documents;
(b) the Lender has no fiduciary relationship to the
Borrower, and the relationship between the Borrower and the Lender is solely
that of debtor and creditor; and
(c) no joint venture exists between the Lender and the
Borrower.
11.13 Hypothecation or Pledge of Loans. Subject to the rights
of the Mortgagors under the Mortgage Loans, the Lender shall have free and
unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude the Lender from engaging in repurchase transactions with the Collateral
or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrower. Without limiting the Lender's rights pursuant to the preceding
sentences, anything to the contrary herein notwithstanding, the Lender agrees
that it will not syndicate or participate the Loans to any other Person.
11.14 Servicing.
(a) The Borrower covenants to maintain or cause the
servicing of the Mortgage Loans to be maintained in conformity with accepted and
prudent servicing practices in the industry for the same type of mortgage loans
as the Mortgage Loans and in a manner at least equal in quality to the servicing
the Borrower provides for mortgage loans which it owns. In the event that the
preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Borrower.
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(b) If the Mortgage Loans are serviced by the Borrower, (i)
the Borrower agrees that the Lender is the collateral assignee of all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the "Servicing Records"), and (ii)
the Borrower grants the Lender a security interest in all servicing fees and
rights relating to the Mortgage Loans and all Servicing Records to secure the
obligation of the Borrower or its designee to service in conformity with this
Section and any other obligation of the Borrower to the Lender. The Borrower
covenants to safeguard such Servicing Records and to deliver them promptly to
the Lender or its designee (including the Custodian) at the Lender's request.
(c) If the Mortgage Loans are serviced by a third party
servicer (such third party servicer, the "Servicer"), the Borrower (i) shall
provide a copy of the servicing agreement to the Lender, which shall be in form
and substance reasonably acceptable to the Lender (the "Servicing Agreement");
and (ii) hereby irrevocably assigns to the Lender and the Lender's successors
and assigns all right, title, interest of the Borrower in, to and under, and the
benefits of, any Servicing Agreement with respect to the Mortgage Loans. The
Lender hereby approves ERE Yarmouth, as the initial Servicer, and the terms of
the Existing Servicing Agreement and the Existing Advisory Agreement. Any
amendments to such agreements which materially increase the fees payable by the
Borrower or materially modify the Servicer's rights or obligations under the
Existing Servicing Agreement shall be subject to the Lender's approval, which
shall not be unreasonably withheld.
(d) If the servicer of the Mortgage Loans is the Borrower
or the Servicer is an Affiliate of the Borrower, the Borrower shall provide to
the Lender a letter from the Borrower or the Servicer, as the case may be, to
the effect that upon the occurrence of an Event of Default, the Lender may
terminate any Servicing Agreement and transfer servicing to its designee, at no
cost or expense to the Lender, it being agreed that the Borrower will pay any
and all fees required to terminate the Servicing Agreement and to effectuate the
transfer of servicing to the designee of the Lender.
(e) After the Funding Date, until the pledge of any
Mortgage Loan is relinquished by the Custodian, the Borrower will have no right
to modify or alter the terms of such Mortgage Loan and the Borrower will have no
obligation or right to repossess such Mortgage Loan or substitute another
Mortgage Loan, except as provided in the Custodial Agreement.
(f) In the event the Borrower or its Affiliate is servicing
the Mortgage Loans, the Borrower shall permit the Lender to inspect the
Borrower's or its Affiliate's servicing facilities, as the case may be, for the
purpose of satisfying the Lender that the Borrower or its Affiliate, as the case
may be, has the ability to service the Mortgage Loans as provided in this Loan
Agreement.
11.15 Periodic Due Diligence Review. The Borrower
acknowledges that the Lender has the right to perform continuing due diligence
reviews with respect to the Mortgage Loans, for purposes of verifying compliance
with the representations, warranties and specifications made hereunder, or
otherwise, and the Borrower agrees that upon reasonable (but no less than one
(1) Business Day's) prior notice to the Borrower, the Lender or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Mortgage Files and any and all
documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession or under the control of the Borrower and/or the
Custodian at their respective normal locations. The Borrower also shall make
available to the Lender a
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knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Mortgage Files and the Mortgage Loans. Without limiting
the generality of the foregoing, the Borrower acknowledges that the Lender may
make Loans to the Borrower based solely upon the information provided by the
Borrower to the Lender in the Mortgage Loan Tape and the representations,
warranties and covenants contained herein, and that the Lender, at its option,
has the right at any time to conduct a partial or complete due diligence review
on some or all of the Mortgage Loans securing such Loan, including without
limitation ordering new credit reports and new appraisals on the related
Mortgaged Properties and otherwise re-generating the information used to
originate such Mortgage Loan. The Lender may underwrite such Mortgage Loans
itself or engage a mutually agreed upon third party underwriter to perform such
underwriting. The Borrower agrees to cooperate with the Lender and any third
party underwriter in connection with such underwriting, including, but not
limited to, providing the Lender and any third party underwriter with access to
any and all documents, records, agreements, instruments or information relating
to such Mortgage Loans in the possession, or under the control, of the Borrower.
Notwithstanding anything to the contrary contained herein, it is agreed by the
Lender that the Borrower's obligation to reimburse the Lender for any and all
out-of-pocket costs and expenses incurred by the Lender in connection with the
Lender's activities pursuant to this Section 11.15 ("Due Diligence Costs") shall
be limited to an aggregate amount equal to $25,000 per annum (the "Due Diligence
Cap"); provided that, in the event that a Default or an Event of Default shall
have occurred, the Due Diligence Cap shall not apply to any due diligence
performed by the Lender as a result of such Default or Event of Default (as
evidenced by the Lender's conduct of any due diligence within five (5) calendar
days following its receipt of notice of a Default or Event of Default), and the
Borrower shall reimburse the Lender for any and all such Due Diligence Costs and
no such Due Diligence Cap shall apply thereto. Notwithstanding the foregoing,
any amounts paid pursuant to this Section 11.15 shall be credited against any
underwriting fee due and payable to MS&Co. at the time such amounts accrue.
11.16 Intent. The parties recognize that each Loan is a
"securities contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended.
11.17 Confidential Information.
(a) The Lender hereby acknowledges and agrees that all
written or computer-readable information provided by the Borrower to the Lender
regarding the Borrower or the Collateral (the "Borrower Confidential
Information"), shall be kept confidential and each of their respective contents
will not be divulged to any party without Borrower's consent except to the
extent that (i) the Lender deems appropriate to do so in working with legal
counsel, auditors, taxing authorities or other governmental agencies or
regulatory bodies or in order to comply with any applicable federal or state
laws, (ii) any portion of the Borrower Confidential Information is in the public
domain other than due to a breach of this covenant, (iii) the Lender reasonably
deems appropriate in connection with exercising any or all of the Lender's
rights or remedies or complying with any obligations under any of the Loan
Documents.
(b) The Borrower hereby acknowledges and agrees that all
written or computer-readable information provided by the Lender to the Borrower
regarding the Lender (the "Lender Confidential Information"), shall be kept
confidential and each of their respective contents will not be divulged to any
party without Lender's consent except to the extent that (i) the Borrower deems
appropriate to do so in working with legal counsel, auditors, taxing authorities
or other governmental agencies or regulatory bodies or in order to comply with
any applicable federal or state laws, (ii) any portion of the Lender
Confidential Information is in the public domain other than due to a breach of
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<PAGE> 44
this covenant, (iii) the Borrower reasonably deems appropriate in connection
with exercising any or all of the Borrower's rights or remedies or complying
with any obligations under any of the Loan Documents.
(c) The provisions set forth in this Section 11.17 shall
survive the termination of this Loan Agreement for a period of two (2) years
following such termination.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed and delivered as of the day and year first above
written.
BORROWER
CHASTAIN CAPITAL CORPORATION
By:
---------------------------------------
Title:
Address for Notices:
Chastain Capital Corporation
3424 Peachtree Road, N.E., Suite 800
Atlanta, Georgia 30326-1113
Attention: Mr. Rufus A. Chambers, Jr.
Telecopier No.: 404-848-8929
Telephone No: 404-848-8600
LENDER
MORGAN STANLEY MORTGAGE
CAPITAL INC.
By:
---------------------------------------
Title:
Address for Notices:
1585 Broadway
New York, New York 10036
Attention: Mr. Marc Flamino
Telecopier No.: 212-761-0093
Telephone No.: 212-761-2408
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<PAGE> 46
SCHEDULE 1
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. Eligible Multifamily Mortgage Loans and Eligible Commercial
Mortgage Loans
Except as disclosed in writing to the Lender, as to each
multifamily and commercial Mortgage Loan included in the Borrowing Base on a
Funding Date or on any other date on which Collateral is determined (and the
related Mortgage, Mortgage Note, Assignment of Mortgage and Mortgaged Property),
the Borrower shall be deemed to make the following representations and
warranties to the Lender as of such date and as of each date Collateral Value is
determined (certain defined terms used herein and not otherwise defined in the
Loan Agreement appearing in Part II to this Schedule 1). With respect to any
representations and warranties made to the best of the Borrower'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 Borrower,
then, notwithstanding that such representation and warranty is made to the best
of the Borrower's knowledge, the knowledge or lack of knowledge of Borrower
shall not be considered a breach of the representation or warranty for any other
reason, such Mortgage Loan shall be reduced to reflect Lender's determination of
the diminution in value caused by such breach; provided, however, that if the
Lender, acting in good faith, cannot promptly determine such diminution in
value, the Lender may assign such Mortgage Loan a Collateral Value of zero. With
respect to Mortgage Loans assigned a Collateral Value of zero as a result of the
Lender's inability to determine the appropriate diminution in value, if the
Lender subsequently determines the diminution in value, the Lender shall
promptly revise the Collateral Value as appropriate.
(i) The information set forth in the Mortgage Loan Schedule
as to the Mortgage Loan is complete, true and correct
in all material respects;
(ii) The Borrower is the sole owner and holder of the
Mortgage Loan and has good and marketable title
thereto, has full right, power and authority to sell
and assign such Mortgage Loan free and clear of any
interest or claim of a third party;
(iii) The Mortgage Loan has not been since the date of
origination by the applicable Qualified Originator, and
currently is not, thirty or more days delinquent, and
the Mortgagor is not in default thereunder beyond any
applicable grace period for the payment of any
obligation to pay principal and interest, taxes,
insurance premiums and required reserves;
(iv) The Borrower has not advanced funds, or knowingly
received any advance of funds from a party other than
the Mortgagor subject to the related Mortgage, directly
or indirectly, for the payment of any amount required
by the Mortgage Loan;
(v) The Mortgage Loan Documents have been duly and properly
executed, and (B) the Mortgage Loan Documents are
legal, valid and binding obligations of the Mortgagor,
and their terms are enforceable against the Mortgagor,
subject only to bankruptcy, insolvency, moratorium,
fraudulent transfer, fraudulent
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conveyance and similar laws affecting rights of
creditors generally and to the application of general
principles of equity;
(vi) The lien of each Mortgage is insured by an ALTA
lender's title insurance policy or its equivalent as
adopted in the applicable jurisdiction issued by one
or more nationally recognized title insurance
companies, insuring the Qualified Originator, 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 (a) the lien of current real property
taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable, (b) covenants,
conditions and restrictions, rights of way, easements
and other matters of public record, none of which,
individually or in the aggregate, in the reasonable
judgment of the Borrower, materially interferes with
the current use of the related Mortgaged Property or
the security intended to be provided by such Mortgage
or with the Mortgagor's ability to pay its
obligations when they become due or the value of the
related Mortgaged Property and (c) the exceptions
(general and specific) set forth in such policy, none
of which, individually or in the aggregate, in the
reasonable judgment of the Borrower, materially
interferes with the current use of the related
Mortgaged Property or security intended to be
provided by such Mortgage, with the Mortgagor's
ability to pay its obligations when they become due
or the value of the related Mortgaged Property (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 the
Mortgage Loan). To the actual knowledge of the
Borrower, no material claims have been made under
such title policy;
(vii) As of the date of origination of the Mortgage Loan
there were no, and to the best knowledge of the
Borrower there are no, mechanics', materialman's or
other similar liens or claims which have been filed
for work, labor or materials affecting the Mortgaged
Property which are or may be liens prior to, or equal
or coordinate with, the lien of the Mortgage, unless
such lien is insured against under the related title
insurance policy;
(viii) Each building or other improvement located on any
Mortgaged Property was insured by a fire and extended
perils insurance policy, issued by an insurer or
reinsured by an insurer meeting the requirements of
the Mortgage Loan Documents, in an amount not less
than the replacement cost of the Mortgaged Property;
each Mortgaged Property was also covered by business
interruption insurance and comprehensive general
liability insurance in amounts generally required by
institutional lenders for similar properties; all
premiums on such insurance policies required to be
paid as of the date hereof have been paid; such
insurance policies require prior notice to the
insured of termination or cancellation, and no such
notice has been received; and the Mortgage Loan
Documents obligate the Mortgagor to maintain all such
insurance and, upon the Mortgagor's failure to do so,
authorize the mortgagee to maintain such insurance at
the Mortgagor's cost and expense and to seek
reimbursement therefor from such Mortgagor;
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<PAGE> 48
(ix) As of the most recent date of inspection of each
Mortgaged Property by the Borrower, based solely on
the Borrower's review of the report prepared by the
engineer who inspected the structure, exterior walls,
roofing, interior construction, mechanical and
electrical systems and general conditions of the
site, buildings and other improvements with respect
to the Mortgage Loan (which report indicated, where
appropriate, a variety of deferred maintenance items
and recommended capital improvements with respect to
such Mortgaged Property, as well as the estimated
cost of such items and improvements and the most
recent visual inspection (as described in (xviii)
below) of the Mortgaged Property), no building or
other improvement on any Mortgaged Property has been
affected in any material manner or suffered any
material loss as a result of any fire, wind,
explosion, accident, riot, war, or act of God or the
public enemy, and each Mortgaged Property is free of
any material damage that would affect materially and
adversely the value of the Mortgaged Property as
security for the Mortgage Loan and is in good repair.
The Borrower has neither received notice, nor is
otherwise actually aware, of any proceedings pending
for the total condemnation of any Mortgaged Property
or a partial condemnation of any portion material to
the Mortgagor's ability to perform its obligations
under its related Mortgage Loan;
(x) To the Borrower's best knowledge, after review of
compliance confirmations from applicable
municipalities, surveys and/or title insurance
endorsements, none of the improvements included for
the purpose of determining the Appraised Value of
each Mortgaged Property (except Mortgaged Properties
which are legal non-conforming uses and except for
immaterial encroachments or where the same is covered
by title insurance policy endorsement) at the time of
the origination of the Mortgage Loan lies outside of
the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining
properties materially encroach upon the Mortgaged
Property except those which are insured against by
the title insurance policy (including endorsements
thereto) issued in connection with the Mortgage Loan
and all improvements on the Mortgaged Property comply
with the applicable zoning laws and/or set-back
ordinances in force when improvements were added
(except legal non-conforming uses);
(xi) The Mortgage Loan does not violate applicable usury
laws;
(xii) Since the date of origination of the Mortgage Loan,
the terms of the Mortgage Loan have not been
impaired, waived, altered, satisfied, canceled,
subordinated or modified in any respect (except with
respect to modifications the economic terms of which
are reflected in the Mortgage Loan Schedule and which
are evidenced by documents in the Mortgage File
delivered to the Custodian) and no portion of the
Mortgaged Property has been released from the lien of
the Mortgage in any manner;
(xiii) All applicable Mortgage recording taxes and other
filing fees have been paid in full or deposited with
the issuer of the title insurance policy issued in
connection with the Mortgage Loan for payment upon
recordation of the relevant documents;
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<PAGE> 49
(xiv) Each assignment of leases and rents, if any, creates
a valid assignment of, or a valid security interest
in, certain rights under the related leases, subject
only to a license granted to the relevant Mortgagor
to exercise certain rights and to perform certain
obligations of the lessor under such leases,
including the right to operate the related Mortgaged
Property, subject only to those exceptions described
in clause (vi) above. To the best of the Borrower's
knowledge and without affirmative investigation, no
person other than the relevant 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, subject only to those
exceptions described in clause (vi) above;
(xv) Each Mortgage, upon due recordation, is a valid and
enforceable first lien on the related Mortgaged
Property, subject only to those exceptions described
in clause (vi) above;
(xvi) The Borrower has not taken any action, nor does the
Borrower have any knowledge that the Mortgagor has
taken any action, that would cause the
representations and warranties made by the Mortgagor
in the Mortgage Loan Documents not to be true;
(xvii) The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future
advances thereunder and the Borrower covenants that
it will not make any future advances under the
Mortgage Loan to the Mortgagor. Except for the
escrows and disbursements therefrom as contemplated
by the Mortgage Loan Documents, any Mortgagor
requirements for on or off-site improvements as to
disbursement of any escrow funds therefor have been
complied with;
(xviii) The Borrower has inspected or caused to be inspected
each Mortgaged Property within the past twelve months
preceding the date hereof;
(xix) The Mortgage Loan does not have a shared appreciation
feature, other contingent interest feature or
negative amortization, except with respect to those
Mortgage Loans that provide for deferred interest;
(xx) The Mortgage Loan is a whole loan and contains no
equity participation by the lender;
(xxi) To the best knowledge of the Borrower, no fraudulent
acts were committed by the Borrower in connection
with the origination process of the Mortgage Loan;
(xxii) All taxes and governmental assessments that prior to
the date of origination of the Mortgage Loan became
due and owing in respect of each Mortgaged Property
have been paid, or an escrow of funds in an amount
sufficient to cover such payments has been
established or are insured against by the title
insurance policy issued in connection with the
origination of the Mortgage Loan;
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<PAGE> 50
(xxiii) To the extent required under applicable law, the
Borrower was authorized to transact and do business
in each jurisdiction in which a Mortgaged Property is
located at all times when it held the Mortgage Loan;
(xxiv) To the best knowledge of the Borrower, there is no
material default, breach, violation or event of
acceleration existing under any of the Mortgage Loan
Documents and the Borrower has not received actual
notice of any 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 and does constitute a default, breach,
violation or event of acceleration; no waiver of the
foregoing exists and no person other than the holder
of the Note may declare any of the foregoing;
(xxv) Each Mortgage contains customary and enforceable
provisions such as to render the rights and remedies
of the holder thereof adequate for the realization
against each related Mortgaged Property of the
material benefits of the security, including
realization by judicial or, if applicable,
non-judicial foreclosure, and there is no exemption
available to the Mortgagor which would materially
interfere with such right to foreclosure;
(xxvi) With respect to each Mortgaged Property, a Phase I
environmental report and, in certain cases where
warranted, a Phase II environmental report or an
update to such Phase I report was conducted by a
licensed qualified engineer. The Borrower has
reviewed each such report and update. The Borrower,
having made no independent inquiry other than
reviewing the environmental reports and updates
referenced herein and without other investigation or
inquiry, has no knowledge of any material and adverse
environmental condition or circumstance affecting the
related Mortgaged Property that was not disclosed in
the related report and/or update. The Borrower has
not received any actual notice of a material
violation of CERCLA or any applicable federal, state
or local environmental law with respect to any
Mortgaged Property that was not disclosed in the
related report and/or update. The Borrower has not
taken any actions which would cause any Mortgaged
Property not to be in compliance with all federal,
state and local laws pertaining to environmental
hazards;
(xxvii) The Mortgage Loan Documents contain provisions for
the acceleration of the payment of the unpaid
principal balance of the Mortgage Loan if (A) the
Mortgagor voluntarily transfers or encumbers all or
any portion of any related Mortgaged Property, or (B)
any direct or indirect interest in Mortgagor is
voluntarily transferred or assigned, other than, in
each case, as permitted under the terms and
conditions of the Mortgage Loan Documents;
(xxviii) To the best of the Borrower's knowledge and without
affirmative investigation or inquiry, there is no
pending action, suit or proceeding, arbitration or
governmental investigation against the Mortgagor or
any Mortgaged Property, the adverse outcome of which
could materially and adversely affect the Mortgagor's
performance of its obligations under the Mortgage
Loan Documents;
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<PAGE> 51
(xxix) The servicing and collection practices used by any
Servicer, and to the best of the Borrower's
knowledge, the origination practices of the related
Qualified Originator, have been in all respects
legal, proper and prudent and have met customary
industry standards except to the extent that, in
connection with its origination, such standards were
modified by the applicable Qualified Originator in
its reasonable discretion;
(xxx) In connection with the assignment, transfer or
conveyance of any individual Mortgage, the Note and
Mortgage contain no provision limiting the right or
ability of the applicable Qualified Originator to
assign, transfer and convey the Mortgage to any other
person or entity;
(xxxi) If any Mortgaged Property is subject to any leases
(other than any Ground Lease referred to in (xxxv)
below), to the best of the Borrower's knowledge, the
Mortgagor is the owner and holder of the landlord's
interest under any leases, and the related Mortgage
and Assignment of Leases, Rents and Profits, if any,
provides for the appointment of a receiver for rents
or allows the mortgagee to enter into possession to
collect rent or provide for rents to be paid directly
to mortgagee in the event of a default, subject to
the exceptions described in clause (vi) hereof;
(xxxii) If a Mortgage is a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has
been properly designated and currently so serves and
is named in the deed of trust, and no fees or
expenses are or will become payable to the trustee
under the deed of trust, except in connection with
the sale or release of the Mortgaged Property
following default or payment of the Mortgage Loan;
(xxxiii) Any insurance proceeds in respect of a casualty loss
or taking (other than business interruption/rental
interruption proceeds) 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 (provided that such proceeds exceed the
threshold amount described in the Mortgage Loan
Documents) as the repair or restoration progresses,
or to the payment of the outstanding principal
balance of the Mortgage Loan together with any
accrued interest thereon, except to the extent of any
excess proceeds after restoration;
(xxxiv) Either (a) no improvements located on a Mortgaged
Property are located in a federally-designated
special flood hazard area as defined by the Federal
Insurance Administration or, (b) the Mortgagor is
required to maintain, or the Borrower maintains,
flood insurance with respect to such improvements in
an amount representing coverage not less than the
least of (1) the outstanding principal balance of the
Mortgage Loan, (2) the full insurable value of the
Mortgaged Property, and (3) the maximum amount of
insurance available under the National Flood
Insurance Act of 1968, as amended;
(xxxv) With respect to any Mortgage which is secured in
whole or in part by the interest of a Mortgagor as a
lessee under a Ground Lease and based upon the
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<PAGE> 52
terms of the Ground Lease or an estoppel letter from
the ground lessor the following apply to such Ground
Lease:
(A) The Ground Lease or a memorandum thereof
has been duly recorded, the Ground Lease permits the
interest of the lessee thereunder to be encumbered by
the related Mortgage, does not restrict the use of
the Mortgaged Property by the lessee or its
successors and assigns in a manner that would
adversely affect the security provided by the related
Mortgage, and there has not been a material change in
the terms of the Ground Lease since its recordation,
with the exception of written instruments which are
part of the related Mortgage Loan Documents delivered
to the Custodian.
(B) The Ground Lease is not subject to any
liens or encumbrances superior to, or of equal
priority with, the related Mortgage, other than the
related ground lessor's related fee interest and any
exceptions described in clause (vi) hereof.
(C) The Borrower's interest in the Ground
Lease is assignable to the holder of the Mortgage
upon notice to, but without the consent of, the
lessor thereunder and, in the event that it is so
assigned, it is further assignable by the trustee and
its successors and assigns upon notice to, but
without a need to obtain the consent of, such lessor.
(D) To the best of the Borrower's knowledge,
as of the Origination Date of the Mortgage Loan, the
Ground Lease was in full force and effect and no
material default had occurred under the Ground Lease
and there was no existing condition which, but for
the passage of time or the giving of notice, would
result in a default under the terms of the Ground
Lease. No notice of default under the Ground Lease
has been received by the Borrower.
(E) The Ground Lease requires the lessor
thereunder to give notice of any default by the
lessee to the mortgagee; and the Ground Lease, or an
estoppel letter received by the mortgagee from the
lessor, further provides that notice of termination
given under the Ground Lease is not effective against
the mortgagee unless a copy of the notice has been
delivered to the mortgagee in the manner described in
such Ground Lease or estoppel letter.
(F) The mortgagee is permitted a reasonable
opportunity (including, where necessary, sufficient
time to gain possession of the interest of the lessee
under the Ground Lease) to cure any default under the
Ground Lease which is curable after the receipt of
notice of any default, before the lessor thereunder
may terminate the Ground Lease.
(G) The Ground Lease either (i) has a term
which extends not less than ten (10) years beyond the
maturity date of the related Mortgage Loan or (ii)
grants the lessee the option to extend the term of
the lease for a period (in the aggregate) which
exceeds not less than ten (10) years beyond the
maturity date of the related Mortgage Loan.
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<PAGE> 53
(H) The ground lease requires the lessor to
enter into a new lease with the mortgagee having
substantially similar terms as the old lease upon
termination of the Ground Lease for any reason,
including rejection of the Ground Lease in a
bankruptcy proceeding, provided the mortgagee cures
the lessee's defaults to the extent they are curable
and succeeds to the interest of the Mortgagor.
(I) Under the terms of the Ground Lease and
the related Mortgage, taken together, any related
insurance proceeds 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
the proceeds as the repair or restoration progresses,
or to the payment of the outstanding principal
balance of the Mortgage Loan together with any
accrued interest thereon.
(J) Such Ground Lease does not impose any
material restrictions on subletting that would be
viewed as commercially unreasonable by an
institutional investor.
(K) Either the Ground Lease or the related
Mortgage contains the Borrower's covenant that such
Ground Lease shall not be amended, canceled, or
terminated without the prior written consent of the
[mortgagee].
(L) Either the Ground Lease or an estoppel
letter contains a covenant that the lessor thereunder
is not permitted in the absence of an uncured default
under the Ground Lease, to disturb the possession,
interest or quiet enjoyment of any lessee in the
relevant portion of the Mortgaged Property subject to
such Ground Lease for any reason, or in any manner,
which would materially adversely affect the security
provided by the related Mortgage;
(xxxvi) (A) the Mortgage Loan is directly secured by a
Mortgage on commercial real property or multifamily
residential property, and (B) the principal amount of
the Mortgage Loan either (I) at origination (or if
the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of
the Code at a time when the Mortgage Loan was not in
default or default with respect thereto was not
reasonably foreseeable, the date of the last such
modification) or (II) at the related Funding Date,
was at least equal to 80% of the fair market value of
such real property, as evidenced by an appraisal
conducted within 12 months of the origination of the
Mortgage Loan, or as determined by the Borrower based
on market studies and pursuant to its underwriting
standards; provided that the fair market value of the
real property interest must first be reduced by (1)
the amount of any lien on the real property interest
that is senior to the Mortgage Loan (unless such
senior lien also secures a Mortgage Loan, in which
event the computation described in (I) and (II) shall
be made on an aggregated basis) and (2) a
proportionate amount of any lien that is in parity
with the Mortgage Loan (unless such other lien
secures a Mortgage Loan that is cross-collateralized
with such Mortgage Loan, in which event the
computation described in (I) and (II) shall be made
on an aggregate basis);
S-2-8
<PAGE> 54
(xxxvii) To the best knowledge of the Borrower, certificates
of occupancy and building permits, as applicable,
have been issued with respect to the Mortgaged
Property;
(xxxviii)Any escrow accounts for taxes or other reserves
required to be funded on the date of origination of
the Mortgage Loan pursuant to the Mortgage Loan
documents have been funded and all such escrow
accounts required to have been funded as of the
Funding Date (taking into account any applicable
notice and grace period) have been funded;
(xxxix) The related Assignment of Mortgage constitutes a
legal, valid and binding assignment of the related
Mortgage to the Lender, and the related Reassignment
of Assignment of Leases, Rents and Profits, if any,
constitutes a legal, valid and binding assignment
thereof to the Lender;
(xl) The related Note is not, and has not been since the
date of origination of the Mortgage Loan, secured by
any collateral except the lien of the related
Mortgage, any related Assignment of Leases, Rents and
Profits and any related security agreement and escrow
agreement and any other collateral being transferred
to the Lender hereunder; the security for the
Mortgage Loan consists only of the related Mortgaged
Property or Properties, any leases (including without
limitation any credit leases) thereof, and any
appurtenances, fixtures and other property located
thereon and any other collateral pledged or given as
part of the Mortgage Loan Documents being assigned to
the Lender hereunder; and such Mortgaged Property or
Properties do not secure any mortgage loan other than
the Mortgage Loan being transferred and assigned to
the Lender hereunder (except for Mortgage Loans, if
any, which are cross-collateralized with other
Mortgage Loans being conveyed to the Lender or
subsequent transferee hereunder and identified on the
Mortgage Loan Schedule);
(xli) To the Borrower's knowledge, based on due diligence
that it customarily performs in the origination of
comparable mortgage loans, as of the date of
origination of each Mortgage Loan, the related
Mortgagor was in possession of all material licenses,
permits and franchises required by applicable law for
the ownership and operation of the related Mortgaged
Property as it was then operated;
(xlii) The Mortgage Loan is directly secured by a first lien
on one or more parcels of real estate upon which is
located one or more commercial structures; and the
Mortgage Loan was originated by a savings and loan
association, savings bank, commercial bank, credit
union, insurance company, or similar institution
which is supervised and examined by a Federal or
State authority, or by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant
to sections 203 and 211 of the National Housing Act;
(xliii) With respect to each Mortgage Loan in excess of
$5,000,000: (A) The Borrower is an entity whose
organizational documents provide that it is, and at
least so long as the Mortgage Loan is outstanding
will continue to be, a single-purpose entity. (For
this purpose, "single-purpose entity" shall mean a
person, other than an individual, which is formed or
organized solely for the purpose of
S-2-9
<PAGE> 55
owning and operating a single property, does not
engage in any business unrelated to such property and
its financing, does not have any assets other than
those related to its interest in the property or its
financing, or any indebtedness other than as
permitted by the related Mortgage or the other
Mortgage Loan Documents, has its own books and
records and accounts separate and apart from any
other person, and holds itself out as being a legal
entity, separate and apart from any other person);
(B) A non-consolidation opinion was obtained
for the Borrower or affiliated group of the Borrower
of Mortgage Loans or groups of Mortgage Loans with an
original principal balance in excess of $20,000,000.
(C) The general partners or managing members
of the Borrower or Affiliates of the Borrower of
Mortgage Loans or groups of Mortgage Loans having an
original principal balance in excess of $20,000,000
have an independent director.
S-2-10
<PAGE> 56
Part II Defined Terms
In addition to terms defined elsewhere in the Loan Agreement,
the following terms shall have the following meanings when used in this Schedule
1:
"ALTA" means the American Land Title Association.
"Appraised Value" shall mean the value set forth in an
appraisal made in connection with the origination of the related Mortgage Loan
as the value of the Mortgaged Property.
"Best's" means Best's Key Rating Guide, as the same shall be
amended from time to time.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or
any successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"Ground Lease" means a lease for all or any portion of the
real property comprising the Mortgaged Property, the lessee's interest in which
is held by the Mortgagor of the related Mortgage Loan.
"Origination Date" means, with respect to each Mortgage Loan,
the date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by the Borrower with respect to such Mortgage Loan,
in which case the Origination Date shall be deemed to be the date that is 40
days prior to the date of the first payment under the Mortgage Note relating to
such Mortgage Loan.
"Qualified Originator" means the Borrower or an originator of
Mortgage Loans reasonably acceptable to the Lender.
"Underwriting Guidelines" shall mean the underwriting
guidelines attached as Exhibit F hereto.
S-2-11
<PAGE> 57
SCHEDULE 3
FILING JURISDICTIONS AND OFFICES
The office of the Superior Court of Fulton County, Georgia
S-2-1
<PAGE> 58
SCHEDULE 4
DELIVERY PROCEDURES
[TO BE PROVIDED BY LENDER]
S-2-1
<PAGE> 59
SCHEDULE 5A
REQUIRED FIELDS FOR MORTGAGE
LOAN LENDER TAPE
I. Acceptable File Formats:
1. Fixed Position ASCII - Header line is mandatory.
2. Databases - (dBase, FoxPro) - No memo fields.
3. Spreadsheet - (Lotus, Excel)
a. Remove empty rows between records.
b. Remove empty columns between fields.
c. Date fields must contain valid date formats, not character
labels.
d. Numeric fields must not contain characters. If the value
is 0 or not applicable, leave blank or 0.
e. Unhide all columns and rows.
f. Remove all splits and panes.
4. Comma-Delimited ASCII - Header record is optional.
II. Additional data requirements:
1. For Fixed Position ASCII and Database files, provide file layout
detailing field description, starting position and ending
positions or length for initial set-up file only. The
starting positions and the field widths remain consistent on
every loan and every file.
2. For comma-delimited ASCII files, please provide field descriptions
and order of fields for initial file only.
3. For all file formats, provide comprehensive code definitions for all
fields indicated with an asterisk(*) for the initial set-up
file only. Code definitions must be exactly the same within
the file and on every file. Provide any additional codes on
subsequent files not provided on the initial set-up file
4. The order of the fields must remain the same on every file.
5. The scale of a number field must remain the same on every file. For
example, a coupon of 7.5% must always show as 7.5 or .075, but
not both.
III. File transmission:
1. Email:
CC: [email protected]
2. Modem: 212-296-3132 or (212) 761-3922.
Please call 212-761-2128 prior to transmission.
Commercial Fields Required for Data Transmission
1. Loan Number
2. Borrower Name
3. Property Address
4. Property City
5. Property State
S-2-1
<PAGE> 60
6. Property County
7. Property Zip
8. Lien Position
9. Adjustment Type (ARM or Fixed)
10. Property (Collateral) Type - Office, Retail Store: Anchored, Unanchored,
Shadow, etc.
11. Occupancy Rate (if applicable)
12. Original Coupon
13. Current Coupon
14. Original Balance
15. Current Balance
16. Original P&I
17. Current P&I
18. Origination Date
19. First Payment Date
20. Maturity Date
21. Date Paid Through
22. Original Term
23. Original Amortization Term
24. Product Type (2/6 Arm, 3/6 Arm, etc.)
25. Balloon Flag
26. Original LTV
27. Original Appraisal
28. Unit DSCR (Debt Service Coverage Ratio)*
29. Corporate DSCR
30. Payment Frequency (monthly, quarterly, semi, etc.)
31. Servicing Fee
32. Prepayment Penalty Period
33. Prepayment Penalty Description
*"Debt Service Coverage Ratio" or "DSCR" mean the ratio of Net
Underwritable Cash Flow plus interest expense to long and
short-term borrowing requirements over the trailing twelve
months, based on the actual mortgage coupon rate for fixed
rate Mortgage Loans and at the lifetime cap rate for any
floating interest rate Mortgage Loans, with the exact
components of such ratio determined by the Lender in its sole,
good faith judgment. "Net Underwritable Cash Flow" shall mean
the net operating income (making certain assumptions regarding
minimum vacancy levels, the lesser of actual and "market"
rental rates, management fees and other factors) less
structural reserves and reserves for tenant improvements and
leasing commissions (whether these three types of reserves are
actually impounded or not), as such components are agreed upon
by the Borrower and the Lender.]
If the loan is an Adjustable Rate Loan, the following additional information is
necessary:
1. Index Type (1 YR Treasury, 6 Mo. LIBOR, etc.)
2. Rounding Factor
3. Convertible
4. Neg. Am Flag
5. Neg. Am Cap
6. Periodic Payment Cap
7. Margin
8. Maximum Rate
S-2-2
<PAGE> 61
9. Minimum Rate
10. Initial Periodic Rate Cap
11. Subsequent Periodic Rate Cap
12. First Rate Adjustment Date
13. First Payment Adjustment Date
14. Rate Adjustment Period
15. Payment Adjustment Period
S-2-3
<PAGE> 62
SCHEDULE 5B
REQUIRED FIELDS FOR
MORTGAGE LOAN CUSTODIAN TAPE
[TO BE CONFIRMED]
Commercial Fields Required for Data Transmission:
1. Loan Number
2. Borrower Name
3. Property Address
4. Property City
5. Property State
6. Property County
7. Property Zip
8. Original Balance
9. Original Coupon
10. Maturity Date
11. Wet (Yes/No)
S-2-1
<PAGE> 63
EXHIBIT A
[FORM OF PROMISSORY NOTE]
$ 500,000,000 May 15, 1998
New York, New York
FOR VALUE RECEIVED, CHASTAIN CAPITAL CORPORATION, a Georgia
corporation (the "Borrower"), hereby promises to pay to the order of MORGAN
STANLEY MORTGAGE CAPITAL INC. (the "Lender"), at the principal office of the
Lender at 1585 Broadway, New York, New York, 10036, in lawful money of the
United States, and in immediately available funds, the principal sum of FIVE
HUNDRED MILLION DOLLARS ($500,000,000) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by the Lender to the
Borrower under the Loan Agreement), on the dates and in the principal amounts
provided in the Loan Agreement, and to pay interest on the unpaid principal
amount of each such Loan, at such office, in like money and funds, for the
period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Loan Agreement.
The date, amount and interest rate of each Loan made by the
Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof; provided, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing under the Loan Agreement or
hereunder in respect of the Loans made by the Lender.
This Note is the Note referred to in the Master Loan and
Security Agreement dated as of May 15, 1998 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Loan Agreement")
between the Borrower and the Lender, and evidences Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective meanings
assigned to them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of
collection and enforcement (including reasonable attorneys' fees and
disbursements of Lender's counsel) in respect of this Note when incurred,
including, without limitation, reasonable attorneys' fees through appellate
proceedings.
Notwithstanding the pledge of the Collateral, the Borrower
hereby acknowledges, admits and agrees that the Borrower's obligations under
this Note are recourse obligations of the Borrower to which the Borrower pledges
its full faith and credit.
The Borrower, and any indorsers or guarantors hereof, (a)
severally waive diligence, presentment, protest and demand and also notice of
protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that
this Note, or any payment hereunder, may be extended from time to time, and
consent to the acceptance of further Collateral, the release of any Collateral
for this Note, the release of any party primarily or secondarily liable hereon,
and (c) expressly agree that it will not be necessary for the Lender, in order
to enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrower or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by
A-1
<PAGE> 64
agreement by the Lender with any person now or hereafter liable for the payment
of this Note, shall affect the liability under this Note of the Borrower, even
if the Borrower is not a party to such agreement; provided, however, that the
Lender and the Borrower, by written agreement between them, may affect the
liability of the Borrower.
Any reference herein to the Lender shall be deemed to include
and apply to every subsequent holder of this Note. Reference is made to the Loan
Agreement for provisions concerning optional and mandatory prepayments,
Collateral, acceleration and other material terms affecting this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
THE STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE) WHOSE LAWS
THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS NOTE. THE BORROWER AGREES THAT
ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS NOTE MAY BE
COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN,
OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK.
CHASTAIN CAPITAL CORPORATION
By:
---------------------------------
Name:
Title:
A-2
<PAGE> 65
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Loan
Agreement to the Borrower, on the dates, in the principal amounts and bearing
interest at the rates set forth below, and subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT INTEREST AMOUNT PAID UNPAID PRINCIPAL NOTATION
DATE MADE OF LOAN RATE OR PREPAID AMOUNT MADE BY
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
A-3
<PAGE> 66
EXHIBIT B
[FORM OF CUSTODIAL AGREEMENT]
[Stored as a separate document]
B-1
<PAGE> 67
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO BORROWER]
(date)
Morgan Stanley Mortgage Capital Inc.
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
You have requested [our] [my] opinion, as counsel to Chastain Capital
Corporation, a [ corporation] (the "Borrower"), with respect to certain
matters in connection with that certain Master Loan and Security Agreement,
dated as of May 15, 1998 (the "Loan and Security Agreement"), by and between the
Borrower and Morgan Stanley Mortgage Capital Inc. (the "Lender"), being executed
contemporaneously with a Promissory Note dated May 15, 1998 from the Borrower to
the Lender (the "Note"), a Custodial Agreement, dated as of May 15, 1998 (the
"Custodial Agreement"), by and among the Borrower, LaSalle National Bank (the
"Custodian"), and the Lender. Capitalized terms not otherwise defined herein
have the meanings set forth in the Loan and Security Agreement.
[We] [I] have examined the following documents:
1. the Loan and Security Agreement;
2. the Note;
3. Custodial Agreement;
4. unfiled copies of the financing statements listed on Schedule
1 - (collectively, the "Financing Statements") naming the
Borrower as Debtor and the Lender as Secured Party and
describing the Collateral (as defined in the Loan and Security
Agreement) as to which security interests may be perfected by
filing under the Uniform Commercial Code of the States listed
on Schedule 1 - (the "Filing Collateral"), which I understand
will be filed in the filing offices listed on Schedule 1 -
(the "Filing Offices");
5. the reports listed on Schedule 2 - as to UCC financing
statements (collectively, the "UCC Search Report"); and
6. such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
To the extent [we] [I] have deemed necessary and proper, [we] [I] have
relied upon the representations and warranties of the Borrower contained in the
Loan and Security Agreement. [We] [I] have assumed the authenticity of all
documents submitted to me as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
documents.
C-1
<PAGE> 68
Based upon the foregoing, it is [our] [my] opinion that:
1. The Borrower is a [ corporation] duly organized, validly
existing and in good standing under the laws of [state] and is qualified to
transact business in, and is in good standing under, the laws of the state of
[state].
2. The Borrower has the [corporate] power to engage in the
transactions contemplated by the Loan and Security Agreement, the Note, and the
Custodial Agreement and all requisite [corporate] power, authority and legal
right to execute and deliver the Loan and Security Agreement, the Note, and the
Custodial Agreement and observe the terms and conditions of such instruments.
The Borrower has all requisite [corporate] power to borrow under the Loan and
Security Agreement and to grant a security interest in the Collateral pursuant
to the Loan and Security Agreement.
3. The execution, delivery and performance by the Borrower of the
Loan and Security Agreement, the Note, and the Custodial Agreement, and the
borrowings by the Borrower and the pledge of the Collateral under the Loan and
Security Agreement have been duly authorized by all necessary corporate action
on the part of the Borrower. Each of the Loan and Security Agreement, the Note
and the Custodial Agreement have been executed and delivered by the Borrower and
are legal, valid and binding agreements enforceable in accordance with their
respective terms against the Borrower, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder or with the Lender's
security interest in the Mortgage Loans.
4. No consent, approval, authorization or order of, and no filing
or registration with, any court or governmental agency or regulatory body is
required on the part of the Borrower for the execution, delivery or performance
by the Borrower of the Loan and Security Agreement, the Note and the Custodial
Agreement or for the borrowings by the Borrower under the Loan and Security
Agreement or the granting of a security interest to the Lender in the
Collateral, pursuant to the Loan and Security Agreement.
5. The execution, delivery and performance by the Borrower of,
and the consummation of the transactions contemplated by, the Loan and Security
Agreement, the Note and the Custodial Agreement do not and will not (a) violate
any provision of the Borrower's charter or by-laws, (b) violate any applicable
law, rule or regulation, (c) violate any order, writ, injunction or decree of
any court or governmental authority or agency or any arbitral award applicable
to the Borrower of which I have knowledge (after due inquiry) or (d) result in a
breach of, constitute a default under, require any consent under, or result in
the acceleration or required prepayment of any indebtedness pursuant to the
terms of, any agreement or instrument of which I have knowledge (after due
inquiry) to which the Borrower is a party or by which it is bound or to which it
is subject, or (except for the Liens created pursuant to the Loan and Security
Agreement) result in the creation or imposition of any Lien upon any Property of
the Borrower pursuant to the terms of any such agreement or instrument.
6. There is no action, suit, proceeding or investigation pending
or, to the best of [our] [my] knowledge, threatened against the Borrower which,
in [our] [my] judgment, either in any one instance or in the aggregate, would be
reasonably likely to result in any material adverse change in the properties,
business or financial condition, or prospects of the Borrower or in any material
impairment of the right or ability of the Borrower to carry on its business
substantially as now
C-2
<PAGE> 69
conducted or in any material liability on the part of the Borrower or which
would draw into question the validity of the Loan and Security Agreement, the
Note, the Custodial Agreement or the Mortgage Loans or of any action taken or to
be taken in connection with the transactions contemplated thereby, or which
would be reasonably likely to impair materially the ability of the Borrower to
perform under the terms of the Loan and Security Agreement, the Note, the
Custodial Agreement or the Mortgage Loans.
7. The Loan and Security Agreement is effective to create, in
favor of the Lender, a valid security interest under the Uniform Commercial Code
in all of the right, title and interest of the Borrower in, to and under the
Collateral as collateral security for the payment of the Secured Obligations (as
defined in the Loan and Security Agreement), except that (a) such security
interests will continue in Collateral after its sale, exchange or other
disposition only to the extent provided in Section 9-306 of the Uniform
Commercial Code, (b) the security interests in Collateral in which the Borrower
acquires rights after the commencement of a case under the Bankruptcy Code in
respect of the Borrower may be limited by Section 552 of the Bankruptcy Code.
8. When the Mortgage Notes are delivered to the Custodian,
endorsed in blank by a duly authorized officer of the Borrower, the security
interest referred to in paragraph 7 above in the Mortgage Notes will constitute
a fully perfected first priority security interest in all right, title and
interest of the Borrower therein, in the Mortgage Loan evidenced thereby and in
the Borrower's interest in the related Mortgaged Property.
9. (a) Upon the filing of financing statements on Form UCC-1
naming the Lender as "Secured Party" and the Borrower as "Debtor", and
describing the Collateral, in the jurisdictions and recording offices listed on
Schedule 1 attached hereto, the security interests referred to in paragraph 8
above will constitute fully perfected security interests under the Uniform
Commercial Code in all right, title and interest of the Borrower in, to and
under such Collateral, which can be perfected by filing under the Uniform
Commercial Code.
(b) The UCC Search Report sets forth the proper filing
offices and the proper debtors necessary to identify those Persons who have on
file in the jurisdictions listed on Schedule 1 financing statements covering the
Filing Collateral as of the dates and times specified on Schedule 2. Except for
the matters listed on Schedule 2, the UCC Search Report identifies no Person who
has filed in any Filing Office a financing statement describing the Filing
Collateral prior to the effective dates of the UCC Search Report.
10. The Assignments of Mortgage are in recordable form, except for
the insertion of the name of the assignee, and upon the name of the assignee
being inserted, are acceptable for recording under the laws of the state where
each related Mortgaged Property is located.
Very truly yours,
C-3
<PAGE> 70
EXHIBIT D
[FORM OF REQUEST FOR BORROWING]
Master Loan and Security Agreement, dated as of May 15, 1998 (the "Loan
and Security Agreement"), by and between the Borrower and Morgan Stanley
Mortgage Capital Inc. (the "Lender"),
Lender: Morgan Stanley Mortgage Capital Inc.
Borrower: Chastain Capital Corporation
Requested Fund Date:
-----------------------------------------
Transmission Date:
-----------------------------------------
Transmission Time:
Type of Funding:
(Table or Dry)
-----------------------------------------
Type of Loan Requested:
(Committed or Uncommitted)
-----------------------------------------
Number of Mortgage
Loans to be Pledged:
-----------------------------------------
UPB: $
-----------------------------------------
Requested Wire Amount: $
-----------------------------------------
Interest Period (if any):
-----------------------------------------
Wire Instructions:
Requested by:
CHASTAIN CAPITAL CORPORATION
By:
---------------------------------------
Name:
Title:
D-1
<PAGE> 71
EXHIBIT E-1
[FORM OF BORROWER'S RELEASE LETTER]
[Date]
Morgan Stanley Mortgage Capital Inc.
1585 Broadway
New York, New York 10036
Attention:
--------------------
Facsimile:
--------------------
Re: Master Loan and Security Agreement, dated as of May 15, 1998 (the "Loan
and Security Agreement"), by and between Chastain Capital Corporation
(the "Borrower") and Morgan Stanley Mortgage Capital Inc. (the
"Lender")
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached Schedule A
(the "Mortgage Loans") (a) we hereby certify to you that the Mortgage Loans are
not subject to a lien of any third party and (b) we hereby release all right,
interest or claim of any kind with respect to such Mortgage Loans, such release
to be effective automatically without further action by any party upon payment
from Morgan Stanley Mortgage Capital Inc., of the amount of the Loan
contemplated under the Loan and Security Agreement (calculated in accordance
with the terms thereof) in accordance with the wiring instructions set forth in
the Loan and Security Agreement.
Very truly yours,
Chastain Capital Corporation
By:
-----------------------------------
Name:
Title:
E-1-1
<PAGE> 72
EXHIBIT E-2
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
Morgan Stanley Mortgage Capital Inc.
1585 Broadway
New York, New York 10036
Attention:
----------------
Facsimile:
----------------
Re: Certain Mortgage Loans Identified on Schedule A - hereto and owned by
Chastain Capital Corporation
The undersigned hereby releases all right, interest, lien or claim of
any kind with respect to the mortgage loan(s) described in the attached Schedule
A, such release to be effective automatically without any further action by any
party upon payment in one or more installments, in immediately available funds
of $____________________, in accordance with the following wire instructions:
----------------------------------
----------------------------------
Very truly yours,
[WAREHOUSE LENDER]
By:
-----------------------------
Name:
Title:
F-1
<PAGE> 73
EXHIBIT F
UNDERWRITING GUIDELINES
F-2
<PAGE> 74
EXHIBIT G
FORM OF BLOCKED ACCOUNT AGREEMENT
______ __, 1997
- ------------------
- ------------------
- ------------------
Attn:
-------------
Re: Blocked Account Established by Chastain Capital Corporation
("Borrower") Pursuant to that Certain Servicing Agreement (as amended,
supplemented or otherwise modified from time to time, the "Servicing
Agreement"), dated , 199_, between Servicer and Borrower
Ladies and Gentlemen:
We refer to the collection account established by [NAME OF SERVICER]
(the "Servicer") for the Borrower and the Lender, pursuant to the Loan
Agreement, at [BANK], [CITY], [STATE], Account No. [ACCOUNT #], ABA# [ABA #],
subaccount identified with respect to Mortgage Loans pledged to the Lender (the
"Blocked Account"), which the Borrower maintains in accordance with the Loan
Agreement.
Pursuant to the Loan Agreement, the Servicer will, from time to time,
deposit or cause to be deposited into the Blocked Account funds received from
borrowers for payment of Mortgage Loans made by the Borrower. The Lender has
established a secured loan arrangement with the Borrower. By its execution of
this letter, the Borrower acknowledges that the Borrower has granted a security
interest in all of the Borrower's right, title and interest in and to the
Blocked Account and any funds from time to time on deposit therein with respect
to such Mortgage Loans, that such funds are received by the [BANK] in trust for
the benefit of the Lender and, except as provided below, are for application
against the Borrower's liabilities to the Lender.
Except as expressly provided to the contrary herein, the Blocked
Account shall be subject to the sole dominion and control of the Lender.
By the [BANK]'s execution of this letter, it agrees: (a) that all funds
from time to time hereafter in the Blocked Account are the property of the
Borrower held in trust for the benefit of, and subject to a security interest in
favor of, the Lender; (b) that the [BANK] will not exercise any right of
set-off, banker's lien or any similar right in connection with such funds
provided, that in the event any check is returned to the [BANK] because of
insufficient funds (or is otherwise unpaid) the [BANK] shall be entitled to set
off the amount of any such returned check; (c) that until the [BANK] receives
written notification from the Lender to the contrary, as set forth in clause (e)
below, the Servicer shall
G-1
<PAGE> 75
be entitled to withdraw or transfer funds from the Blocked Account; (d) except
as set forth in the ______ Agreement or in clause (c) above, the [BANK] will not
permit any person or entity to withdraw or transfer funds from the Blocked
Account; and (e) that if the Lender shall notify the [BANK] that an event of
default has occurred under the Lender's secured lending arrangement with the
Borrower, the [BANK] shall not permit the Servicer and/or the Borrower to make
any further withdrawals or transfers and shall thereafter cause or permit
withdrawals from the Blocked Account solely in such manner as the Lender may
instruct.
All bank statements in respect to the Blocked Account shall be sent to
the Servicer with copies to:
Morgan Stanley Mortgage Capital Inc.
1585 Broadway
New York, New York 10036
Attention: Mr. Marc Flamino
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
G-2
<PAGE> 76
Kindly acknowledge your agreement with the terms of this agreement by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
MORGAN STANLEY MORTGAGE CAPITAL INC.
By:
----------------------------------------
Title:
Agreed and acknowledged:
[BANK]
By:
--------------------------------------------
Title:
Agreed and acknowledged:
- -----------------------------------------------
By:
--------------------------------------------
Title:
G-3
<PAGE> 77
EXHIBIT H
[FORM OF BAILEE AGREEMENT]
May 15, 1998
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Kevin J. O'Shea, Esq.
Re: Bailee Agreement (the "Bailee Agreement") in connection with
the pledge of certain mortgage loans by Chastain Capital
Corporation (the "Borrower") to Morgan Stanley Mortgage
Capital Inc. (the "Lender")
Gentlemen and Mesdames:
In consideration of the mutual promises set forth herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Lender and Paul, Hastings, Janofsky & Walker LLP
(the "Bailee") hereby agree as follows:
1. The Borrower shall deliver to the Bailee in connection with
any Mortgage Loans delivered to the Bailee hereunder an Identification
Certificate in the form of Annex 1 attached hereto to which shall be attached a
Mortgage Loan Schedule identifying which Mortgage Loans are being delivered to
the Bailee hereunder. Such Mortgage Loan Schedule shall contain the following
fields of information: (a) the mortgage loan identifying number; (b) the
mortgagor's name; (c) the mortgaged property's street address, city, state and
zip code; (d) the original balance; (e) the current principal balance; (f) the
original mortgage interest rate; (g) the original term; (h) the remaining term;
(i) the date of the last payment made and the due date of such payment; (j) the
Collateral Value of such Mortgage Loan; (k) a field indicating whether the
Mortgage Loan is a Table Funded Mortgage Loan; and (l) a field indicating
whether the Mortgage Loan is an Eligible Multifamily Mortgage Loan or an
Eligible Commercial Mortgage Loan.
2. On or prior to the date indicated on the Identification
Certificate delivered by the Borrower (the "Funding Date"), the Borrower shall
have delivered to the Bailee, as bailee for hire, the following original
documents (collectively, the "Mortgage File") for each mortgage loan (the
"Mortgage Loans") listed in Exhibit A attached hereto (the "Mortgage Loan
Schedule"):
(a) The original Mortgage Note bearing all intervening
endorsements, endorsed "Pay to the order of _________ without recourse" and
signed in the name of the last endorsee (the "Last Endorsee") by an authorized
Person (in the event that the Mortgage Loan was acquired by the
<PAGE> 78
Last Endorsee in a merger, the signature must be in the following form: "[Last
Endorsee], successor by merger to [name of predecessor]"; in the event that the
Mortgage Loan was acquired or originated by the Last Endorsee while doing
business under another name, the signature must be in the following form: "[Last
Endorsee], formerly known as [previous name]").
(b) The original of the guarantee executed in connection with the
Mortgage Note (if any).
(c) The original Mortgage with evidence of recording thereon, or a
copy thereof together with an Officer's Certificate of the Borrower or a
Settlement Agent certifying that such represents a true and correct copy of the
original and that such original has been submitted for recordation in the
appropriate governmental recording office of the jurisdiction where the
Mortgaged Property is located.
(d) The originals of all assumption, modification, consolidation
or extension agreements with evidence of recording thereon, or copies thereof
together with an Officer's Certificate of the Borrower or a Settlement Agent
certifying that such represent true and correct copies of the originals and that
such originals have each been submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.
(e) The original Assignment of Mortgage in blank for each Mortgage
Loan, in form and substance acceptable for recording and signed in the name of
the Last Endorsee (in the event that the Mortgage Loan was acquired by the Last
Endorsee in a merger, the signature must be in the following form: "[Last
Endorsee], successor by merger to [name of predecessor]"; in the event that the
Mortgage Loan was acquired or originated while doing business under another
name, the signature must be in the following form: "[Last Endorsee], formerly
known as [previous name]").
(f) The originals of all intervening assignments of mortgage with
evidence of recording thereon, or copies thereof together with an Officer's
Certificate of the Borrower certifying that such represent true and correct
copies of the originals and that such originals have each been submitted for
recordation in the appropriate governmental recording office of the jurisdiction
where the Mortgaged Property is located.
(g) The original attorney's opinion of title and abstract of title
or the original mortgagee title insurance policy, or if the original mortgagee
title insurance policy has not been issued, the irrevocable commitment to issue
the same.
(h) The original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Mortgage Loan.
(i) The original assignment of leases and rents, if any, with
evidence of recording thereon, or a copy thereof together with an Officer's
Certificate of the Borrower or an approved Settlement Agent certifying that such
copy represents a true and correct copy of the original that has been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located.
(j) The original assignment of assignment of leases and rents, if
any, from the Borrower in blank, in form and substance acceptable for recording.
-2-
<PAGE> 79
(k) A copy of the UCC-1 Financing Statements, certified as true
and correct by the Borrower, and all necessary UCC-3 Continuation Statements
with evidence of filing thereon or copies thereof certified by the Borrower or
an approved Settlement Agent to have been sent for filing, and UCC-3 Assignments
executed by the Borrower in blank, which UCC-3 Assignments shall be in form and
substance acceptable for filing.
(l) An environmental indemnity agreement (if any).
(m) An omnibus assignment in blank (if any).
(n) A disbursement letter from the Mortgagor to the original
mortgagee (if any).
provided, however, that as to certain Mortgages or assignments thereof which
have been delivered or are being delivered to recording offices for recording
and have not been returned to the Borrower in time to permit their delivery
hereunder at the time of such transfer, in lieu of delivering such original
documents, the Borrower shall deliver to the Custodian a true copy thereof with
a certification by the Borrower on the face of such copy substantially as
follows: "certified true and correct copy of original which has been transmitted
for recordation". The Borrower will deliver such original documents, together
with any related policy of title insurance not previously delivered, on behalf
of the Borrower to the Custodian promptly after they are received.
3. The Bailee shall issue and deliver to the Lender and the
Custodian prior to [____] on the Funding Date by facsimile (a) in the name of
the Lender, an initial trust receipt and certification in the form of Annex 2
hereto (the "Trust Receipt") which Trust Receipt shall state that the Bailee has
received the documents comprising each Mortgage File as listed in Paragraph 2
hereof for each Mortgage Loan listed on the Mortgage Loan Schedule except for
such documents listed on the Mortgage Loan Schedule and Exception report
attached thereto and (b) a copy of the executed documents listed in Paragraph 2
(a).
For purposes of this Bailee Agreement:
(a) the "Mortgage Loan Schedule and Exception Report" shall mean a
list of Mortgage Loans delivered by the Bailee to the Lender on the Funding
Date, reflecting the Mortgage Loans held by the Bailee for the benefit of the
Lender, which includes any Exceptions with respect to each Mortgage Loan listed
thereon. Each Mortgage Loan Schedule and Exception Report shall set forth (a)
the Mortgage Loans being pledged to the Lender on the Funding Date as well as
the Mortgage Loans previously pledged to the Lender (if any) and held by the
Bailee under this Bailee Agreement, and (b) all Exceptions with respect thereto,
with any updates thereto from the time last delivered; and
(b) an "Exception" shall mean, with respect to any Mortgage Loan,
any of the following: (i). the variances from the requirements of Section 1
hereof with respect to the Mortgage Files (giving effect to the Borrower's right
to deliver certified copies in lieu of original documents in certain
circumstances), and (ii) any Mortgage Loan with respect to which the Bailee
receives written notice or has actual knowledge of a lien subject or security
interest in favor of a person other than the Lender with respect to such
Mortgage Loan.
4. On the applicable Funding Date, in the event that the Lender
fails to make a Loan to the Borrower secured by the Mortgage Loans identified in
the related Identification Certificate, the Lender shall deliver by facsimile to
the Bailee at (212) 319-4090 to the attention of Kevin J.
-3-
<PAGE> 80
O'Shea, Esq. an authorization (the "Facsimile Authorization") to release the
Mortgage Files with respect to the Mortgage Loans identified therein to the
Borrower. Upon receipt of such Facsimile Authorization, the Bailee shall release
the Mortgage Files to the Borrower in accordance with the Borrower's
instructions.
5. Following the Funding Date, the Bailee shall forward the
Mortgage Files to LaSalle National Bank, 135 S. LaSalle Street, Chicago,
Illinois 60674 Attention: Ms. Mary Ann Ashmore (the "Custodian") by insured
overnight courier for receipt by the Custodian no later than three (3) Business
Days following the applicable Funding Date (the "Delivery Date").
6. From and after the applicable Funding Date until the time of
receipt of the Facsimile Authorization or the applicable Delivery Date, as
applicable, the Bailee (a) shall maintain continuous custody and control of the
related Mortgage Files as bailee for the Lender and (b) is holding the related
Mortgage Loans as sole and exclusive bailee for the Lender unless and until
otherwise instructed in writing by the Lender.
7. The Borrower agrees to indemnify and hold the Bailee and its
directors, officers, agents and employees harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including
reasonable attorney's fees, that may be imposed on, incurred by, or asserted
against it or them in any way relating to or arising out of this Bailee
Agreement or any action taken or not taken by it or them hereunder unless such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (other than special, indirect, punitive or
consequential damages, which shall in no event be paid by the Bailee) were
imposed on, incurred by or asserted against the Bailee because of the breach by
the Bailee of its obligations hereunder, which breach was caused by negligence,
lack of good faith or willful misconduct on the part of the Bailee or any of its
directors, officers, agents or employees. The foregoing indemnification shall
survive any resignation or removal of the Bailee or the termination or
assignment of this Bailee Agreement.
8. (a) In the event that the Bailee fails to produce a
Mortgage Note, Assignment of Mortgage or any other document related to a
Mortgage Loan that was in its possession within ten (10) business days after
required or requested by the Borrower or Lender (a "Delivery Failure"), and
provided that the Bailee previously delivered to the Lender a Trust Receipt
which did not list such document as an Exception on the Funding Date; the Bailee
shall indemnify the Borrower or Lender in accordance with the succeeding
paragraph of this Section 8.
(b) The Bailee agrees to indemnify and hold the Lender and
Borrower, and their respective affiliates and designees harmless against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever,
including reasonable attorney's fees, that may be imposed on, incurred by, or
asserted against it or them in any way relating to or arising out of a Custodial
Delivery Failure or the Bailee's negligence, lack of good faith or willful
misconduct. The foregoing indemnification shall survive any termination or
assignment of this Bailee Agreement.
9. The Bailee and the Borrower each hereby represents, warrants
and covenants that the Bailee is not an affiliate of or otherwise controlled by
the Borrower.
10. In connection with a pledge of the Mortgage Loans as
collateral for an obligation of the Lender, the Lender may pledge its interest
in the Mortgage Files covered held by the
-4-
<PAGE> 81
Bailee for the benefit of the Lender from time to time by delivering written
notice to the Bailee in the form of Exhibit C hereto stating that the Lender has
pledged its interest in the identified Mortgage Loans and Mortgage Files, and
the identity of the party to whom the Mortgage Loans have been pledged (such
party, the "Pledgee"). Upon receipt of such notice from the Lender, the Bailee
shall mark its records to reflect the pledge of the Mortgage Loans by the Lender
to the Pledgee. The Bailee's records shall reflect the pledge of the Mortgage
Loans by the Lender to the Pledgee until such time as the Bailee receives
written instructions from the Lender that the Mortgage Loans are no longer
pledged by the Lender to the Pledgee, at which time the Bailee shall change its
records to reflect the release of the pledge of the Mortgage Loans and that the
Bailee is holding the Mortgage Loans as custodian for, and for the benefit of,
the Lender.
11. The agreement set forth in this Bailee Agreement letter may
not be modified, amended or altered, except by written instrument, executed by
all of the parties hereto.
12. This Bailee Agreement may not be assigned by the Borrower or
the Bailee without the prior written consent of the Lender.
13. For the purpose of facilitating the execution of this Bailee
Agreement letter as herein provided and for other purposes, this Bailee
Agreement letter may be executed simultaneously in any number of counterparts,
each of which counterparts shall be deemed to be an original, and such
counterparts shall constitute and be one and the same instrument.
14. THIS BAILEE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Very truly yours,
CHASTAIN CAPITAL CORPORATION
Borrower
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
ACCEPTED AND AGREED:
PAUL, HASTINGS, JANOFSKY & WALKER, LLP,
Bailee
By:__________________________
Name: Kevin J. O'Shea, Esq.
Title: Partner
ACCEPTED AND AGREED:
MORGAN STANLEY MORTGAGE CAPITAL INC.,
Lender
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
-6-
<PAGE> 82
Annex 1
IDENTIFICATION CERTIFICATE
On this _____ day of April 1998, CHASTAIN CAPITAL CORPORATION (the
"Borrower"), under that certain Bailee Agreement, dated as of May 15, 1998 (the
"Bailee Agreement"), among the Borrower, __________________, (the "Bailee"), and
MORGAN STANLEY MORTGAGE CAPITAL INC., as Lender, does hereby instruct the Bailee
to hold, in its capacity as Bailee, the Mortgage Files with respect to the
Mortgage Loans listed on Attachment A hereto, which Mortgage Loans shall be
subject to the terms of the Bailee Agreement as of the date hereof.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Bailee Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Identification
Certificate to be executed and delivered by its duly authorized officer as of
the day and year first above written.
CHASTAIN CAPITAL CORPORATION
By:
---------------------------
Name:
Title:
-1-
<PAGE> 83
Annex 2
TRUST RECEIPT AND CERTIFICATION
May 15, 1998
Morgan Stanley Capital Inc.
1585 Broadway
New York, New York 10036
Attention:
---------------
Re: Bailee Letter, dated as of May 15, 1998 (the "Bailee
Agreement") among Chastain Capital Corporation (the
"Borrower"), Morgan Stanley Mortgage Capital Inc. (the
"Lender") and (the "Bailee")
Gentlemen and Mesdames:
In accordance with the provisions of Paragraph 3 of the
above-referenced Bailee Letter, the undersigned, as the Bailee, hereby certifies
that as to each mortgage loan described in the mortgage loan schedule (Exhibit
A), a copy of which is attached hereto, it has reviewed the Mortgage File and
has determined that (i) all documents listed in Paragraph 2 of the Bailee
Agreement are in its possession and (ii) such documents have been reviewed by it
and appear regular on their face and relate to such mortgage loan, and (iii)
based on its examination, the foregoing documents on their face satisfy the
requirements set forth in Paragraph 2 of the Bailee Agreement.
The Bailee hereby confirms that it is holding each such Mortgage File
as agent and bailee for the exclusive use and benefit of the Lender pursuant to
the terms of the Bailee Agreement.
All initially capitalized terms used herein shall have the meanings
ascribed to them in the above-referenced Bailee Agreement.
-----------------------------
BAILEE
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE> 84
EXHIBIT I
[FORM OF INSURED CLOSING LETTER]
[TO BE PROVIDED]
<PAGE> 85
EXHIBIT J
SETTLEMENT AGENT APPROVAL REQUEST
Date: April _, 1998
The undersigned, CHASTAIN CAPITAL CORPORATION (the "Borrower"),
requests the Lender's approval of the Settlement Agent[s] listed below. The
Borrower certifies that the name and address of each Settlement Agent listed
below is true and correct. The Borrower further certifies that the Borrower has
attached hereto as Attachment 1 hereto, true and correct copies of the errors
and omissions polic[ies] for each Settlement Agent listed below.
Capitalized terms not otherwise defined herein are defined in that
certain Master Loan and Security Agreement (the "Security Agreement"), dated as
of May 15, 1998 between the Borrower and Morgan Stanley Mortgage Capital Inc.,
as Lender, or in that certain Custodial Agreement (the "Custodial Agreement"),
dated as of May 15, 1998, among the Borrower, LaSalle National Bank, as
Custodian, and Morgan Stanley Mortgage Capital Inc., as Lender.
-------------------------------------------------------------------
Settlement Agent's Name Settlement Agent's Address
----------------------- --------------------------
-------------------------------------------------------------------
CHASTAIN CAPITAL CORPORATION
By:
-------------------------------------------
Name:
Title:
Acknowledged and Agreed:
MORGAN STANLEY MORTGAGE CAPITAL INC.
By:
------------------------
Name:
----------------------
Title:
---------------------
Date:
----------------------
- --------------------------------------------------------------------------------
-4-
<PAGE> 86
Attachment 1 Schedule J
SETTLEMENT AGENT ERRORS AND OMISSIONS POLICIES
[TO BE PROVIDED BY THE BORROWER]
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CHASTAIN CAPITAL CORPORATION FOR THE PERIOD ENDED JUNE
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 22,515,940
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,094,964
<PP&E> 3,678,345
<DEPRECIATION> 5,255
<TOTAL-ASSETS> 127,455,082
<CURRENT-LIABILITIES> 2,068,294
<BONDS> 0
0
0
<COMMON> 89,808
<OTHER-SE> 124,829,826
<TOTAL-LIABILITY-AND-EQUITY> 127,455,082
<SALES> 0
<TOTAL-REVENUES> 1,345,990
<CGS> 0
<TOTAL-COSTS> 7,679
<OTHER-EXPENSES> 1,278,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 102,636
<INCOME-TAX> 0
<INCOME-CONTINUING> 102,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,636
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
