As filed with the Securities and Exchange Commission on August 14, 1998
UNITED STATES
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: 1-8063
CAPITAL TRUST
(Exact name of registrant as specified in its charter)
California 94-6181186
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
605 Third Avenue, 26th Floor, New York, NY 10016
- --------------------------------------------------------------------------------
(Address of principal executive offices) Zip Code)
(212) 655-0220
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /]
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the close of the latest practical date.
Class Outstanding at August 13, 1998
- ------------------------------------------- ------------------------------
Class A Common Shares of Beneficial Interest, 18,213,816
$1.00 par value ("Class A Common Shares")
<PAGE>
CAPITAL TRUST
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Part I. Financial Information
Item 1: Financial Statements 1
Consolidated Balance Sheets - June 30, 1998 (unaudited) and
December 31, 1997 (audited) 1
Consolidated Statements of Operations - Three and Six Months
Ended June 30, 1998 and 1997 (unaudited) 2
Consolidated Statements of Changes in Shareholders' Equity -
Six Months Ended June 30, 1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows - Six Months Ended June
30, 1998 and 1997 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information
Item 1: Legal Proceedings 18
Item 2: Changes in Securities 18
Item 3: Defaults Upon Senior Securities 18
Item 4: Submission of Matters to a Vote of Security Holders 18
Item 5: Other Information 18
Item 6: Exhibits and Reports on Form 8-K 18
Signatures 20
</TABLE>
<PAGE>
Capital Trust and Subsidiaries
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------- ----------------
(unaudited) (audited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 9,804 $ 49,268
Commercial mortgage-backed securities and other available-for-sale
securities, at fair value 67,688 11,975
Loans and other investments, net of $1,702 (unaudited) and $462
reserve for possible Credit losses at June 30, 1998 and
December 31, 1997, respectively
545,530 251,812
Excess of purchase price over net tangible assets acquired, net 319 331
Deposits and other receivables 2,438 284
Accrued interest receivable 5,520 818
Prepaid and other assets 5,962 2,878
==================== ====================
Total assets $ 637,261 $ 317,366
==================== ====================
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and accrued expenses $ 8,758 $ 5,718
Notes payable 14,611 4,953
Credit Facilities 353,894 79,864
Repurchase obligations 105,954 82,173
Deferred origination fees and other revenue 4,989 1,369
-------------------- --------------------
Total liabilities 488,206 174,077
-------------------- --------------------
Commitments and contingencies
Shareholders' equity:
Class A Preferred Shares, $1.00 par value, $0.26 cumulative annual
dividend, 12,639 shares authorized, 12,268 shares issued and
outstanding (liquidation preference of $33,000) 12,268 12,268
Class A Common Shares, $1.00 par value; unlimited shares
authorized, 18,157 shares issued and outstanding 18,157 18,157
Restricted Class A Common Shares, $1.00 par value, 72 shares issued
and outstanding at June 30, 1998 72 -
Additional paid-in capital 158,790 158,137
Unearned compensation (646) -
Accumulated other comprehensive income (55) 387
Accumulated deficit (39,531) (45,660)
-------------------- --------------------
Total shareholders' equity 149,055 143,289
-------------------- --------------------
Total liabilities and shareholders' equity $ 637,261 $ 317,366
==================== ====================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
- 1 -
<PAGE>
Capital Trust and Subsidiaries
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1998 and 1997
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -------------------------------------
1998 1997 1998 1997
-------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Income from loans and other investments:
Interest and related income $ 14,066 $ 40 $ 22,043 $ 76
Less: interest and related expenses 6,516 - 9,597 -
--------------
---------------- ---------------- -----------------
Net income from loans and other investments 7,550 40 12,446 76
-------------- ---------------- ----------------- -----------------
Other revenues:
Advisory and investment banking fees 5,790 - 8,650 -
Rental income - 15 - 305
Other interest income 310 316 680 603
Loss on sale of rental properties - - - (432)
-------------- ---------------- ----------------- ----------------
Total other revenues 6,100 331 9,330 476
-------------- ---------------- ----------------- -----------------
Other expenses:
General and administrative 4,020 710 7,261 1,142
Other interest expense 105 24 211 123
Rental property expenses - (14) - 123
Depreciation and amortization 62 3 108 24
Provision for possible credit losses 760 - 1,240 -
-------------- ---------------- ----------------- -----------------
Total other expenses 4,947 723 8,820 1,412
-------------- ---------------- ----------------- -----------------
Net income (loss) before income taxes 8,703 (352) 12,956 (860)
Provision for income taxes 3,679 - 5,259 -
-------------- ---------------- ----------------- -----------------
Net income (loss) $ 5,024 $ (352) $ 7,697 $ (860)
Less: Class A Preferred Share dividend and
dividend requirement 784 - 1,568 -
-------------- ---------------- ----------------- -----------------
Net income (loss) allocable to Class A
Common Shares $ 4,240 $ (352) $ 6,129 $ (860)
============= ================ ================= =================
Per share information:
Net income (loss) per Class A Common Share:
Basic $ 0.23 $ (0.04) $ 0.34 $ (0.09)
============= ================ ================= =================
Diluted $ 0.16 $ (0.04) $ 0.25 $ (0.09)
============= ================ ================= =================
Weighted average Class A Common Shares
outstanding:
Basic 18,229,650 9,157,150 18,218,835 9,157,150
============= ================ ================= =================
Diluted 30,770,567 9,157,150 30,744,162 9,157,150
============= ================ ================= =================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-2-
<PAGE>
Capital Trust and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
For the Six Months Ended June 30, 1998 and 1997
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Restricted
Class A Class A Class A
Comprehensive Common Preferred Common
Income (Loss) Shares Shares Shares
------------------ ----------------------------------------
<S> <C> <C> <C> <C>
Six months ended June 30, 1997
- -----------------------------
Balance at December 31, 1996 $ - $ - $ 9,157 $ -
Net loss (860) - - -
Change in unrealized gain (loss) 157 - - -
on available-for-sale securities
Other - - - -
================== ========================================
Balance at June 30, 1997 $ (703) $ - $ 9,157 $ -
================== ========================================
Six months ended June 30, 1998
- ------------------------------
Balance at December 31, 1997 $ - $ 12,268 $18,157 $ - $
Net income 7,697 - - -
Change in unrealized gain (loss) (442) - - -
on available-for-sale securities
Issuance of restricted - - - 72
Class A Common Shares
Restricted Class A Common
Shares earned - - - -
Class A Preferred Share
Dividend - - - -
================= ========================================
Balance at June 30, 1998 $ 7,255 $ 12,268 $18,157 $ 72
================= ========================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid-In Unearned Comprehensive Accumulated
Capital Compensation Income Deficit Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Six months ended June 30, 1997
- -----------------------------
Balance at December 31, 1996 $ 55,098 $ - $ (22) $ (39,762) $ 24,471
Net loss - - - (860) (860)
Change in unrealized gain (loss) - - 157 - 157
on available-for-sale securities
Other 27 - - - 27
============================================================================
Balance at June 30, 1997 $ 55,125 $ - $ 135 $ (40,622) $ 23,795
============================================================================
Six months ended June 30, 1998
- ------------------------------
Balance at December 31, 1997 $ 158,137 $ - $ 387 $ (45,660) $ 143,289
Net income - - - 7,697 7,697
Change in unrealized gain (loss) - - (442) - (442)
on available-for-sale securities
Issuance of restricted 653 (725) - - -
Class A Common Shares
Restricted Class A Common
Shares earned - 79 - - 79
Class A Preferred Share
Dividend - - - (1,568) (1,568)
===========================================================================
Balance at June 30, 1998 $ 158,790 $ (646) $ (55) $ (39,531) $ 149,055
============================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE>
Capital Trust and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended June 30, 1998 and 1997
(in thousands)(unaudited)
<TABLE>
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,697 $ (860)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 108 25
Restricted Class A Common Shares earned 79 -
Net amortization of premiums and accretion of discounts on loans
and other investments 477 -
Loss on sale of investments and properties - 432
Provision for possible credit losses 1,240 -
Changes in assets and liabilities:
Deposits and receivables (2,154) (89)
Accrued interest receivable (4,702) -
Prepaid and other assets (2,940) (403)
Deferred revenue 3,620 -
Accounts payable and accrued expenses 3,040 834
Other liabilities - (70)
------------------- ------------------
Net cash provided by (used in) operating activities 6,465 (131)
------------------- ------------------
Cash flows from investing activities:
Origination and purchase of loans and other investments (410,599) (49,524)
Principal collections of loans and other investments 54,843 16
Purchases of equipment and leasehold improvements (240) -
Improvements to rental properties - (64)
Proceeds from sale of rental properties - 7,306
Principal collections on available-for-sale securities 4,166 1,576
------------------- ------------------
Net cash used in investing activities (351,830) (40,690)
------------------- ------------------
Cash flows from financing activities:
Proceeds from repurchase obligations 41,837 42,451
Repayment of repurchase obligations (18,056) -
Proceeds from credit facilities 383,289 -
Repayment of credit facilities (109,259) -
Proceeds from notes payable 10,170 -
Repayment of notes payable (512) (4,296)
Dividends paid on Class A Preferred Shares (1,568) -
Additional Paid-in Capital - 27
------------------- ------------------
Net cash provided by financing activities 305,901 38,182
------------------- ------------------
Net decrease in cash and cash equivalents (39,464) (2,639)
Cash and cash equivalents at beginning of period 49,268 4,698
=================== ==================
Cash and cash equivalents at end of period $ 9,804 $ 2,059
=================== ==================
Supplemental disclosure of cash flow information
Interest paid during the period $ 7,640 $ 123
=================== ==================
Taxes paid during the period $ 3,139 $ -
=================== ==================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE>
Capital Trust and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1998
(unaudited)
1. Presentation of Financial Information
The accompanying unaudited consolidated interim financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying unaudited consolidated interim financial
statements should be read in conjunction with the financial statements and the
related management's discussion and analysis of financial condition and results
of operations filed with the 1997 Form 10-K of Capital Trust and Subsidiaries
(the "Company"). In the opinion of management, all adjustments (consisting only
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the three and six months ended June
30, 1998, are not necessarily indicative of results that may be expected for the
entire year ending December 31, 1998.
At December 31, 1996, the Company owned commercial rental property in
Sacramento, California through a 59% limited partnership interest in Totem
Square L.P., a Washington limited partnership ("Totem"), and an indirect 1%
general partnership interest in Totem through its wholly-owned subsidiary,
Cal-REIT Totem Square, Inc. An unrelated party held the remaining 40% interest.
This property was sold during the quarter ended June 30, 1997 and the Totem
Square L.P. and Totem Square, Inc. subsidiaries were liquidated and dissolved.
The unaudited consolidated interim financial statements of the Company include
the accounts of the Company, Victor Capital Group, L.P. ("Victor Capital") and
its wholly-owned subsidiaries (included in the consolidated statement of
operations since their acquisition on July 15, 1997) and the results from the
disposition of the Company's rental property held by Totem, which was sold on
March 4, 1997. All significant intercompany balances and transactions have been
eliminated in consolidation. The accounting and reporting policies of the
Company conform in all material respects to generally accepted accounting
principles. Certain prior period amounts have been reclassified to conform to
current period classifications.
2. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
-5-
<PAGE>
Capital Trust and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(unaudited)
3. Earnings Per Class A Common Share
Earnings per Class A Common Share is presented based on the requirements of
Statement of Accounting Standards No. 128 ("SFAS No. 128") which is effective
for periods ending after December 15, 1997. SFAS No. 128 simplifies the standard
for computing earnings per share and makes them comparable with international
earnings per share standards. The statement replaces primary earnings per share
with basic earnings per share ("Basic EPS") and fully diluted earnings per share
with diluted earnings per share ("Diluted EPS"). Basic EPS is computed based on
the income applicable to Class A Common Shares (which is net income (loss)
reduced by the dividends on the class A 9.5% cumulative convertible preferred
shares of beneficial interest, $1.00 par value ("Class A Preferred Shares"))
divided by the weighted-average number of Class A Common Shares outstanding
during the period. Diluted EPS is based on the net earnings applicable to Class
A Common Shares plus dividends on the Class A Preferred Shares, divided by the
weighted average number of Class A Common Shares and dilutive potential Class A
Common Shares that were outstanding during the period. Dilutive potential Class
A Common Shares include the convertible Class A Preferred Shares and dilutive
options to purchase Class A Common Shares. At June 30, 1998, the Class A
Preferred Shares and dilutive portion of options to purchase Class A Common
Shares were considered Class A Common Share equivalents for purposes of
calculating Diluted EPS. At June 30, 1997, there was no difference between Basic
EPS and Diluted EPS or weighted average Class A Common Shares outstanding, as
there were no dilutive securities outstanding.
4. Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS No. 130") which is effective for
fiscal years beginning after December 15, 1997. The statement changes the
reporting of certain items currently reported in the shareholders' equity
section of the balance sheet and establishes standards for reporting of
comprehensive income and its components in a full set of general purpose
financial statements. The Company has adopted this standard effective January 1,
1998. Total comprehensive income (loss) was $4,700,000 and $(236,000) for the
three months ended June 30, 1998 and 1997, respectively, and $7,255,000 and
$(703,000) for the six months ended June 30, 1998 and 1997, respectively. The
primary component of comprehensive income other than net income was unrealized
gain (loss) on available-for-sale securities.
-6-
<PAGE>
5. Loans and Other Investments
At June 30, 1998, the amount and weighted average interest rate the Company's
loans and other investments by category was as follows (in thousands):
<TABLE>
<CAPTION>
Weighted
Average
Amount Interest Rate
------------------- -------------------
<S> <C> <C>
Mortgage Loans $ 277,653 11.43%
Mezzanine Loans 267,539 11.60%
Other mortgage loans receivable 2,040 8.41%
-------------------
Total loans and other investments 547,232 11.50%
Less: Reserve for possible credit losses (1,702)
===================
Net loans and other investments $ 545,530
===================
</TABLE>
At June 30, 1998, $414.2 million of the aforementioned loans and other
investments bear interest at floating rates ranging from LIBOR plus 320 basis
points to LIBOR plus 700 basis points before amortization of fees, premiums and
discounts. The remaining $133.0 million of loans and other investments were
originated or purchased with fixed rates ranging from 8% to 12% at June 30,
1998. All of the loans and other investments with fixed rates were the subject
of interest rate swaps to provide a floating rate. The weighted average interest
rate in effect at June 30, 1998, including interest rate swaps and amortization
of fees, premiums and discounts, was 11.50%.
During the six months ended June 30, 1998, the Company completed eighteen new
loan and investment transactions totaling approximately $436.7 million and
provided $7.4 million of additional fundings on four existing loans. The Company
funded $410.6 million of the foregoing loans and investments through June 30,
1998 and had unfunded commitments on such assets totaling $45.4 million at June
30, 1998.
During the quarter ended June 30, 1998, due to prepayments made on underlying
securities that reduced the interest rate/risk profile and maturity of a
subordinated interest security, the Company concluded that it no longer
anticipated holding this security to maturity. The security was sold during the
quarter ended September 30, 1998 at par. Because of this decision to sell a
held-to-maturity security, the Company has transferred all subordinated
interests, which have a book value of $60,321 as of June 30, 1998, from
held-to-maturity securities to available-for-sale at amortized costs which
approximated market value.
At June 30, 1998, the Company had committed to originate one loan for $28.0
million subject to definitive documentation (of which $23.0 million was funded
in early July 1998) and had letters of intent outstanding for various other
lending transactions, which were subject to satisfaction of certain conditions.
-7-
<PAGE>
Capital Trust and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(unaudited)
6. Long-Term Debt
Credit Facilities
Effective January 1, 1998, pursuant to an amended and restated credit agreement,
the Company increased its existing line of credit with a commercial lender to
$250 million (the "Credit Facility") and subsequently further amended the credit
agreement to increase the facility to $300 million effective June 22, 1998. An
additional commitment fee was paid when the Company's borrowings exceeded $250
million. The Credit Facility provides for advances to fund lender-approved loans
and investments made by the Company. The amended and restated agreement expires
on December 31, 2000.
On June 8, 1998, the Company entered into an additional credit agreement with
another commercial lender that provides for a $300 million line of credit that
expires in November 1999 (the "Second Credit Facility" together with the Credit
Facility, the "Credit Facilities"). The Second Credit Facility provides for
advances to fund lender-approved loans and investments made by the Company (such
loans and investments together with loans and investments approved under the
Credit Facility, the "Funded Portfolio Assets").
The Company incurred an initial commitment fee upon the signing of the Second
Credit Facility and will pay an additional commitment fee when borrowings exceed
$250 million. Future repayments and redrawdowns of amounts previously subject to
the drawdown fee will not require the Company to pay any additional fees. The
Second Credit Facility provides for margin calls on asset-specific borrowings in
the event of asset quality and/or market value deterioration as determined under
the Second Credit Facility. The Second Credit Facility contains customary
representations and warranties, covenants and conditions and events of default.
The Second Credit Facility also contains a covenant obligating the Company to
avoid undergoing an ownership change that results in Craig M. Hatkoff, John R.
Klopp or Samuel Zell no longer retaining their senior offices and trusteeships
with the Company and practical control of the Company's business and operations.
The obligations of the Company under the Credit Facilities are secured by
pledges of the Funded Portfolio Assets acquired with advances under the Credit
Facilities. Borrowings under the Credit Facilities bear interest at specified
rates over LIBOR (averaging approximately 8.02% for the borrowings outstanding
at June 30, 1998) which rates vary according to the credit quality of the Funded
Portfolio Assets and the advance rate.
On June 30, 1998, the unused amounts available under the Credit Facilities were
$246.1 million.
-8-
<PAGE>
Capital Trust and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(unaudited)
Repurchase Obligations
In May 1998, the Company entered into a repurchase agreement in connection with
the purchase of a subordinated participation in a note. At June 30, 1998, the
Company has sold such assets totaling $19.0 million and has a liability to
repurchase these assets for $15.2 million. The liability bears interest at
specified rates over LIBOR (reflecting a total borrowing rate of 7.16% at June
30, 1998) and matures in May 1999.
7. Income Taxes
The Company will elect to file a consolidated federal income tax return for the
year ending December 31, 1998. The provision for income taxes for the six months
ended June 30, 1998 is comprised of the following (in thousands):
Current
Federal $ 2,842
State 1,270
Local 1,147
Deferred
Federal -
State -
Local -
==============
Provision for income taxes $ 5,259
==============
The Company has federal net operating loss carryforwards ("NOLs") as of June 30,
1998 of approximately $17.7 million. Such NOLs expire through 2012. The Company
also has a federal capital loss carryover of approximately $1.6 million that can
be used to offset future capital gains. Due to an affiliate's purchase of
6,959,593 Class A Common Shares from the Company's former parent in January 1997
and another prior ownership change, a substantial portion of the NOLs are
limited for federal income tax purposes to approximately $1.5 million annually.
Any unused portion of such annual limitation can be carried forward to future
periods. The Company also has approximately $3.5 million of NOL's from losses in
1997 (after the ownership changes described above) that can be utilized against
taxable income in 1998.
The reconciliation of income tax computed at the U.S. federal statutory tax rate
to the effective income tax rate for the quarter ended June 30, 1998 is as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Federal in/come tax at statutory rate (34%) $ 4,405 34.0%
State and local taxes, net of federal tax benefit 1,595 12.3
Tax benefit of utilization of net operating loss carryforward (850) (6.5)
Other 109 0.8
------------------------------
$ 5,259 40.6%
==============================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax reporting purposes.
-9-
<PAGE>
Capital Trust and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(unaudited)
The components of the net deferred tax assets recorded under SFAS No. 109 as of
June 30, 1998 are as follows (in thousands):
Net operating loss carryforward $ 8,240
Reserves on other assets and for possible credit losses 3,552
Deferred revenue 616
Reserve for uncollectible accounts 208
-----------------
Deferred tax assets $ 12,616
Valuation allowance (12,616)
-----------------
$ -
=================
The Company recorded a valuation allowance to fully reserve its net deferred
assets. Under SFAS No. 109, this valuation allowance will be adjusted in future
years, as appropriate. However, the timing and extent of such future adjustments
can not presently be determined.
8. Employee Benefit Plans
1998 Long-Term Incentive Share Plan
On May 23, 1997, the Board of Trustees adopted the 1997 Long-Term Incentive Plan
(the "Incentive Share Plan"), which became effective upon shareholder approval
on July 15, 1997 at the 1997 annual meeting of shareholders (the "1997 Annual
Meeting"). The Incentive Share Plan permits the grant of nonqualified share
option ("NQSO"), incentive share option ("ISO"), restricted share, share
appreciation right ("SAR"), performance unit, performance share and share unit
awards. The Company has reserved an aggregate of 2,000,000 Class A Common Shares
for issuance pursuant to awards under the Incentive Share Plan and the Company
Non-Employee Trustee Share Plan. The maximum number of shares that may be
subject of awards to any employee during the term of the Incentive Share Plan
may not exceed 500,000 shares and the maximum amount payable in cash to any
employee with respect to any performance period pursuant to any performance unit
or performance share award is $1.0 million.
During the quarter ended June 30, 1998, the Company issued an aggregate of
82,000 options to acquire Class A Common Shares with an exercise price of
between $10.00 and $11.38 per share (which were issued at or above the Class A
Common Share price on the date of the grant).
-10-
<PAGE>
Capital Trust and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(unaudited)
The following table summarizes the activity under the Incentive Share Plan for
the six months ended June 30, 1998:
<TABLE>
<CAPTION>
Options Exercise Price
Outstanding per Share
-------------------------- --------------------------
<S> <C> <C>
Outstanding at January 1, 1998 607,000 $6.00
Granted 1,007,250 $10.00 - $11.38
Exercised -
Canceled 57,500 $6.00 - $10.00
-------------------------- --------------------------
========================== ==========================
Outstanding at June 30, 1998 1,556,750 $6.00 - $11.38
========================== ==========================
</TABLE>
9. Subsequent Event
On July 28, 1998, the Company privately placed 150,000 8.25% Step Up Convertible
Trust Preferred Securities (liquidation amount $1,000 per security) with an
aggregate liquidation amount of $150 million (the "Convertible Trust Preferred
Securities"). The Convertible Trust Preferred Securities were issued by the
Company's consolidated statutory trust subsidiary, CT Convertible Trust I (the
"Trust"). This private placement transaction was completed concurrently with the
related issuance and sale to the Trust of the Company's 8.25% Step Up
Convertible Junior Subordinated Debentures in the aggregate principal amount of
$154,650,000 (the "Convertible Debentures"). Distributions on the Convertible
Trust Preferred Securities are payable quarterly in arrears on each calendar
quarter-end and correspond to the payments of interest made on the Convertible
Debentures, the sole assets of the Trust. Distributions are payable only to the
extent payments are made in respect to the Convertible Debentures.
The Company received $145.2 million in net proceeds, after original issue
discount and transaction expenses, pursuant to the above transactions,
reflecting an original issue discount of 3% from the liquidation amount of the
Convertible Trust Preferred Securities. The proceeds were initially used to pay
down the Company's Credit Facilities. The Convertible Trust Preferred Securities
are convertible at any time by the holders thereof into the Company's listed
Class A Common Shares at a conversion price of $11.70. The Convertible
Debentures have a 20-year maturity and are non-callable for five years. Upon
repayment of the Convertible Debentures at maturity or upon redemption, the
proceeds of such repayment or payment shall be simultaneously paid and applied
to redeem, among other things, the Convertible Trust Preferred Securities. If
the securities have not been redeemed by September 30, 2004, the distribution
rate will step up by 0.75% per annum. The 3% ($4.5 million) discount on the
issuance will be amortized over the life of the Convertible Trust Preferred
Securities or 20 years.
-11-
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Form 10-Q. Historical results set forth are not necessarily indicative of the
future financial position and results of operations of the Company. The
following discussion reflects the reclassification on July 15, 1997 of the
Company's common shares of beneficial interest, $1.00 par value ("Old Common
Shares"), as class A common shares of beneficial interest, $1.00 par value (the
"Class A Common Shares").
Recent Developments
On January 3, 1997, Capital Trust Investors Limited Partnership
("CTILP"), an affiliate of Equity Group Investments, Inc. ("EGI") and Samuel
Zell, purchased from the Company's former parent, 6,959,593 Class A Common
Shares (representing approximately 76% of the then-outstanding Class A Common
Shares) for an aggregate purchase price of $20,222,011. Prior to the purchase,
which was approved by the then-incumbent Board of Trustees, EGI and Victor
Capital Group, L.P. ("Victor Capital") presented to the Company's then-incumbent
Board of Trustees a proposed new business plan in which the Company would cease
to be a REIT and instead become a specialty finance company designed primarily
to take advantage of high-yielding mezzanine investment and other real estate
asset opportunities in commercial real estate. EGI and Victor Capital also
proposed that they provide the Company with a new management team to implement
the business plan and that they invest through an affiliate a minimum of $30.0
million in a new class of preferred shares to be issued by the Company.
The Board of Trustees approved CTILP's purchase of the former parent's
Class A Common Shares, the new business plan and the issuance of a minimum of
$30.0 million of a new class of preferred shares of the Company at $2.69 per
share, such shares to be convertible into Class A Common Shares of the Company
on a one-for-one basis. The Company subsequently agreed that, concurrently with
the consummation of the proposed preferred equity investment, it would acquire
for $5.0 million Victor Capital's real estate investment banking, advisory and
asset management businesses, including the services of its experienced
management team.
At the Company's 1997 annual meeting of shareholders ("1997 Annual
Meeting"), the Company's shareholders approved the investment, pursuant to which
the Company would issue and sell up to approximately $34.0 million of class A
9.5% cumulative convertible preferred shares of beneficial interest, $1.00 par
value ("Class A Preferred Shares"), to Veqtor Finance Company, LLC ("Veqtor"),
an affiliate of Samuel Zell and the principals of Victor Capital (the
"Investment"). The Company's shareholders also approved the amended and restated
declaration of trust, which, among other things, reclassified the Company's Old
Common Shares as Class A Common Shares and changed the Company's name to
"Capital Trust."
Immediately following the 1997 Annual Meeting, the Investment was
consummated; 12,267,658 Class A Preferred Shares were sold to Veqtor for an
aggregate purchase price of $33,000,000. Concurrently with the foregoing
transaction, Veqtor purchased the 6,959,593 Class A Common Shares held by CTILP
for an aggregate purchase price of approximately $21.3 million. As a result of
these transactions, currently, Veqtor beneficially owns 19,227,251 (or
approximately 63%) of the outstanding voting shares of the Company. Veqtor
funded the
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<PAGE>
approximately $54.3 million aggregate purchase price for the Class A Common
Shares and Class A Preferred Shares with $5.0 million of capital contributions
from its members and $50.0 million of borrowings under the 12% convertible
redeemable notes (the "Veqtor Notes") issued to institutional investors. In June
1998, the Veqtor Notes were converted into preferred units of Veqtor by
agreement between the common members of Veqtor and the institutional investors.
Pursuant to an amended and restated limited liability company agreement of
Veqtor, the Veqtor notes were converted into preferred units of Veqtor (the
"Veqtor Preferred Units") and the institutional investors were admitted as
preferred members of Veqtor. Veqtor may in the future redeem the Veqtor
Preferred Units for an aggregate of 9,899,710 shares (assuming redemption on the
earliest possible date, July 16, 1999). The common members of Veqtor and Veqtor
agreed with the Company in December 1997 that Veqtor should redeem the preferred
units then authorized by the original limited liability company agreement of
Veqtor in effect at such time at the earliest date upon which Veqtor has the
right to effectuate such redemption. Veqtor has confirmed to the Company that
the foregoing agreement obligates Veqtor to redeem the Veqtor Preferred Units
according to the timetable specified therein.
In addition, immediately following the 1997 Annual Meeting, the
acquisition of the real estate services businesses of Victor Capital was
consummated and a new management team was appointed by the Company from among
the ranks of Victor Capital's professional team and elsewhere. The Company
thereafter immediately commenced full implementation of its current business
plan under the direction of its newly elected board of trustees and new
management team.
After the 1997 Annual Meeting, the Company completed two significant
financing and capital raising transactions. As of September 30, 1997, the
Company obtained a $150 million line of credit ("Credit Facility") from a
commercial lender, which was subsequently increased to $250 million as of
January 1, 1998 and $300 million as of June 22, 1998. On December 16, 1997, the
Company completed a public offering of 9,000,000 Class A Common Shares resulting
in net proceeds to the Company of approximately $91.4 million. This significant
source of borrowed funds and infusion of cash allowed the Company to commence
full scale operations as a specialty finance company pursuant to its current
business plan.
On July 28, 1998, the Company privately placed 150,000 8.25% Step Up
Convertible Trust Preferred Securities (liquidation amount $1,000 per security)
with an aggregate liquidation amount of $150 million (the "Convertible Trust
Preferred Securities"). The Convertible Trust Preferred Securities were issued
by the Company's consolidated statutory trust subsidiary, CT Convertible Trust I
(the "Trust"). This private placement transaction was completed concurrently
with the related issuance and sale to the Trust of the Company's 8.25% Step Up
Convertible Junior Subordinated Debentures in the aggregate principal amount of
$154,650,000 (the "Convertible Debentures"). Distributions on the Convertible
Trust Preferred Securities are payable quarterly in arrears on each calendar
quarter-end and correspond to the payments of interest made on the Convertible
Debentures, the sole assets of the Trust. Distributions are payable only to the
extent payments are made in respect to the Convertible Debentures.
The Company received $145.2 million in net proceeds, after original
issue discount and transaction expenses, pursuant to the above transactions,
reflecting an original issue discount of 3% from the liquidation amount of the
Convertible Trust Preferred Securities. The proceeds were initially used to pay
down the Company's Credit Facilities. The Convertible Trust Preferred
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Securities are convertible at any time by the holders thereof into the Company's
listed Class A Common Shares at a conversion price of $11.70. The Convertible
Debentures have a 20-year maturity and are non-callable for five years. Upon
repayment of the Convertible Debentures at maturity or upon redemption, the
proceeds of such repayment or payment shall be simultaneously paid and applied
to redeem, among other things, the Convertible Trust Preferred Securities. If
the securities have not been redeemed by September 30, 2004, the distribution
rate will step up by 0.75% per annum. The 3% ($4.5 million) discount on the
issuance will be amortized over the life of the Convertible Trust Preferred
Securities or 20 years.
Overview of Financial Condition
During the six months ended June 30, 1998, the Company completed
eighteen new loan and investment transactions totaling approximately $436.7
million and provided $7.4 million of additional fundings on four existing loans.
The Company funded $410.6 million of the foregoing loans and investments through
June 30, 1998, which enabled the Company to grow its assets from $317.4 million
to $637.3 million. The significant infusion of cash from the public offering of
Class A Common Shares in December 1997 allowed the Company to expand its
specialty finance company operations. The equity capital provided by the public
offering, used in combination with additional borrowings under the Credit
Facilities (as defined below) and repurchase financing, allowed the Company to
make the investments described below.
Since December 31, 1997, the Company has identified, negotiated and
committed to fund or acquire eighteen loan and investment transactions. These
include eight Mortgage Loan transactions totaling $153.5 million (of which $16.1
million remains unfunded at June 30, 1998), eight Mezzanine Loan transactions
totaling $246.9 million (of which $17.4 million remains unfunded at June 30,
1998), and two acquisitions of three classes of subordinated interests issued by
a financial asset securitization investment trust totaling $36.3 million. The
Company also funded $7.4 million of commitments under four existing loans. The
Company believes that these investments will provide investment yields within
the Company's target range of 400 to 600 basis points above LIBOR. The Company
maximizes its return on equity by utilizing its existing cash on hand and then
employing leverage on its investments (employing a cash optimization model). The
Company may make investments with yields that fall outside of the investment
range set forth above, but that correspond with the level of risk perceived by
the Company to be inherent in such investments. At June 30, 1998, the Company
had outstanding loans and investments totaling in excess of $581 million,
additional commitments for fundings on outstanding loans of approximately $45.4
million and a $28.0 million commitment to originate a new mortgage loan (of
which $23.0 million was funded in early July 1998).
When possible, in connection with the acquisition of investments, the
Company obtains seller financing in the form of repurchase agreements. Four of
the transactions completed during the six months ended June 30, 1998 described
above were financed in this manner representing total original repurchase
financings of $41.8 million. These financings are generally completed at
discounted terms as compared to those available under the Credit Facilities.
Effective January 1, 1998, pursuant to an amended and restated credit
agreement, the Company increased its line of credit under the Credit Facility to
$250 million and subsequently increased the facility to $300 million effective
June 22, 1998. An additional commitment fee was paid when the Company's
borrowings exceeded $250 million. The Credit Facility provides
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for advances to fund lender-approved loans and investments made by the Company.
The Credit Facility expires on December 31, 2000.
On June 8, 1998, the Company entered into an additional credit
agreement with another commercial lender that provides for a $300 million line
of credit that expires in November 1999 (the "Second Credit Facility" together
with the Credit Facility, the "Credit Facilities"). The Second Credit Facility
provides for advances to fund lender-approved loans and investments made by the
Company (such loans and investments together with loans and investments approved
under the Credit Facility, "Funded Portfolio Assets").
The Company incurred an initial commitment fee upon the signing of the
Second Credit Facility and an additional commitment fee will be due when
borrowings exceed $250 million. Future repayments and redrawdowns of amounts
previously subject to the drawdown fee will not require the Company to pay any
additional fees. The Second Credit Facility provides for margin calls on
asset-specific borrowings in the event of asset quality and/or market value
deterioration as determined under the Second Credit Facility. The Second Credit
Facility contains customary representations and warranties, covenants and
conditions and events of default. The Second Credit Facility also contains a
covenant obligating the Company to avoid undergoing an ownership change that
results in Craig M. Hatkoff, John R. Klopp or Samuel Zell no longer retaining
their senior offices and trusteeships with the Company and practical control of
the Company's business and operations.
At June 30, 1998, the Company had $353.9 million of outstanding
borrowings under the Credit Facilities.
As of June 30, 1998, certain of the Company's loans and other
investments have been hedged so that the assets and the corresponding
liabilities were matched at floating rates over LIBOR. The Company has entered
into interest rate swap agreements for notional amounts totaling approximately
$87.4 million with financial institution counterparties whereby the Company
swapped fixed rate instruments, which averages approximately 6.04%, for floating
rate instruments based on the London Interbank Offered Rate ("LIBOR"). The
agreements mature at varying times from December 1998 to July 2008.
As of January 1, 1997, the Company's real estate portfolio, which
included two commercial properties, was carried at a book value of $8,585,000.
The portfolio included a shopping center in Sacramento, California and a 60%
interest in a mixed-use retail property in Kirkland, Washington. During the
first quarter, these two commercial properties were sold. The proceeds from
these sales were invested in mortgage loans and in liquid mortgage-backed
securities.
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<PAGE>
Comparison of the Six and Three Months Ended June 30, 1998 to the
Six and Three Months Ended June 30, 1997
The Company reported net income allocable to Class A Common Shares of
$6,129,000 for the six months ended June 30, 1998, an increase of $6,989,000
from the net loss allocable to Class A Common Shares of $860,000 for the six
months ended June 30, 1997. The Company reported net income allocable to Class A
Common Shares of $4,240,000 for the three months ended June 30, 1998, an
increase of $4,592,000, from the net loss allocable to Class A Common Shares of
$352,000 for the three months ended June 30, 1997. These changes were primarily
the result of the revenues generated from loans and other investments and
significant advisory and investment banking fees.
Net income from loans and other investments increased $12,370,000 to
$12,446,000 for the six months ended June 30, 1998 over the $76,000 for the six
months ended June 30, 1997. Net income from loans and other investments
increased $7,510,000 to $7,550,000 for the three months ended June 30, 1998 over
the $40,000 for the three months ended June 30, 1997. This increase is primarily
attributable to the revenue earned by the Company from new loans and investments
originated or acquired by the Company that increased by more than $550 million
from June 30, 1997 to June 30, 1998. The increase in net income was partially
offset by the interest paid on repurchase agreements and the Credit Facilities
during the six months and quarter ended June 30, 1998. No interest expense for
these types of borrowings was incurred during the six months or quarter ended
June 30, 1997.
During the six months ended June 30, 1998, other revenues increased
$8,854,000 to $9,330,000 over the same period in 1997. The increase during the
three months ended June 30, 1998 over the same period in 1997 was $5,769,000 to
$6,100,000. The increase for the six months ended June 30, 1998 was primarily
due to the addition of $8,650,000 of advisory and investment banking fees
generated by Victor Capital and its related subsidiaries, which was partially
offset by a $305,000 decrease in rental income as the Company sold its remaining
rental properties during the first quarter of 1997. The sales of the rental
properties in the first quarter of 1997 resulted in the Company recognizing a
loss of $432,000. The Company sold a shopping center in Sacramento, California
and recognized a net loss of approximately $34,000. The Company also sold a
retail property located in Kirkland, Washington, resulting in a net loss of
approximately $398,000, the majority of which was attributable to transfer taxes
and the elimination of unamortized tenant improvements and leasing commissions.
The increase for the three months ended June 30, 1998 was primarily due to the
addition of $5,790,000 of advisory and investment banking fees generated by
Victor Capital and its related subsidiaries.
Other expenses increased from $1,412,000 for the six months ended June
30, 1997 to $8,820,000 for six months ended June 30, 1998 and from $723,000 for
the three months ended June 30, 1997 to $4,947,000 for the three months ended
June 30, 1998. The increase was primarily due to the additional general and
administrative expenses necessary for the commencement and continuation of
full-scale operations as a specialty finance company, the largest component of
such expenses is employee salaries and related costs, and the increase in the
provision for possible credit losses. As of June 30, 1998, the Company had 42
full time employees as compared to none at June 30, 1997. The provision for
possible credit losses was $1,240,000 for the six months ended June 30, 1998 and
was $760,000 for the three months ended June 30, 1998 as the Company provided
reserves on its loan and investment portfolio pursuant to
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<PAGE>
its reserve policy. The Company had no provision for possible credit loss in the
quarter or six months ended June 30, 1997.
In 1997, the Company did not incur any income tax expense or benefit
associated with the loss it incurred due to the uncertainty of realization of
net operating loss carryforwards. In the six and three months ended June 30,
1998, the Company accrued $5,259 and 3,679, respectively, of income tax expense
for federal, state and local income taxes. For federal purposes, the Company
utilized one half of the expected net operating loss carryforward to be utilized
in 1998 in calculating the accrual for the six months ended June 30, 1998 and
one quarter of the expected net operating loss carryforward to be utilized in
1998 in calculating the accrual for the three months ended June 30, 1998.
The preferred share dividend and dividend requirement arose in 1997 as
a result of the Company's issuance of $33 million of Class A Preferred Shares on
July 15, 1997. Dividends accrue on these shares at a rate of 9.5% per annum on a
per share price of $2.69 for the 12,267,658 shares outstanding.
Liquidity and Capital Resources
At June 30, 1998, the Company had $9,804,000 in cash. The primary
sources of liquidity for the Company for the remainder of 1998, which the
Company believes will adequately meet future operating liquidity and capital
resource requirements, will be cash on hand, cash generated from operations,
interest payments received on its investments, loans and securities, additional
borrowings under the Company's Credit Facilities and the $145.2 million in net
proceeds, after original issue discount and transaction expenses, from the
issuance of the Convertible Trust Preferred Securities. The primary demands on
the Company's capital resources will be the funding required for the origination
or acquisition of loans and other investments as the Company continues with its
specialty finance operations and the growth of its portfolio of loans and other
investments.
The Company experienced a net decrease in cash of $39,464,000 for the
six months ended June 30, 1998, compared to $2,639,000 for the six months ended
June 30, 1997. This use of cash was primarily due to the utilization of the
proceeds of the Class A Common Share offering in the fourth quarter of 1997 in
making loans and other investments during the first six months of 1998 offset by
additional borrowings. Cash provided by operating activities during the six
months ended June 30, 1998 increased by $6,596,000 to $6,465,000, from cash used
in operating activities of $131,000 during the same period of 1997. For the six
months ended June 30, 1998, cash used in investing activities was $351,830,000,
an increase of $311,140,000 from $40,690,000 during the same period in 1997
primarily the result of the loans and other investments completed since December
31, 1997. The increase in cash provided by financing activities, which increased
$267,719,000 to $305,901,000 from $38,182,000, was due primarily to the proceeds
of repurchase obligations and net borrowings under the Credit Facilities.
At June 30, 1998, the Company has three outstanding notes payable
totaling $14,611,000, outstanding borrowings on the Credit Facilities of
$353,894,000 and outstanding repurchase obligations of $105,954,000.
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PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
10.1 Master Loan and Security Agreement, dated as of June 8,
1998, between the Company and Morgan Stanley Mortgage
Capital Inc.
10.2 CMBS Loan Agreement, dated as of June 30, 1998, between
the Company and Morgan Stanley & Co. International
Limited.
10.3 First Amendment to Amended and Restated Credit Agreement,
dated as of June 22, 1998, between the Company and German
American Capital Corporation.
11.1 Statements regarding computation of earnings (loss) per
share
27.1 Financial Data Schedules
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(b) Reports on Form 8-K
During the fiscal quarter ended June 30, 1998, the Company filed five
Current Reports on Form 8-K:
(1) Current Report on Form 8-K, dated March 20, 1998, as filed
with the Commission on April 6, 1998, reporting under Item 2
"Acquisition or Disposition of Assets" the origination and
funding in part of a subordinate acquisition loan obligation.
(2) Current Report on Form 8-K, dated April 21, 1998, as filed
with the Commission on April 23, 1998, reporting under Item 2
"Acquisition or Disposition of Assets" the origination and
funding of a junior mezzanine loan obligation.
(3) Current Report on Form 8-K, dated May 14, 1998, as filed with
the Commission on May 22, 1998, reporting under Item 2
"Acquisition or Disposition of Assets" the acquisition of a
subordinate interest in a mortgage loan and tenant improvement
facility.
(4) Current Report on Form 8-K, dated June 2, 1998, as filed with
the Commission on June 12, 1998, reporting under Item 2
"Acquisition or Disposition of Assets" the origination and
funding in part of a first mortgage acquisition and
improvements loan.
(5) Current Report on Form 8-K, dated June 16, 1998, as filed with
the Commission on June 24, 1998, reporting under Item 2
"Acquisition or Disposition of Assets" the origination and
funding of a mezzanine loan.
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<PAGE>
SIGNATURES
Pursuant to the requirement 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.
CAPITAL TRUST
August 12. 1998 /s/ John R. Klopp
-----------------
Date John R. Klopp
Chief Executive Officer
/s/ Edward L Shugrue III
------------------------
Edward L. Shugrue III
Managing Director and
Chief Financial Officer
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<PAGE>
Exhibit 10.1
EXECUTION
================================================================================
MASTER LOAN AND SECURITY AGREEMENT
FOR A CREDIT FACILITY
IN AN AMOUNT UP TO $300,000,000
Dated as of June 8, 1998
CAPITAL TRUST
as Borrower
and
MORGAN STANLEY MORTGAGE CAPITAL INC.
as Lender
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Recitals .......................................................................................4
Section 1. Definitions and Accounting Matters.....................................................4
1.01 Certain Defined Terms..................................................................4
1.02 Accounting Terms and Determinations...................................................17
Section 2 Loans, Note and Prepayments...........................................................18
2.01 Loans.................................................................................18
2.02 Notes.................................................................................18
2.03 Procedures for Borrowing..............................................................18
2.04 Mandatory Prepayments or Pledge.......................................................23
Section 3 Payments; Computations; Etc...........................................................24
3.01 Repayment of Loans; Interest..........................................................24
3.02 Payments..............................................................................25
3.03 Computations..........................................................................25
3.04 U.S. Taxes............................................................................25
3.05 Booking of Loans......................................................................26
3.06 Lender's Funding of Eurodollar Rate Loans.............................................26
3.07 Breakage Costs........................................................................27
3.08 Compensation for Increased Costs......................................................27
3.09 Limitation on Types of Loans; Illegality..............................................28
Section 4 Collateral Security...................................................................28
4.01 Collateral; Security Interest.........................................................28
4.02 Further Documentation.................................................................29
4.03 Changes in Locations, Name, etc.......................................................30
4.04 Lender's Appointment as Attorney-in-Fact..............................................30
4.05 Performance by Lender of Borrower's Obligations.......................................31
4.06 Proceeds..............................................................................31
4.07 Remedies..............................................................................32
4.08 Limitation on Duties Regarding Preservation of Collateral.............................33
4.09 Powers Coupled with an Interest.......................................................33
4.10 Release of Security Interest..........................................................33
4.11 Release of Collateral.................................................................33
4.12 Substitution of Eligible Collateral...................................................33
Section 5 Conditions Precedent..................................................................34
5.01 Initial Loan..........................................................................34
5.02 Initial and Subsequent Loans..........................................................34
5.03 Additional Requirements...............................................................36
Section 6 Representations and Warranties........................................................37
6.01 Existence.............................................................................37
i
<PAGE>
6.02 Action................................................................................37
6.03 Financial Condition...................................................................37
6.04 Litigation............................................................................38
6.05 No Breach.............................................................................38
6.06 Approvals.............................................................................38
6.07 Margin Regulations....................................................................38
6.08 Taxes.................................................................................38
6.09 Investment Company Act................................................................39
6.10 Collateral; Collateral Security.......................................................39
6.11 Chief Executive Office................................................................40
6.12 Location of Books and Records.........................................................40
6.13 True and Complete Disclosure..........................................................40
6.14 Tangible Net Worth....................................................................40
6.15 ERISA.................................................................................40
Section 7 Covenants of the Borrower.............................................................40
7.01 Financial Statements, Reports, etc....................................................40
7.02 Litigation............................................................................41
7.03 Existence, etc........................................................................41
7.04 Prohibition of Fundamental Changes....................................................42
7.05 Borrowing Base Deficiency.............................................................42
7.06 Notices...............................................................................42
7.07 Reports...............................................................................43
7.08 Transactions with Affiliates..........................................................43
7.09 Foreclosure or Other Remediation by Borrower..........................................43
7.10 Limitation on Liens...................................................................43
7.11 Limitation on Distributions...........................................................44
7.12 Maintenance of Tangible Net Worth.....................................................44
7.13 Maintenance of Ratio of Earnings Before Interest......................................44
7.14 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth......................44
7.15 Servicer; Servicing Tape..............................................................44
7.16 Remittance of Prepayments.............................................................44
Section 8 Events of Default.....................................................................44
Section 9 Remedies Upon Default.................................................................46
Section 10 No Duty of Lender.....................................................................47
Section 11 Miscellaneous.........................................................................47
11.01 Waiver................................................................................47
11.02 Notices...............................................................................47
11.03 Indemnification and Expenses..........................................................47
11.04 Amendments............................................................................48
11.05 Successors and Assigns................................................................48
11.06 Survival..............................................................................48
11.07 Captions..............................................................................49
11.08 Counterparts..........................................................................49
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<PAGE>
11.09 Loan Agreement Constitutes Security Agreement; Governing Law..........................49
11.10 SUBMISSION TO JURISDICTION; WAIVERS...................................................49
11.11 WAIVER OF JURY TRIAL..................................................................49
11.12 Acknowledgments.......................................................................50
11.13 Hypothecation or Pledge of Loans......................................................50
11.14 Servicing.............................................................................50
11.15 Periodic Due Diligence Review.........................................................51
11.16 Intent................................................................................52
11.17 Change of Borrower's State of Formation...............................................52
11.18 Trustee Exculpation...................................................................52
SCHEDULES
SCHEDULE 1 Filing Jurisdictions and Offices
SCHEDULE 2 Approved Appraisers
SCHEDULE 3 Approved Engineers
SCHEDULE 4 Approved Environmental Consultants
EXHIBITS
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 Form of Lender's Release Letter
EXHIBIT F Form of Bailee Agreement
</TABLE>
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<PAGE>
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of June 8, 1998,
between CAPITAL TRUST, a California business trust ("Borrower"), and MORGAN
STANLEY MORTGAGE CAPITAL INC., a New York corporation ("Lender").
RECITALS
Borrower has requested that Lender from time to time make
revolving credit loans to it to finance certain conduit loans, multifamily and
commercial mortgage loans, mezzanine loans, equity interests, and other approved
collateral owned by Borrower, and Lender is prepared to make such loans upon the
terms and conditions hereof. In addition, Borrower has requested that Lender
from time to time make revolving credit loans to it to finance certain
commercial mortgage-backed securities owned by Borrower and Lender is prepared
to make such loans pursuant to the terms and conditions of a loan, repurchase or
other agreement to be entered into separately between Borrower and Lender (the
"CMBS Loan Agreement"). References herein to commercial mortgage backed
securities and related terms are solely to set forth the definitions of
Eurodollar Rate Spread, Advance Rate and Maximum Advance Rate for such
collateral and the CMBS Loan Agreement shall govern as to all other matters.
Lender and Borrower further understand that Borrower may enter
into loan facilities with other parties on a secured and unsecured basis,
including, without limitation, loans secured by collateral similar to the
Collateral hereunder.
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 will have the same
meanings when used in the plural and vice versa):
"Advance Rate" means, for any item of Eligible Collateral, the
ratio, expressed as a percentage, set forth opposite the collateral type in the
chart provided in the definition of Eurodollar Rate Spread or as otherwise
defined or limited herein.
"Affiliate" shall mean (i) with respect to Lender, any entity
which controls, is controlled by, or is under common control with Lender, and
(ii) with respect to Borrower, any affiliate of Borrower as such term is defined
in the Bankruptcy Code.
"Appraisal" means an appraisal of any Property prepared by a
licensed appraiser listed on Schedule 3 attached hereto, as such schedule may be
amended from time to time by Borrower or Lender upon approval by Lender in its
reasonable discretion, in accordance with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation, in compliance with the
requirements of Title 11 of the Financial Institution Reform, Recovery and
Enforcement Act and utilizing customary valuation methods such as the income,
sales/market or cost approaches, as any of the same may be updated by
recertification from time to time by the appraiser performing such Appraisal.
4
<PAGE>
"Asset-Specific Loan Balance" means a portion of the Loan
allocable to each item of the Eligible Collateral. Such portion initially
consists of the sum of all advances of the Loan made on account of such Eligible
Collateral, without subtracting from such advances the Drawdown Fee, Lender's
Transaction Costs and other advance costs and fees to the extent borrowed.
Wherever this Loan Agreement states that principal payments on account of the
Loan are to be allocated or applied to or against the Asset-Specific Loan
Balance of a specific item of Eligible Collateral, the Asset-Specific Loan
Balance of such item of Eligible Collateral shall be deemed reduced accordingly
by the amount of the principal payments so applied.
"Asset Value" shall mean, as of any date in respect of an item of
Eligible Collateral, the price at which such Eligible Collateral could readily
be sold as determined in the sole good faith of Lender, which price may be
determined to be zero. Lender's determination of Asset Value, which may be made
at any time and from time to time, shall be conclusive upon the parties.
Whenever an Asset Value determination is required under this Loan Agreement,
Borrower shall cooperate with Lender in its determination of the Asset Value of
each item of Eligible Collateral (including, without limitation, providing all
information and documentation in the possession of Borrower regarding such item
of Eligible Collateral or otherwise required by Lender in its sole good faith
business discretion).
"Bailee" shall mean Battle Fowler LLP or such other third party as
Lender may approve.
"Bailee Agreement" shall mean the Bailee Agreement among Borrower,
Lender and Bailee in the form of Exhibit F hereto.
"Bailee's Trust Receipt and Certification" shall mean a Trust
Receipt and Certification in the form annexed to the Bailee Agreement as
Attachment 2.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of
1978, as amended from time to time.
"Base Rate" means, as determined by Lender on a daily basis, the
higher of (a) the rate per annum established by The Chase Manhattan Bank from
time to time as its "Prime" Rate or "reference" rate (which Borrower
acknowledges is not necessarily such bank's lowest rate) and (b) one-half
percentage point (0.5%) (50 basis points) over the Federal funds rate, as
determined by Lender in its sole discretion.
"Borrower" shall have the meaning provided in the heading hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of all
Eligible Collateral pledged to secure the amounts from time to time outstanding
under this Loan Agreement.
"Borrowing Base Deficiency" shall have the meaning provided in
Section 2.04 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 Custodian is authorized or obligated by law or executive
order to be closed.
5
<PAGE>
"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 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.
"CMBS" shall mean, in the singular or plural as the context
requires, securities backed by mortgages and other liens on commercial real
estate and related collateral or by securities, interests or other obligations
backed by such mortgages.
"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 Assignment" shall mean all documents pursuant to which
Borrower shall have collaterally assigned all of its right, title and interest
in, to and under an item of Collateral to secure a Loan made hereunder.
"Collateral Documents" shall mean with respect to any Collateral
Loan, Equity Interest, or Other Approved Collateral, the documents comprising
the Collateral File for such item of Collateral.
"Collateral File" shall mean, as to each item of Collateral, those
documents set forth in a schedule to be delivered by Lender to Custodian and
which are delivered to the Custodian pursuant to the terms of this Loan
Agreement or the Custodial Agreement including, without limitation, all
documents required by Lender to grant and perfect a first priority security
interest in such item of Collateral.
"Collateral Loan" shall mean, as applicable, a Mortgage Loan or a
Mezzanine Loan.
"Collateral Obligor" shall mean any obligor under any Collateral
Loan, any issuer of any security comprising any portion of the Collateral and
any entity in which an Equity Interest comprises any portion of the Collateral.
"Collateral Report" shall mean the collateral schedule and
exception report prepared by Custodian pursuant to the Custodial Agreement.
"Collateral Schedule" shall mean a list of Eligible Collateral to
be pledged pursuant to this Loan Agreement, attached to a Custodial
Identification Certificate setting forth, as to each item of Eligible
Collateral, the applicable information for such Collateral Type specified on
Annex 1 to the Custodial Agreement.
"Collateral Type" shall mean a Mortgage Loan, Mezzanine Loan,
Equity Interest and Other Approved Collateral.
"Collateral Value" shall mean, with respect to each item of
Eligible Collateral, the Asset Value of such Eligible Collateral multiplied by
the applicable Advance Rate set forth
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<PAGE>
in the definition of "Eurodollar Rate Spread" set forth herein or as otherwise
defined or limited herein; provided, that, the Collateral Value shall be deemed
to be zero or such greater amount as determined by Lender in respect of each
item of Eligible Collateral (1) in respect of which there is a breach of a
representation or warranty by a Collateral Obligor, (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 (such period to include any
applicable grace periods) unless otherwise approved by Lender, or (3) which has
been released from the possession of Custodian under the Custodial Agreement to
Borrower for a period in excess of 14 days.
"Collection Account" shall mean one or more accounts established
by the Servicer subject to a security interest in favor of Lender, into which
all Collections shall be deposited by the Servicer.
"Collections" shall mean, collectively, all collections and
proceeds on or in respect of the Collateral, excluding collections required to
be paid to the Servicer or a borrower on the Collateral.
"Conduit Loan" shall mean a Mortgage Loan, secured by a first
mortgage on a real property, that in Lender's determination, satisfies the
following criteria: (i) principal balance not exceeding $40,000,000.00; (ii)
interest at a fixed rate with prepayment protection satisfactory to Lender;
(iii) single-asset, bankruptcy remote property owner complying with all
nationally recognized statistical rating agency requirements; (iv) no
subordinate financing and mortgage and organizational documents prohibiting
subordinate financing or unsecured financing not otherwise subject to
intercreditor agreements satisfactory to rating agencies; (v) debt service
coverage ratio (as determined by Lender in its sole discretion) of not less than
1.25:1 or such higher debt service coverage ratio as may be required by rating
agencies; (vi) not having any characteristics that would impair the rating of
any securities issued pursuant to a securitization that included a substantial
component of mortgages similar to such mortgage; and (vii) in full compliance
with such other "conduit" underwriting and structuring requirements as Lender
shall establish from time to time.
"control" shall mean possession of the power, directly or
indirectly, to (a) vote more than fifty percent (50%) of the voting securities
having ordinary power for the election of directors of an entity, or (b) direct
or cause the direction of the management and policies of such entity, whether by
contract or otherwise.
"Custodial Agreement" shall mean the Custodial Agreement, dated as
of the date hereof, among Borrower, Custodian and Lender, substantially in the
form of Exhibit B hereto, as the same shall be modified and supplemented and in
effect from time to time.
"Custodial Identification Certificate" shall mean the certificate
executed by Borrower in connection with the pledge of Eligible Collateral to
Lender in the form of Annex 3 to the Custodial Agreement.
"Custodian" shall mean LaSalle National Bank as custodian under
the Custodial Agreement, and its successors and permitted assigns thereunder.
"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.
7
<PAGE>
"Diligence Materials" means the Preliminary Due Diligence Package
together with the materials requested in the Supplemental Due Diligence List.
"Direct Mortgage" means a recorded mortgage or deed of trust in
favor of Lender on real property.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Drawdown Fee" shall mean, for each Loan with respect to any
particular item of Eligible Collateral, an amount equal to the product of 0.25%
and the principal amount of such Loan; provided, however, that (a) the Drawdown
Fee shall be equal to zero to the extent that such Loan is to be made with
respect to a Conduit Loan as Collateral and (b) with respect to any other such
item of Eligible Collateral, borrowings which are repaid and subsequently
reborrowed will not be charged a subsequent Drawdown Fee.
"Due Diligence Review" shall mean the performance by Lender of any
or all of the reviews permitted under Section 11.15 hereof with respect to any
or all of the Collateral, as desired by 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 Collateral" shall mean Mortgage Loans, Mezzanine Loans,
Equity Interests and Other Approved Collateral as to which the representations
and warranties in Section 6.10 hereof are correct.
"Equity Interest" shall mean any interest in a Person constituting
a share of stock or a partnership or membership interest or other right or
interest in a Person not characterized as indebtedness under GAAP.
"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 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 Borrower is
a member.
"Eurocurrency Reserve Requirements" shall mean, for any day as
applied to a Loan, the aggregate (without duplication) of the rates (expressed
as a decimal fraction) of reserve requirements in effect on such day (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, with respect to any Eurodollar
Contract
8
<PAGE>
Period, the rate per annum equal to the rate appearing at page 3750 of the
Telerate Screen as 30, 60 or 90 day LIBOR on such date, and if such rate shall
not be so quoted, the rate per annum at which 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 exchange
operations in respect of its Loans are then being conducted for delivery on such
day for a period of 30, 60 or 90 days and in an amount comparable to the amount
of the Loans to be outstanding on such day.
"Eurodollar Contract Period" means, with respect to each Loan, an
interest rate contract period of (i) such period as shall be determined by
Borrower from time to time on the second Business Day prior to the expiration of
each Eurodollar Contract Period, which Eurodollar Contract Period shall be
thirty (30) days, sixty (60) days or ninety (90) days, or (ii) if Borrower shall
make no determination under clause (i) of this definition, thirty (30) days;
provided, that: (a) Eurodollar quotations for the period requested are
reasonably available to Lender in the Eurodollar market for such Eurodollar
Contract Period; (b) in no event shall a Eurodollar Contract Period extend
beyond the Termination Date; (c) the initial Eurodollar Contract Period with
respect to each Asset-Specific Loan Balance shall commence on the related
Funding Date and each succeeding Eurodollar Contract Period shall commence on
the day on which the immediately preceding Eurodollar Contract Period shall
expire, and (d) if a Eurodollar Contract Period would otherwise terminate on a
day that is not a Business Day, such Eurodollar Contract Period shall terminate
on (1) if the next succeeding Business Day occurs during the same calendar
month, the next succeeding Business Day and (2) if the next succeeding Business
Day occurs during the following calendar month, the next preceding Business Day.
"Eurodollar Rate" shall mean, with respect to each day a Loan is
outstanding, a rate per annum determined by Lender in its sole discretion in
accordance with the following formula (rounded upwards to the nearest 1/100th of
one percent), which rate as determined by Lender shall be conclusive absent
manifest error by Lender:
Eurodollar Base Rate
----------------------------------------------
1.00 minus Eurocurrency Reserve
Requirements
9
<PAGE>
"Eurodollar Rate Spread" means as to each Advance Rate the
applicable Eurodollar Rate Spread set forth below opposite such Advance Rate for
the applicable Collateral type, or such other Eurodollar Rate Spread as may be
mutually agreed to by Borrower and Lender:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Collateral Type Advance Eurodollar Rate Spread (expressed
Rate as percentage points per annum
and as basis points)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conduit Loan 90% 0.75% 75bp
95% 1.00% 100bp
- -------------------------------------------------------------------------------------------------------------
Non-Conduit Mortgage Loans
First Mortgage (75% LTV maximum) 90% 1.45% 145bp
First Mortgage (75% LTV maximum) 95% 1.65% 165bp
- -------------------------------------------------------------------------------------------------------------
Subordinate Mortgage Loans, Mezzanine 65% 1.75% 175bp
Loans, CMBS and Equity Interests* 75% 1.85% 185bp
80% 2.20% 220bp
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Solely for illustrative purposes, Borrower and Lender agree that the
following example of a transaction illustrates their intent: with respect
to an item of Collateral for which the appraised value of the underlying
real property is $100,000,000, on which Mortgage Loans and Mezzanine Loans
have been made in the aggregate amount of $85,000,000, with Lender
advancing hereunder 95% of a 75% LTV ($71,250,000), plus 80% of a
subordinate Mortgage Loan or Mezzanine Loan (80% of $10,000,000 equals
$8,000,000), the aggregate loans from Lender to Borrower would equal
$79,250,000, resulting in a 93.2% underlying loan-to-loan value. In
addition, Lender will finance loans originated by Borrower with an
aggregate underlying LTV up to 95% and above 95% on a case-by-case basis.
The Eurodollar Rate Spread may exceed the levels set forth above on loans
with underlying LTVs in excess of 90%.
"Eurodollar Substitute Rate" means a rate of interest equal to (a)
the Base Rate minus (b) Two and eighty-five hundredths percent (2.85%) per annum
(285 basis points).
"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 Lender from three
federal funds brokers of recognized standing selected by Lender.
"Funding Costs" shall mean, collectively, the actual costs to
Lender of breaking a Eurodollar contract (or costs that would have been incurred
if Lender had entered into and broken a Eurodollar contract for a Eurodollar
Contract Period as requested by Borrower) prior to the expiration of the
Eurodollar Contract Period applicable thereto in connection with (a) any
prepayment (whether voluntary or involuntary) of all or any portion of an
Asset-Specific Loan Balance or other principal repayments required or permitted
under the Security Documents, that is made at any time other than at the
expiration of the related Eurodollar Contract Period, (b) any voluntary or
involuntary acceleration of the Termination Date, such that the Termination Date
occurs on any date that is not the expiration date of the Eurodollar Contract
Period with respect to any Asset-Specific Loan Balance, and (c) any other set of
circumstances not attributable solely
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<PAGE>
to Lender's acts. Subject to the foregoing, Funding Costs shall not include any
diminution in yield suffered by Lender upon re-lending or re-investing the
principal of the Loan after any prepayment of the Loan.
"Funding Date" shall mean the date on which a Loan is made
hereunder.
"GAAP" shall mean generally accepted accounting principles
consistently applied 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 any obligor
on any underlying loan, Borrower, any of its Subsidiaries or any of its
properties.
"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, 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 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) 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) 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) 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) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements or like arrangements; (g)
Indebtedness of others Guaranteed by such Person; (h) all obligations of such
Person incurred in connection with the acquisition or carrying of fixed assets
by such Person; and (i) Indebtedness of general partnerships of which such
Person is a general partner.
"Interest Rate Protection Agreement" shall mean, with respect to
any or all of the Mortgage Loans and Mezzanine Loans, any short sale of US
Treasury Securities, or futures contract, or mortgage related security, or
Eurodollar futures contract, or options related contract,
11
<PAGE>
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 any obligor on any underlying loan or Borrower (specifically with
respect to such items of Collateral) and acceptable to Lender.
"Lender" shall have the meaning provided in the heading hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, encumbrance,
security interest or adverse claim.
"Loan" and "Loans" shall have the meanings provided in Section
2.01(a) hereof.
"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 and the Custodial Agreement.
"LTV" shall mean, as to any Eligible Collateral, the ratio that
(x) the aggregate outstanding principal balances of all loans (including Loans
hereunder) and preferred equity interests secured in whole or in part by real
property or direct or indirect beneficial interests therein relating to such
Eligible Collateral bears to (y) the value, determined by an Appraisal
reasonably acceptable to Lender, of the real property (together with all
applicable appurtenant interests and subject to all applicable liens,
encumbrances and tenancies), or direct or indirect beneficial interests which
form the basis of such Eligible Collateral.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition or prospects of
Borrower taken as a whole, (b) the ability of 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 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 aggregate value of the Collateral.
"Maximum Advance Rate" shall mean, as to any item of Eligible
Collateral, the maximum Advance Rate that shall be determined by Lender in
Lender's sole and absolute discretion; provided, that, with respect to the
specific categories of Eligible Collateral referred to in the definition of
Eurodollar Rate Spread, the Maximum Advance Rate shall not exceed the respective
Advance Rates set forth in such definition.
"Maximum Credit" shall mean Two Hundred Fifty Million Dollars
($250,000,000.00); provided, however, that if no Default or Event of Default
shall have occurred and shall be continuing, Borrower shall be entitled to
increase the Maximum Credit up to Three Hundred Million Dollars
($300,000,000.00) at any time prior to the Termination Date upon the payment by
Borrower to Lender of an amount equal to (i) the amount of the requested
increase in the Maximum Credit then in effect multiplied by (ii) 30 basis points
(0.30%) multiplied by (iii) the number of days remaining to, and including, the
Termination Date divided by (iv) the number of days from and after the date
hereof to, and including, the Termination Date (the "Maximum Credit Increase
Fee"). The Maximum Credit under this Loan Agreement shall be
12
<PAGE>
reduced by an amount equal to the amount from time to time outstanding under the
CMBS Loan Agreement such that in no event shall the aggregate amount outstanding
under this Loan Agreement and the CMBS Loan Agreement exceed $250,000,000 (or,
in the event the Maximum Credit has been increased to $300,000,000 pursuant to
the terms hereof, $300,000,000).
"Mezzanine Loan" shall mean a loan secured by a pledge of Equity
Interests in one or more entities holding direct or indirect beneficial
interests in an entity owning (or having a ground lease interest in) a
commercial or multi-family residential property, preferred equity interests or a
second mortgage.
"Monthly Statement" shall mean, for each calendar month during
which this Loan Agreement shall be in effect, Borrower's reconciliation in
arrears of beginning balances, interest, principal, paid-to-date and ending
balances for each asset constituting the Collateral, together with (a) an
Officer's Certificate with respect to all Collateral pledged to Lender as at the
end of such month, (b) a written report of any developments or events that are
reasonably likely to have a Material Adverse Effect, (c) a written report of any
and all written modifications to any documents underlying any items of
Collateral and (d) such other internally prepared reports as mutually agreed by
Borrower and Lender which reconciliation, Officer's Certificate and reports
shall be delivered to Lender for each calendar month during the term of this
Loan Agreement within ten (10) days following the end of each such calendar
month.
"Mortgage" shall mean the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a valid lien on the fee or
leasehold interest in real property securing the Mortgage Note and the
assignment of rents and leases related thereto.
"Mortgage Loan" shall mean a mortgage loan (including, without
limitation, a Conduit Loan) which Custodian has been instructed to hold for
Lender pursuant to the Custodial Agreement, and which Mortgage Loan includes,
without limitation, (i) the indebtedness evidenced by a Mortgage Note and
secured by a related Mortgage and (ii) all right, title and interest of Borrower
in and to the Mortgaged Property covered by such Mortgage.
"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 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.
"MS & Co." shall mean Morgan Stanley & Co. Incorporated, a
registered broker-dealer.
"MS Indebtedness" shall mean all Indebtedness from time to time
owed by Borrower to Lender or any Affiliate of Lender including, without
limitation, under this Loan Agreement, the CMBS Loan Agreement, or any
repurchase or other agreement between Lender, or an Affiliate of Lender, and
Borrower.
"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
13
<PAGE>
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.
"'Non-Table' Funded Eligible Collateral" shall mean the items of
Eligible Collateral as described in Section 2.03(e) of this Loan Agreement.
"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 shall be modified, amended,
supplemented or extended and in effect from time to time.
"Officer's Certificate" shall mean the certificate of a
Responsible Officer as set forth in Section 5.02(b) hereof.
"Other Approved Collateral" shall mean such other Property of
Borrower as Lender shall accept as Collateral for the Loans.
"Payment Date" shall mean, with respect to each Loan, the first
Business Day of each calendar month following the related Funding Date.
"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 Borrower or any ERISA Affiliate during the five-year period ended
immediately before the date of this Loan Agreement or to which Borrower or any
ERISA Affiliate makes, is obligated to make or has, within the five-year period
before the date of this Loan Agreement, been required to make contributions and
that is covered Title IV of ERISA or Section 302 of ERISA or Section 412 of the
Code, 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 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 4% per annum plus the Base
Rate.
"Preliminary Due Diligence Package" means with respect to any
proposed Collateral, the following due diligence information relating to such
proposed Collateral to be provided by Borrower to Lender pursuant to this Loan
Agreement:
(i) a summary memorandum outlining the proposed transaction,
including potential transaction benefits and all material
underwriting risks, all Underwriting Issues and all other
characteristics of the proposed transaction that a prudent
lender would consider material;
(ii) current rent roll, if applicable;
14
<PAGE>
(iii) cash flow pro-forma, plus historical information, if
available;
(iv) description of the property (real property, pledged loan
or other Collateral);
(v) indicative debt service coverage ratios;
(vi) indicative loan-to-value ratio;
(vii) Borrower's or any affiliate's relationship with its
potential underlying borrower or any affiliate;
(viii) if applicable, Phase I environmental report (including
asbestos and lead paint report);
(ix) if applicable, engineering and structural reports;
(x) third party reports, to the extent available and
applicable, including:
(a) current Appraisal;
(b) Phase II or other follow-up environmental report if
recommended in Phase I;
(c) seismic reports; and
(d) operations and maintenance plan with respect to
asbestos containing materials;
(xi) analyses and reports with respect to such other matters
concerning the Collateral as Lender may in its sole
discretion require;
(xii) documents comprising such Collateral, or current drafts
thereof, including, without limitation, underlying debt and
security documents, guaranties, underlying borrower's
organizational documents, warrant agreements, and loan and
collateral pledge agreements, as applicable; and
(xiii) a list that specifically and expressly identifies any
Collateral Documents that relate to such Collateral but are
not in Borrower's possession.
"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 T, U and X" shall mean Regulations 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.
"Responsible Officer" shall mean, as to any Person, the chief
executive officer, any vice chairman and the chief financial officer of such
Person or, for the purpose of executing
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certificates, the vice president and counsel responsible therefor.
"Secured Obligations" shall have the meaning provided in Section
4.01(a) hereof.
"Security Documents" means this Loan Agreement, the Note, and all
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower to evidence or secure the Loan(s) or otherwise in
satisfaction of the requirements of this Loan Agreement, or the other documents
listed above as same may be amended or modified from time to time.
"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.
"Servicing Records" shall have the meaning provided in Section
11.14(b) hereof.
"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.
"Supplemental Due Diligence List" means, with respect to any
proposed Collateral, information or deliveries concerning such proposed
Collateral, such items that Lender shall request in addition to the Preliminary
Due Diligence Package including, without limitation, a credit approval
memorandum representing the final terms of the underlying transaction, a final
LTV ratio computation and a final debt service coverage ratio computation for
such proposed Collateral.
"'Table Funded' Eligible Collateral" shall mean the items of
Eligible Collateral as described in Section 2.03(e) of this Loan Agreement.
"Tangible Net Worth" shall mean, as of a particular date,
(a) all amounts which would be included under capital (it being
agreed that any convertible trust preferred securities will be included as
capital) on a balance sheet of Borrower at such date, determined in accordance
with GAAP, less
(b) (i)amounts owing to Borrower from Affiliates and (ii)
intangible assets.
"Termination Date" shall mean December __, 1999 or such earlier
date on which this Loan Agreement shall terminate in accordance with the
provisions hereof or by operation of law.
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"Title Insurance Policy" shall mean, with respect to any real
property underlying a Collateral Loan, a mortgagee's title insurance policy or
policies issued to Lender and Lender's successors and assigns (or, subject to
the prior written approval of Lender, an endorsement to Borrower's title
insurance policy insuring the collateral assignment to Lender of the applicable
mortgage) by one or more title companies reasonably satisfactory to Lender,
which policy or policies shall be in form and substance reasonably acceptable to
Lender, with such endorsements as Lender shall reasonably require and, with
respect to any Collateral Loan, a mortgagee's title insurance policy or policies
issued to Lender and Lender's successors and/or assigns by one or more title
companies reasonably satisfactory to Lender reflecting Lender's interest in such
Collateral Loan.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of Borrower during such period less the amount of any nonspecific
balance sheet reserves maintained in accordance with GAAP.
"Transaction Costs" shall mean, with respect to any Loan, all
actual out-of-pocket reasonable costs and expenses paid or incurred by Lender
and payable by Borrower relating to the making of such Loan (including legal
fees and other fees described in Section 11.03 hereof). Lender shall endeavor to
limit the Transaction Costs associated with such Loan (excluding the initial
Loan) to $5,000, but the foregoing shall not limit Borrower's obligations with
respect to Transaction Costs or constitute a "cap" on Transaction Costs for any
Loan. Transaction Costs shall not include costs incurred by Lender for overhead
and general administrative expenses.
"Trust Receipt" shall mean the receipt delivered by Custodian
pursuant to the provisions of Section 4 of the Custodial Agreement acknowledging
receipt of a Collateral File in connection with a Loan hereunder in the form of
Annex 2 to the Custodial Agreement.
"Underwriting Issues" means with respect to any Collateral as to
which Borrower intends to request a Loan, all information that has come to
Borrower's attention, based on the making of reasonable inquiries and the
exercise of reasonable care and diligence under the circumstances, which would
be considered a materially "negative" factor (either separately or in the
aggregate with other information), or a material defect in loan documentation or
closing deliveries (such as any absence of any material Collateral Document(s)),
to a reasonable institutional lender in determining whether to originate or
acquire the Collateral in question.
"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 Lender hereunder shall be
prepared, in accordance with GAAP.
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Section 2. Loans, Note and Prepayments
2.01. Loans
(a) Lender agrees to consider, as provided herein, from time to
time Borrower's requests that Lender make, on the terms and conditions of this
Loan Agreement, loans (each, individually, a "Loan" and, collectively, the
"Loans") to 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 Maximum Credit as in effect from time to
time. Nothing in this Loan Agreement shall be interpreted as a commitment by
Lender to make any Loans, but rather sets forth the procedures to be used in
connection with periodic requests for Loans and the conditions to the making of
any Loans. Borrower hereby acknowledges that Lender is under no obligation to
agree to make, or to make, any Loan pursuant to this Loan Agreement.
(b) Subject to the terms and conditions of this Loan Agreement,
during such period Borrower may borrow, prepay and reborrow hereunder.
2.02. Notes
(a) The Loans made by Lender shall be evidenced by a single
promissory note of Borrower substantially in the form of Exhibit A hereto, dated
the date hereof, payable to Lender in the principal amount of Three Hundred
Million Dollars ($300,000,000.00), as otherwise duly completed; provided,
however, that until such time as Borrower has satisfied all conditions precedent
to the increase of the Maximum Credit amount from $250,000,000.00 to
$300,000,000.00, Borrower shall not be permitted to borrow amounts in excess of
$250,000,000.00. Lender shall have the right to have its Note subdivided, by
exchange for promissory notes of lesser denominations or otherwise and shall
have the right to sell participating interests in such Note; provided, however,
that Lender must retain (i) in excess of fifty percent (50%) ownership interest
in the Note and (ii) control over all decisions with respect to loan pricing and
the exercise of remedies with respect to each item of Collateral; and provided,
further, however, that Lender may subject up to one hundred percent (100%) of
the Loans made hereunder to a repurchase agreement.
(b) The date, amount and interest rate of each Loan made by Lender
to Borrower, and each payment made on account of the principal thereof, shall be
recorded by Lender on its books and, prior to any transfer of the Note, endorsed
by Lender on the schedule attached to the Note or any continuation thereof;
provided that the failure of Lender to make any such recordation or endorsement
shall not affect the obligations of Borrower to make a payment when due of any
amount owing hereunder or under the Note in respect of the Loans.
2.03. Procedures for Borrowing
(a) Preliminary Approval of Proposed Collateral.
(i) Borrower may, from time to time, submit to Lender a
Preliminary Due Diligence Package for Lender's review and approval in order to
request a borrowing hereunder with respect to any proposed Collateral that
Borrower proposes to pledge to Lender and to be included in the Borrowing Base
in connection with such borrowing.
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(ii) Upon Lender's receipt of a complete Preliminary Due Diligence
Package, Lender within two (2) Business Days shall have the right to request, in
Lender's sole and absolute discretion, additional diligence materials and
deliveries that Lender shall specify on a Supplemental Due Diligence List. Upon
Lender's receipt of all of the Diligence Materials or Lender's waiver thereof,
Lender, within five (5) Business Days, shall either (i) notify Borrower of the
Maximum Advance Rate (which may be less than the Advance Rate set forth in the
definition of Eurodollar Rate Spread) and the Asset Value for the proposed
Collateral or (ii) deny, in Lender's sole and absolute discretion, Borrower's
request for an advance. Lender's failure to respond to Borrower within five (5)
Business Days following receipt of all Diligence Materials or Lender's written
waiver thereof shall be deemed to be a denial of Borrower's request for an
advance, unless Lender and Borrower have agreed otherwise in writing. Nothing in
this Section 2.03(a)(ii) or elsewhere in this Loan Agreement shall, or be deemed
to, prohibit Lender from determining in its sole discretion the adequacy,
correctness and appropriateness of, or from disapproving, any and all financial
and other underwriting data required to be supplied by Borrower under this Loan
Agreement.
(b) Final Approval of Proposed Collateral. Upon Lender's
notification to Borrower of the Maximum Advance Rate and the Asset Value for any
proposed Collateral, Borrower shall, if Borrower desires to obtain one or more
advances secured by such proposed Collateral, satisfy the conditions set forth
below (in addition to satisfying the conditions precedent to obtaining each
advance, as set forth in Section 5 of this Loan Agreement) as conditions
precedent to Lender's approval of such proposed Collateral as Collateral, all in
a manner, and pursuant to documentation, satisfactory in all respects to Lender
and its counsel:
(i) Environmental and Engineering. If applicable, Lender
shall have received an Environmental Report and an Engineering Report, each in
form and substance satisfactory to Lender, by an Engineer and Environmental
Consultant listed on Schedules 3 and 4 attached hereto, respectively, as each
such schedule may be amended from time to time by Lender in its reasonable
discretion.
(ii) Appraisal. If applicable, Lender shall have received an
Appraisal.
(iii) Insurance. With respect to proposed Collateral that is
real property, Lender shall have received certificates or other evidence of
insurance demonstrating insurance coverage in respect of such real property of
types, in amounts, with insurers and otherwise in compliance with the terms,
provisions and conditions set forth in the Collateral Documents or the Security
Documents. Such certificates or other evidence shall indicate Borrower, as
lender, will be named as an additional insured as its interest may appear and
shall contain a loss payee endorsement in favor of such additional insured with
respect to the property policies required to be maintained under the Collateral
Documents.
(iv) Survey. With respect to a Mortgage Loan, a Mezzanine
Loan or an Equity Interest, to the extent obtained by Borrower from the
Collateral Obligor with respect to any item of Collateral at the origination of
the underlying loan or equity interest, as the case may be, relating thereto,
Lender shall have received with respect to proposed Collateral that is real
property, a current Survey of such real property in a form satisfactory to
Lender.
(v) Lien Search Reports. Lender or Lender's counsel shall
have
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received, as reasonably requested by Lender, satisfactory reports of UCC, tax
lien, judgment and litigation searches and title reports and updates, as
applicable, conducted by search firms and/or title companies acceptable to
Lender with respect to the Collateral, Borrower and the related underlying
obligor, such searches to be conducted in each location Lender shall reasonably
designate.
(vi) Title Insurance Policy. (A) With respect to a Mortgage
Loan, Borrower shall have delivered to Lender (1) an unconditional commitment to
issue title insurance policies in favor of Lender and Lender's successors and/or
assigns with respect to Lender's interest in the related real property with an
amount of insurance that shall be not less than the related Asset-Specific Loan
Balance (taking into account the proposed advance) or such other amount as
Lender shall require in its sole discretion or (2) an endorsement or
confirmatory letter from the existing title company to the existing Title
Insurance Policy in favor of Lender and Lender's successors and/or assigns that
amends the existing title insurance policy by stating that the amount of the
insurance is no less than the related Asset-Specific Loan Balance (taking into
account the proposed advance) or such other amount of title coverage as Lender
shall require in its sole discretion.
(B) With respect to a Mezzanine Loan or an Equity Interest, Borrower
shall have delivered to Lender such evidence as Lender, in its sole discretion,
shall require of the ownership of the real property underlying such item of
Collateral including, without limitation, a copy of a title insurance policy
dated a date, and by a title insurer, in each case acceptable to Lender in its
sole discretion, showing that title is vested in the related Collateral Obligor
or in an entity in whom such Collateral Obligor holds a beneficial interest.
(vii) Security Documents. Borrower shall have executed and
delivered to Lender, in form and substance satisfactory to Lender and its
counsel, all security documents perfecting Lender's security interest in the
proposed Collateral (and in any Interest Rate Protection Agreements held by
Borrower with respect thereto) which shall be subject to no Liens except as
expressly permitted by Lender. Each of the security documents shall contain such
representations and warranties concerning the proposed Collateral and such other
terms as shall be reasonably satisfactory to Lender.
(viii) Opinions of Counsel. Lender shall have received from
counsel to Borrower its legal opinion as to enforceability of this Loan
Agreement and all documents executed and delivered hereunder in connection with
such Loan, (at Lender's option) an opinion from local counsel where the
applicable property is located and an opinion to Borrower and its successors and
assigns from counsel to the underlying obligor on the underlying loan
transaction, as applicable, as to enforceability of the loan documents governing
such transaction and such other matters as Lender shall require (including,
without limitation, opinions as to due formation, authority, choice of law and
perfection of security interests). Such legal opinions shall be addressed to
Lender and its successors and assigns, dated the related Funding Date, and in
form and substance reasonably satisfactory to Lender.
(ix) Additional Real Estate Matters. To the extent obtained
by Borrower from the Collateral Obligor relating to any item of Collateral at
the origination of the underlying loan or equity interest relating thereto,
Borrower shall have delivered to Lender such other real estate related
certificates and documentation as may have been requested by Lender, such as (i)
certificates of occupancy and letters certifying that the property is in
compliance with
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all applicable zoning laws, each issued by appropriate Governmental Authority
and (ii) abstracts of all Leases in effect at the real property relating to such
Collateral.
(x) Other Documents. Lender shall have received such other
documents as Lender or its counsel shall request with respect to each or any
item of Collateral.
(c) Collateral Approval or Disapproval. Within two (2) Business
Days following the date upon which Borrower has tendered performance of the
conditions enumerated in Sections 2.03(b)(i) through (x), or has delivered such
items or documents fully executed, if applicable, in final form, Lender shall
either (i) if the Collateral Documents or the Security Documents with respect to
the proposed Collateral are not reasonably satisfactory in form and substance to
Lender, notify Borrower that Lender has not approved the proposed Collateral as
Collateral or (ii) notify Borrower and Bailee that Lender has approved the
proposed Collateral as Collateral and such notice shall identify the documents
to be delivered to Custodian in connection with such proposed Collateral
pursuant to Sections 2.03 and 5 of this Loan Agreement and shall identify the
party whom Lender shall designate to record and/or file, as the case may be, any
security documents necessary to perfect Lender's security interest in the
Eligible Collateral. The terms of delivery and filing and/or recordation of such
security documents shall be set forth in a separate agreement between Lender and
its designee. Lender's failure to respond to Borrower within two (2) Business
Days shall be deemed to be a denial of Borrower's request that Lender approve
the proposed Collateral, unless Lender and Borrower have agreed otherwise in
writing.
(d) Procedure for Borrowing with Respect to Eligible Collateral.
Once Lender has approved the Collateral in accordance with Section 2.03(c)
above, Borrower may request a Loan hereunder, on any Business Day during the
period from and including the Effective Date to and including the Termination
Date, by delivering to Lender, with a copy to Custodian, an irrevocable written
request for borrowing, substantially in the form of Exhibit D attached hereto,
which request must be received by Lender prior to 11:00 a.m., New York City
time, one (l) Business Day prior to the requested Funding Date. Such request for
borrowing shall (1) attach a schedule identifying the Eligible Collateral that
Borrower proposes to pledge to Lender and to be included in the Borrowing Base
in connection with such borrowing, (2) specify the requested Funding Date, and
(3) attach an Officer's Certificate signed by a Responsible Officer of Borrower
as required by Section 5.02(b) hereof. Contemporaneously with the delivery of
the request for borrowing, Borrower shall deliver to Lender with a copy to
Custodian, a Custodial Identification Certificate along with the accompanying
Collateral Schedule with respect to all proposed Eligible Collateral to be
pledged to Lender on the applicable Funding Date.
(e) Delivery of Collateral Files and Security Documents.
"Non-Table Funded" Eligible Collateral:
1) By no later than 1:00 p.m., New York City time, one (1)
Business Day prior to any Funding Date, the Borrower and/or the Bailee shall
deliver to the Custodian as to any Eligible Collateral on a case-by-case basis,
(i) original counterparts of all Collateral Documents comprising the Collateral
File, (ii) the security documents described in Section 2.03(b)(vii) above, and
(iii) to the extent applicable, any other documents, reports or updated
information as Lender shall request pursuant to Section 2.03(b)(i)-(x) and
Section 5.03(b) not heretofore finally
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approved by Lender.
"Table Funded" Eligible Collateral:
1) By no later than 1:00 p.m., New York City time, on the Funding
Date, the Borrower shall cause the Bailee to deliver to the Custodian by
facsimile (i) as to each item of Eligible Collateral, the note, if
applicable, evidencing the making of a loan secured by such Eligible
Collateral, a fully executed Bailee Agreement and Bailee's Trust Receipt
and Certification issued by the Bailee thereunder, (ii) as to all other
categories of Eligible Collateral on a case-by-case basis, the delivery of
all fully executed documents and instruments required by Lender to comprise
the Collateral File and (iii) evidence satisfactory to Lender that all
documents necessary to perfect Borrower's interest in the Eligible
Collateral have been delivered to a party acceptable to Lender for
recordation and filing.
2) By no later than 1:00 p.m., New York City time, on the third
Business Day following the applicable Funding Date, the Borrower shall
cause the Bailee to deliver to the Custodian the Collateral File.
(f) No later than 1:00 p.m., New York City time, on each Funding
Date, Borrower shall provide Custodian with a final Custodial Identification
Certificate and related Collateral Schedule with respect to the Eligible
Collateral to be pledged to the Lender on such Funding Date, indicating any
changes, if any, from the Custodial Identification Certificate and related
Collateral Schedule heretofore delivered to Lender and Custodian pursuant to
Section 2.03(d) above.
(g) If Borrower shall deliver a request for a borrowing pursuant
to Section 2.03(d) hereof and all conditions precedent set forth in Sections
2.03(a), 2.03(b), 2.03(c), 5.01 and 5.02 have been met, and provided no Default
or Event of Default shall have occurred and be continuing, Lender shall make a
Loan to Borrower on the requested Funding Date, in the amount so requested and
approved by Lender.
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(h) Subject to the delivery by Custodian to Borrower and Lender of
a Trust Receipt with a Collateral Schedule in respect to all Collateral pledged
to Lender on such Funding Date by no later then 3:00 p.m. on such date, and
subject further to the provisions of Section 5 hereof, such borrowing will then
be made available to Borrower by Lender transferring, via wire transfer, to the
following account of Borrower: Bank of New York, 530 Fifth Avenue, New York, New
York, Account No. 630-0439428 for the benefit of Capital Trust, ABA# 021-000018,
Attn: Tarryn Kone ((212) 852-4219), in the aggregate amount of such borrowing in
funds immediately available to Borrower.
(i) From time to time, the Borrower shall forward to the Custodian
additional original documents or additional documents evidencing any (i)
assumption, modification, consolidation or extension of a Collateral Loan, or
(iii) any amendment to the operative documents with respect to an Equity
Interest, in each case approved by the Lender in accordance with the terms of
this Loan Agreement and upon receipt of any such other documents, the Custodian
shall hold such other documents as the Lender shall request from time to time.
(j) With respect to any documents 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 required, in
lieu of delivering such original documents, Borrower shall deliver to Lender a
true copy thereof with an Officer's Certificate certifying that such copy is a
true, correct and complete copy of the original, which has been transmitted for
recordation. The Borrower shall deliver such original documents to the Custodian
promptly when they are received.
2.04. Mandatory Prepayments or Pledge
(a) Lender may determine and re-determine the Borrowing Base on
any Business Day and on as many Business Days as it may elect. If at any time
(i) the aggregate outstanding principal amount of Loans exceeds the Borrowing
Base (a "Borrowing Base Deficiency"), as determined by Lender in its sole
discretion and notified to Borrower on any Business Day, Borrower shall no later
than one Business Day after receipt of such notice, or (ii) Borrower shall have
received a prepayment of the principal of any loan or preferred equity interest
comprising a portion of the Collateral (including, without limitation, the
payment of casualty or condemnation proceeds), Borrower shall, not later than
one (1) Business Day after receipt of such prepayment, either prepay the Loans
in part or in whole or pledge additional Collateral (which Collateral shall be
in all respects acceptable to Lender) to 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 as re-determined by Lender after the
addition of Collateral. So long as no Default or Event of Default has occurred
and is then continuing, all partial repayments shall be applied against the
Asset-Specific Loan Balance relating to the Loan being repaid.
(b) If at any time under any Collateral Document evidencing
Eligible Collateral (x) there is an Event of Default, or event with which the
giving of notice or lapse of time or both would become an Event of Default, or
(y) any representation or warranty made by or on behalf of the relevant
Collateral Obligor becomes false or misleading in any material respect or (z)
the relevant Collateral Obligor fails to perform or observe any material
covenant or other obligation, Lender may, in its sole discretion and without
regard to any determination of
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the Asset Value of such Eligible Collateral, notify Borrower of such occurrence
and may require that the Asset-Specific Loan Balance related to the relevant
Eligible Collateral be prepaid in whole or in part in the determination of
Lender. Not later than one (1) Business Day after the receipt of such notice,
Borrower shall prepay the Asset-Specific Loan Balance related to such Eligible
Collateral. Lender may, in its sole discretion, determine and re-determine the
amount to be prepaid irrespective of whether or not either (i) any statement of
fact contained in any Officer's Certificate delivered pursuant to Section
5.02(b) or (ii) any representation of Borrower set forth in Section 6.13 was
true to Borrower's actual knowledge.
Section 3. Payments; Computations; Etc
3.01. Repayment of Loans; Interest
(a) Borrower hereby promises to repay in full on the Termination
Date the aggregate outstanding principal amount of the Loans.
(b) Borrower hereby promises to pay to Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to the Eurodollar Rate plus the applicable Eurodollar Rate
Spread. Notwithstanding the foregoing, Borrower hereby promises to pay to
Lender, to the extent permitted by applicable law, interest at the applicable
Post-Default Rate on any principal of any Loan and on any other amount payable
by 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. Payment and acceptance of interest
pursuant to this subsection shall not constitute a waiver of any Default and
shall not otherwise limit or prejudice any right of Lender hereunder. In no
event shall Lender be entitled to receive any proceeds received from any
Collateral Obligor in connection with the refinancing and/or final distribution
to Lender with respect to any Eligible Collateral to the extent same exceeds the
sums provided to be paid to Lender under Section 7.l6 of this Loan Agreement.
(c) Accrued interest on each Loan shall be payable monthly in
arrears 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.
(d) The Loans may be prepaid in whole or in part at any time upon
two (2) Business Days prior written notice, without any penalty or premium;
provided, however, that any such prepayment shall be accompanied by an amount
representing accrued interest on the principal amount being prepaid and all
other amounts then due under the Loan Documents (including, without limitation,
all amounts due under Section 3 hereof). Each partial prepayment that is
voluntary (as opposed to mandatory under the terms of this Loan Agreement) shall
be in an amount of not less than One Hundred Thousand Dollars ($100,000). So
long as no Default or Event of Default has occurred and is then continuing, each
voluntary prepayment shall be applied to reduce any Asset-Specific Loan Balance
as designated by Borrower to Lender in writing.
(e) With respect to any item of Collateral, Borrower shall repay
to Lender
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an amount equal to the amount of casualty or condemnation proceeds paid to, or
for the benefit of, Borrower or any underlying obligor in respect of such item
of Collateral to the extent that Borrower is not required under the underlying
loan documents with Borrower's obligor to reserve, escrow, readvance or apply
such proceeds for the benefit of such obligor or the underlying real property.
So long as no Default or Event of Default has occurred and is then continuing,
such amounts paid to Lender shall be applied in reduction of the Asset-Specific
Loan Balance relating to such item of Collateral.
3.02. Payments
(a) Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by Borrower under this Loan
Agreement and the Note shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to Lender at the following account
maintained by Lender: Account No. 40615114, for the account of MSMCI, Citibank,
N.A., ABA No. 021000089, Attn: Whole Loan Operations, Mortgage-Backed Securities
Department, Fixed Income Division, 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). Borrower acknowledges that it has no rights of
withdrawal from the foregoing account. Lender shall endeavor to send Borrower a
detailed bill on the date which is two (2) Business Days prior to the date on
which payment is due; provided, however, that the failure of Lender to send, or
of Borrower to receive, such bill shall in no way affect Borrower's obligation
to pay amounts due under this Loan Agreement.
(b) Except to the extent otherwise expressly provided herein, if
the due date of any payment under this Loan 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.
3.03 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. Lender shall
determine any rate of interest payable on Loans hereunder, and such
determination shall be conclusive and binding, absent manifest error.
3.04. U.S. Taxes
(a) Borrower agrees to pay to Lender such additional amounts as
are necessary in order that the net payment of any amount due to Lender
hereunder after deduction for or withholding in respect of any U.S. Tax (as
defined below) imposed with respect to such payment (or in lieu thereof, payment
of such U.S. Tax by 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:
(ii) to any payment to Lender hereunder unless Lender is entitled
to submit a Form 1001 (relating to 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 Lender hereunder in respect of the Loans), or
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(iii) to any U.S. Tax imposed solely by reason of the failure by
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 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 3.03, (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 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, any political subdivision of the United States of
America or any taxing authority thereof or therein.
(b) Within 30 days after paying any such amount to Lender, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, Borrower shall deliver to
Lender evidence satisfactory to Lender of such deduction, withholding or payment
(as the case may be).
(c) Lender represents and warrants to Borrower that on the date
hereof 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 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 Lender hereunder in respect of the Loans). Lender
shall not assign or sell participation interests in the Loans made or to be made
hereunder to a foreign bank if as a result thereof Lender shall be unable to
make the representations set forth in this Section 3.04(c).
3.05. Booking of Loans. Without limitation of Lender's rights to
sell, assign or transfer a Loan or any interest therein, including any
participation interest therein, at any time and from time to time, Lender may
make, carry or transfer such Loan at, to, or for the account of any of its
branch offices or the office of an Affiliate of Lender; provided, however, that
the representation in Section 3.04(c) shall remain true throughout the term of
such Loan.
3.06. Borrower hereby expressly acknowledges and agrees that
Lender may fund a Loan in any manner it sees fit, including (i) through the
actual purchase of a Eurodollar deposit bearing interest at the rate obtained
pursuant to the definition of Eurodollar Rate in an amount equal to the
principal amount of such Loan and having a maturity comparable to the relevant
interest period or (ii) through Lender's entering into or purchase of repurchase
agreements, interest rate agreements, swap agreements or other arrangements in
such amounts as Lender shall determine (and which amounts may or may not, in
Lender's sole discretion, be "match funded" to such Loan). Calculation of all
amounts payable to Lender under this Section 3.06 and under Section 3.07 shall
be made as though Lender had actually funded such Loan through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to the
definition of Eurodollar Rate in an amount equal to the amount of
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such Loan and having a maturity comparable to the relevant interest period and
through the transfer of such Eurodollar deposit from an off-shore office of
Lender to a domestic office of Lender in the United States of America; provided,
however, that Lender may fund such Loan in any manner it sees fit and the
foregoing assumptions shall be utilized only for purposes of calculating amounts
payable under this Section 3.06 and under Section 3.07, if any.
3.07. Funding Costs. (a) Borrower shall compensate Lender, upon
written request by Lender (which request shall set forth the basis for
requesting such amounts), for all Funding Costs.
(b) Lender shall deliver to Borrower a statement setting forth the
amount and basis of determination of any Funding Cost, it being agreed that such
statement and the method of calculation shall be conclusive and binding on
Borrower, absent manifest error. In addition, in the event Borrower provides
Lender not less than five (5) Business Days prior written notice of a proposed
voluntary prepayment hereunder, Lender shall deliver to Borrower a non-binding
good faith estimate of the applicable components and amount of Funding Costs
which would be incurred by Borrower if Borrower were to make a voluntary
prepayment hereunder; provided, however, that Borrower shall remain liable for
all Funding Costs shown on the statement referred to in the first sentence of
this subsection (b), notwithstanding such good faith estimate.
(c) In lieu of prepaying the Loan when and as otherwise required
or permitted by this Loan Agreement, Borrower may on any Business Day (a
"Deposit Funding Date") instead deposit with Lender an amount equal to the
applicable prepayment, to be held by Lender (the "Prepayment Deposit") until
such date as application of the Prepayment Deposit on account of the Loan would
not cause Lender to suffer Funding Costs (the "Deposit Application Date"). Any
Prepayment Deposit held by Lender shall: (a) constitute additional security for
the Loan, for which the parties shall enter into such security documents (and
account establishment and administration documents) as Lender shall require; (b)
be held by Lender in an interest-bearing account selected and controlled solely
by Lender, interest on which shall be added to principal and applied in the same
manner as principal; (c) at Lender's option, be accompanied by a payment (as
estimated by Lender) equal to the difference between the interest to be earned
on the Prepayment Deposit and the interest that will accrue on a portion of the
Loan equal to the Prepayment Deposit during the period from the Deposit Funding
Date to the Deposit Application Date; (d) with respect to the Collateral,
entitle Borrower to the same rights and benefits (including the right to
releases, if any) that would have been available to Borrower if Borrower had
prepaid the Loan (and designated Asset-Specific Loan Balance(s)) by an amount
equal to the Prepayment Deposit; and (e) be applied on account of the Loan
(principal and interest) on the Deposit Application Date.
3.08. Compensation for Increased Costs. If Lender shall in good
faith determine that any change in any law, treaty or governmental rule,
regulation or order, or in the interpretation, administration or application
thereof, or any determination of a court or governmental authority, or
compliance with any guideline, request or directive issued or made by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(a) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or
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loans by, or other credit extended by, or any other acquisition of funds
by, any office of Lender; or
(b) imposes any other condition on or affecting Lender or its
obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to Lender of
agreeing to make, making or maintaining the Loan hereunder or to reduce any
amount received or receivable by Lender with respect thereto; then, in any such
case, Borrower shall promptly (but in any event no later than five (5) Business
Days following any notice from Lender of the same) pay to Lender, upon receipt
of the statement referred to in the next sentence, such additional amount or
amounts as may be necessary to compensate Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Lender shall deliver to
Borrower a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to Lender under this Section 3.08, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
3.09. Limitation on Types of Loans; Illegality. Anything herein to
the contrary notwithstanding, if:
(a) 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
(b) Lender determines, which determination shall be conclusive,
that the relevant rate of interest referred to in the definition of "Eurodollar
Base Rate" in Section 1.01 hereof upon the basis of which the rate of interest
for Loans is to be determined is not likely adequate to cover the cost to Lender
of making or maintaining Loans; or
(c) Lender determines, which determination shall be conclusive,
that it is or will be unlawful for Lender to honor its obligation to make or
maintain Loans hereunder using a Eurodollar Rate as a result of compliance by
Lender in good faith with any law, treaty, governmental rule, regulation,
guideline or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful);
then Lender shall give Borrower prompt notice thereof and, so long
as such condition remains in effect, Lender shall be under no obligation to make
additional Loans, and Borrower shall, either prepay all such Loans as may be
outstanding or pay interest on such Loans at a rate per annum equal to the
Eurodollar Substitute Rate.
Section 4. Collateral Security
4.01. Collateral; Security Interest
(a) Borrower hereby assigns, pledges and grants a security
interest in all of its right, title and interest in, to and under the Collateral
described in Section 4.01(b) below to Lender to secure the repayment of
principal of and interest on all Loans and all other amounts owing to Lender
hereunder, under the Note, under the other Loan Documents and any and all MS
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Indebtedness from time to time outstanding (collectively, the "Secured
Obligations"). Borrower agrees to mark its computer records to evidence the
interests granted to Lender hereunder.
(b) All of Borrower's right, title and interest in, to and under
each of the following items of property pledged by Borrower to Lender from time
to time and whether now owned or hereafter acquired, now existing or hereafter
created and wherever located, is hereinafter individually and collectively
referred to as the "Collateral":
(i) all Mortgage Loans, Mezzanine Loans, Equity Interests and
Other Approved Collateral;
(ii) all Collateral Documents, including without limitation all
promissory notes, any collateral pledged or otherwise relating to such
Collateral, all representations and warranties made to, or for the benefit
of, Borrower by any Collateral Obligor, all Servicing Records (as defined
in Section 11.14(b) below) and servicing agreements, together with all
files, documents, instruments, surveys, certificates, correspondence,
appraisals, computer programs, computer storage media, accounting records
and other books and records relating thereto, in each case subject to prior
liens and encumbrances permitted by Lender;
(iii) all guaranties and insurance (issued by governmental
agencies or otherwise) and any insurance certificate or other document
evidencing such guaranties or insurance relating to any Collateral and all
claims and payments thereunder;
(iv) all other insurance policies and insurance proceeds relating
to any Collateral or the related Property;
(v) all Interest Rate Protection Agreements;
(vi) the Collection Account and all monies from time to time on
deposit in the Collection Account;
(vii) all "general intangibles", "accounts" and "chattel paper" as
defined in the Uniform Commercial Code relating to or constituting any and
all of the foregoing; and
(viii) any and all replacements, substitutions, distributions on,
or proceeds (including, without limitation, condemnation proceeds) of, any
and all of the foregoing set forth in items (i) through (vii) of this
Section 4.01(b), whether now owned or hereafter acquired, now existing or
hereafter created and wherever located.
(c) Pursuant to the Custodial Agreement, Custodian shall hold the
Collateral Documents as exclusive bailee and agent for Lender pursuant to terms
of the Custodial Agreement and shall deliver to Lender Trust Receipts each to
the effect that it has reviewed such Collateral Documents in the manner and to
the extent required by the Custodial Agreement and identifying any deficiencies
in such Collateral Documents as so reviewed.
4.02. Further Assurances
(a) Borrower shall undertake, with respect to each item of
Collateral
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pledged hereunder as security for a Loan, any and all actions deemed necessary
by Lender for the granting by Borrower to Lender of a valid first priority
security interest in such Collateral. Without limiting the generality of the
foregoing, Borrower shall take such steps as are for the granting and perfection
of a first priority security interest in Securities and related Collateral.
(b) At any time and from time to time, upon the written request of
Lender, and at the sole expense of Borrower, 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 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. Borrower also hereby authorizes Lender to file any such
financing or continuation statement without the signature of 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. 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
Lender at least ten (10) days prior written notice thereof and shall have
delivered to Lender all Uniform Commercial Code financing statements and
amendments thereto as Lender shall request and taken all other actions deemed
necessary by 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) Borrower hereby irrevocably constitutes and appoints 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 Borrower and in the name of Borrower or in its own name, from
time to time in Lender's discretion, for the purpose of carrying out the terms
of this Loan Agreement, 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, Borrower hereby gives Lender the power and right,
on behalf of Borrower, without assent by, but with notice to, Borrower, if an
Event of Default shall have occurred and be continuing, to do the following:
(i) in the name of 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 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
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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 Lender or as 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 part thereof and to enforce
any other right in respect of any Collateral; (E) to defend any suit,
action or proceeding brought against 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 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 Lender were the absolute owner thereof for all purposes, and to do,
at Lender's option and Borrower's expense, at any time, and from time to
time, all acts and things which Lender deems reasonably necessary to
protect, preserve or realize upon the Collateral and Lender's Liens thereon
and to effect the intent of this Loan Agreement, all as fully and
effectively as Borrower might do.
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 until the repayment in full of all Secured
Obligations hereunder.
(b) Borrower also authorizes 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 Lender are solely to protect Lender's
interests in the Collateral and shall not impose any duty upon Lender to
exercise any such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither Lender
nor any of its officers, directors, or employees shall be responsible to
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 Borrower
fails to perform or comply with any of its agreements contained in the Loan
Documents and Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of 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
Borrower to 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 Borrower consisting of
cash, checks and other near-cash items shall be held by Borrower in trust for
Lender, segregated from other funds of Borrower, and, within two Business Days
of receipt by Borrower, shall be turned over to Lender in the exact form
received by Borrower (duly endorsed by Borrower to Lender, if required, in order
to be negotiated by Lender), and (b) any and all such proceeds received by
Lender (whether from Borrower or otherwise) may, in the sole discretion of
Lender, be held by Lender as collateral
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security for, and/or then or at any time thereafter may be applied by Lender
against, the Secured Obligations (whether matured or unmatured), such
application to be in such order as 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
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, 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, 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 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 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. 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 Borrower, which right or equity is hereby
waived or released. Borrower further agrees, at Lender's request, to assemble
the Collateral and make it available to Lender at places which Lender shall
reasonably select, whether at Borrower's premises or elsewhere. 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 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 Lender may elect, and only after such application and after the
payment by 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 Lender account for the surplus, if any, to Borrower. To the extent
permitted by applicable law, Borrower waives all claims, damages and demands it
may acquire against Lender arising out of the exercise by Lender of any of its
rights hereunder, other than those claims, damages and demands arising from the
gross negligence or willful misconduct of 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. Borrower shall remain liable for any deficiency (plus
accrued interest thereon as contemplated pursuant to Section 3.01(b) hereof) if
the proceeds of any sale or other disposition of the Collateral (net of costs
incurred in connection with such sale or other disposition) are insufficient to
pay the Secured Obligations and the fees and disbursements of any attorneys
employed by Lender to collect such deficiency.
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4.08. Limitation on Duties Regarding Preservation of Collateral.
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
Lender deals with similar property for its own account. Neither 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 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. Upon termination of this Loan
Agreement and the CMBS Loan Agreement and repayment to Lender of all Secured
Obligations and the performance of all obligations under the Loan Documents and
under the CMBS Loan Agreement, Lender shall release its security interest in any
remaining Collateral.
4.11. Release of Collateral. Provided that no Default or Event of
Default shall exist (other than one that (a) relates solely to the Collateral to
be released and (b) will be cured simultaneously with such release) and that
Borrower shall have paid all sums then due under the Loan relating thereto, upon
(i) Borrower's payment in full of the Asset-Specific Loan Balance with respect
to a portion of the Collateral and (ii) receipt by Lender of a written request
from Borrower for the release of such Collateral, Lender shall as soon as
practicable release (and Lender shall reasonably cooperate with Borrower to
facilitate reasonable escrow arrangements to facilitate a simultaneous release
of) the related Collateral Documents and the related Collateral and any liens
related thereto to Borrower or, to the extent necessary to facilitate future
savings of mortgage tax in states that impose mortgage taxes, assign such liens
as Borrower shall request; provided, that any such assignments shall be without
recourse, representation or warranty of any kind except that Lender shall
represent and warrant that such Collateral has not been previously assigned by
Lender. Lender shall with reasonable promptness, after a written request from
Borrower, execute any document or instrument necessary to effectuate such
release or assignment.
4.12. Substitution of Eligible Collateral. From time to time until
the Custodian is otherwise notified by the Lender, which notice shall be given
by the Lender only during the existence of an Event of Default, and with the
prior written consent of the Lender, the Borrower may substitute for one or more
items of Eligible Collateral constituting the Collateral with one or more
substitute items of Eligible Collateral having aggregate Collateral Value equal
to or greater than the Collateral Value of the Collateral being substituted for,
or obtain the release of one or more items of Collateral constituting Collateral
hereunder: provided that, after giving effect to such substitution or release,
the Secured Obligations then outstanding shall not exceed the Borrowing Base,
which determination shall be made solely by the Lender. In connection with any
such requested substitution or release, the Borrower will provide notice to the
Custodian and the Lender no later than 3:00 p.m. New York City time, on the date
of such request, specifying the items of Collateral to be substituted for or
released and the items of substitute Collateral to be pledged hereunder in
substitution thereof, if any, and shall deliver with such notice a Custodial
Identification Certificate and a revised Collateral Schedule indicating any
substitute Collateral.
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Section 5. Conditions Precedent
5.01. Initial Loan. The obligation of 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
Lender shall have received all of the following items and documents, each of
which shall be satisfactory to Lender and its counsel in form and substance:
(a) Loan Documents.
(i) This Loan Agreement, duly completed and executed;
(ii) The Note, duly completed and executed, together with a fee in
the amount of $750,000.00;
(iii) The Custodial Agreement, duly executed and delivered by
Borrower and Custodian. In addition, Borrower shall have taken such other action
as Lender shall have requested in order to perfect the security interests
created pursuant to the Loan Agreement;
(b) Organizational Documents. Certified copies of the trust
agreement (or equivalent documents) of Borrower and of all requisite authority
for Borrower with respect to the execution, delivery and performance of the Loan
Documents and each other document to be delivered by Borrower from time to time
in connection herewith (and Lender may conclusively rely on such certificate
until it receives notice in writing from Borrower to the contrary);
(c) Legal Opinion. A legal opinion of counsel to Borrower,
substantially in the form attached hereto as Exhibit C;
(d) Trust Receipt and Collateral Schedule and Exception Report. A
Trust Receipt, substantially in the form of Annex 2 of the Custodial Agreement,
dated the Effective Date, from Custodian, duly completed, with a Collateral
Schedule and Exception Report attached thereto;
(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 (i) consenting to termination of such Servicing Agreement
upon the occurrence of an Event of Default and (ii) agreeing to hold all moneys
received in respect of each item of Collateral for the benefit of Lender,
attached; and
(f) Other Documents. Such other documents as Lender may reasonably
request.
5.02. Initial and Subsequent Loans. The making of each Loan to
Borrower (including the initial Loan) on any Business Day is subject to the
delivery of all Collateral Documents pertaining to the Eligible Collateral to be
pledged for such Loan, together with all documents set forth in Section
2.03(b)(i)-(x) and the satisfaction of the following further conditions
precedent, both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof:
(a) no Event of Default or Default shall have occurred and be
continuing on
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such date either before or after giving effect to the making of the advance;
(b) Lender shall have received from Borrower and Borrower shall
have received from each Collateral Obligor such representations and warranties
as Lender shall, in its sole discretion, deem satisfactory. The representations
and warranties made by Borrower in Section 6 hereof, and elsewhere in each of
the Loan Documents, 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, solely with respect to Eligible Collateral
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). Lender shall
have received an officer's certificate signed by a Responsible Officer of
Borrower certifying as to the truth and accuracy of the above, which certificate
shall also include a representation that (i) Borrower is in compliance with all
governmental licenses and authorizations, (ii) Borrower is qualified to do
business, validly existing and, to the extent determinable, in good standing, in
all required jurisdictions, (iii) the facts set forth in the Diligence Materials
related to the Collateral for such Loan are, to the best knowledge of Borrower
after diligent inquiry, true and correct (or shall fully explain all adverse
changes from the information previously supplied to Lender), (iv) there has been
no change in the organizational and authority documents provided to Lender
pursuant to Section 5.01(b) hereof since the date of the most recent
certification thereof to Lender, and (v) there has been no Material Adverse
Effect since the date of the last advance to Borrower hereunder.
(c) the aggregate outstanding principal amount of the Loans shall
not exceed the Borrowing Base;
(d) subject to Lender's right to perform one or more Due Diligence
Reviews pursuant to Section 11.15 hereof, Lender shall have completed its due
diligence review of the Collateral Documents for each item of Collateral and
such other documents, records, agreements, instruments, mortgaged properties or
information relating to such item of Collateral as Lender in its sole discretion
deems appropriate to review and such review shall be satisfactory to Lender in
its sole discretion;
(e) Lender shall have received from Custodian a Trust Receipt,
together with a Collateral Schedule and Exception Report with Exceptions (as
defined in the Custodial Agreement) as are acceptable to Lender in its sole
discretion, in respect of the Eligible Collateral to be pledged hereunder on
such Business Day;
(f) Lender shall have received from Borrower a Lender's Release
Letter substantially in the form of Exhibit E hereto (or such other form
acceptable to Lender) covering each item of Collateral to be pledged to Lender
to the extent such Collateral is subject to a lender's lien;
(g) 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 Lender not being able to
finance any Loans
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through the "repo market" or "lending market" with traditional
counterparties at rates which would have been reasonable prior to the
occurrence of such event or events;
(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 expected to be) at least 30
consecutive days or an event or events shall have occurred resulting in
Lender not being able to sell securities backed by mortgage loans at prices
which would have been reasonable prior to such event or events; or
(iii) there shall have occurred a material adverse change in the
financial condition of Lender which effects (or can reasonably be expected
to effect) materially and adversely the ability of Lender to fund its
obligations under this Loan Agreement;
(h) Drawdown Fee. Borrower shall have paid Lender from the
proceeds of the advance to be made in connection with such Loan, a Drawdown Fee
calculated on the amount of such Loan then being disbursed.
(i) Transaction Costs. Borrower shall have paid Lender from the
proceeds of the advance to be made in connection with such Loan, all Transaction
Costs for which bills have been submitted; provided, however, that nothing
herein shall be deemed to waive Borrower's obligation to pay all Transaction
Costs whether billed before or after the making of a Loan pursuant to which such
Transaction Costs were incurred.
(j) Other Documents. Lender shall have received such other
documents, and Borrower shall have taken such other action in order to perfect
the security interests created hereunder, as Lender or its counsel shall deem
necessary.
Each request for a borrowing by Borrower hereunder shall
constitute a certification by 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).
5.03. Additional Requirements
(a) Borrower and Lender recognize and agree that the categories of
Collateral set forth in the Recital paragraph hereof and defined herein as
categories of assets which may be submitted by Borrower to Lender for review by
Lender as Eligible Collateral hereunder are general in nature and that the full
scope of such Collateral categories may be unknown. Consequently, the
appropriate requirements are not fully known for (i) the documents to be
provided by Borrower for underwriting and due diligence review by Lender and
(ii) submittals by Borrower in order to create and perfect a first priority
security interest in the Collateral. Therefore, Borrower and Lender agree that,
as a further condition precedent to funding a Loan in respect of any Collateral
hereunder, Borrower shall have delivered to Lender all information and documents
determined by Lender in good faith to be required for its underwriting and
examination of such Collateral and for the granting and perfection of a first
priority security interest therein.
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(b) Without limiting the generality of the foregoing Section
5.03(a), Borrower shall execute and deliver all documents necessary for the
granting of a first priority security interest in any Collateral determined by
Lender to be Eligible Collateral hereunder, including without limitation (i) all
instruments evidencing indebtedness payable to Borrower or pledged to Borrower
as security for a loan, (ii) all instruments granting or perfecting a security
interest for the benefit of Borrower or pledged to Borrower as security for a
loan (including, without limitation, collateral assignments, pledge agreements
and UCC financing statements), (iii) all instruments evidencing an interest in
an entity pledged to Borrower as security for a loan (including, without
limitation, partnership interests, shares of corporate stock, participation
interests, and other beneficial interests of any kind), (iv) all instruments
guaranteeing the repayment of indebtedness owed to Borrower, or pledged to
Borrower for the repayment of a Loan and (v) all agreements among holders of
debt or equity interests providing for a priority among such parties of
interests in related assets forming the basis of an item of Collateral.
Section 6. Representations and Warranties
Borrower represents and warrants to Lender that throughout the
term of this Loan Agreement:
6.01. Existence. Borrower (a) is a business trust duly organized
and validly existing under the laws of the jurisdiction of its organization, (b)
has all requisite 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 on its Property, business or financial
condition or prospects; and (c) is qualified to do business, validly existing
and is, to the extent determinable, 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 on
its Property, business or financial condition or prospects.
6.02. Action. Borrower has all necessary power, authority and
legal right to execute, deliver and perform its obligations under each of the
Loan Documents; the execution, delivery and performance by Borrower of each of
the Loan Documents have been duly authorized by all necessary action on its
part; and each Loan Document has been duly and validly executed and delivered by
Borrower and constitutes a legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms.
6.03. Financial Condition. Borrower agrees to promptly deliver to
Lender all publicly filed financial information when and to the extent that the
same is made available to the general public. Borrower has heretofore furnished
to Lender a copy of (a) its consolidated balance sheet and the consolidated
balance sheets of its consolidated Subsidiaries for the fiscal year of Borrower
ended December 31, 1997 and the related consolidated statements of income and
retained earnings and of cash flows for Borrower and its consolidated
Subsidiaries for such fiscal year, setting forth in each case in comparative
form the figures for the previous year, (b) its consolidated balance sheet and
the consolidated balance sheets of its consolidated Subsidiaries for such fiscal
year and the related consolidated statements of income and retained earnings and
of cash flows for Borrower and its consolidated Subsidiaries for such fiscal
year, setting forth in each case in comparative form the figures for the
previous year, with the opinion thereon of
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Ernst & Young and Coopers & Lybrand and (c) its consolidated balance sheet and
the consolidated balance sheets of its consolidated Subsidiaries for the
quarterly fiscal period of Borrower ended March 31, 1998 and the related
consolidated statements of income and retained earning and of cash flows for
Borrower and its consolidated Subsidiaries for such quarterly fiscal periods,
setting forth in each case in comparative form the figures for the previous
year. All such financial statements are complete and correct and fairly present,
in all material respects, the consolidated financial condition of Borrower and
its Subsidiaries and the consolidated results of their operations as at such
dates and for such fiscal periods, all in accordance with GAAP applied on a
consistent basis. Since March 31, 1998, there has been no material adverse
change in the consolidated business, operations or financial condition of
Borrower and its consolidated Subsidiaries taken as a whole from that set forth
in said financial statements.
6.04. Litigation. There are no actions, suits, arbitrations,
investigations or proceedings pending or, to the best of its knowledge,
threatened against 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 could be reasonably likely to have a Material Adverse Effect,
(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 or (iii) makes a claim or claims in an aggregate amount greater than
$1,000,000.00.
6.05. 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 trust agreement of 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 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 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 Borrower or any of its Subsidiaries
pursuant to the terms of any such agreement or instrument.
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 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 any provisions of Regulation T, U or X.
6.08. Taxes. 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 and have paid all taxes due pursuant to such returns or pursuant
to any assessment received by any of them, 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 Borrower and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of Borrower, adequate.
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6.09. Investment Company Act. Neither 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) Borrower has not assigned, pledged, or otherwise conveyed or
encumbered any Collateral to any other Person, and immediately prior to the
pledge of such Collateral to Lender, unless otherwise approved by Lender in
writing, Borrower was the sole owner of such Collateral and had good and
marketable title thereto, free and clear of all Liens, in each case except for
Liens to be released simultaneously with the Liens granted in favor of Lender
hereunder. No Collateral pledged to Lender hereunder was acquired by Borrower
from an Affiliate of Borrower unless otherwise approved by Lender in writing.
(b) The provisions of this Loan Agreement are effective to create
in favor of Lender a valid security interest in all right, title and interest of
Borrower in, to and under the Collateral.
(c) (i) Upon (x) receipt by Custodian of each Mortgage Note
evidencing a Mortgage Loan, endorsed in blank by a duly authorized officer of
Borrower, (y) the recordation of the mortgage to Lender securing such Mortgage
Loan and an assignment of such mortgage and (z) the filing of a UCC-1 financing
statement with respect to such assignment of mortgage, Lender shall have a fully
perfected first priority security interest therein, subject only to prior liens
and encumbrances permitted by Lender, in the Mortgage Loan evidenced thereby and
in Borrower's interest in the related Property.
(ii) Upon (x) receipt by Custodian of each note evidencing a
Mezzanine Loan, endorsed in blank by a duly authorized officer of Borrower, (y)
the delivery of a duly executed pledge to Borrower of direct or indirect
beneficial interests in the underlying property and the filing of UCC-1
financing statements with respect thereto, and (z) the delivery by Borrower of a
duly executed pledge of such pledged interests and the filing of UCC-3
assignment statements with respect thereto, Lender shall have a fully perfected
first priority security interest therein, in the Mezzanine Loan evidenced
thereby, and in Borrower's interest in the related Property.
(iii) As to all other Collateral, upon receipt by Custodian of all
documents set forth in Lender's notice to Borrower and Custodian pursuant to
Section 2.03(b)(x) hereof, Lender shall have a fully perfected first priority
security interest therein and in Borrower's interest in the related Property.
(d) Upon the filing of financing statements on Form UCC-1 naming
Lender as "Secured Party" and Borrower as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices for which security
interests may be perfected in the Collateral by the filing of UCC financing
statements, the security interests granted hereunder in the Collateral will
constitute fully perfected first priority security interests under the Uniform
Commercial Code in all right, title and interest of Borrower in, to and under
such Collateral which can be perfected by filing under the Uniform Commercial
Code.
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6.11. Chief Executive Office. Borrower's chief executive office on
the Effective Date is located at 605 Third Avenue, 26th Floor, New York, New
York 10016.
6.12. Location of Books and Records. The location where Borrower
keeps its books and records, including all computer tapes and records relating
to the Collateral is its chief executive office.
6.13. True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of Borrower to 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, (x)
do not contain any untrue statement of material fact and (y) contain all
statements of material fact necessary to make the statements herein or therein,
in light of the circumstances under which they were made, true. All written
information furnished after the date hereof by or on behalf of Borrower to
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 the actual knowledge of a Responsible
Officer of 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 Lender for use in connection
with the transactions contemplated hereby or thereby.
6.14. Tangible Net Worth. On the Effective Date, the Tangible Net
Worth is not less than the sum of (i) $100,000,000 plus (ii) an amount equal to
75% of the aggregate of positive changes in Borrower's book equity, since March
31, 1998 (without deduction for quarterly losses).
6.15. ERISA. Each Plan to which Borrower or its Subsidiaries make
direct contributions, and, to the knowledge of 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 Borrower would be under an
obligation to furnish a report to Lender under Section 7.01(d) hereof assuming a
request therefor has been made by Lender.
Section 7. Covenants of Borrower. Borrower covenants and agrees
with Lender that, so long as any Loan is outstanding and until payment in full
of all Secured Obligations:
7.01. Financial Statements, Reports, etc. Borrower agrees to
promptly deliver to Lender all publicly filed financial information when and to
the extent same is available to the general public. In addition to such public
financial information, Borrower shall also provide the following financial
information:
(a) the Monthly Statement;
(b) within forty-five (45) days following the end of each quarter,
a status
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report with respect to such quarter which describes the cumulative sources and
uses of the funds for the immediately preceding calendar quarter on each asset
pledged under this Loan Agreement and a detailed report in a form reasonably
satisfactory to Lender;
(c) within forty-five (45) days following the end of each quarter,
a certificate from a Responsible Officer of Borrower in form and substance
reasonably satisfactory to Lender that there has been no Event of Default and no
Material Adverse Effect;
(d) within fifteen (15) Business Days after Lender's request, such
further information with respect to the operation of any real property, the
Collateral, the financial affairs of Borrower and any Plan and Multiemployer
Plan as may be requested by Lender, including all business plans prepared by or
for Borrower; provided, however, that with respect to information not previously
known to, or in the possession of, Borrower relating to any Multiemployer Plan,
Borrower shall only be required to provide such information as may be obtained
through good faith efforts;
(e) upon Lender's request, a copy of any financial or other report
Borrower shall receive from any underlying obligor with respect to an item of
Collateral within fifteen (15) days after Borrower's receipt thereof; and
(f) such other reports as Lender shall reasonably require.
7.02. Litigation. Borrower will promptly, and in any event within
10 days after service of process on any of the following, give to Lender notice
of all litigation, actions suits, arbitrations, investigations (including,
without limitation, any of the foregoing which are pending or threatened) or
other legal or arbitrable proceedings affecting Borrower or any of its
Subsidiaries or affecting any of the Property of any of them before any
Governmental Authority that (i) questions or challenges the validity or
enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $1,000,000.00, or (iii) which,
individually or in the aggregate, if adversely determined could reasonably be
likely to have a Material Adverse Effect.
7.03. Existence, etc. Borrower will:
(a) preserve and maintain its legal existence and 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, 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 on its Property, business or financial condition, or
prospects;
(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 Lender 10 days' prior written
notice of such change;
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(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 Lender, during normal business
hours, 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 Lender.
7.04. Prohibition of Fundamental Changes. 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
Borrower may enter into a merger or consolidation if (a) the surviving or
resulting entity shall be a corporation or partnership organized under the laws
of the United States or any state thereof; (b) such entity shall expressly
assume by written agreement, in form and substance satisfactory to Lender in
Lender's sole discretion, the performance of all of Borrower's duties and
obligations under this Loan Agreement, the Note and the Loan Documents; and (c)
such entity shall be at least as creditworthy as Borrower, as determined by
Lender in Lender's sole and absolute discretion; and, provided, further, that if
after giving effect thereto, no Default would exist hereunder. Notwithstanding
the foregoing, Borrower shall not enter into or be subject to any transaction,
and no direct or indirect change in the ownership structure of Borrower shall
occur (whether or not within Borrower's control), if as a result thereof: (a)
any of Craig M. Hatkoff, John R. Klopp and Samuel Zell would no longer retain
his respective present or comparable or more senior offices (Vice Chairman and
Chairman of the Executive Committee; Chief Executive Officer and Vice Chairman;
and Chairman of the Board, respectively) and directorships, or (b) in Lender's
judgment, such individuals would no longer collectively retain effective control
of Borrower's business and operations.
7.05. Borrowing Base Deficiency. If at any time there exists a
Borrowing Base Deficiency, Borrower shall cure same in accordance with Section
2.04 hereof.
7.06. Notices. Borrower shall give notice to Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence
of any Default or Event of Default;
(b) with respect to any Collateral pledged to Lender hereunder,
immediately upon receipt of any principal payment (in full or partial) or
payment in respect of an Equity Interest;
(c) with respect to any Collateral pledged to Lender hereunder,
immediately upon receipt of notice or knowledge that the underlying Property has
been damaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty, or otherwise damaged so as to affect adversely the
Asset Value of such pledged Collateral;
(d) promptly upon receipt of notice or knowledge of (i) any
default related
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to any Collateral unless otherwise specifically approved by Lender in writing,
(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, (iii) any event or change in circumstances has or could reasonably
be expected to have an adverse affect on the Collateral Value of the Collateral
for a Loan or (iv) any event or change in circumstances which could reasonably
be expected to have a Material Adverse Effect;
(e) with respect to any item of Collateral pledged to Lender
hereunder, promptly upon entering into a modification of any documents
pertaining to such item of Collateral which would have a material adverse effect
on such item of Collateral; and
(f) with respect to any Collateral pledged to Lender hereunder,
immediately upon the acquisition or receipt by Borrower or any Affiliate of
Borrower of any interest of any kind in respect of such Collateral which
interest has not been pledged to Lender as Collateral under this Loan Agreement.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of Borrower setting forth details of the
occurrence referred to therein and stating what action Borrower has taken or
proposes to take with respect thereto.
7.07. Reports. Borrower shall provide Lender with a quarterly
report, which report shall include, among other items, a summary of Borrower's
delinquency and loss experience with respect to any Collateral serviced by
Borrower, any Servicer or any designee of either, plus any such additional
reports as Lender may reasonably request with respect to Borrower's or any
Servicer's servicing portfolio or pending originations of Collateral.
7.08. Transactions with Affiliates. Borrower will not, except as
approved by Lender in writing, enter into any transaction in any manner relating
to any item of Collateral hereunder, including without limitation any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate; provided, however, that Lender may consider for approval any such
transaction which is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of Borrower's business and (c) upon fair and reasonable
terms no less favorable to Borrower than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate, or make a payment
under such transactions that is not otherwise permitted by this Section 7.08 to
any Affiliate. In no event shall Borrower pledge to Lender hereunder any items
of Collateral acquired by Borrower from an Affiliate of Borrower.
7.09. Foreclosure or Other Remediation by Borrower. Borrower may
propose, and Lender will consider but shall be under no obligation to approve,
strategies for the foreclosure or other realization upon the security for
underlying loans held by Borrower relating to items of Collateral hereunder.
7.10. Limitation on Liens. Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created, or otherwise specifically permitted in writing by Lender
under this Loan Agreement, and Borrower will defend the right, title and
interest of Lender's in and to any of the Collateral against the claims and
demands of all persons whomsoever. Borrower may request from time to time,
subject to Lender's approval in Lender's sole determination, to sell
participation interests in its interests in items of Collateral, the sale of
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which participation interests shall be arm's length transactions and subject to
such terms and conditions as Lender in its sole discretion shall require.
7.11. Limitation on Distributions. After the occurrence and during
the continuation of any Event of Default, 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 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 Borrower.
7.12. Maintenance of Tangible Net Worth. Borrower shall not permit
Tangible Net Worth at any time to be less than the sum of (i) $100,000,000 plus
(ii) an amount equal to 75% of the aggregate of positive changes in Borrower's
book equity since March 31, 1998.
7.13. Maintenance of Ratio of Earnings Before Interest, Taxes,
Depreciation and Amortization to Interest and Preferred Dividends. Borrower
shall not permit the ratio of (a) earnings before interest, taxes, depreciation
and amortization to (b) the sum of (i) interest expense and (ii) preferred
dividends (specifically excluding any convertible trust preferred dividends) to
be less than 1.20:1.
7.14. Maintenance of Ratio of Total Indebtedness to Tangible Net
Worth. Borrower shall not permit the ratio of Total Indebtedness to Tangible Net
Worth at any time to be greater than 5:1. Lender may consider waiving the
foregoing requirement under certain circumstances if requested by Borrower;
however, Lender shall be under no obligation to do so.
7.15. Servicer; Servicing Tape. Borrower shall provide to Lender
on the fifth Business Day of each month a computer readable file containing
servicing information, including without limitation those fields specified by
Lender from time to time, on a loan-by-loan basis and in the aggregate, with
respect to the Mortgage Loans, Mezzanine Loans and Equity Interests serviced
hereunder by Borrower or any Servicer. Borrower shall not cause any Collateral
to be serviced by any Servicer other than a Servicer expressly approved in
writing by Lender.
7.16. Remittance of Prepayments. Borrower shall remit, with
sufficient detail to enable Lender to appropriately identify the Loan, or Loans,
to which any amount remitted applies, to Lender on each Thursday (or the next
Business Day if such Thursday is not a Business Day) all principal prepayments
that Borrower has received during the previous week in an amount equal to the
sum of the Asset-Specific Loan Balances being prepaid, together with all
interest due thereon through the date of such remittance, any and all charges
due with respect to such Loans and any and all costs and expenses incurred by
Lender (as provided in this Loan Agreement) in connection with such Loan or
Loans and the prepayment thereof.
Section 8. Event of Default. Each of the following events shall
constitute an event of default (an "Event of Default") hereunder:
(a) 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
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(b) Borrower shall default in the payment of any principal of or
interest on any MS Indebtedness when due (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment); or
(c) Borrower shall default in the payment of any other amount
payable by it hereunder or under any other Loan Document after notification by
Lender of such default, and such default shall have continued unremedied for
seven (7) Business Days; or
(d) any representation, warranty or certification made or deemed
made herein, or in any other Loan Document by Borrower or any certificate
furnished to 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 the representations and warranties set forth in Section 6
hereof which shall be considered solely for the purpose of Section 2.04(b)
hereof; unless Borrower shall have made any such representations and warranties
with knowledge that they were materially false or misleading at the time made);
or
(e) Borrower shall fail to comply with the requirements of Section
7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.08 through 7.16
hereof; or Borrower shall otherwise fail to comply with the requirements of
Section 7.03 hereof and such default shall continue unremedied for a period of
ten (10) Business Days; or Borrower shall fail to observe or perform any other
covenant 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 ten (10) Business Days; or
(f) a final judgment or judgments for the payment of money in
excess of $5,000,000.00 in the aggregate shall be rendered against Borrower or
any of its Subsidiaries by one or more courts, administrative tribunals or other
bodies having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within sixty (60) days from the date of
entry thereof, and Borrower or any such Subsidiary shall not, within said period
of sixty (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
(g) Borrower shall admit in writing its inability to pay its debts
as such debts become due; or
(h) 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 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
(i) a proceeding or case shall be commenced, without the
application or consent of 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
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readjustment of its debts, (ii) the appointment of, or the taking of possession
by, a receiver, custodian, trustee, examiner, liquidator or the like of Borrower
or any such Subsidiary or of all or any substantial part of its property, or
(iii) similar relief in respect of 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 sixty (60) or more days; or an order for
relief against Borrower or any such Subsidiary shall be entered in an
involuntary case under the Bankruptcy Code; or
(j) the Custodial Agreement or any Loan Document shall for
whatever reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by Borrower; or
(k) Borrower shall grant, or suffer to exist, any Lien on any
Collateral except the Liens contemplated hereby; or the Liens contemplated
hereby shall cease to be first priority perfected Liens on the Collateral in
favor of Lender or shall be Liens in favor of any Person other than Lender; or
(l) Borrower or any of Borrower's Affiliates shall be in default
under any note, indenture, loan agreement, guaranty, swap agreement or any other
contract to which it is a party (other than MS Indebtedness), 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, in any such case in which the amount of such obligation or
obligations, in the aggregate, exceed $10,000,000.00; or
(m) any materially adverse change in the Property, business,
financial condition or prospects of Borrower or any of its Subsidiaries shall
occur, in each case as determined by Lender in its sole discretion, or any other
condition shall exist which, in Lender's sole discretion, constitutes a material
impairment of Borrower's ability to perform its obligations under this Loan
Agreement, the Note or any other Loan Document.
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), 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 Borrower.
(b) Upon the occurrence of one or more Events of Default, Lender
shall have the right to obtain physical possession of the Servicing Records and
all other files of Borrower relating to the Collateral and all documents
relating to the Collateral which are then or may thereafter come in to the
possession of Borrower or any third party acting for Borrower and
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Borrower shall deliver to Lender such assignments as Lender shall request.
Lender shall be entitled to specific performance of all agreements of Borrower
contained in this Loan Agreement.
(c) Upon the occurrence of an Event of Default, without limiting
any other rights or remedies of Lender, Lender shall have the right to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by or for account of Lender or Lender's Affiliates to
any indebtedness at any time owing to Lender to the credit or for the account of
Borrower against any and all of the Indebtedness of Borrower, irrespective of
whether Lender shall have made any demand under this Loan Agreement, the Note,
any other Security Document or any other document executed in connection with
any other MS Indebtedness.
Section 10. No Duty of Lender. The powers conferred on Lender
hereunder are solely to protect Lender's interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. 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 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 Lender 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 telex or
telecopy) 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 telex or 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) Borrower agrees to hold Lender harmless from and indemnify
Lender against all liabilities, losses, damages, judgments, costs and expenses
of any kind which may be imposed on, incurred by or asserted against 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
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Document or any transaction contemplated hereby or thereby, that, in each case,
results from anything other than Lender's gross negligence or willful
misconduct. Without limiting the generality of the foregoing, Borrower agrees to
hold Lender harmless from and indemnify Lender against all Costs with respect to
all Collateral Loans and Equity Interests relating to or arising out of any
violation or alleged violation of any environmental law, rule or regulation or
any consumer credit laws, including without limitation the Truth in Lending Act
and/or the Real Estate Settlement Procedures Act, that, in each case, results
from anything other than Lender's gross negligence or willful misconduct. In any
suit, proceeding or action brought by Lender in connection with any Collateral
for any sum owing thereunder, or to enforce any provisions of any Collateral
Documents, Borrower will save, indemnify and hold 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 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 Borrower. Borrower also agrees to reimburse Lender as and
when billed by Lender for all Lender's reasonable costs and expenses incurred in
connection with the enforcement or the preservation of 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. Borrower hereby acknowledges that,
notwithstanding the fact that the Note is secured by the Collateral, the
obligation of Borrower under the Note is a recourse obligation of Borrower.
(b) Borrower agrees to pay as and when billed by Lender all of the
reasonable out-of-pocket costs and expenses incurred by 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.
Borrower agrees to pay as and when billed by Lender all of the out-of-pocket
costs and expenses incurred in connection with 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 Lender and (ii) all the due diligence, inspection, testing and review
costs and expenses incurred by Lender with respect to Collateral under this Loan
Agreement, including, but not limited to, those costs and expenses incurred by
Lender pursuant to Sections 11.03(a), 11.14 and 11.15 hereof.
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 Borrower and Lender and
any provision of this Loan Agreement may be waived by 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 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 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
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or misleading, notwithstanding that 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. 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 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
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 BORROWER AND LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
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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. 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) Lender has no fiduciary relationship to Borrower, and the
relationship between Borrower and Lender is solely that of debtor and creditor;
and
(c) no joint venture exists between Lender and Borrower.
11.13. Hypothecation or Pledge of Loans. Lender shall have free
and unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude Lender from engaging in repurchase transactions with the Collateral or
otherwise pledging, repledging, transferring, hypothecating, or rehypothecating
the Collateral or pledging or otherwise transferring its rights to payment
hereunder in respect of any Loan made hereunder; provided, that no action by
Lender referred to in this sentence shall confer on any Person other than Lender
any right against Borrower to require any prepayment under Section 2.04 hereof
or any right to enforce against Borrower any other provision of this Loan
Agreement, but may grant to any Person the right to require Lender to enforce
any such provisions. Nothing contained in this Loan Agreement shall obligate
Lender to segregate any Collateral delivered to Lender by Borrower.
11.14. Servicing.
(a) Borrower covenants to maintain or cause the servicing of the
Collateral to be maintained with respect to each type of Collateral pledged to
Lender hereunder in conformity with accepted and prudent servicing practices in
the industry for such same type of Collateral and in a manner at least equal in
quality to the servicing Borrower provides for assets similar to such Collateral
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 Borrower and Lender, which Lender's consent
shall not be unreasonably withheld. Midland Loan Services, L.P. shall be the
initial servicer.
(b) If the Collateral, or any portion thereof, is serviced by
Borrower, (i) Borrower agrees that 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 such Collateral (the "Servicing
Records"), and (ii) Borrower grants Lender a security interest in all servicing
fees and rights relating to such Collateral and all Servicing Records to secure
the obligation of Borrower or its designee to service in conformity with this
Section and any other obligation of Borrower to Lender. Borrower covenants to
safeguard such
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Servicing Records and to deliver them promptly to Lender or its designee
(including Custodian) at Lender's request.
(c) If the Collateral, or any portion thereof, is serviced by a
third party servicer (such third party servicer, the "Servicer"), Borrower (i)
shall provide a copy of the servicing agreement to Lender, which shall be in
form and substance acceptable to Lender (the "Servicing Agreement"); and (ii)
hereby irrevocably assigns to Lender and Lender's successors and assigns all
right, title, interest of Borrower in, to and under, and the benefits of, any
Servicing Agreement with respect to such Collateral. Any successor to the
Servicer shall be approved in writing by Lender prior to such successor's
assumption of servicing obligations with respect to such Collateral.
(d) Borrower shall provide to Lender a letter from Borrower (if
Borrower is the Servicer) or the Servicer, as the case may be, to the effect
that upon the occurrence of an Event of Default, Lender may terminate any
Servicing Agreement and transfer servicing to its designee, at no cost or
expense to Lender, it being agreed that Borrower will pay any and all fees
required to terminate the Servicing Agreement and to effectuate the transfer of
servicing to the designee of Lender.
(e) After the Funding Date, until the pledge of any Collateral is
relinquished by Custodian, Borrower will have no right to modify or alter the
terms of any of the documents pertaining to such Collateral and Borrower will
have no obligation or right to repossess such Collateral or substitute other
Collateral, except as provided in the Custodial Agreement; provided, however,
that so long as no Default or Event of Default has occurred and is continuing,
Borrower may enter into such modifications of the terms of such documents as do
not, as to any individual item of Collateral, (i) result in a negative monetary
effect or (ii) constitute a material adverse effect.
(f) In the event Borrower or its Affiliate is servicing any
Collateral, Borrower shall permit Lender to inspect Borrower's or its
Affiliate's servicing facilities, as the case may be, for the purpose of
satisfying Lender that Borrower or its Affiliate, as the case may be, has the
ability to service such Collateral as provided in this Loan Agreement.
(g) Borrower shall cause the Servicer to provide a copy of each
report and notice sent to Borrower to be sent to Lender concurrently therewith.
11.15. Periodic Due Diligence Review. Borrower acknowledges that
Lender has the right to perform continuing due diligence reviews with respect to
the Collateral, for purposes of verifying compliance with the representations,
warranties and specifications made hereunder, or determining and re-determining
the Borrowing Base under Section 2.04(a) hereof, or otherwise, and Borrower
agrees that Lender, at its option, has the right at any time to conduct a
partial or complete due diligence review on any or all of the Collateral
securing the Loans, including, without limitation, ordering new credit reports
and Appraisals on the applicable Collateral and otherwise regenerating the
information used to originate such Eligible Collateral. Upon reasonable (but no
less than one (1) Business Day) prior notice to Borrower, Lender or its
authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of, the Collateral Files and any
and all documents, records, agreements, instruments or information relating to
such Collateral in the possession or under the control of Borrower and/or
Custodian. Borrower also shall make available to Lender a
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knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Collateral Files and the Collateral. Borrower agrees to
cooperate with Lender and any third party underwriter designated by Lender in
connection with such underwriting, including, but not limited to, providing
Lender and any third party underwriter with access to any and all documents,
records, agreements, instruments or information relating to such Collateral in
the possession, or under the control, of Borrower. Borrower further agrees that
Borrower shall reimburse Lender for any and all out-of-pocket costs and expenses
incurred by Lender in connection with Lender's activities pursuant to this
Section 11.15.
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. Change of Borrower's State of Formation. If Borrower shall
change the State under whose laws Borrower shall be organized, Borrower shall
promptly provide Lender with a copy of its new Declaration of Trust, Articles of
Incorporation or similar document, certified by the Secretary of State or other
appropriate official of Borrower's new State of formation, if applicable,
together with such opinions of counsel regarding such change as Lender, in its
sole discretion, shall require.
11.18. Trustee Exculpation. The parties agree that except for
fraudulent acts, willful misrepresentation or gross negligence, no trustee of
Borrower shall have personal liability hereunder to Lender and any obligation of
Borrower hereunder to Lender shall be satisfied solely from the assets of
Borrower.
[SIGNATURE PAGE FOLLOWS]
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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
CAPITAL TRUST
By:/s/ Edward Shugrue
---------------------------------
Name: Edward L. Shugrue III
Title: Chief Financial Officer
Address for Notices:
605 Third Avenue, 26th Floor
New York, New York 10016
Attention: Edward L. Shugrue, III
Peter S. Ginsberg, Esq.
John Felleter
Telecopier No.: (212) 655-0044
Telephone No: (212) 655-0225
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: John A. Cahill, Esq.
Telecopier No.: (212) 856-7801
Telephone No.: (212) 856-6930
LENDER
MORGAN STANLEY MORTGAGE
CAPITAL INC.
By:/s/ Christian B. Malone
---------------------------------
Name: Christian B. Malone
Title: Vice President
Address for Notices:
1585 Broadway
New York, New York 10036
Attention: Whole Loan Operations
Mortgage-Backed Securities Department,
Fixed-Income Division
Telecopier No.: 212-761-0710
Telephone No.: 212-761-2063
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With a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166-0153
Attention: Frederick B. Utley, III, Esq.
Telecopier No.: (212) 878-8375
Telephone No.: (212) 878-8356
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SCHEDULE 1
FILING JURISDICTIONS AND OFFICES
[TO BE PROVIDED BY COUNSEL TO BORROWER]
S-1-55
<PAGE>
SCHEDULE 2
APPROVED APPRAISERS
1. KTR Appraisal Services
2. Cushman & Wakefield, Inc.
3. Landauer Real Estate Counselors
4. CB Commercial
5. The Weitzman Group
6. Greenwich Group
7. Arthur Anderson
8. Joseph Blake
S-2-56
<PAGE>
SCHEDULE 3
APPROVED ENGINEERS
1. EMG
2. KTR Realty Services
3. Merritt & Harris, Inc.
4. C.A. Rich, Inc.
5. IVI
6. Dames & Moore
7. Law
8. Echland
9. EM&CA
10. Acqua Terra
11. ATC (BCM Engineers)
12. Horn Chandler & Thomas
S-3-57
<PAGE>
SCHEDULE 4
APPROVED ENVIRONMENTAL CONSULTANTS
1. Acqua Terra
2. Law Environmental
3. KTR Realty Services
4. EMG
5. Clayton
6. Dames & Moore
7. Brown & Root
8. C.A. Rich, Inc.
9. Echland
10. EM&CA
11. ATC (BCM Engineers)
12. Front Royal
S-4-58
<PAGE>
EXHIBIT A
[FORM OF PROMISSORY NOTE]
$ 300,000,000.00 June 8, 1998
New York, New York
FOR VALUE RECEIVED, CAPITAL TRUST, a California business trust
(the "Borrower"), hereby promises to pay to the order of MORGAN STANLEY MORTGAGE
CAPITAL INC. (the "Lender"), at the principal office of 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 THREE HUNDRED MILLION DOLLARS
($300,000,000.00) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by Lender to 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 Lender to
Borrower, and each payment made on account of the principal thereof, shall be
recorded by Lender on its books and, prior to any transfer of this Note,
endorsed by Lender on the schedule attached hereto or any continuation thereof;
provided, that the failure of Lender to make any such recordation or endorsement
shall not affect the obligations of Borrower to make a payment when due of any
amount owing under the Loan Agreement or hereunder in respect of the Loans made
by Lender.
This Note is the Note referred to in the Master Loan and Security
Agreement dated as of June 8, 1998 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Loan Agreement") between Borrower
and Lender, and evidences Loans made by Lender thereunder. Terms used but not
defined in this Note have the respective meanings assigned to them in the Loan
Agreement.
Borrower agrees to pay all 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, Borrower hereby
acknowledges, admits and agrees that Borrower's obligations under this Note are
recourse obligations of Borrower to which Borrower pledges its full faith and
credit.
Borrower, and any endorsers or guarantors hereof, (a) severally
waive diligence, presentment, protest and demand and also notice of protest,
demand, dishonor and nonpayment 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 Lender, in order to enforce
payment of this Note, to first institute or exhaust Lender's remedies against
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 Lender with any person now or hereafter liable for
the payment of this Note, shall affect the liability under this Note of
Borrower, even if Borrower is not a party to
A-1
<PAGE>
such agreement; provided, however, that Lender and Borrower, by written
agreement between them, may affect the liability of Borrower.
Any reference herein to 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
Borrower expressly elects to apply to this Note. 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.
CAPITAL TRUST
a California business trust
By:
----------------------------
Name: Edward L. Shugrue, III
Title: Chief Financial Officer
A-2
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Loan
Agreement to 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>
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
Date Made Principal Interest Amount Paid Unpaid Principal Notation
Amount of Loan Rate or Prepaid Amount Made by
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
- ---------------- --------------------- ------------- ------------------- ---------------------- ------------
</TABLE>
A-3
<PAGE>
EXHIBIT B
[FORM OF CUSTODIAL AGREEMENT]
[STORED AS A SEPARATE DOCUMENT]
B-1
<PAGE>
EXHIBIT C
[FORM OF OPINION OF COUNSEL OF BORROWER]
C-1
<PAGE>
EXHIBIT D
[FORM OF REQUEST FOR BORROWING]
Master Loan and Security Agreement, dated as of June __, 1998 (the
"Loan and Security Agreement"), by and between Borrower and Morgan Stanley
Mortgage Capital Inc. (the "Lender"),
Lender: Morgan Stanley Mortgage Capital Inc.
Borrower: [NAME OF BORROWER]
Requested Fund Date:
------------------------------
Transmission Date:
------------------------------
Transmission time:
------------------------------
[Type of Funding:
(Wet or Dry)
------------------------------]
[Type of Loan requested:
Committed or Uncommitted
------------------------------]
Number of Mortgage
Loans to be Pledged:
------------------------------
Unpaid Principal Balance: $
------------------------------
Requested Wire Amount: $
------------------------------
Wire Instructions:
Requested by:
[NAME OF BORROWER]
By:
---------------------------
Name:
Title:
D-1
<PAGE>
EXHIBIT E
[FORM OF LENDER'S RELEASE LETTER]
(Date)
Morgan Stanley Mortgage Capital Inc.
1585 Broadway
New York, New York 10036
Attention:
Facsimile:
Re: Certain Collateral Identified on Schedule A hereto and owned by
[BORROWER]
The undersigned hereby releases all right, interest, lien or claim
of any kind with respect to the Collateral 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 finds
of $ , in accordance with the following wire instructions:
................................................................................
................................................................................
........................
Very truly yours,
[LENDER]
By:
---------------------------
Name:
Title:
E-1-1
<PAGE>
EXHIBIT F
[FORM OF BAILEE AGREEMENT]
F-1-1
<PAGE>
Exhibit 10.2
================================================================================
CMBS LOAN AGREEMENT
FOR A CREDIT FACILITY
IN AN AMOUNT UP TO $300,000,000
Dated as of June 30, 1998
CAPITAL TRUST
as Borrower
and
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
as Lender
================================================================================
<PAGE>
TABLE OF CONTENTS
Recitals ..................................................................4
Section 1. Definitions and Accounting Matters................................4
1.01 Certain Defined Terms.............................................4
1.02 Accounting Terms and Determinations..............................17
Section 2 Loans, Note and Prepayments......................................18
2.01 Loans............................................................18
2.02 Notes............................................................18
2.03 Procedures for Borrowing.........................................18
2.04 Mandatory Prepayments or Pledge..................................23
Section 3 Payments; Computations; Etc......................................24
3.01 Repayment of Loans; Interest.....................................24
3.02 Payments.........................................................25
3.03 Computations.....................................................25
3.04 U.S. Taxes.......................................................25
3.05 Booking of Loans.................................................26
3.06 Lender's Funding of Eurodollar Rate Loans........................26
3.07 Breakage Costs...................................................27
3.08 Compensation for Increased Costs.................................27
3.09 Limitation on Types of Loans; Illegality.........................28
Section 4 Collateral Security..............................................28
4.01 Collateral; Security Interest....................................28
4.02 Further Documentation............................................29
4.03 Changes in Locations, Name, etc..................................30
4.04 Lender's Appointment as Attorney-in-Fact.........................30
4.05 Performance by Lender of Borrower's Obligations..................31
4.06 Proceeds.........................................................31
4.07 Remedies.........................................................32
4.08 Limitation on Duties Regarding Preservation of Collateral........33
4.09 Powers Coupled with an Interest..................................33
4.10 Release of Security Interest.....................................33
4.11 Release of Collateral............................................33
4.12 Substitution of Eligible Collateral..............................33
Section 5 Conditions Precedent.............................................34
5.01 Initial Loan.....................................................34
5.02 Initial and Subsequent Loans.....................................34
5.03 Additional Requirements..........................................36
Section 6 Representations and Warranties...................................37
6.01 Existence........................................................37
i
<PAGE>
6.02 Action...........................................................37
6.03 Financial Condition..............................................37
6.04 Litigation.......................................................38
6.05 No Breach........................................................38
6.06 Approvals........................................................38
6.07 Margin Regulations...............................................38
6.08 Taxes............................................................38
6.09 Investment Company Act...........................................39
6.10 Collateral; Collateral Security..................................39
6.11 Chief Executive Office...........................................39
6.12 Location of Books and Records....................................39
6.13 True and Complete Disclosure.....................................39
6.14 Tangible Net Worth...............................................40
6.15 ERISA............................................................40
Section 7 Covenants of the Borrower........................................40
7.01 Financial Statements, Reports, etc...............................40
7.02 Litigation.......................................................41
7.03 Existence, etc...................................................41
7.04 Prohibition of Fundamental Changes...............................41
7.05 Borrowing Base Deficiency........................................42
7.06 Notices..........................................................42
7.07 Reports..........................................................43
7.08 Transactions with Affiliates.....................................43
7.09 Foreclosure or Other Remediation by Borrower.....................43
7.10 Limitation on Liens..............................................43
7.11 Limitation on Distributions......................................43
7.12 Maintenance of Tangible Net Worth................................43
7.13 Maintenance of Ratio of Earnings Before Interest.................43
7.14 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth.44
7.15 Servicer; Servicing Tape.........................................44
7.16 Remittance of Prepayments........................................44
Section 8 Events of Default................................................44
Section 9 Remedies Upon Default............................................46
Section 10 No Duty of Lender................................................46
Section 11 Miscellaneous....................................................47
11.01 Waiver...........................................................47
11.02 Notices..........................................................47
11.03 Indemnification and Expenses.....................................47
11.04 Amendments.......................................................48
11.05 Successors and Assigns...........................................48
11.06 Survival.........................................................48
11.07 Captions.........................................................48
11.08 Counterparts.....................................................48
ii
<PAGE>
11.09 Loan Agreement Constitutes Security Agreement; Governing Law.....48
11.10 SUBMISSION TO JURISDICTION; WAIVERS..............................49
11.11 WAIVER OF JURY TRIAL.............................................49
11.12 Acknowledgments..................................................49
11.13 Hypothecation or Pledge of Loans.................................49
11.14 Servicing........................................................50
11.15 Periodic Due Diligence Review....................................51
11.16 Intent...........................................................51
11.17 Change of Borrower's State of Formation..........................51
11.18 Trustee Exculpation..............................................52
SCHEDULES
- ---------
SCHEDULE 1 Filing Jurisdictions and Offices
SCHEDULE 2 Approved Appraisers
SCHEDULE 3 Approved Engineers
SCHEDULE 4 Approved Environmental Consultants
EXHIBITS
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 Form of Lender's Release Letter
EXHIBIT F Form of Bailee Agreement
iii
<PAGE>
CMBS LOAN AGREEMENT
CMBS LOAN AGREEMENT, dated as of June 30, 1998, between
CAPITAL TRUST, a California business trust ("Borrower"), and MORGAN STANLEY &
CO. INTERNATIONAL LIMITED ("Lender").
RECITALS
Borrower has requested that Lender from time to time make
revolving credit loans to it to finance certain commercial mortgage-backed
securities owned by Borrower, and Lender is prepared to make such loans upon the
terms and conditions hereof. In addition, Borrower has requested that Morgan
Stanley Mortgage Capital Inc. ("MSMC") from time to time make revolving credit
loans to it to finance certain Mortgage Loans, Mezzanine Loans, Equity Interests
and other approved collateral owned by Borrower and MSMC has agreed to make such
loans pursuant to the terms and conditions of the Master Loan and Security
Agreement dated as of June 8, 1998 (the "Conduit Loan Agreement").
Lender and Borrower further understand that Borrower may enter
into loan facilities with other parties on a secured and unsecured basis,
including, without limitation, loans secured by collateral similar to the
Collateral hereunder.
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 will have the same
meanings when used in the plural and vice versa):
"Advance Rate" means, for any item of Eligible Collateral, the
ratio, expressed as a percentage, set forth opposite the collateral type in the
chart provided in the definition of Eurodollar Rate Spread or as otherwise
defined or limited herein.
"Affiliate" shall mean (i) with respect to Lender, any entity
which controls, is controlled by, or is under common control with Lender, and
(ii) with respect to Borrower, any affiliate of Borrower as such term is defined
in the Bankruptcy Code.
"Appraisal" means an appraisal of any Property prepared by a
licensed appraiser listed on Schedule 3 attached hereto, as such schedule may be
amended from time to time by Borrower or Lender upon approval by Lender in its
reasonable discretion, in accordance with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation, in compliance with the
requirements of Title 11 of the Financial Institution Reform, Recovery and
Enforcement Act and utilizing customary valuation methods such as the income,
sales/market or cost approaches, as any of the same may be updated by
recertification from time to time by the appraiser performing such Appraisal.
"Asset-Specific Loan Balance" means a portion of the Loan
allocable to each item of the Eligible Collateral. Such portion initially
consists of the sum of all advances of the Loan made on account of such Eligible
Collateral, without subtracting from such advances the
4
<PAGE>
Drawdown Fee, Lender's Transaction Costs and other advance costs and fees to the
extent borrowed. Wherever this Loan Agreement states that principal payments on
account of the Loan are to be allocated or applied to or against the
Asset-Specific Loan Balance of a specific item of Eligible Collateral, the
Asset-Specific Loan Balance of such item of Eligible Collateral shall be deemed
reduced accordingly by the amount of the principal payments so applied.
"Asset Value" shall mean, as of any date in respect of an item
of Eligible Collateral, the price at which such Eligible Collateral could
readily be sold as determined in the sole good faith of Lender, which price may
be determined to be zero. Lender's determination of Asset Value, which may be
made at any time and from time to time, shall be conclusive upon the parties.
Whenever an Asset Value determination is required under this Loan Agreement,
Borrower shall cooperate with Lender in its determination of the Asset Value of
each item of Eligible Collateral (including, without limitation, providing all
information and documentation in the possession of Borrower regarding such item
of Eligible Collateral or otherwise required by Lender in its sole good faith
business discretion).
"Bailee" shall mean Battle Fowler LLP or such other third
party as Lender may approve.
"Bailee Agreement" shall mean the Bailee Agreement among
Borrower, Lender and Bailee in the form of Exhibit F hereto.
"Bailee's Trust Receipt and Certification" shall mean a Trust
Receipt and Certification in the form annexed to the Bailee Agreement as
Attachment 2.
"Bankruptcy Code" shall mean the United States Bankruptcy Code
of 1978, as amended from time to time.
"Base Rate" means, as determined by Lender on a daily basis,
the higher of (a) the rate per annum established by The Chase Manhattan Bank
from time to time as its "Prime" Rate or "reference" rate (which Borrower
acknowledges is not necessarily such bank's lowest rate) and (b) one-half
percentage point (0.5%) (50 basis points) over the Federal funds rate, as
determined by Lender in its sole discretion.
"Borrower" shall have the meaning provided in the heading
hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of
all Eligible Collateral pledged to secure the amounts from time to time
outstanding under this Loan Agreement.
"Borrowing Base Deficiency" shall have the meaning provided in
Section 2.04 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 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
5
<PAGE>
capital lease on a 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.
"CMBS" shall mean, in the singular or plural as the context
requires, securities backed by mortgages and other liens on commercial real
estate and related collateral or by securities, interests or other obligations
backed by such mortgages.
"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 Assignment" shall mean all documents pursuant to
which Borrower shall have collaterally assigned all of its right, title and
interest in, to and under an item of Collateral to secure a Loan made hereunder.
"Collateral Documents" shall mean with respect to any
Collateral Loan, Equity Interest, or Other Approved Collateral, the documents
comprising the Collateral File for such item of Collateral.
"Collateral File" shall mean, as to each item of Collateral,
those documents set forth in a schedule to be delivered by Lender to Custodian
and which are delivered to the Custodian pursuant to the terms of this Loan
Agreement or the Custodial Agreement including, without limitation, all
documents required by Lender to grant and perfect a first priority security
interest in such item of Collateral.
"Collateral Loan" shall mean, as applicable, a Mortgage Loan
or a Mezzanine Loan.
"Collateral Obligor" shall mean any obligor under any
Collateral Loan, any issuer of any security comprising any portion of the
Collateral and any entity in which an Equity Interest comprises any portion of
the Collateral.
"Collateral Report" shall mean the collateral schedule and
exception report prepared by Custodian pursuant to the Custodial Agreement.
"Collateral Schedule" shall mean a list of Eligible Collateral
to be pledged pursuant to this Loan Agreement, attached to a Custodial
Identification Certificate setting forth, as to each item of Eligible
Collateral, the applicable information for such Collateral Type specified on
Annex 1 to the Custodial Agreement.
"Collateral Type" shall mean CMBS and Other Approved
Collateral.
"Collateral Value" shall mean, with respect to each item of
Eligible Collateral, the Asset Value of such Eligible Collateral multiplied by
the applicable Advance Rate set forth in the definition of "Eurodollar Rate
Spread" set forth herein or as otherwise defined or limited herein; provided,
that, the Collateral Value shall be deemed to be zero or such greater amount as
determined by Lender in respect of each item of Eligible Collateral (1) in
respect of which there is a breach of a representation or warranty by a
Collateral Obligor, (2) in respect of which there
6
<PAGE>
is a delinquency in the payment of principal and/or interest which continues for
a period in excess of 30 days (such period to include any applicable grace
periods) unless otherwise approved by Lender, or (3) which has been released
from the possession of Custodian under the Custodial Agreement to Borrower for a
period in excess of 14 days.
"Collection Account" shall mean one or more accounts
established by the Servicer subject to a security interest in favor of Lender,
into which all Collections shall be deposited by the Servicer.
"Collections" shall mean, collectively, all collections and
proceeds on or in respect of the Collateral, excluding collections required to
be paid to the Servicer or a borrower on the Collateral.
"Conduit Loan" shall mean a Mortgage Loan, secured by a first
mortgage on a real property, that in Lender's determination, satisfies the
following criteria: (i) principal balance not exceeding $40,000,000.00; (ii)
interest at a fixed rate with prepayment protection satisfactory to Lender;
(iii) single-asset, bankruptcy remote property owner complying with all
nationally recognized statistical rating agency requirements; (iv) no
subordinate financing and mortgage and organizational documents prohibiting
subordinate financing or unsecured financing not otherwise subject to
intercreditor agreements satisfactory to rating agencies; (v) debt service
coverage ratio (as determined by Lender in its sole discretion) of not less than
1.25:1 or such higher debt service coverage ratio as may be required by rating
agencies; (vi) not having any characteristics that would impair the rating of
any securities issued pursuant to a securitization that included a substantial
component of mortgages similar to such mortgage; and (vii) in full compliance
with such other "conduit" underwriting and structuring requirements as Lender
shall establish from time to time.
"control" shall mean possession of the power, directly or
indirectly, to (a) vote more than fifty percent (50%) of the voting securities
having ordinary power for the election of directors of an entity, or (b) direct
or cause the direction of the management and policies of such entity, whether by
contract or otherwise.
"Custodial Agreement" shall mean the Custodial Agreement,
dated as of the date hereof, among Borrower, Custodian and Lender, substantially
in the form of Exhibit B hereto, as the same shall be modified and supplemented
and in effect from time to time.
"Custodial Identification Certificate" shall mean the
certificate executed by Borrower in connection with the pledge of Eligible
Collateral to Lender in the form of Annex 3 to the Custodial Agreement.
"Custodian" shall mean LaSalle National Bank as custodian
under the Custodial Agreement, and its successors and permitted assigns
thereunder.
"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.
"Diligence Materials" means the Preliminary Due Diligence
Package together with the materials requested in the Supplemental Due Diligence
List.
"Direct Mortgage" means a recorded mortgage or deed of trust
in favor of
7
<PAGE>
Lender on real property.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"Drawdown Fee" shall mean, for each Loan with respect to any
particular item of Eligible Collateral, an amount equal to the product of 0.25%
and the principal amount of such Loan; provided, however, that (a) the Drawdown
Fee shall be equal to zero to the extent that such Loan is to be made with
respect to a Conduit Loan as Collateral and (b) with respect to any other such
item of Eligible Collateral, borrowings which are repaid and subsequently
reborrowed will not be charged a subsequent Drawdown Fee.
"Due Diligence Review" shall mean the performance by Lender of
any or all of the reviews permitted under Section 11.15 hereof with respect to
any or all of the Collateral, as desired by 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 Collateral" shall mean CMBS and Other Approved
Collateral as to which the representations and warranties in Section 6.10 hereof
are correct.
"Equity Interest" shall mean any interest in a Person
constituting a share of stock or a partnership or membership interest or other
right or interest in a Person not characterized as indebtedness under GAAP.
"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 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 Borrower is a member.
"Eurocurrency Reserve Requirements" shall mean, for any day as
applied to a Loan, the aggregate (without duplication) of the rates (expressed
as a decimal fraction) of reserve requirements in effect on such day (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, with respect to any
Eurodollar Contract Period, the rate per annum equal to the rate appearing at
page 3750 of the Telerate Screen as 30, 60 or 90 day LIBOR on such date, and if
such rate shall not be so quoted, the rate per annum at which 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 exchange operations in respect of its Loans are then being conducted
for delivery on
8
<PAGE>
such day for a period of 30, 60 or 90 days and in an amount comparable to the
amount of the Loans to be outstanding on such day.
"Eurodollar Contract Period" means, with respect to each Loan,
an interest rate contract period of (i) such period as shall be determined by
Borrower from time to time on the second Business Day prior to the expiration of
each Eurodollar Contract Period, which Eurodollar Contract Period shall be
thirty (30) days, sixty (60) days or ninety (90) days, or (ii) if Borrower shall
make no determination under clause (i) of this definition, thirty (30) days;
provided, that: (a) Eurodollar quotations for the period requested are
reasonably available to Lender in the Eurodollar market for such Eurodollar
Contract Period; (b) in no event shall a Eurodollar Contract Period extend
beyond the Termination Date; (c) the initial Eurodollar Contract Period with
respect to each Asset-Specific Loan Balance shall commence on the related
Funding Date and each succeeding Eurodollar Contract Period shall commence on
the day on which the immediately preceding Eurodollar Contract Period shall
expire, and (d) if a Eurodollar Contract Period would otherwise terminate on a
day that is not a Business Day, such Eurodollar Contract Period shall terminate
on (1) if the next succeeding Business Day occurs during the same calendar
month, the next succeeding Business Day and (2) if the next succeeding Business
Day occurs during the following calendar month, the next preceding Business Day.
"Eurodollar Rate" shall mean, with respect to each day a Loan
is outstanding, a rate per annum determined by Lender in its sole discretion in
accordance with the following formula (rounded upwards to the nearest 1/100th of
one percent), which rate as determined by Lender shall be conclusive absent
manifest error by Lender:
Eurodollar Base Rate
- --------------------------------------------------------------------------------
1.00 minus Eurocurrency Reserve
Requirements
9
<PAGE>
"Eurodollar Rate Spread" means as to each Advance Rate the
applicable Eurodollar Rate Spread set forth below opposite such Advance Rate for
the applicable Collateral type, or such other Eurodollar Rate Spread as may be
mutually agreed to by Borrower and Lender:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Collateral Type Advance Rate Eurodollar Rate Spread (expressed as
percentage points per annum and as basis
points)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conduit Loan 90% 0.75% 75bp
95% 1.00% 100bp
- -------------------------------------------------------------------------------------------------
Non-Conduit Mortgage Loans
First Mortgage (75% LTV maximum) 90% 1.45% 145bp
First Mortgage (75% LTV maximum) 95% 1.65% 165bp
- -------------------------------------------------------------------------------------------------
Subordinate Mortgage Loans, Mezzanine 65% 1.75% 175bp
Loans, CMBS and Equity Interests* 75% 1.85% 185bp
80% 2.20% 220bp
- -------------------------------------------------------------------------------------------------
</TABLE>
* Solely for illustrative purposes, Borrower and Lender agree that the
following example of a transaction illustrates their intent: with respect
to an item of Collateral for which the appraised value of the underlying
real property is $100,000,000, on which Mortgage Loans and Mezzanine Loans
have been made in the aggregate amount of $85,000,000, with Lender
advancing hereunder 95% of a 75% LTV ($71,250,000), plus 80% of a
subordinate Mortgage Loan or Mezzanine Loan (80% of $10,000,000 equals
$8,000,000), the aggregate loans from Lender to Borrower would equal
$79,250,000, resulting in a 93.2% underlying loan-to-loan value. In
addition, Lender will finance loans originated by Borrower with an
aggregate underlying LTV up to 95% and above 95% on a case-by-case basis.
The Eurodollar Rate Spread may exceed the levels set forth above on loans
with underlying LTVs in excess of 90%.
"Eurodollar Substitute Rate" means a rate of interest equal to
(a) the Base Rate minus (b) Two and eighty-five hundredths percent (2.85%) per
annum (285 basis points).
"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 Lender from three
federal funds brokers of recognized standing selected by Lender.
"Funding Costs" shall mean, collectively, the actual costs to
Lender of breaking a Eurodollar contract (or costs that would have been incurred
if Lender had entered into and broken a Eurodollar contract for a Eurodollar
Contract Period as requested by Borrower) prior to the expiration of the
Eurodollar Contract Period applicable thereto in connection with (a) any
prepayment (whether voluntary or involuntary) of all or any portion of an
Asset-Specific Loan Balance or other principal repayments required or permitted
under the Security Documents, that is made at any time other than at the
expiration of the related Eurodollar Contract Period, (b) any voluntary or
involuntary acceleration of the Termination Date, such that the Termination Date
occurs on any date that is not the expiration date of the Eurodollar Contract
Period with respect to any Asset-Specific Loan Balance, and (c) any other set of
circumstances not attributable solely
10
<PAGE>
to Lender's acts. Subject to the foregoing, Funding Costs shall not include any
diminution in yield suffered by Lender upon re-lending or re-investing the
principal of the Loan after any prepayment of the Loan.
"Funding Date" shall mean the date on which a Loan is made
hereunder.
"GAAP" shall mean generally accepted accounting principles
consistently applied 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
any obligor on any underlying loan, Borrower, any of its Subsidiaries or any of
its properties.
"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,
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 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) 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) 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) 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) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements or like arrangements; (g)
Indebtedness of others Guaranteed by such Person; (h) all obligations of such
Person incurred in connection with the acquisition or carrying of fixed assets
by such Person; and (i) Indebtedness of general partnerships of which such
Person is a general partner.
"Interest Rate Protection Agreement" shall mean, with respect
to any or all of the Mortgage Loans and Mezzanine Loans, any short sale of US
Treasury Securities, or futures contract, or mortgage related security, or
Eurodollar futures contract, or options related contract,
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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 any obligor on any underlying loan or Borrower (specifically with
respect to such items of Collateral) and acceptable to Lender.
"Lender" shall have the meaning provided in the heading
hereto.
"Lien" shall mean any mortgage, lien, pledge, charge,
encumbrance, security interest or adverse claim.
"Loan" and "Loans" shall have the meanings provided in Section
2.01(a) hereof.
"Loan Agreement" shall mean this CMBS Loan Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"Loan Documents" shall mean, collectively, this Loan
Agreement, the Supplemental Terms and Conditions (Rule 15a-6 Annex), the Note
and the Custodial Agreement.
"LTV" shall mean, as to any Eligible Collateral, the ratio
that (x) the aggregate outstanding principal balances of all loans (including
Loans hereunder) and preferred equity interests secured in whole or in part by
real property or direct or indirect beneficial interests therein relating to
such Eligible Collateral bears to (y) the value, determined by an Appraisal
reasonably acceptable to Lender, of the real property (together with all
applicable appurtenant interests and subject to all applicable liens,
encumbrances and tenancies), or direct or indirect beneficial interests which
form the basis of such Eligible Collateral.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition or prospects of
Borrower taken as a whole, (b) the ability of 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 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 aggregate value of the Collateral.
"Maximum Advance Rate" shall mean, as to any item of Eligible
Collateral, the maximum Advance Rate that shall be determined by Lender in
Lender's sole and absolute discretion; provided, that, with respect to the
specific categories of Eligible Collateral referred to in the definition of
Eurodollar Rate Spread, the Maximum Advance Rate shall not exceed the respective
Advance Rates set forth in such definition.
"Maximum Credit" shall mean Two Hundred Fifty Million Dollars
($250,000,000.00); provided, however, that if no Default or Event of Default
shall have occurred and shall be continuing, Borrower shall be entitled to
increase the Maximum Credit up to Three Hundred Million Dollars
($300,000,000.00) at any time prior to the Termination Date upon the payment by
Borrower to Lender of an amount equal to (i) the amount of the requested
increase in the Maximum Credit then in effect multiplied by (ii) 30 basis points
(0.30%) multiplied by (iii) the number of days remaining to, and including, the
Termination Date divided by (iv) the number of days from and after the date
hereof to, and including, the Termination Date (the "Maximum Credit Increase
Fee"). The Maximum Credit under this Loan Agreement shall be
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reduced by an amount equal to the amount from time to time outstanding under the
Conduit Loan Agreement such that in no event shall the aggregate amount
outstanding under this Loan Agreement and the Conduit Loan Agreement exceed
$250,000,000 (or, in the event the Maximum Credit has been increased to
$300,000,000 pursuant to the terms hereof, $300,000,000).
"Mezzanine Loan" shall mean a loan secured by a pledge of
Equity Interests in one or more entities holding direct or indirect beneficial
interests in an entity owning (or having a ground lease interest in) a
commercial or multi-family residential property, preferred equity interests or a
second mortgage.
"Monthly Statement" shall mean, for each calendar month during
which this Loan Agreement shall be in effect, Borrower's reconciliation in
arrears of beginning balances, interest, principal, paid-to-date and ending
balances for each asset constituting the Collateral, together with (a) an
Officer's Certificate with respect to all Collateral pledged to Lender as at the
end of such month, (b) a written report of any developments or events that are
reasonably likely to have a Material Adverse Effect, (c) a written report of any
and all written modifications to any documents underlying any items of
Collateral and (d) such other internally prepared reports as mutually agreed by
Borrower and Lender which reconciliation, Officer's Certificate and reports
shall be delivered to Lender for each calendar month during the term of this
Loan Agreement within ten (10) days following the end of each such calendar
month.
"Mortgage" shall mean the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a valid lien on the fee or
leasehold interest in real property securing the Mortgage Note and the
assignment of rents and leases related thereto.
"Mortgage Loan" shall mean a mortgage loan (including, without
limitation, a Conduit Loan) which Custodian has been instructed to hold for
Lender pursuant to the Custodial Agreement, and which Mortgage Loan includes,
without limitation, (i) the indebtedness evidenced by a Mortgage Note and
secured by a related Mortgage and (ii) all right, title and interest of Borrower
in and to the Mortgaged Property covered by such Mortgage.
"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 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.
"MS & Co." shall mean Morgan Stanley & Co. Incorporated, a
registered broker-dealer.
"MS Indebtedness" shall mean all Indebtedness from time to
time owed by Borrower to Lender or any Affiliate of Lender including, without
limitation, under this Loan Agreement, the Conduit Loan Agreement, or any
repurchase or other agreement between Lender, or an Affiliate of Lender, and
Borrower.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in
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Section 3(37) of ERISA to which contributions have been or are required to be
made by Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA.
"'Non-Table' Funded Eligible Collateral" shall mean the items
of Eligible Collateral as described in Section 2.03(e) of this Loan Agreement.
"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 shall be modified, amended,
supplemented or extended and in effect from time to time.
"Officer's Certificate" shall mean the certificate of a
Responsible Officer as set forth in Section 5.02(b) hereof.
"Other Approved Collateral" shall mean such other Property of
Borrower as Lender shall accept as Collateral for the Loans.
"Payment Date" shall mean, with respect to each Loan, the
first Business Day of each calendar month following the related Funding Date.
"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 Borrower or any ERISA Affiliate during the
five-year period ended immediately before the date of this Loan Agreement or to
which Borrower or any ERISA Affiliate makes, is obligated to make or has, within
the five-year period before the date of this Loan Agreement, been required to
make contributions and that is covered Title IV of ERISA or Section 302 of ERISA
or Section 412 of the Code, 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 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 4% per annum plus the Base
Rate.
"Preliminary Due Diligence Package" means with respect to any
proposed Collateral, the following due diligence information relating to such
proposed Collateral to be provided by Borrower to Lender pursuant to this Loan
Agreement:
(i) a summary memorandum outlining the proposed
transaction, including potential transaction benefits
and all material underwriting risks, all Underwriting
Issues and all other characteristics of the proposed
transaction that a prudent lender would consider
material;
(ii) current rent roll, if applicable;
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(iii) cash flow pro-forma, plus historical information, if
available;
(iv) description of the property (real property, pledged
loan or other Collateral);
(v) indicative debt service coverage ratios;
(vi) indicative loan-to-value ratio;
(vii) Borrower's or any affiliate's relationship with its
potential underlying borrower or any affiliate;
(viii) if applicable, Phase I environmental report
(including asbestos and lead paint report);
(ix) if applicable, engineering and structural reports;
(x) third party reports, to the extent available and
applicable, including:
(a) current Appraisal;
(b) Phase II or other follow-up environmental
report if recommended in Phase I;
(c) seismic reports; and
(d) operations and maintenance plan with respect
to asbestos containing materials;
(xi) analyses and reports with respect to such other
matters concerning the Collateral as Lender may in
its sole discretion require;
(xii) documents comprising such Collateral, or current
drafts thereof, including, without limitation,
underlying debt and security documents, guaranties,
underlying borrower's organizational documents,
warrant agreements, and loan and collateral pledge
agreements, as applicable; and
(xiii) a list that specifically and expressly identifies any
Collateral Documents that relate to such Collateral
but are not in Borrower's possession.
"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 T, U and X" shall mean Regulations 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.
"Responsible Officer" shall mean, as to any Person, the chief
executive officer, any vice chairman and the chief financial officer of such
Person or, for the purpose of executing
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certificates, the vice president and counsel responsible therefor.
"Secured Obligations" shall have the meaning provided in
Section 4.01(a) hereof.
"Security Documents" means this Loan Agreement, the Note, and
all other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower to evidence or secure the Loan(s) or otherwise in
satisfaction of the requirements of this Loan Agreement, or the other documents
listed above as same may be amended or modified from time to time.
"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.
"Servicing Records" shall have the meaning provided in Section
11.14(b) hereof.
"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.
"Supplemental Due Diligence List" means, with respect to any
proposed Collateral, information or deliveries concerning such proposed
Collateral, such items that Lender shall request in addition to the Preliminary
Due Diligence Package including, without limitation, a credit approval
memorandum representing the final terms of the underlying transaction, a final
LTV ratio computation and a final debt service coverage ratio computation for
such proposed Collateral.
"'Table Funded' Eligible Collateral" shall mean the items of
Eligible Collateral as described in Section 2.03(e) of this Loan Agreement.
"Tangible Net Worth" shall mean, as of a particular date,
(a) all amounts which would be included under capital (it
being agreed that any convertible trust preferred securities will be included as
capital) on a balance sheet of Borrower at such date, determined in accordance
with GAAP, less
(b) (i)amounts owing to Borrower from Affiliates and (ii)
intangible assets.
"Termination Date" shall mean December 31, 1999 or such
earlier date on which this Loan Agreement shall terminate in accordance with the
provisions hereof or by operation of law.
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"Title Insurance Policy" shall mean, with respect to any real
property underlying a Collateral Loan, a mortgagee's title insurance policy or
policies issued to Lender and Lender's successors and assigns (or, subject to
the prior written approval of Lender, an endorsement to Borrower's title
insurance policy insuring the collateral assignment to Lender of the applicable
mortgage) by one or more title companies reasonably satisfactory to Lender,
which policy or policies shall be in form and substance reasonably acceptable to
Lender, with such endorsements as Lender shall reasonably require and, with
respect to any Collateral Loan, a mortgagee's title insurance policy or policies
issued to Lender and Lender's successors and/or assigns by one or more title
companies reasonably satisfactory to Lender reflecting Lender's interest in such
Collateral Loan.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of Borrower during such period less the amount of any nonspecific
balance sheet reserves maintained in accordance with GAAP.
"Transaction Costs" shall mean, with respect to any Loan, all
actual out-of-pocket reasonable costs and expenses paid or incurred by Lender
and payable by Borrower relating to the making of such Loan (including legal
fees and other fees described in Section 11.03 hereof). Lender shall endeavor to
limit the Transaction Costs associated with such Loan (excluding the initial
Loan) to $5,000, but the foregoing shall not limit Borrower's obligations with
respect to Transaction Costs or constitute a "cap" on Transaction Costs for any
Loan. Transaction Costs shall not include costs incurred by Lender for overhead
and general administrative expenses.
"Trust Receipt" shall mean the receipt delivered by Custodian
pursuant to the provisions of Section 4 of the Custodial Agreement acknowledging
receipt of a Collateral File in connection with a Loan hereunder in the form of
Annex 2 to the Custodial Agreement.
"Underwriting Issues" means with respect to any Collateral as
to which Borrower intends to request a Loan, all information that has come to
Borrower's attention, based on the making of reasonable inquiries and the
exercise of reasonable care and diligence under the circumstances, which would
be considered a materially "negative" factor (either separately or in the
aggregate with other information), or a material defect in loan documentation or
closing deliveries (such as any absence of any material Collateral Document(s)),
to a reasonable institutional lender in determining whether to originate or
acquire the Collateral in question.
"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 and 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 Lender hereunder shall be
prepared, in accordance with GAAP.
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Section 2. Loans, Note and Prepayments
2.01. Loans
(a) Lender agrees to consider, as provided herein, from time
to time Borrower's requests that Lender make, on the terms and conditions of
this Loan Agreement, loans (each, individually, a "Loan" and, collectively, the
"Loans") to 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 Maximum Credit as in effect from time to
time. Nothing in this Loan Agreement shall be interpreted as a commitment by
Lender to make any Loans, but rather sets forth the procedures to be used in
connection with periodic requests for Loans and the conditions to the making of
any Loans. Borrower hereby acknowledges that Lender is under no obligation to
agree to make, or to make, any Loan pursuant to this Loan Agreement.
(b) Subject to the terms and conditions of this Loan
Agreement, during such period Borrower may borrow, prepay and reborrow
hereunder.
2.02. Notes
(a) The Loans made by Lender shall be evidenced by a single
promissory note of Borrower substantially in the form of Exhibit A hereto, dated
the date hereof, payable to Lender in the principal amount of Three Hundred
Million Dollars ($300,000,000.00), as otherwise duly completed; provided,
however, that until such time as Borrower has satisfied all conditions precedent
to the increase of the Maximum Credit amount from $250,000,000.00 to
$300,000,000.00, Borrower shall not be permitted to borrow amounts in excess of
$250,000,000.00. Lender shall have the right to have its Note subdivided, by
exchange for promissory notes of lesser denominations or otherwise and shall
have the right to sell participating interests in such Note; provided, however,
that Lender must retain (i) in excess of fifty percent (50%) ownership interest
in the Note and (ii) control over all decisions with respect to loan pricing and
the exercise of remedies with respect to each item of Collateral; and provided,
further, however, that Lender may subject up to one hundred percent (100%) of
the Loans made hereunder to a repurchase agreement.
(b) The date, amount and interest rate of each Loan made by
Lender to Borrower, and each payment made on account of the principal thereof,
shall be recorded by Lender on its books and, prior to any transfer of the Note,
endorsed by Lender on the schedule attached to the Note or any continuation
thereof; provided that the failure of Lender to make any such recordation or
endorsement shall not affect the obligations of Borrower to make a payment when
due of any amount owing hereunder or under the Note in respect of the Loans.
2.03. Procedures for Borrowing
(a) Preliminary Approval of Proposed Collateral.
(i) Borrower may, from time to time, submit to Lender a
Preliminary Due Diligence Package for Lender's review and approval in order to
request a borrowing hereunder with respect to any proposed Collateral that
Borrower proposes to pledge to Lender and to be included in the Borrowing Base
in connection with such borrowing.
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(ii) Upon Lender's receipt of a complete Preliminary Due
Diligence Package, Lender within two (2) Business Days shall have the right to
request, in Lender's sole and absolute discretion, additional diligence
materials and deliveries that Lender shall specify on a Supplemental Due
Diligence List. Upon Lender's receipt of all of the Diligence Materials or
Lender's waiver thereof, Lender, within five (5) Business Days, shall either (i)
notify Borrower of the Maximum Advance Rate (which may be less than the Advance
Rate set forth in the definition of Eurodollar Rate Spread) and the Asset Value
for the proposed Collateral or (ii) deny, in Lender's sole and absolute
discretion, Borrower's request for an advance. Lender's failure to respond to
Borrower within five (5) Business Days following receipt of all Diligence
Materials or Lender's written waiver thereof shall be deemed to be a denial of
Borrower's request for an advance, unless Lender and Borrower have agreed
otherwise in writing. Nothing in this Section 2.03(a)(ii) or elsewhere in this
Loan Agreement shall, or be deemed to, prohibit Lender from determining in its
sole discretion the adequacy, correctness and appropriateness of, or from
disapproving, any and all financial and other underwriting data required to be
supplied by Borrower under this Loan Agreement.
(b) Final Approval of Proposed Collateral. Upon Lender's
notification to Borrower of the Maximum Advance Rate and the Asset Value for any
proposed Collateral, Borrower shall, if Borrower desires to obtain one or more
advances secured by such proposed Collateral, satisfy the conditions set forth
below (in addition to satisfying the conditions precedent to obtaining each
advance, as set forth in Section 5 of this Loan Agreement) as conditions
precedent to Lender's approval of such proposed Collateral as Collateral, all in
a manner, and pursuant to documentation, satisfactory in all respects to Lender
and its counsel:
(i) Environmental and Engineering. If applicable, Lender
shall have received an Environmental Report and an Engineering Report, each in
form and substance satisfactory to Lender, by an Engineer and Environmental
Consultant listed on Schedules 3 and 4 attached hereto, respectively, as each
such schedule may be amended from time to time by Lender in its reasonable
discretion.
(ii) Appraisal. If applicable, Lender shall have received
an Appraisal.
(iii) Insurance. With respect to proposed Collateral that
is real property, Lender shall have received certificates or other evidence of
insurance demonstrating insurance coverage in respect of such real property of
types, in amounts, with insurers and otherwise in compliance with the terms,
provisions and conditions set forth in the Collateral Documents or the Security
Documents. Such certificates or other evidence shall indicate Borrower, as
lender, will be named as an additional insured as its interest may appear and
shall contain a loss payee endorsement in favor of such additional insured with
respect to the property policies required to be maintained under the Collateral
Documents.
(iv) Survey. With respect to a Mortgage Loan, a Mezzanine
Loan or an Equity Interest, to the extent obtained by Borrower from the
Collateral Obligor with respect to any item of Collateral at the origination of
the underlying loan or equity interest, as the case may be, relating thereto,
Lender shall have received with respect to proposed Collateral that is real
property, a current Survey of such real property in a form satisfactory to
Lender.
(v) Lien Search Reports. Lender or Lender's counsel shall
have
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received, as reasonably requested by Lender, satisfactory reports of UCC, tax
lien, judgment and litigation searches and title reports and updates, as
applicable, conducted by search firms and/or title companies acceptable to
Lender with respect to the Collateral, Borrower and the related underlying
obligor, such searches to be conducted in each location Lender shall reasonably
designate.
(vi) Title Insurance Policy. (A) With respect to a
Mortgage Loan, Borrower shall have delivered to Lender (1) an unconditional
commitment to issue title insurance policies in favor of Lender and Lender's
successors and/or assigns with respect to Lender's interest in the related real
property with an amount of insurance that shall be not less than the related
Asset-Specific Loan Balance (taking into account the proposed advance) or such
other amount as Lender shall require in its sole discretion or (2) an
endorsement or confirmatory letter from the existing title company to the
existing Title Insurance Policy in favor of Lender and Lender's successors
and/or assigns that amends the existing title insurance policy by stating that
the amount of the insurance is no less than the related Asset-Specific Loan
Balance (taking into account the proposed advance) or such other amount of title
coverage as Lender shall require in its sole discretion.
(B) With respect to a Mezzanine Loan or an Equity Interest, Borrower
shall have delivered to Lender such evidence as Lender, in its sole discretion,
shall require of the ownership of the real property underlying such item of
Collateral including, without limitation, a copy of a title insurance policy
dated a date, and by a title insurer, in each case acceptable to Lender in its
sole discretion, showing that title is vested in the related Collateral Obligor
or in an entity in whom such Collateral Obligor holds a beneficial interest.
(vii) Security Documents. Borrower shall have executed
and delivered to Lender, in form and substance satisfactory to Lender and its
counsel, all security documents perfecting Lender's security interest in the
proposed Collateral (and in any Interest Rate Protection Agreements held by
Borrower with respect thereto) which shall be subject to no Liens except as
expressly permitted by Lender. Each of the security documents shall contain such
representations and warranties concerning the proposed Collateral and such other
terms as shall be reasonably satisfactory to Lender.
(viii) Opinions of Counsel. Lender shall have received
from counsel to Borrower its legal opinion as to enforceability of this Loan
Agreement and all documents executed and delivered hereunder in connection with
such Loan, (at Lender's option) an opinion from local counsel where the
applicable property is located and an opinion to Borrower and its successors and
assigns from counsel to the underlying obligor on the underlying loan
transaction, as applicable, as to enforceability of the loan documents governing
such transaction and such other matters as Lender shall require (including,
without limitation, opinions as to due formation, authority, choice of law and
perfection of security interests). Such legal opinions shall be addressed to
Lender and its successors and assigns, dated the related Funding Date, and in
form and substance reasonably satisfactory to Lender.
(ix) Additional Real Estate Matters. To the extent
obtained by Borrower from the Collateral Obligor relating to any item of
Collateral at the origination of the underlying loan or equity interest relating
thereto, Borrower shall have delivered to Lender such other real estate related
certificates and documentation as may have been requested by Lender, such as (i)
certificates of occupancy and letters certifying that the property is in
compliance with
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all applicable zoning laws, each issued by appropriate Governmental Authority
and (ii) abstracts of all Leases in effect at the real property relating to such
Collateral.
(x) Other Documents. Lender shall have received such
other documents as Lender or its counsel shall request with respect to each or
any item of Collateral.
(c) Collateral Approval or Disapproval. Within two (2)
Business Days following the date upon which Borrower has tendered performance of
the conditions enumerated in Sections 2.03(b)(i) through (x), or has delivered
such items or documents fully executed, if applicable, in final form, Lender
shall either (i) if the Collateral Documents or the Security Documents with
respect to the proposed Collateral are not reasonably satisfactory in form and
substance to Lender, notify Borrower that Lender has not approved the proposed
Collateral as Collateral or (ii) notify Borrower and Bailee that Lender has
approved the proposed Collateral as Collateral and such notice shall identify
the documents to be delivered to Custodian in connection with such proposed
Collateral pursuant to Sections 2.03 and 5 of this Loan Agreement and shall
identify the party whom Lender shall designate to record and/or file, as the
case may be, any security documents necessary to perfect Lender's security
interest in the Eligible Collateral. The terms of delivery and filing and/or
recordation of such security documents shall be set forth in a separate
agreement between Lender and its designee. Lender's failure to respond to
Borrower within two (2) Business Days shall be deemed to be a denial of
Borrower's request that Lender approve the proposed Collateral, unless Lender
and Borrower have agreed otherwise in writing.
(d) Procedure for Borrowing with Respect to Eligible
Collateral. Once Lender has approved the Collateral in accordance with Section
2.03(c) above, Borrower may request a Loan hereunder, on any Business Day during
the period from and including the Effective Date to and including the
Termination Date, by delivering to Lender, with a copy to Custodian, an
irrevocable written request for borrowing, substantially in the form of Exhibit
D attached hereto, which request must be received by Lender prior to 11:00 a.m.,
New York City time, one (l) Business Day prior to the requested Funding Date.
Such request for borrowing shall (1) attach a schedule identifying the Eligible
Collateral that Borrower proposes to pledge to Lender and to be included in the
Borrowing Base in connection with such borrowing, (2) specify the requested
Funding Date, and (3) attach an Officer's Certificate signed by a Responsible
Officer of Borrower as required by Section 5.02(b) hereof. Contemporaneously
with the delivery of the request for borrowing, Borrower shall deliver to Lender
with a copy to Custodian, a Custodial Identification Certificate along with the
accompanying Collateral Schedule with respect to all proposed Eligible
Collateral to be pledged to Lender on the applicable Funding Date.
(e) Delivery of Collateral Files and Security Documents.
"Non-Table Funded" Eligible Collateral:
1) By no later than 1:00 p.m., New York City time, one (1)
Business Day prior to any Funding Date, the Borrower and/or the Bailee shall
deliver to the Custodian as to any Eligible Collateral on a case-by-case basis,
(i) original counterparts of all Collateral Documents comprising the Collateral
File, (ii) the security documents described in Section 2.03(b)(vii) above, and
(iii) to the extent applicable, any other documents, reports or updated
information as Lender shall request pursuant to Section 2.03(b)(i)-(x) and
Section 5.03(b) not heretofore finally
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approved by Lender.
"Table Funded" Eligible Collateral:
1) By no later than 1:00 p.m., New York City time, on the
Funding Date, the Borrower shall cause the Bailee to deliver to the
Custodian by facsimile (i) as to each item of Eligible Collateral, the
note, if applicable, evidencing the making of a loan secured by such
Eligible Collateral, a fully executed Bailee Agreement and Bailee's Trust
Receipt and Certification issued by the Bailee thereunder, (ii) as to all
other categories of Eligible Collateral on a case-by-case basis, the
delivery of all fully executed documents and instruments required by Lender
to comprise the Collateral File and (iii) evidence satisfactory to Lender
that all documents necessary to perfect Borrower's interest in the Eligible
Collateral have been delivered to a party acceptable to Lender for
recordation and filing.
2) By no later than 1:00 p.m., New York City time, on the
third Business Day following the applicable Funding Date, the Borrower
shall cause the Bailee to deliver to the Custodian the Collateral File.
(f) No later than 1:00 p.m., New York City time, on each
Funding Date, Borrower shall provide Custodian with a final Custodial
Identification Certificate and related Collateral Schedule with respect to the
Eligible Collateral to be pledged to the Lender on such Funding Date, indicating
any changes, if any, from the Custodial Identification Certificate and related
Collateral Schedule heretofore delivered to Lender and Custodian pursuant to
Section 2.03(d) above.
(g) If Borrower shall deliver a request for a borrowing
pursuant to Section 2.03(d) hereof and all conditions precedent set forth in
Sections 2.03(a), 2.03(b), 2.03(c), 5.01 and 5.02 have been met, and provided no
Default or Event of Default shall have occurred and be continuing, Lender shall
make a Loan to Borrower on the requested Funding Date, in the amount so
requested and approved by Lender.
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(h) Subject to the delivery by Custodian to Borrower and
Lender of a Trust Receipt with a Collateral Schedule in respect to all
Collateral pledged to Lender on such Funding Date by no later then 3:00 p.m. on
such date, and subject further to the provisions of Section 5 hereof, such
borrowing will then be made available to Borrower by Lender transferring, via
wire transfer, to the following account of Borrower: Bank of New York, 530 Fifth
Avenue, New York, New York, Account No. 630-0439428 for the benefit of Capital
Trust, ABA# 021-000018, Attn: Tarryn Kone ((212) 852-4219), in the aggregate
amount of such borrowing in funds immediately available to Borrower.
(i) From time to time, the Borrower shall forward to the
Custodian additional original documents or additional documents evidencing any
(i) assumption, modification, consolidation or extension of a Collateral Loan,
or (iii) any amendment to the operative documents with respect to an Equity
Interest, in each case approved by the Lender in accordance with the terms of
this Loan Agreement and upon receipt of any such other documents, the Custodian
shall hold such other documents as the Lender shall request from time to time.
(j) With respect to any documents 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
required, in lieu of delivering such original documents, Borrower shall deliver
to Lender a true copy thereof with an Officer's Certificate certifying that such
copy is a true, correct and complete copy of the original, which has been
transmitted for recordation. The Borrower shall deliver such original documents
to the Custodian promptly when they are received.
2.04. Mandatory Prepayments or Pledge
(a) Lender may determine and re-determine the Borrowing Base
on any Business Day and on as many Business Days as it may elect. If at any time
(i) the aggregate outstanding principal amount of Loans exceeds the Borrowing
Base (a "Borrowing Base Deficiency"), as determined by Lender in its sole
discretion and notified to Borrower on any Business Day, Borrower shall no later
than one Business Day after receipt of such notice, or (ii) Borrower shall have
received a prepayment of the principal of any loan or preferred equity interest
comprising a portion of the Collateral (including, without limitation, the
payment of casualty or condemnation proceeds), Borrower shall, not later than
one (1) Business Day after receipt of such prepayment, either prepay the Loans
in part or in whole or pledge additional Collateral (which Collateral shall be
in all respects acceptable to Lender) to 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 as re-determined by Lender after the
addition of Collateral. So long as no Default or Event of Default has occurred
and is then continuing, all partial repayments shall be applied against the
Asset-Specific Loan Balance relating to the Loan being repaid.
(b) If at any time under any Collateral Document evidencing
Eligible Collateral (x) there is an Event of Default, or event with which the
giving of notice or lapse of time or both would become an Event of Default, or
(y) any representation or warranty made by or on behalf of the relevant
Collateral Obligor becomes false or misleading in any material respect or (z)
the relevant Collateral Obligor fails to perform or observe any material
covenant or other obligation, Lender may, in its sole discretion and without
regard to any determination of
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the Asset Value of such Eligible Collateral, notify Borrower of such occurrence
and may require that the Asset-Specific Loan Balance related to the relevant
Eligible Collateral be prepaid in whole or in part in the determination of
Lender. Not later than one (1) Business Day after the receipt of such notice,
Borrower shall prepay the Asset-Specific Loan Balance related to such Eligible
Collateral. Lender may, in its sole discretion, determine and re-determine the
amount to be prepaid irrespective of whether or not either (i) any statement of
fact contained in any Officer's Certificate delivered pursuant to Section
5.02(b) or (ii) any representation of Borrower set forth in Section 6.13 was
true to Borrower's actual knowledge.
Section 3. Payments; Computations; Etc
3.01. Repayment of Loans; Interest
(a) Borrower hereby promises to repay in full on the
Termination Date the aggregate outstanding principal amount of the Loans.
(b) Borrower hereby promises to pay to Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to the Eurodollar Rate plus the applicable Eurodollar Rate
Spread. Notwithstanding the foregoing, Borrower hereby promises to pay to
Lender, to the extent permitted by applicable law, interest at the applicable
Post-Default Rate on any principal of any Loan and on any other amount payable
by 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. Payment and acceptance of interest
pursuant to this subsection shall not constitute a waiver of any Default and
shall not otherwise limit or prejudice any right of Lender hereunder. In no
event shall Lender be entitled to receive any proceeds received from any
Collateral Obligor in connection with the refinancing and/or final distribution
to Lender with respect to any Eligible Collateral to the extent same exceeds the
sums provided to be paid to Lender under Section 7.l6 of this Loan Agreement.
(c) Accrued interest on each Loan shall be payable monthly in
arrears 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.
(d) The Loans may be prepaid in whole or in part at any time
upon two (2) Business Days prior written notice, without any penalty or premium;
provided, however, that any such prepayment shall be accompanied by an amount
representing accrued interest on the principal amount being prepaid and all
other amounts then due under the Loan Documents (including, without limitation,
all amounts due under Section 3 hereof). Each partial prepayment that is
voluntary (as opposed to mandatory under the terms of this Loan Agreement) shall
be in an amount of not less than One Hundred Thousand Dollars ($100,000). So
long as no Default or Event of Default has occurred and is then continuing, each
voluntary prepayment shall be applied to reduce any Asset-Specific Loan Balance
as designated by Borrower to Lender in writing.
(e) With respect to any item of Collateral, Borrower shall
repay to Lender
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an amount equal to the amount of casualty or condemnation proceeds paid to, or
for the benefit of, Borrower or any underlying obligor in respect of such item
of Collateral to the extent that Borrower is not required under the underlying
loan documents with Borrower's obligor to reserve, escrow, readvance or apply
such proceeds for the benefit of such obligor or the underlying real property.
So long as no Default or Event of Default has occurred and is then continuing,
such amounts paid to Lender shall be applied in reduction of the Asset-Specific
Loan Balance relating to such item of Collateral.
3.02. Payments
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by Borrower under
this Loan Agreement and the Note shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to Lender at an
account in the United States, to be notified by MS & Co. on behalf of Lender
from time to time in writing, 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). Borrower acknowledges that it has no rights of
withdrawal from the foregoing account. Lender shall endeavor to send Borrower a
detailed bill on the date which is two (2) Business Days prior to the date on
which payment is due; provided, however, that the failure of Lender to send, or
of Borrower to receive, such bill shall in no way affect Borrower's obligation
to pay amounts due under this Loan Agreement.
(b) Except to the extent otherwise expressly provided herein,
if the due date of any payment under this Loan 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.
3.03 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. Lender
shall determine any rate of interest payable on Loans hereunder, and such
determination shall be conclusive and binding, absent manifest error.
3.04. U.S. Taxes
(a) Borrower agrees to pay to Lender such additional amounts
as are necessary in order that the net payment of any amount due to Lender
hereunder after deduction for or withholding in respect of any U.S. Tax (as
defined below) imposed with respect to such payment (or in lieu thereof, payment
of such U.S. Tax by 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 Lender hereunder unless (A) Lender is
entitled to submit a Form 1001 (relating to 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 Lender hereunder in respect of the Loans), or (B) prior to such
payment Lender shall have furnished to Borrower a Form W-8 (or substitute) or
otherwise established an exemption from U.S. withholding tax, or
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(ii) to any U.S. Tax imposed solely by reason of the failure
by 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 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 3.03, (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 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, any political subdivision of the United States of
America or any taxing authority thereof or therein.
(b) Within 30 days after paying any such amount to Lender, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, Borrower shall deliver to
Lender evidence satisfactory to Lender of such deduction, withholding or payment
(as the case may be).
(c) Lender shall not assign or sell participation interests in
the Loans made or to be made hereunder subject to Section 2.02 and unless it
shall have given prior notice to Borrower and unless a condition specified in
Section 3.04 (a) (i) or (ii) shall not apply.
3.05 Booking of Loans Without limitation of Lender's rights to
sell, assign or transfer a Loan or any interest therein, including any
participation interest therein, at any time and from time to time, Lender may
make, carry or transfer such Loan at, to, or for the account of any of its
branch offices or the office of an Affiliate of Lender; provided, however, that
the representation in Section 3.04(c) shall remain true throughout the term of
such Loan.
3.06 Lender's Funding of Eurodollar Rate Loans. Borrower
hereby expressly acknowledges and agrees that Lender may fund a Loan in any
manner it sees fit, including (i) through the actual purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to the definition of
Eurodollar Rate in an amount equal to the principal amount of such Loan and
having a maturity comparable to the relevant interest period or (ii) through
Lender's entering into or purchase of repurchase agreements, interest rate
agreements, swap agreements or other arrangements in such amounts as Lender
shall determine (and which amounts may or may not, in Lender's sole discretion,
be "match funded" to such Loan). Calculation of all amounts payable to Lender
under this Section 3.06 and under Section 3.07 shall be made as though Lender
had actually funded such Loan through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to the definition of Eurodollar
Rate in an amount equal to the amount of such Loan and having a maturity
comparable to the relevant interest period and through the transfer of such
Eurodollar deposit from an off-shore office of Lender to a domestic office of
Lender in the United States of America; provided, however, that Lender may fund
such Loan in any manner it sees fit and the foregoing assumptions shall be
utilized only for purposes of calculating amounts payable under this Section
3.06 and under Section 3.07, if any.
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3.07. Funding Costs. (a) Borrower shall compensate Lender,
upon written request by Lender (which request shall set forth the basis for
requesting such amounts), for all Funding Costs.
(b) Lender shall deliver to Borrower a statement setting forth
the amount and basis of determination of any Funding Cost, it being agreed that
such statement and the method of calculation shall be conclusive and binding on
Borrower, absent manifest error. In addition, in the event Borrower provides
Lender not less than five (5) Business Days prior written notice of a proposed
voluntary prepayment hereunder, Lender shall deliver to Borrower a non-binding
good faith estimate of the applicable components and amount of Funding Costs
which would be incurred by Borrower if Borrower were to make a voluntary
prepayment hereunder; provided, however, that Borrower shall remain liable for
all Funding Costs shown on the statement referred to in the first sentence of
this subsection (b), notwithstanding such good faith estimate.
(c) In lieu of prepaying the Loan when and as otherwise
required or permitted by this Loan Agreement, Borrower may on any Business Day
(a "Deposit Funding Date") instead deposit with Lender an amount equal to the
applicable prepayment, to be held by Lender (the "Prepayment Deposit") until
such date as application of the Prepayment Deposit on account of the Loan would
not cause Lender to suffer Funding Costs (the "Deposit Application Date"). Any
Prepayment Deposit held by Lender shall: (a) constitute additional security for
the Loan, for which the parties shall enter into such security documents (and
account establishment and administration documents) as Lender shall require; (b)
be held by Lender in an interest-bearing account selected and controlled solely
by Lender, interest on which shall be added to principal and applied in the same
manner as principal; (c) at Lender's option, be accompanied by a payment (as
estimated by Lender) equal to the difference between the interest to be earned
on the Prepayment Deposit and the interest that will accrue on a portion of the
Loan equal to the Prepayment Deposit during the period from the Deposit Funding
Date to the Deposit Application Date; (d) with respect to the Collateral,
entitle Borrower to the same rights and benefits (including the right to
releases, if any) that would have been available to Borrower if Borrower had
prepaid the Loan (and designated Asset-Specific Loan Balance(s)) by an amount
equal to the Prepayment Deposit; and (e) be applied on account of the Loan
(principal and interest) on the Deposit Application Date.
3.08. Compensation for Increased Costs. If Lender shall in
good faith determine that any change in any law, treaty or governmental rule,
regulation or order, or in the interpretation, administration or application
thereof, or any determination of a court or governmental authority, or
compliance with any guideline, request or directive issued or made by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(a) imposes, modifies or holds applicable any reserve
(including any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, or
advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of Lender; or
(b) imposes any other condition on or affecting
Lender or its obligations hereunder or the interbank
Eurodollar market;
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and the result of any of the foregoing is to increase the cost to Lender of
agreeing to make, making or maintaining the Loan hereunder or to reduce any
amount received or receivable by Lender with respect thereto; then, in any such
case, Borrower shall promptly (but in any event no later than five (5) Business
Days following any notice from Lender of the same) pay to Lender, upon receipt
of the statement referred to in the next sentence, such additional amount or
amounts as may be necessary to compensate Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Lender shall deliver to
Borrower a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to Lender under this Section 3.08, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
3.09. Limitation on Types of Loans; Illegality. Anything
herein to the contrary notwithstanding, if:
(a) 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
(b) Lender determines, which determination shall be
conclusive, that the relevant rate of interest referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rate
of interest for Loans is to be determined is not likely adequate to cover the
cost to Lender of making or maintaining Loans; or
(c) Lender determines, which determination shall be
conclusive, that it is or will be unlawful for Lender to honor its obligation to
make or maintain Loans hereunder using a Eurodollar Rate as a result of
compliance by Lender in good faith with any law, treaty, governmental rule,
regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful);
then Lender shall give Borrower prompt notice thereof and, so
long as such condition remains in effect, Lender shall be under no obligation to
make additional Loans, and Borrower shall, either prepay all such Loans as may
be outstanding or pay interest on such Loans at a rate per annum equal to the
Eurodollar Substitute Rate.
Section 4. Collateral Security
4.01. Collateral; Security Interest
(a) Borrower hereby assigns, pledges and grants a security
interest in all of its right, title and interest in, to and under the Collateral
described in Section 4.01(b) below to Lender to secure the repayment of
principal of and interest on all Loans and all other amounts owing to Lender
hereunder, under the Note, under the other Loan Documents and any and all MS
Indebtedness from time to time outstanding (collectively, the "Secured
Obligations"). Borrower agrees to mark its computer records to evidence the
interests granted to Lender hereunder.
(b) All of Borrower's right, title and interest in, to and
under each of the following items of property pledged by Borrower to Lender from
time to time and whether now
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owned or hereafter acquired, now existing or hereafter created and wherever
located, is hereinafter individually and collectively referred to as the
"Collateral":
(i) all CMBS and Other Approved Collateral;
(ii) all Collateral Documents, including without
limitation all securities, promissory notes, any collateral pledged or
otherwise relating to such Collateral, all representations and
warranties made to, or for the benefit of, Borrower by any Collateral
Obligor, all Servicing Records (as defined in Section 11.14(b) below)
and servicing agreements, together with all files, documents,
instruments, surveys, certificates, correspondence, appraisals,
computer programs, computer storage media, accounting records and other
books and records relating thereto, in each case subject to prior liens
and encumbrances permitted by Lender;
(iii) all guaranties and insurance (issued by
governmental agencies or otherwise) and any insurance certificate or
other document evidencing such guaranties or insurance relating to any
Collateral and all claims and payments thereunder;
(iv) all other insurance policies and insurance
proceeds relating to any Collateral or the related Property;
(v) all Interest Rate Protection Agreements;
(vi) the Collection Account and all monies from time
to time on deposit in the Collection Account;
(vii) all "general intangibles", "accounts" and
"chattel paper" as defined in the Uniform Commercial Code relating to
or constituting any and all of the foregoing; and
(viii) any and all replacements, substitutions,
distributions on, or proceeds (including, without limitation,
condemnation proceeds) of, any and all of the foregoing set forth in
items (i) through (vii) of this Section 4.01(b), whether now owned or
hereafter acquired, now existing or hereafter created and wherever
located.
(c) Pursuant to the Custodial Agreement, Custodian shall hold
the Collateral Documents as exclusive bailee and agent for Lender pursuant to
terms of the Custodial Agreement and shall deliver to Lender Trust Receipts each
to the effect that it has reviewed such Collateral Documents in the manner and
to the extent required by the Custodial Agreement and identifying any
deficiencies in such Collateral Documents as so reviewed.
4.02. Further Assurances
(a) Borrower shall undertake, with respect to each item of
Collateral pledged hereunder as security for a Loan, any and all actions deemed
necessary by Lender for the granting by Borrower to Lender of a valid first
priority security interest in such Collateral. Without limiting the generality
of the foregoing, Borrower shall take such steps as are for the granting and
perfection of a first priority security interest in Securities and related
Collateral.
(b) At any time and from time to time, upon the written
request of Lender,
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and at the sole expense of Borrower, 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 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. Borrower also hereby authorizes Lender to file any such
financing or continuation statement without the signature of 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. 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
Lender at least ten (10) days prior written notice thereof and shall have
delivered to Lender all Uniform Commercial Code financing statements and
amendments thereto as Lender shall request and taken all other actions deemed
necessary by 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) Borrower hereby irrevocably constitutes and appoints
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 Borrower and in the name of Borrower or in its own name,
from time to time in Lender's discretion, for the purpose of carrying out the
terms of this Loan Agreement, 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, Borrower hereby gives Lender the power
and right, on behalf of Borrower, without assent by, but with notice to,
Borrower, if an Event of Default shall have occurred and be continuing, to do
the following:
(i) in the name of 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 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 Lender or as 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
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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 part
thereof and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action or proceeding brought against 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 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 Lender were the absolute
owner thereof for all purposes, and to do, at Lender's option and
Borrower's expense, at any time, and from time to time, all acts and
things which Lender deems reasonably necessary to protect, preserve or
realize upon the Collateral and Lender's Liens thereon and to effect
the intent of this Loan Agreement, all as fully and effectively as
Borrower might do.
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 until the repayment in full of all Secured
Obligations hereunder.
(b) Borrower also authorizes 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 Lender are solely to protect
Lender's interests in the Collateral and shall not impose any duty upon Lender
to exercise any such powers. Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither
Lender nor any of its officers, directors, or employees shall be responsible to
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
Borrower fails to perform or comply with any of its agreements contained in the
Loan Documents and Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of 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
Borrower to 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 Borrower consisting of
cash, checks and other near-cash items shall be held by Borrower in trust for
Lender, segregated from other funds of Borrower, and, within two Business Days
of receipt by Borrower, shall be turned over to Lender in the exact form
received by Borrower (duly endorsed by Borrower to Lender, if required, in order
to be negotiated by Lender), and (b) any and all such proceeds received by
Lender (whether from Borrower or otherwise) may, in the sole discretion of
Lender, be held by Lender as collateral security for, and/or then or at any time
thereafter may be applied by Lender against, the Secured Obligations (whether
matured or unmatured), such application to be in such order as 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 Borrower or to whomsoever may be lawfully entitled to
receive the same. For purposes hereof, proceeds
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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, 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, 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 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 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. 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 Borrower, which right or equity is hereby
waived or released. Borrower further agrees, at Lender's request, to assemble
the Collateral and make it available to Lender at places which Lender shall
reasonably select, whether at Borrower's premises or elsewhere. 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 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 Lender may elect, and only after such application and after the
payment by 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 Lender account for the surplus, if any, to Borrower. To the extent
permitted by applicable law, Borrower waives all claims, damages and demands it
may acquire against Lender arising out of the exercise by Lender of any of its
rights hereunder, other than those claims, damages and demands arising from the
gross negligence or willful misconduct of 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. Borrower shall remain liable for any deficiency (plus
accrued interest thereon as contemplated pursuant to Section 3.01(b) hereof) if
the proceeds of any sale or other disposition of the Collateral (net of costs
incurred in connection with such sale or other disposition) are insufficient to
pay the Secured Obligations and the fees and disbursements of any attorneys
employed by Lender to collect such deficiency.
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4.08. Limitation on Duties Regarding Preservation of
Collateral. 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 Lender deals with similar property for its own account. Neither 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 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. Upon termination of this
Loan Agreement and the Conduit Loan Agreement and repayment to Lender of all
Secured Obligations and the performance of all obligations under the Loan
Documents and under the Conduit Loan Agreement, Lender shall release its
security interest in any remaining Collateral.
4.11. Release of Collateral. Provided that no Default or Event
of Default shall exist (other than one that (a) relates solely to the Collateral
to be released and (b) will be cured simultaneously with such release) and that
Borrower shall have paid all sums then due under the Loan relating thereto, upon
(i) Borrower's payment in full of the Asset-Specific Loan Balance with respect
to a portion of the Collateral and (ii) receipt by Lender of a written request
from Borrower for the release of such Collateral, Lender shall as soon as
practicable release (and Lender shall reasonably cooperate with Borrower to
facilitate reasonable escrow arrangements to facilitate a simultaneous release
of) the related Collateral Documents and the related Collateral and any liens
related thereto to Borrower or, to the extent necessary to facilitate future
savings of mortgage tax in states that impose mortgage taxes, assign such liens
as Borrower shall request; provided, that any such assignments shall be without
recourse, representation or warranty of any kind except that Lender shall
represent and warrant that such Collateral has not been previously assigned by
Lender. Lender shall with reasonable promptness, after a written request from
Borrower, execute any document or instrument necessary to effectuate such
release or assignment.
4.12. Substitution of Eligible Collateral. From time to time
until the Custodian is otherwise notified by the Lender, which notice shall be
given by the Lender only during the existence of an Event of Default, and with
the prior written consent of the Lender, the Borrower may substitute for one or
more items of Eligible Collateral constituting the Collateral with one or more
substitute items of Eligible Collateral having aggregate Collateral Value equal
to or greater than the Collateral Value of the Collateral being substituted for,
or obtain the release of one or more items of Collateral constituting Collateral
hereunder: provided that, after giving effect to such substitution or release,
the Secured Obligations then outstanding shall not exceed the Borrowing Base,
which determination shall be made solely by the Lender. In connection with any
such requested substitution or release, the Borrower will provide notice to the
Custodian and the Lender no later than 3:00 p.m. New York City time, on the date
of such request, specifying the items of Collateral to be substituted for or
released and the items of substitute Collateral to be pledged hereunder in
substitution thereof, if any, and shall deliver with such notice a Custodial
Identification Certificate and a revised Collateral Schedule indicating any
substitute Collateral.
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Section 5. Conditions Precedent
5.01. Initial Loan. The obligation of 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
Lender shall have received all of the following items and documents, each of
which shall be satisfactory to Lender and its counsel in form and substance:
(a) Loan Documents.
(i) This Loan Agreement, duly completed and executed;
(ii) The Note, duly completed and executed, together with a
fee in the amount of $750,000.00;
(iii) The Custodial Agreement, duly executed and delivered by
Borrower and Custodian. In addition, Borrower shall have taken such other action
as Lender shall have requested in order to perfect the security interests
created pursuant to the Loan Agreement;
(b) Organizational Documents. Certified copies of the trust
agreement (or equivalent documents) of Borrower and of all requisite authority
for Borrower with respect to the execution, delivery and performance of the Loan
Documents and each other document to be delivered by Borrower from time to time
in connection herewith (and Lender may conclusively rely on such certificate
until it receives notice in writing from Borrower to the contrary);
(c) Legal Opinion. A legal opinion of counsel to Borrower,
substantially in the form attached hereto as Exhibit C;
(d) Trust Receipt and Collateral Schedule and Exception
Report. A Trust Receipt, substantially in the form of Annex 2 of the Custodial
Agreement, dated the Effective Date, from Custodian, duly completed, with a
Collateral Schedule and Exception Report attached thereto;
(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 (i) consenting to termination of such Servicing Agreement
upon the occurrence of an Event of Default and (ii) agreeing to hold all moneys
received in respect of each item of Collateral for the benefit of Lender,
attached; and
(f) The Supplemental Terms and Conditions (Rule 15a-6 Annex)
duly executed by Borrower.
(g) Other Documents. Such other documents as Lender may
reasonably request.
5.02. Initial and Subsequent Loans. The making of each Loan to
Borrower (including the initial Loan) on any Business Day is subject to the
delivery of all Collateral Documents pertaining to the Eligible Collateral to be
pledged for such Loan, together with all documents set forth in Section
2.03(b)(i)-(x) and the satisfaction of the following further conditions
precedent, both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof:
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(a) no Event of Default or Default shall have occurred and be
continuing on such date either before or after giving effect to the making of
the advance;
(b) Lender shall have received from Borrower and Borrower
shall have received from each Collateral Obligor such representations and
warranties as Lender shall, in its sole discretion, deem satisfactory. The
representations and warranties made by Borrower in Section 6 hereof, and
elsewhere in each of the Loan Documents, 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, solely with respect to Eligible
Collateral 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). Lender shall have received an officer's certificate signed by a
Responsible Officer of Borrower certifying as to the truth and accuracy of the
above, which certificate shall also include a representation that (i) Borrower
is in compliance with all governmental licenses and authorizations, (ii)
Borrower is qualified to do business, validly existing and, to the extent
determinable, in good standing, in all required jurisdictions, (iii) the facts
set forth in the Diligence Materials related to the Collateral for such Loan
are, to the best knowledge of Borrower after diligent inquiry, true and correct
(or shall fully explain all adverse changes from the information previously
supplied to Lender), (iv) there has been no change in the organizational and
authority documents provided to Lender pursuant to Section 5.01(b) hereof since
the date of the most recent certification thereof to Lender, and (v) there has
been no Material Adverse Effect since the date of the last advance to Borrower
hereunder.
(c) the aggregate outstanding principal amount of the Loans
shall not exceed the Borrowing Base;
(d) subject to Lender's right to perform one or more Due
Diligence Reviews pursuant to Section 11.15 hereof, Lender shall have completed
its due diligence review of the Collateral Documents for each item of Collateral
and such other documents, records, agreements, instruments, mortgaged properties
or information relating to such item of Collateral as Lender in its sole
discretion deems appropriate to review and such review shall be satisfactory to
Lender in its sole discretion;
(e) Lender shall have received from Custodian a Trust Receipt,
together with a Collateral Schedule and Exception Report with Exceptions (as
defined in the Custodial Agreement) as are acceptable to Lender in its sole
discretion, in respect of the Eligible Collateral to be pledged hereunder on
such Business Day;
(f) Lender shall have received from Borrower a Lender's
Release Letter substantially in the form of Exhibit E hereto (or such other form
acceptable to Lender) covering each item of Collateral to be pledged to Lender
to the extent such Collateral is subject to a lender's lien;
(g) 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
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shall have occurred resulting in Lender not being able to
finance any Loans through the "repo market" or "lending
market" with traditional counterparties at rates which would
have been reasonable prior to the occurrence of such event or
events;
(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 expected to be) at least 30 consecutive days or an
event or events shall have occurred resulting in Lender not
being able to sell securities backed by mortgage loans at
prices which would have been reasonable prior to such event or
events; or
(iii) there shall have occurred a material adverse
change in the financial condition of Lender which effects (or
can reasonably be expected to effect) materially and adversely
the ability of Lender to fund its obligations under this Loan
Agreement;
(h) Drawdown Fee. Borrower shall have paid Lender from the
proceeds of the advance to be made in connection with such Loan, a Drawdown Fee
calculated on the amount of such Loan then being disbursed.
(i) Transaction Costs. Borrower shall have paid Lender from
the proceeds of the advance to be made in connection with such Loan, all
Transaction Costs for which bills have been submitted; provided, however, that
nothing herein shall be deemed to waive Borrower's obligation to pay all
Transaction Costs whether billed before or after the making of a Loan pursuant
to which such Transaction Costs were incurred.
(j) Other Documents. Lender shall have received such other
documents, and Borrower shall have taken such other action in order to perfect
the security interests created hereunder, as Lender or its counsel shall deem
necessary.
Each request for a borrowing by Borrower hereunder shall
constitute a certification by 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).
5.03. Additional Requirements
(a) Borrower and Lender recognize and agree that the
categories of Collateral set forth in the Recital paragraph hereof and defined
herein as categories of assets which may be submitted by Borrower to Lender for
review by Lender as Eligible Collateral hereunder are general in nature and that
the full scope of such Collateral categories may be unknown. Consequently, the
appropriate requirements are not fully known for (i) the documents to be
provided by Borrower for underwriting and due diligence review by Lender and
(ii) submittals by Borrower in order to create and perfect a first priority
security interest in the Collateral. Therefore, Borrower and Lender agree that,
as a further condition precedent to funding a Loan in respect of any Collateral
hereunder, Borrower shall have delivered to Lender all information and documents
determined by Lender in good faith to be required for its underwriting and
examination of such Collateral and for the granting and perfection of a first
priority security interest therein.
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(b) Without limiting the generality of the foregoing Section
5.03(a), Borrower shall execute and deliver all documents necessary for the
granting of a first priority security interest in any Collateral determined by
Lender to be Eligible Collateral hereunder, including without limitation (i) all
instruments evidencing indebtedness payable to Borrower or pledged to Borrower
as security for a loan, (ii) all instruments granting or perfecting a security
interest for the benefit of Borrower or pledged to Borrower as security for a
loan (including, without limitation, collateral assignments, pledge agreements
and UCC financing statements), (iii) all instruments evidencing an interest in
an entity pledged to Borrower as security for a loan (including, without
limitation, partnership interests, shares of corporate stock, participation
interests, and other beneficial interests of any kind), (iv) all instruments
guaranteeing the repayment of indebtedness owed to Borrower, or pledged to
Borrower for the repayment of a Loan and (v) all agreements among holders of
debt or equity interests providing for a priority among such parties of
interests in related assets forming the basis of an item of Collateral.
Section 6. Representations and Warranties
Borrower represents and warrants to Lender that throughout the
term of this Loan Agreement:
6.01. Existence. Borrower (a) is a business trust duly
organized and validly existing under the laws of the jurisdiction of its
organization, (b) has all requisite 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 on its Property, business or financial
condition or prospects; and (c) is qualified to do business, validly existing
and is, to the extent determinable, 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 on
its Property, business or financial condition or prospects.
6.02. Action. Borrower has all necessary power, authority and
legal right to execute, deliver and perform its obligations under each of the
Loan Documents; the execution, delivery and performance by Borrower of each of
the Loan Documents have been duly authorized by all necessary action on its
part; and each Loan Document has been duly and validly executed and delivered by
Borrower and constitutes a legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms.
6.03. Financial Condition. Borrower agrees to promptly deliver
to Lender all publicly filed financial information when and to the extent that
the same is made available to the general public. Borrower has heretofore
furnished to Lender a copy of (a) its consolidated balance sheet and the
consolidated balance sheets of its consolidated Subsidiaries for the fiscal year
of Borrower ended December 31, 1997 and the related consolidated statements of
income and retained earnings and of cash flows for Borrower and its consolidated
Subsidiaries for such fiscal year, setting forth in each case in comparative
form the figures for the previous year, (b) its consolidated balance sheet and
the consolidated balance sheets of its consolidated Subsidiaries for such fiscal
year and the related consolidated statements of income and retained earnings and
of cash flows for Borrower and its consolidated Subsidiaries for such fiscal
year, setting forth in each case in comparative form the figures for the
previous year, with the opinion thereon of
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Ernst & Young and Coopers & Lybrand and (c) its consolidated balance sheet and
the consolidated balance sheets of its consolidated Subsidiaries for the
quarterly fiscal period of Borrower ended March 31, 1998 and the related
consolidated statements of income and retained earning and of cash flows for
Borrower and its consolidated Subsidiaries for such quarterly fiscal periods,
setting forth in each case in comparative form the figures for the previous
year. All such financial statements are complete and correct and fairly present,
in all material respects, the consolidated financial condition of Borrower and
its Subsidiaries and the consolidated results of their operations as at such
dates and for such fiscal periods, all in accordance with GAAP applied on a
consistent basis. Since March 31, 1998, there has been no material adverse
change in the consolidated business, operations or financial condition of
Borrower and its consolidated Subsidiaries taken as a whole from that set forth
in said financial statements.
6.04. Litigation. There are no actions, suits, arbitrations,
investigations or proceedings pending or, to the best of its knowledge,
threatened against 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 could be reasonably likely to have a Material Adverse Effect,
(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 or (iii) makes a claim or claims in an aggregate amount greater than
$1,000,000.00.
6.05. 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 trust agreement of 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 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 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 Borrower or any of its Subsidiaries
pursuant to the terms of any such agreement or instrument.
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
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 any provisions of Regulation T, U or X.
6.08. Taxes. 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 and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any of them, 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 Borrower and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of Borrower, adequate.
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6.09. Investment Company Act. Neither 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) Borrower has not assigned, pledged, or otherwise conveyed
or encumbered any Collateral to any other Person, and immediately prior to the
pledge of such Collateral to Lender, unless otherwise approved by Lender in
writing, Borrower was the sole owner of such Collateral and had good and
marketable title thereto, free and clear of all Liens, in each case except for
Liens to be released simultaneously with the Liens granted in favor of Lender
hereunder. No Collateral pledged to Lender hereunder was acquired by Borrower
from an Affiliate of Borrower unless otherwise approved by Lender in writing.
(b) The provisions of this Loan Agreement are effective to
create in favor of Lender a valid security interest in all right, title and
interest of Borrower in, to and under the Collateral.
(c) As to all other Collateral, upon receipt by Custodian of
all documents set forth in Lender's notice to Borrower and Custodian pursuant to
Section 2.03(b)(x) hereof, Lender shall have a fully perfected first priority
security interest therein and in Borrower's interest in the related Property.
(d) Upon (i) the delivery to Lender or its designee of CMBS or
other items of Collateral constituting securities (as defined in Article 8 of
the Uniform Commercial Code) in accordance with Section 5.02 hereof and (ii) the
filing of financing statements on Form UCC-1 naming Lender as "Secured Party"
and Borrower as "Debtor", and describing the Collateral, in the jurisdictions
and recording offices for which security interests may be perfected in the
Collateral by the filing of UCC financing statements, the security interests
granted hereunder in the Collateral will constitute fully perfected first
priority security interests under the Uniform Commercial Code in all right,
title and interest of Borrower in, to and under such Collateral, and, without
limiting the foregoing, Lender will have a "securities entitlement" (as defined
in Article 8 of the Uniform Commercial Code) in the Collateral referenced in the
foregoing clause (i).
6.11. Chief Executive Office. Borrower's chief executive
office on the Effective Date is located at 605 Third Avenue, 26th Floor, New
York, New York 10016.
6.12. Location of Books and Records. The location where
Borrower keeps its books and records, including all computer tapes and records
relating to the Collateral is its chief executive office.
6.13. True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of Borrower to 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, (x)
do not contain any untrue statement of material fact and (y) contain all
statements of material fact necessary to make the statements herein or therein,
in light of the circumstances under which they were made, true. All written
information furnished after the date hereof by or on behalf of Borrower to
Lender in connection with this Loan Agreement and
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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 the actual
knowledge of a Responsible Officer of 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
Lender for use in connection with the transactions contemplated hereby or
thereby.
6.14. Tangible Net Worth. On the Effective Date, the Tangible
Net Worth is not less than the sum of (i) $100,000,000 plus (ii) an amount equal
to 75% of the aggregate of positive changes in Borrower's book equity, since
March 31, 1998 (without deduction for quarterly losses).
6.15. ERISA. Each Plan to which Borrower or its Subsidiaries
make direct contributions, and, to the knowledge of 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 Borrower would be
under an obligation to furnish a report to Lender under Section 7.01(d) hereof
assuming a request therefor has been made by Lender.
Section 7. Covenants of Borrower. Borrower covenants and
agrees with Lender that, so long as any Loan is outstanding and until payment in
full of all Secured Obligations:
7.01. Financial Statements, Reports, etc. Borrower agrees to
promptly deliver to Lender all publicly filed financial information when and to
the extent same is available to the general public. In addition to such public
financial information, Borrower shall also provide the following financial
information:
(a) the Monthly Statement;
(b) within forty-five (45) days following the end of each
quarter, a status report with respect to such quarter which describes the
cumulative sources and uses of the funds for the immediately preceding calendar
quarter on each asset pledged under this Loan Agreement and a detailed report in
a form reasonably satisfactory to Lender;
(c) within forty-five (45) days following the end of each
quarter, a certificate from a Responsible Officer of Borrower in form and
substance reasonably satisfactory to Lender that there has been no Event of
Default and no Material Adverse Effect;
(d) within fifteen (15) Business Days after Lender's request,
such further information with respect to the operation of any real property, the
Collateral, the financial affairs of Borrower and any Plan and Multiemployer
Plan as may be requested by Lender, including all business plans prepared by or
for Borrower; provided, however, that with respect to information not previously
known to, or in the possession of, Borrower relating to any Multiemployer Plan,
Borrower shall only be required to provide such information as may be obtained
through good faith efforts;
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(e) upon Lender's request, a copy of any financial or other
report Borrower shall receive from any underlying obligor with respect to an
item of Collateral within fifteen (15) days after Borrower's receipt thereof;
and
(f) such other reports as Lender shall reasonably require.
7.02. Litigation. Borrower will promptly, and in any event
within 10 days after service of process on any of the following, give to Lender
notice of all litigation, actions suits, arbitrations, investigations
(including, without limitation, any of the foregoing which are pending or
threatened) or other legal or arbitrable proceedings affecting Borrower or any
of its Subsidiaries or affecting any of the Property of any of them before any
Governmental Authority that (i) questions or challenges the validity or
enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $1,000,000.00, or (iii) which,
individually or in the aggregate, if adversely determined could reasonably be
likely to have a Material Adverse Effect.
7.03. Existence, etc. Borrower will:ence, etc.
(a) preserve and maintain its legal existence and 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, 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 on its Property, business or financial condition, or
prospects;
(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 Lender 10 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 Lender, during normal business
hours, 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 Lender.
7.04. 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 Borrower may enter into a merger or
consolidation if (a) the surviving or resulting
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entity shall be a corporation or partnership organized under the laws of the
United States or any state thereof; (b) such entity shall expressly assume by
written agreement, in form and substance satisfactory to Lender in Lender's sole
discretion, the performance of all of Borrower's duties and obligations under
this Loan Agreement, the Note and the Loan Documents; and (c) such entity shall
be at least as creditworthy as Borrower, as determined by Lender in Lender's
sole and absolute discretion; and, provided, further, that if after giving
effect thereto, no Default would exist hereunder. Notwithstanding the foregoing,
Borrower shall not enter into or be subject to any transaction, and no direct or
indirect change in the ownership structure of Borrower shall occur (whether or
not within Borrower's control), if as a result thereof: (a) any of Craig M.
Hatkoff, John R. Klopp and Samuel Zell would no longer retain his respective
present or comparable or more senior offices (Vice Chairman and Chairman of the
Executive Committee; Chief Executive Officer and Vice Chairman; and Chairman of
the Board, respectively) and directorships, or (b) in Lender's judgment, such
individuals would no longer collectively retain effective control of Borrower's
business and operations.
7.05. Borrowing Base Deficienty. If at any time there exists a
Borrowing Base Deficiency, Borrower shall cure same in accordance with Section
2.04 hereof.
7.06. Notices. Borrower shall give notice to Lender:
(a) promptly upon receipt of notice or knowledge of the
occurrence of any Default or Event of Default;
(b) with respect to any Collateral pledged to Lender
hereunder, immediately upon receipt of any principal payment (in full or
partial) or payment in respect of an Equity Interest;
(c) with respect to any Collateral pledged to Lender
hereunder, immediately upon receipt of notice or knowledge that the underlying
Property has been damaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty, or otherwise damaged so as to
affect adversely the Asset Value of such pledged Collateral;
(d) promptly upon receipt of notice or knowledge of (i) any
default related to any Collateral unless otherwise specifically approved by
Lender in writing, (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, (iii) any event or change in circumstances has
or could reasonably be expected to have an adverse affect on the Collateral
Value of the Collateral for a Loan or (iv) any event or change in circumstances
which could reasonably be expected to have a Material Adverse Effect;
(e) with respect to any item of Collateral pledged to Lender
hereunder, promptly upon entering into a modification of any documents
pertaining to such item of Collateral which would have a material adverse effect
on such item of Collateral; and
(f) with respect to any Collateral pledged to Lender
hereunder, immediately upon the acquisition or receipt by Borrower or any
Affiliate of Borrower of any interest of any kind in respect of such Collateral
which interest has not been pledged to Lender as Collateral under this Loan
Agreement.
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Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of Borrower setting forth details of the
occurrence referred to therein and stating what action Borrower has taken or
proposes to take with respect thereto.
7.07. Reports. Borrower shall provide Lender with a quarterly
report, which report shall include, among other items, a summary of Borrower's
delinquency and loss experience with respect to any Collateral serviced by
Borrower, any Servicer or any designee of either, plus any such additional
reports as Lender may reasonably request with respect to Borrower's or any
Servicer's servicing portfolio or pending originations of Collateral.
7.08. Transactions with Affiliates. Borrower will not, except
as approved by Lender in writing, enter into any transaction in any manner
relating to any item of Collateral hereunder, including without limitation any
purchase, sale, lease or exchange of property or the rendering of any service,
with any Affiliate; provided, however, that Lender may consider for approval any
such transaction which is (a) otherwise permitted under this Loan Agreement, (b)
in the ordinary course of Borrower's business and (c) upon fair and reasonable
terms no less favorable to Borrower than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate, or make a payment
under such transactions that is not otherwise permitted by this Section 7.08 to
any Affiliate. In no event shall Borrower pledge to Lender hereunder any items
of Collateral acquired by Borrower from an Affiliate of Borrower.
7.09. Foreclosure or Other Remediation by Borrower. Borrower
may propose, and Lender will consider but shall be under no obligation to
approve, strategies for the foreclosure or other realization upon the security
for underlying loans held by Borrower relating to items of Collateral hereunder.
7.10. Limitation on Liens. Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created, or otherwise specifically permitted in writing by Lender
under this Loan Agreement, and Borrower will defend the right, title and
interest of Lender's in and to any of the Collateral against the claims and
demands of all persons whomsoever. Borrower may request from time to time,
subject to Lender's approval in Lender's sole determination, to sell
participation interests in its interests in items of Collateral, the sale of
which participation interests shall be arm's length transactions and subject to
such terms and conditions as Lender in its sole discretion shall require.
7.11. Limitation on Distributions. After the occurrence and
during the continuation of any Event of Default, 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 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 Borrower.
7.12. Maintenance of Tangible Net Worth. Borrower shall not
permit Tangible Net Worth at any time to be less than the sum of (i)
$100,000,000 plus (ii) an amount equal to 75% of the aggregate of positive
changes in Borrower's book equity since March 31, 1998.
7.13. Maintenance of Ratio of Earnings Before Interest, Taxes,
Depreciation
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and Amortization to Interest and Preferred Dividends. Borrower shall not permit
the ratio of (a) earnings before interest, taxes, depreciation and amortization
to (b) the sum of (i) interest expense and (ii) preferred dividends
(specifically excluding any convertible trust preferred dividends) to be less
than 1.20:1.
7.14. Maintenance of Ratio of Total Indebtedness to Tangible
Net Worth. Borrower shall not permit the ratio of Total Indebtedness to Tangible
Net Worth at any time to be greater than 5:1. Lender may consider waiving the
foregoing requirement under certain circumstances if requested by Borrower;
however, Lender shall be under no obligation to do so.
7.15. Servicer; Servicing Tape. Borrower shall provide to
Lender on the fifth Business Day of each month a computer readable file
containing servicing information, including without limitation those fields
specified by Lender from time to time, on a loan-by-loan basis and in the
aggregate, with respect to the Mortgage Loans, Mezzanine Loans and Equity
Interests serviced hereunder by Borrower or any Servicer. Borrower shall not
cause any Collateral to be serviced by any servicer other than a servicer
expressly approved in writing by Lender.
7.16. Remittance of Prepayments. Borrower shall remit, with
sufficient detail to enable Lender to appropriately identify the Loan, or Loans,
to which any amount remitted applies, to Lender on each Thursday (or the next
Business Day if such Thursday is not a Business Day) all principal prepayments
that Borrower has received during the previous week in an amount equal to the
sum of the Asset-Specific Loan Balances being prepaid, together with all
interest due thereon through the date of such remittance, any and all charges
due with respect to such Loans and any and all costs and expenses incurred by
Lender (as provided in this Loan Agreement) in connection with such Loan or
Loans and the prepayment thereof.
Section 8. Events of Default. Each of the following events
shall constitute an event of default (an "Event of Default") hereunder:
(a) 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) Borrower shall default in the payment of any principal of
or interest on any MS Indebtedness when due (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment); or
(c) Borrower shall default in the payment of any other amount
payable by it hereunder or under any other Loan Document after notification by
Lender of such default, and such default shall have continued unremedied for
seven (7) Business Days; or
(d) any representation, warranty or certification made or
deemed made herein, or in any other Loan Document by Borrower or any certificate
furnished to 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 the representations and warranties set forth in Section 6
hereof which shall be considered solely for the purpose of Section 2.04(b)
hereof; unless Borrower shall have made any such representations and warranties
with knowledge that they were materially false or misleading at the time made);
or
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(e) Borrower shall fail to comply with the requirements of
Section 7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.08
through 7.16 hereof; or Borrower shall otherwise fail to comply with the
requirements of Section 7.03 hereof and such default shall continue unremedied
for a period of ten (10) Business Days; or Borrower shall fail to observe or
perform any other covenant 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 ten (10) Business Days; or
(f) a final judgment or judgments for the payment of money in
excess of $5,000,000.00 in the aggregate shall be rendered against Borrower or
any of its Subsidiaries by one or more courts, administrative tribunals or other
bodies having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within sixty (60) days from the date of
entry thereof, and Borrower or any such Subsidiary shall not, within said period
of sixty (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
(g) Borrower shall admit in writing its inability to pay its
debts as such debts become due; or
(h) 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 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
(i) a proceeding or case shall be commenced, without the
application or consent of 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 Borrower or any such
Subsidiary or of all or any substantial part of its property, or (iii) similar
relief in respect of 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 sixty (60) or more days; or an order for relief against
Borrower or any such Subsidiary shall be entered in an involuntary case under
the Bankruptcy Code; or
(j) the Custodial Agreement or any Loan Document shall for
whatever reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by Borrower; or
(k) Borrower shall grant, or suffer to exist, any Lien on any
Collateral except the Liens contemplated hereby; or the Liens contemplated
hereby shall cease to be first
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priority perfected Liens on the Collateral in favor of Lender or shall be Liens
in favor of any Person other than Lender; or
(l) Borrower or any of Borrower's Affiliates shall be in
default under any note, indenture, loan agreement, guaranty, swap agreement or
any other contract to which it is a party (other than MS Indebtedness), 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, in any such case in which the amount of such obligation or
obligations, in the aggregate, exceed $10,000,000.00; or
(m) any materially adverse change in the Property, business,
financial condition or prospects of Borrower or any of its Subsidiaries shall
occur, in each case as determined by Lender in its sole discretion, or any other
condition shall exist which, in Lender's sole discretion, constitutes a material
impairment of Borrower's ability to perform its obligations under this Loan
Agreement, the Note or any other Loan Document.
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), 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 Borrower.
(b) Upon the occurrence of one or more Events of Default,
Lender shall have the right to obtain physical possession of the Servicing
Records and all other files of Borrower relating to the Collateral and all
documents relating to the Collateral which are then or may thereafter come in to
the possession of Borrower or any third party acting for Borrower and Borrower
shall deliver to Lender such assignments as Lender shall request. Lender shall
be entitled to specific performance of all agreements of Borrower contained in
this Loan Agreement.
(c) Upon the occurrence of an Event of Default, without
limiting any other rights or remedies of Lender, Lender shall have the right to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by or for account of Lender or Lender's
Affiliates to any indebtedness at any time owing to Lender to the credit or for
the account of Borrower against any and all of the Indebtedness of Borrower,
irrespective of whether Lender shall have made any demand under this Loan
Agreement, the Note, any other Security Document or any other document executed
in connection with any other MS Indebtedness.
Section 10. No Duty of Lender. The powers conferred on Lender
hereunder are solely to protect Lender's interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. Lender shall be
accountable only for amounts that it actually receives
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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 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 Lender 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 telex or
telecopy) 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 telex or 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) Borrower agrees to hold Lender harmless from and indemnify
Lender against all liabilities, losses, damages, judgments, costs and expenses
of any kind which may be imposed on, incurred by or asserted against 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 Lender's gross negligence or willful
misconduct. Without limiting the generality of the foregoing, Borrower agrees to
hold Lender harmless from and indemnify Lender against all Costs relating to or
arising out of any violation or alleged violation of any environmental law, rule
or regulation or any consumer credit laws, including without limitation the
Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in
each case, results from anything other than Lender's gross negligence or willful
misconduct. In any suit, proceeding or action brought by Lender in connection
with any Collateral for any sum owing thereunder, or to enforce any provisions
of any Collateral Documents, Borrower will save, indemnify and hold 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 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 Borrower. Borrower also agrees to reimburse Lender as and
when billed by Lender for all Lender's reasonable costs and expenses incurred in
connection with the enforcement or the preservation of Lender's rights
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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. Borrower hereby acknowledges that,
notwithstanding the fact that the Note is secured by the Collateral, the
obligation of Borrower under the Note is a recourse obligation of Borrower.
(b) Borrower agrees to pay as and when billed by Lender all of
the reasonable out-of-pocket costs and expenses incurred by 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.
Borrower agrees to pay as and when billed by Lender all of the out-of-pocket
costs and expenses incurred in connection with 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 Lender and (ii) all the due diligence, inspection, testing and review
costs and expenses incurred by Lender with respect to Collateral under this Loan
Agreement, including, but not limited to, those costs and expenses incurred by
Lender pursuant to Sections 11.03(a), 11.14 and 11.15 hereof.
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 Borrower and Lender and
any provision of this Loan Agreement may be waived by 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 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 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 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.
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11.10. SUBMISSION TO JURISDICTION; WAIVERS. 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 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
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 BORROWER AND 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. 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) Lender has no fiduciary relationship to Borrower, and the
relationship between Borrower and Lender is solely that of debtor and creditor;
and
(c) no joint venture exists between Lender and Borrower.
11.13. Hypothecation or Pledge of Loans. Lender shall have
free and unrestricted use of all Collateral and nothing in this Loan Agreement
shall preclude Lender from engaging in repurchase transactions with the
Collateral or otherwise pledging, repledging,
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transferring, hypothecating, or rehypothecating the Collateral or pledging or
otherwise transferring its rights to payment hereunder in respect of any Loan
made hereunder; provided, that no action by Lender referred to in this sentence
shall confer on any Person other than Lender any right against Borrower to
require any prepayment under Section 2.04 hereof or any right to enforce against
Borrower any other provision of this Loan Agreement, but may grant to any Person
the right to require Lender to enforce any such provisions. Nothing contained in
this Loan Agreement shall obligate Lender to segregate any Collateral delivered
to Lender by Borrower.
11.14. Servicing.
(a) Borrower covenants to maintain or cause the servicing of
the Collateral to be maintained with respect to each type of Collateral pledged
to Lender hereunder in conformity with accepted and prudent servicing practices
in the industry for such same type of Collateral and in a manner at least equal
in quality to the servicing Borrower provides for assets similar to such
Collateral 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 Borrower and Lender, which
Lender's consent shall not be unreasonably withheld. Midland Loan Services, L.P.
shall be the initial servicer.
(b) If the Collateral, or any portion thereof, is serviced by
Borrower, (i) Borrower agrees that 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 such Collateral (the "Servicing
Records"), and (ii) Borrower grants Lender a security interest in all servicing
fees and rights relating to such Collateral and all Servicing Records to secure
the obligation of Borrower or its designee to service in conformity with this
Section and any other obligation of Borrower to Lender. Borrower covenants to
safeguard such Servicing Records and to deliver them promptly to Lender or its
designee (including Custodian) at Lender's request.
(c) If the Collateral, or any portion thereof, is serviced by
a third party servicer (such third party servicer, the "Servicer"), Borrower (i)
shall provide a copy of the servicing agreement to Lender, which shall be in
form and substance acceptable to Lender (the "Servicing Agreement"); and (ii)
hereby irrevocably assigns to Lender and Lender's successors and assigns all
right, title, interest of Borrower in, to and under, and the benefits of, any
Servicing Agreement with respect to such Collateral. Any successor to the
Servicer shall be approved in writing by Lender prior to such successor's
assumption of servicing obligations with respect to such Collateral.
(d) Borrower shall provide to Lender a letter from Borrower
(if Borrower is the Servicer) or the Servicer, as the case may be, to the effect
that upon the occurrence of an Event of Default, Lender may terminate any
Servicing Agreement and transfer servicing to its designee, at no cost or
expense to Lender, it being agreed that Borrower will pay any and all fees
required to terminate the Servicing Agreement and to effectuate the transfer of
servicing to the designee of Lender.
50
<PAGE>
(e) After the Funding Date, until the pledge of any Collateral
is relinquished by Custodian, Borrower will have no right to modify or alter the
terms of any of the documents pertaining to such Collateral and Borrower will
have no obligation or right to repossess such Collateral or substitute other
Collateral, except as provided in the Custodial Agreement; provided, however,
that so long as no Default or Event of Default has occurred and is continuing,
Borrower may enter into such modifications of the terms of such documents as do
not, as to any individual item of Collateral, (i) result in a negative monetary
effect or (ii) constitute a material adverse effect.
(f) In the event Borrower or its Affiliate is servicing any
Collateral, Borrower shall permit Lender to inspect Borrower's or its
Affiliate's servicing facilities, as the case may be, for the purpose of
satisfying Lender that Borrower or its Affiliate, as the case may be, has the
ability to service such Collateral as provided in this Loan Agreement.
(g) Borrower shall cause the Servicer to provide a copy of
each report and notice sent to Borrower to be sent to Lender concurrently
therewith.
11.15. Periodic Due Diligence Review. Borrower acknowledges
that Lender has the right to perform continuing due diligence reviews with
respect to the Collateral, for purposes of verifying compliance with the
representations, warranties and specifications made hereunder, or determining
and re-determining the Borrowing Base under Section 2.04(a) hereof, or
otherwise, and Borrower agrees that Lender, at its option, has the right at any
time to conduct a partial or complete due diligence review on any or all of the
Collateral securing the Loans, including, without limitation, ordering new
credit reports and Appraisals on the applicable Collateral and otherwise
regenerating the information used to originate such Eligible Collateral. Upon
reasonable (but no less than one (1) Business Day) prior notice to Borrower,
Lender or its authorized representatives will be permitted during normal
business hours to examine, inspect, and make copies and extracts of, the
Collateral Files and any and all documents, records, agreements, instruments or
information relating to such Collateral in the possession or under the control
of Borrower and/or Custodian. Borrower also shall make available to Lender a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Collateral Files and the Collateral. Borrower agrees to
cooperate with Lender and any third party underwriter designated by Lender in
connection with such underwriting, including, but not limited to, providing
Lender and any third party underwriter with access to any and all documents,
records, agreements, instruments or information relating to such Collateral in
the possession, or under the control, of Borrower. Borrower further agrees that
Borrower shall reimburse Lender for any and all out-of-pocket costs and expenses
incurred by Lender in connection with Lender's activities pursuant to this
Section 11.15.
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. Change of Borrower's State of Formation. If Borrower
shall change the State under whose laws Borrower shall be organized, Borrower
shall promptly provide Lender with a copy of its new Declaration of Trust,
Articles of Incorporation or similar document, certified by the Secretary of
State or other appropriate official of Borrower's new State of formation, if
applicable, together with such opinions of counsel regarding such change as
Lender, in its sole discretion, shall require.
51
<PAGE>
11.18. Trustee Exculpation. The parties agree that except for
fraudulent acts, willful misrepresentation or gross negligence, no trustee of
Borrower shall have personal liability hereunder to Lender and any obligation of
Borrower hereunder to Lender shall be satisfied solely from the assets of
Borrower.
[SIGNATURE PAGE FOLLOWS]
512
<PAGE>
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
CAPITAL TRUST
By:/s/ Edward Shugrue
-----------------------------------------------
Name: Edward Shugrue
Title: Chief Financial Officer
Address for Notices:
605 Third Avenue, 26th Floor
New York, New York 10016
Attention: Edward L. Shugrue, III
Peter S. Ginsberg, Esq.
John Felleter
Telecopier No.: (212) 655-0044
Telephone No: (212) 655-0225
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: John A. Cahill, Esq.
Telecopier No.: (212) 856-7801
Telephone No.: (212) 856-6930
LENDER
MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
By:/s/ Thomas Wipf
-------------------------------------------------
Name: Thomas Wipf
Title: Principal
Address for Notices:
1585 Broadway
New York, New York 10036
Attention: Mr. Andy Neuberger, Whole Loan Operations
Mortgage-Backed Securities Department,
Fixed-Income Division
Telecopier No.: 212-761-0570
Telephone No.: 212-761-2384
With a copy to:
Rogers & Wells LLP
53
<PAGE>
200 Park Avenue
New York, New York 10166-0153
Attention: Frederick B. Utley, III, Esq.
Telecopier No.: (212) 878-8375
Telephone No.: (212) 878-8356
54
<PAGE>
SCHEDULE 1
FILING JURISDICTIONS AND OFFICES
[TO BE PROVIDED BY COUNSEL TO BORROWER]
S-1-55
<PAGE>
SCHEDULE 2
APPROVED APPRAISERS
1. KTR Appraisal Services
2. Cushman & Wakefield, Inc.
3. Landauer Real Estate Counselors
4. CB Commercial
5. The Weitzman Group
6. Greenwich Group
7. Arthur Anderson
8. Joseph Blake
S-2-56
<PAGE>
SCHEDULE 3
APPROVED ENGINEERS
1. EMG
2. KTR Realty Services
3. Merritt & Harris, Inc.
4. C.A. Rich, Inc.
5. IVI
6. Dames & Moore
7. Law
8. Echland
9. EM&CA
10. Acqua Terra
11. ATC (BCM Engineers)
12. Horn Chandler & Thomas
S-3-57
<PAGE>
SCHEDULE 4
APPROVED ENVIRONMENTAL CONSULTANTS
1. Acqua Terra
2. Law Environmental
3. KTR Realty Services
4. EMG
5. Clayton
6. Dames & Moore
7. Brown & Root
8. C.A. Rich, Inc.
9. Echland
10. EM&CA
11. ATC (BCM Engineers)
12. Front Royal
S-4-58
<PAGE>
EXHIBIT A
[FORM OF PROMISSORY NOTE]
$ 300,000,000.00 June 30, 1998
New York, New York
FOR VALUE RECEIVED, CAPITAL TRUST, a California business trust
(the "Borrower"), hereby promises to pay to the order of MORGAN STANLEY & CO.
INTERNATIONAL LIMITED (the "Lender"), at the principal office of Lender's agent
at 1585 Broadway, New York, New York, 10036, in lawful money of the United
States, and in immediately available funds, the principal sum of THREE HUNDRED
MILLION DOLLARS ($300,000,000.00) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by Lender to 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 Lender
to Borrower, and each payment made on account of the principal thereof, shall be
recorded by Lender on its books and, prior to any transfer of this Note,
endorsed by Lender on the schedule attached hereto or any continuation thereof;
provided, that the failure of Lender to make any such recordation or endorsement
shall not affect the obligations of Borrower to make a payment when due of any
amount owing under the Loan Agreement or hereunder in respect of the Loans made
by Lender.
This Note is the Note referred to in the CMBS Loan Agreement
dated as of June 30, 1998 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Loan Agreement") between Borrower and Lender, and
evidences Loans made by Lender thereunder. Reference is also made to the
Promissory Note dated June 8, 1998 (the " MSMC Note") made by Borrower to Morgan
Stanley Mortgage Capital Inc. ("MSMC") evidencing loans made under a Master Loan
and Security Agreement dated as of June 8, 1998. The indebtedness evidenced by
the MSMC Note and indebtedness evidenced by this Note may not exceed
$300,000,000 in the aggregate. Terms used but not defined in this Note have the
respective meanings assigned to them in the Loan Agreement.
Borrower agrees to pay all 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, Borrower hereby
acknowledges, admits and agrees that Borrower's obligations under this Note are
recourse obligations of Borrower to which Borrower pledges its full faith and
credit.
Borrower, and any endorsers or guarantors hereof, (a)
severally waive diligence, presentment, protest and demand and also notice of
protest, demand, dishonor and nonpayment 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 Lender, in order to
enforce payment of this Note, to first institute
A-1
<PAGE>
or exhaust Lender's remedies against 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 Lender with any
person now or hereafter liable for the payment of this Note, shall affect the
liability under this Note of Borrower, even if Borrower is not a party to such
agreement; provided, however, that Lender and Borrower, by written agreement
between them, may affect the liability of Borrower.
Any reference herein to 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
Borrower expressly elects to apply to this Note. 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.
CAPITAL TRUST
a California business trust
By:
--------------------------------
Name: Edward L. Shugrue, III
Title: Chief Financial Officer
A-2
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Loan
Agreement to 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.
- --------------------------------------------------------------------------------
Date Made Principal Interest Amount Paid or Unpaid Principal Notation
Amount of Loan Rate Prepaid Amount Made by
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-3
<PAGE>
EXHIBIT B
[FORM OF CUSTODIAL AGREEMENT]
[STORED AS A SEPARATE DOCUMENT]
B-1
<PAGE>
EXHIBIT C
[FORM OF OPINION OF COUNSEL OF BORROWER]
C-1
<PAGE>
EXHIBIT D
[FORM OF REQUEST FOR BORROWING]
CMBS Loan Agreement, dated as of June __, 1998 (the "Loan and
Security Agreement"), by and between Borrower and Morgan Stanley & Co.
International Limited (the "Lender"),
Lender: Morgan Stanley & Co. International Limited
Borrower: [NAME OF BORROWER]
Requested Fund Date:
----------------------------
Transmission Date:
----------------------------
Transmission time:
----------------------------
[Type of Funding:
(Wet or Dry)
----------------------------
[Type of Loan requested:
Committed or Uncommitted
----------------------------
Number of Mortgage
Loans to be Pledged:
----------------------------
Unpaid Principal Balance
$---------------------------
Requested Wire Amount:
$---------------------------
Wire Instructions:
Requested by:
[NAME OF BORROWER]
By:
----------------------
Name:
Title:
D-1
<PAGE>
EXHIBIT E
[FORM OF LENDER'S RELEASE LETTER]
(Date)
Morgan Stanley & Co. International Limited
1585 Broadway
New York, New York 10036
Attention:
---------------
Facsimile:
---------------
Re: Certain Collateral Identified on Schedule A hereto and owned by
[BORROWER]
The undersigned hereby releases all right, interest, lien or
claim of any kind with respect to the Collateral 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 finds of $ , in accordance with the following wire instructions:
................................................................................
................................................................................
......................
Very truly yours,
[LENDER]
By:
------------------------
Name:
Title:
E-1-1
<PAGE>
EXHIBIT F
[FORM OF BAILEE AGREEMENT]
F-1-1
Exhibit 10.3
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This First Amendment to Amended and Restated Credit Agreement (this
"Amendment"), dated as of June 22, 1998, is made by and between Capital Trust, a
California business trust having an office at 605 Third Avenue, 26th Floor, New
York, New York 10016, as borrower (the "Borrower"), and German American Capital
Corporation, a Maryland corporation having an office at 31 West 52nd Street, New
York, New York 10019, as lender (the "Lender").
R E C I T A L S
WHEREAS, the parties hereto are party to that certain Amended and
Restated Credit Agreement, dated as of January 1, 1998 (the "Credit Agreement";
terms used but not defined herein shall have the respective meanings ascribed to
such terms in the Credit Agreement), pursuant to which the Lender agreed,
subject to the terms and conditions set forth in the Credit Agreement, to make a
loan to Borrower as provided in the Credit Agreement; and
WHEREAS, the maximum principal amount of the Loan immediately
preceding the execution and delivery of this Amendment is $250,000,000; and
WHEREAS, Borrower and Lender desire to increase the maximum
principal amount of the Loan from $250,000,000 to $300,000,000; and
WHEREAS, Borrower and Lender desire to amend the Credit Agreement
to reflect such increase of the maximum principal amount of the Loan;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows, effective as of the date
hereof:
1. Commitment.
1.1 The first paragraph of the Recitals on page 1 of the Credit
Agreement is hereby deleted in its entirety and replaced by the following
paragraph:
WHEREAS, Borrower desires to obtain a series of loan advances
(each, an "Advance" and collectively, the "Loan") from Lender (as
defined below) in an aggregate amount at any time outstanding of up
to $300,000,000 to provide warehouse funding for a portion of the
principal amount of the Collateral Loans and other Collateral (each
as hereinafter defined) that Borrower or its Acquisition Entities
originates or acquires, as the case may be; and
1.2 The paragraph in which the term "Commitment" is defined in
Section 1.1 of the Credit Agreement is hereby deleted in its entirety and
replaced by the following paragraph:
<PAGE>
"Commitment" means the sum of Three Hundred Million Dollars
($300,000,000).
2. Loan Fee.
2.1 The definition of the term "Loan Fee" in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
"Loan Fee" means the fee set forth below. Borrower shall pay the
Loan Fee to Lender as follows:
-------------------------------------------------------------------
Installment Amount of Loan Borrower Shall Pay The Referenced
Fee: Installment the First Time Lender
Makes any Advance that Causes the
Principal Balance of the Loan to
Exceed:
-------------------------------------------------------------------
$750,000 $1
-------------------------------------------------------------------
$750,000 $75,000,000
-------------------------------------------------------------------
$500,000 $150,000,000
-------------------------------------------------------------------
$250,000 $250,000,000
-------------------------------------------------------------------
NOTE: Borrower has paid to Lender all installments of the Loan Fee.
3. Definition of Liabilities.
3.1 Section 6.1(c) of the Credit Agreement is hereby added, as
follows:
(c) For purposes of applying Section 6.1(a), Borrower's net
worth and the components thereof shall be determined in accordance
with GAAP as reflected in the financial statements certified by
Borrower's outside auditors and as set forth in the following
sentence. "Liabilities" shall consist of: (a) all items treated as
"liabilities" under GAAP; (b) any liabilities of other Persons that
are secured by a Lien on any asset of Borrower (whether or not such
liabilities have been assumed by Borrower); and, to the extent not
otherwise included, (c) Borrower's guaranty of any indebtedness of
any other Person. Notwithstanding anything to the contrary in this
paragraph or elsewhere in this Credit Agreement, the parties
acknowledge that "Liabilities" shall not include Borrower's "Trust
Preferred Securities," provided that such "Trust Preferred
Securities" are either approved by Lender in
2
<PAGE>
all respects or are: (i) issued by any wholly owned special purpose
statutory business trust of Borrower, where (x) the sole asset of
such business trust consists of bonds, debentures, or similar debt
obligations of Borrower with a principal amount in excess of the
total liquidation value of such preferred securities, and (y) the
distributions, redemption payments, and liquidation payments with
respect to such preferred securities are unconditionally and
irrevocably guarantied by Borrower; and (ii) accounted for on the
balance sheet of Borrower, prepared by Borrower's outside auditors,
in a separate line located between total liabilities and
shareholders equity in accordance with GAAP.
4. Notices.
Section 9.1 of the Credit Agreement is hereby amended by adding the
following before the sentence beginning "All Notices and other communications":
and a copy to:
BancOne Mortgage Capital Markets, LLC
1717 Main Street, Suite 1400
Dallas, Texas 75201
Attention: Martin Stadler
Telephone: (214) 290-3349
Telecopier: (214) 290-2664
5. Global Note.
5.1 On or before the date hereof, Borrower shall execute and
deliver to Lender an amendment to the Global Note in the form attached hereto as
Exhibit A (the "Note Amendment"). All references to the Global Note in the
Security Documents shall mean and refer to the Global Note as modified and
amended by the Note Amendment.
6. Principal Balance of Loan.
6.1 Borrower acknowledges that, as of June 22, 1998, the
outstanding principal balance of the Loan was $220,392,785.
7. Covenants, Representations and Warranties of Borrower.
7.1 Borrower hereby reaffirms all terms, covenants, representations
and warranties made in the Security Documents as amended hereby.
3
<PAGE>
7.2 Borrower hereby represents and warrants to the Lender that (a)
it has the legal power and authority to enter into this Amendment without
consent or approval by any third party and this Amendment constitutes the legal,
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms and (b) the execution and delivery by Borrower of this
Amendment has been duly authorized by all requisite action on the part of
Borrower and will not violate any provision of Borrower's organizational
documents.
7.3 Borrower hereby represents and warrants to the Lender that, as
of the date hereof, (a) no Default or Event of Default has occurred and is
continuing; (b) no Default or Event of Default will occur as a result of the
execution, delivery and performance by Borrower of this Amendment; (c) Borrower
has not given any notice of any uncured Default to Lender and (d) there are no
legal proceedings commenced or threatened against Lender by Borrower.
7.4 Borrower hereby confirms and acknowledges that Borrower has no
offsets, defenses, claims, counterclaims, setoffs, or other basis for reduction
with respect to any portion of the Indebtedness.
7.5 Borrower hereby agrees that a breach of any of the
representations and warranties made herein shall constitute an Event of Default
under Section 8.1 of the Credit Agreement, subject to the notice and cure
provisions provided therein.
8. Lender's Acknowledgment.
8.1 Lender acknowledges to Borrower that, as of the date hereof,
both before and after giving effect to this Amendment, to the best of Lender's
knowledge, Borrower is not in default with respect to its obligations under the
Credit Agreement and the Collateral Security Instruments.
9. Effect Upon Security Documents; Trustee Exculpation.
9.1 Except as specifically set forth herein, the Security Documents
shall remain in full force and effect and are hereby ratified and confirmed. The
parties hereto acknowledge and agree that the Credit Agreement, as hereby
amended, is in full force and effect in accordance with its terms and has not
been supplemented, modified or otherwise amended, canceled, terminated or
surrendered, except pursuant to this Amendment. The Credit Agreement is binding
and enforceable as against the parties hereto in accordance with its terms. Any
inconsistency between this Amendment and the Credit Agreement (as it existed
before this Amendment) shall be resolved in favor of this Amendment, whether or
not this Amendment specifically modifies the particular provision(s) in the
Credit Agreement inconsistent with this Amendment. All references to the "Credit
Agreement" in the Security Documents and to the "Agreement" in the Credit
Agreement shall mean and refer to the Credit Agreement as modified and amended
hereby.
4
<PAGE>
9.2 The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Lender under
the Security Documents (except to the extent expressly set forth herein), or any
other document, instrument or agreement executed and/or delivered in connection
therewith.
9.3 The provisions of this Amendment shall be subject to the
provisions of Section 9.13 of the Credit Agreement, which provisions are
incorporated by reference as if herein set forth in full.
10. Governing Law.
10.1 THIS AMENDMENT SHALL BE CONSTRUED, INTERPRETED AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PRINCIPLES.
11. Counterparts.
11.1 This Amendment may be executed in any number of counterparts,
and all such counterparts shall together constitute the same agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed as of the day and year first above written.
BORROWER:
--------
CAPITAL TRUST,
a California business trust
By: /s/ Edward L. Shugrue III
---------------------------------------------
Name: Edward L. Shugrue III
Title: Managing Director and Chief
Financial Officer
LENDER:
------
GERMAN AMERICAN CAPITAL
CORPORATION,
a Maryland corporation
By: /s/ Kenneth Gilison
---------------------------------------------
Name: Kenneth Gilison
Title: Vice President
By: Jon Vaccaro
---------------------------------------------
Name: Jon Vaccaro
Title: Vice President
Exhibit A Note Amendment
Exhibit 11.1
Capital Trust and Subsidiaries
Form 10-Q
Statement Regarding Computation of Earnings (Loss) per Share
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998 Six Months Ended June 30, 1997
----------------------------------------------- ----------------------------------------------
Net Income Shares Per Share Net Loss Shares Per Share
Amount Amount
----------------- ----------------------------- ---------------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net Income per Class A
Common Share $ 6,129,000 18,218,835 $ 0.34 $ (860,000) 9,157,150 $ (0.09)
============ ===========
Effect of Dilutive
Securities
Options outstanding for
the purchase of Class
A Common Stock - 257,669 - -
Convertible Class A
Preferred Stock 1,568,000 12,267,658 - -
----------------- ----------------- ---------------- -----------------
Diluted EPS:
Net Income per Class A
Common Share and
Assumed Conversions $ 7,697,000 30,744,162 $ 0.25 $ (860,000) 9,157,150 $ (0.09)
================= ============================= ================ ================= ===========
Three Months Ended June 30, 1998 Three Months Ended June 30, 1997
----------------------------------------------- ----------------------------------------------
Net Income Shares Per Share Net Loss Shares Per Share
Amount Amount
----------------- ----------------------------- ---------------- ----------------- -----------
Basic EPS:
Net Income per Class A
Common Share $ 4,240,000 18,229,650 $ 0.23 $ (352,000) 9,157,150 $ (0.04)
============ ===========
Effect of Dilutive
Securities
Options outstanding for
the purchase of Class
A Common Stock - 273,259 - -
Convertible Class A
Preferred Stock 784,000 12,267,658 - -
----------------- ----------------- ---------------- -----------------
Diluted EPS:
Net Income per Class A
Common Share and
Assumed Conversions $ 5,024,000 30,770,567 $ 0.16 $ (352,000) 9,157,150 $ (0.04)
================= =============== ============= ================ ================= ===========
</TABLE>
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27.1
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL EXTRACTED FROM THE FINANCIAL STATEMENTS
OF CAPITAL TRUST FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,804
<SECURITIES> 67,688
<RECEIVABLES> 547,232
<ALLOWANCES> 1,702
<INVENTORY> 0
<CURRENT-ASSETS> 13,738
<PP&E> 691
<DEPRECIATION> 190
<TOTAL-ASSETS> 637,261
<CURRENT-LIABILITIES> 8,758
<BONDS> 479,448
12,268
0
<COMMON> 18,229
<OTHER-SE> 118,558
<TOTAL-LIABILITY-AND-EQUITY> 637,261
<SALES> 0
<TOTAL-REVENUES> 31,373
<CGS> 0
<TOTAL-COSTS> 17,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,240
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,956
<INCOME-TAX> 5,259
<INCOME-CONTINUING> 7,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,697
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.25
</TABLE>
