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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1993 Commission File Number 1-10521
CITY NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
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<CAPTION>
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Delaware 95-2568550
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 North Roxbury Drive, Beverly Hills, California 90210
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (310) 550-5400
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, $1.00 par value New York Stock Exchange
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No securities are registered pursuant to Section 12(g) of the Act
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Number of shares of common stock outstanding at March 10, 1994: 45,038,721
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 10, 1994: $299,089,383
Documents Incorporated by Reference
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1. Pages 7 through 53 of the Annual Report to Shareholders for the year
ended December 31, 1993. (Part II of Form 10-K.)
2. Specified material on pages 2 through 13 and 19 through 22 of the
Notice of Annual Meeting and Proxy Statement dated March 18, 1994.
(Part III of Form 10-K.)
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PART I
ITEM 1. BUSINESS
City National Corporation (the Corporation) was organized in Delaware
in 1968 to acquire the outstanding capital stock of City National Bank (the
Bank). Because the Bank comprises substantially all of the business of the
Corporation, references to the "Company" reflect the consolidated activities of
the Corporation and the Bank. The Corporation owns all the outstanding shares
of the Bank.
The Bank, which was founded in 1953, conducts business in Southern
California and operates 19 banking offices in Los Angeles County, two in Orange
County, and one in San Diego County. In November 1993, the Bank closed one
office in Los Angeles County and announced a consolidation plan to improve
efficiency and operational productivity in its branch network. The
streamlining will involve closures of five additional branches in Los Angeles
County and one branch in Orange County, while also designating four of the
remaining locations as regional lending centers. The Bank expects to complete
the closures in early 1994.
The Bank primarily serves middle-market companies, professional and
business borrowers and associated individuals with commercial banking and
fiduciary needs. The Bank provides revolving lines of credit, term loans,
asset based loans, real estate secured loans, trade facilities, and deposit,
cash management and other business services. Real estate construction lending
has been substantially curtailed since late 1990. The Bank also operates an
Investment Management and Trust Services Division offering personal, employee
benefit and corporate trust and estate services, and deals in money market and
other investments for its own account and for its customers. The Bank offers
mutual funds and residential home mortgages in association with other
companies.
Effective January 1, 1991, the Bank entered into an agreement to
subcontract with Systematics, Inc. (now Systematics Financial Services, Inc.)
for applications software, computer operations and integration services. In
December 1992, the Bank entered into an agreement to sell its data processing
business, City National Information Services (CNIS), to Systematics, Inc. for
$12.0 million. A pretax gain of $10.8 million, which is net of certain
software licensing payments and programming expenses shared with Systematics,
Inc. was recognized at closing, June 1, 1993.
Effective January 1, 1993, the Bank sold its merchant credit card
processing business and customer contracts to NOVA Information Systems, Inc.,
for $1.9 million.
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Competition
The banking business is highly competitive. The Bank competes with
domestic and foreign banks for deposits, loans and other banking business. In
addition, other financial intermediaries, such as savings and loans, money
market mutual funds, credit unions and other financial services companies,
compete with the Bank.
Non-depository institutions can be expected to increase the extent to
which they act as financial intermediaries. Large institutional users and
sources of credit may also increase the extent to which they interact directly,
meeting business credit needs outside the banking system. Furthermore, the
geographic constraints on portions of the financial services industry can be
expected to continue to erode.
Monetary Policy
The earnings of the Bank are affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities in the U.S. and abroad. In particular, the Board of Governors of
the Federal Reserve System (Federal Reserve Board) exerts a substantial
influence on interest rates and credit conditions, primarily through open
market operations in U.S. government securities, varying the discount rate on
member bank borrowings and setting reserve requirements against deposits.
Federal Reserve Board monetary policies have had a significant effect on the
operating results of financial institutions in the past and are expected to
continue to do so in the future.
SUPERVISION AND REGULATION
Bank holding companies, banks and their non-bank affiliates are
extensively regulated under both federal and state law. The following is not
intended to be an exhaustive description of the statutes and regulations
applicable to the Corporation's or the Bank's business. The description of
statutory and regulatory provisions is qualified in its entirety by reference
to the particular statutory or regulatory provisions.
Moreover, major new legislation and other regulatory changes affecting
the Corporation, the Bank, banking and the financial services industry in
general have occurred in the last several years and can be expected to occur in
the future. The nature, timing and impact of new and amended laws and
regulations cannot be accurately predicted.
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Bank Holding Companies
Bank holding companies are regulated under the Bank Holding Company
Act (BHC Act) and are supervised by the Federal Reserve Board. Under the BHC
Act, the Corporation files reports of its operations with the Federal Reserve
Board and is subject to examination by it.
The BHC Act requires, among other things, the Federal Reserve Board's
prior approval whenever a bank holding company proposes to (i) acquire all or
substantially all the assets of a bank, (ii) acquire direct or indirect
ownership or control of more than 5% of the voting shares of a bank, or (iii)
merge or consolidate with another bank holding company. The Federal Reserve
Board may not approve an acquisition, merger or consolidation that would result
in or further a monopoly, or may substantially lessen competition in any
section of the country, or in any other manner would be in restraint of trade,
unless the anticompetitive effects of the proposed transaction are clearly
outweighed by the convenience and needs of the community.
The BHC Act prohibits the Federal Reserve Board from approving a bank
holding company's application to acquire a bank or bank holding company located
outside the state where its banking subsidiaries' operations are principally
conducted, unless such acquisition is specifically authorized by statute of the
state where the bank or bank holding company to be acquired is located.
California law permits bank holding companies in other states to acquire
California banks and bank holding companies, provided the acquiring company's
home state has enacted "reciprocal" legislation that expressly authorizes
California bank holding companies to acquire banks or bank holding companies in
that state on terms and conditions substantially no more restrictive than those
applicable to such an acquisition in California by a bank holding company from
the other state.
The BHC Act also prohibits a bank holding company, with certain
exceptions, from acquiring more than 5% of the voting shares of any company
that is not a bank and from engaging in any activities without the Federal
Reserve Board's prior approval other than (1) managing or controlling banks and
other subsidiaries authorized by the BHC Act, or (2) furnishing services to, or
performing services for, its subsidiaries. The BHC Act authorizes the Federal
Reserve Board to approve the ownership of shares in any company, the activities
of which have been determined to be so closely related to banking or to
managing or controlling banks as to be a proper incident thereto. The Federal
Reserve Board has by regulation determined that certain activities are closely
related to banking within the meaning of the BHC Act.
Consistent with its "source of strength" policy (see "Capital Adequacy
Requirements," below), the Federal Reserve Board has stated that, as a matter
of prudent banking, a bank holding
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company generally should not pay cash dividends unless its net income available
to common shareholders has been sufficient to fund fully the dividends, and the
prospective rate of earnings retention appears consistent with the company's
capital needs, asset quality and overall financial condition. The Corporation
ceased paying dividends in the third quarter of 1991. Dividend payments are
expected to resume, based on achieved earnings, and when the Board of Directors
determines that such payments are consistent with the long-term objectives of
the Corporation.
A bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with the extension of
credit.
The Federal Reserve Board may, among other things, issue
cease-and-desist orders with respect to activities of bank holding companies
and nonbanking subsidiaries that represent unsafe or unsound practices or
violate a law, administrative order or written agreement with a federal banking
regulator. The Federal Reserve Board can also assess civil money penalties
against companies or individuals who violate the BHC Act or other federal laws
or regulations, order termination of nonbanking activities by nonbanking
subsidiaries of bank holding companies and order termination of ownership and
control of a nonbanking subsidiary by a bank holding company.
National Banks
The Bank is a national bank and, as such, is subject to supervision
and examination by the Office of the Comptroller of the Currency (OCC) and
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged,
and limitations on the types of investments that may be made and services that
may be offered. Various consumer laws and regulations also affect the Bank's
operations. These laws primarily protect depositors and other customers of the
Bank, rather than the Corporation and its shareholders. The laws and
regulations affecting the Bank were significantly altered and augmented by the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).
"Brokered deposits" are deposits obtained by a bank from a "deposit
broker" or that pay above-market rates of interest. Under FDICIA, only a well
capitalized depository institution may accept brokered deposits without the
prior approval of the Federal Deposit Insurance Corporation (FDIC). Banks that
are not at least adequately capitalized cannot obtain such approval. For
purposes of this provision, the capital category definitions are similar, but
not identical, to the OCC's definitions of those categories for the purpose of
requiring prompt corrective action. See
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"Capital Adequacy Requirements," below. Although the Bank sought, and
received, the permission of the FDIC to accept brokered deposits in 1993, no
such deposits have in fact been accepted.
The Corporation's principal asset is its investment in, and its loans
and advances to, the Bank. Bank dividends are one of the Corporation's
principal sources of liquidity. The Bank's ability to pay dividends is limited
by certain statutes and regulations. OCC approval is required for a national
bank to pay a dividend if the total of all dividends declared in any calendar
year exceeds the total of the bank's net profits (as defined) for that year
combined with its retained net profits for the preceding two calendar years,
less any required transfer to surplus. A national bank may not pay any
dividend that exceeds its net profits then on hand after deducting its loan
losses and bad debts, as defined by the OCC. The OCC and the Federal Reserve
Board have also issued banking circulars emphasizing that the level of cash
dividends should bear a direct correlation to the level of a national bank's
current and expected earnings stream, the bank's need to maintain an adequate
capital base and other factors. National banks that are not in compliance with
regulatory capital requirements generally are not permitted to pay dividends.
The OCC also can prohibit a national bank from engaging in an unsafe
or unsound practice in its business. Depending on the bank's financial
condition, payment of dividends could be deemed to constitute an unsafe or
unsound practice. Under FDICIA, a bank may not, except under certain
circumstances and with prior regulatory approval, pay a dividend if, after so
doing, it would be undercapitalized. The Bank's ability to pay dividends in
the future is, and could be further, influenced by regulatory policies or
agreements and by capital guidelines. The Bank ceased paying dividends in the
second quarter of 1991. Dividend payments were also restricted in 1993 by the
terms of the Bank's Agreement with the OCC, which was terminated on January 21,
1994. See "Regulatory Agreements," below. Dividend payments are expected to
resume, based on achieved earnings, and when the Board of Directors of the Bank
determine that such payments are consistent with the long-term objectives of
the Bank.
The Bank's ability to make funds available to the Corporation is also
subject to restrictions imposed by federal law on the Bank's ability to extend
credit to the Corporation to purchase assets from it, to issue a guarantee,
acceptance or letter of credit on its behalf (including an endorsement or
standby letter of credit), to invest in its stock or securities, or to take
such stock or securities as collateral for loans to any borrower. Such
extensions of credit and issuances generally must be secured and are generally
limited, with respect to the Corporation, to 10% of the Bank's capital stock
and surplus.
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The Bank is insured by the FDIC and therefore is subject to its
regulations. Among other things, FDICIA provided authority for special
assessments against insured deposits and required the FDIC to develop a general
risk-based assessment system. The insurance assessment is set forth in a
schedule issued by the FDIC that specifies, at semiannual intervals, target
reserve ratios for the Bank Insurance Fund designed to increase to at least
1.25% of estimated insured deposits in 15 years. During 1992, the assessment
rate for all banks was 0.23% of the average assessment base. However, in
October 1992, the FDIC adopted a risk-based assessment system under which
insured institutions will be assigned to one of nine categories, based on
capital levels and degree of supervisory concern. Depending on its category
(which may not be disclosed without the permission of the FDIC), a bank's
assessment now ranges from 0.23% to 0.31% of the base, effective January 1,
1993. Due to declines in total deposits, the increases in FDIC insurance
assessment rates that became effective in July 1, 1992 and January 1, 1993 did
not result in an increase in FDIC insurance assessment expense.
FDICIA also contains numerous other regulatory requirements. Annual
examinations are required for all insured depository institutions by the
appropriate federal banking agency, with some exceptions. In December 1992,
the Federal Reserve Board issued regulations under FDICIA requiring
institutions to adopt policies limiting their exposure to correspondent
institutions in relation to the correspondent's financial condition and, in
particular, to limit exposure to any correspondent that is not adequately
capitalized, as defined, to not more than 25% of the exposed institution's
total capital. FDICIA also requires the banking agencies to review and, under
certain circumstances, prescribe more stringent accounting and reporting
standards than required by generally accepted accounting principles. In
addition, FDICIA contains a number of consumer banking provisions, including
disclosure requirements and substantive contractual limitations with respect to
deposit accounts.
Under FDICIA, institutions other than small institutions must prepare
a management report stating management's responsibility for preparing the
institution's annual financial statements, complying with designated safety and
soundness laws and regulations and other related matters. The report also must
contain an assessment by management of the effectiveness of internal controls
over financial reporting and of the institution's compliance with designated
laws and regulations. The institution's independent public accountant must
examine, attest to, and report separately on, the assertions of management
concerning internal controls over financial
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reporting and must apply procedures agreed to by the FDIC to test compliance by
the institution with designated laws and regulations concerning loans to
insiders and dividend restrictions.
Banks and bank holding companies are also subject to the Community
Reinvestment Act of 1977, as amended (CRA). CRA requires the Bank to ascertain
and meet the credit needs of the communities it serves, including low- and
moderate-income neighborhoods. The Bank's compliance with CRA is reviewed and
evaluated by the OCC, which assigns the Bank a publicly available CRA rating at
the conclusion of the examination. Further, an assessment of CRA compliance is
also required in connection with applications for OCC approval of certain
activities, including establishing or relocating a branch office that accepts
deposits or merging or consolidating with, or acquiring the assets or assuming
the liabilities of, a federally regulated financial institution. An
unfavorable rating may be the basis for OCC denial of such an application, or
approval may be conditioned upon improvement of the applicant's CRA record. In
the case of a bank holding company applying for approval to acquire a bank or
other bank holding company, the Federal Reserve Board will assess the CRA
record of each subsidiary bank of the applicant, and such records may be the
basis for denying the application.
In the most recent completed examination, conducted in 1993, the OCC
assigned the Bank a rating of "Satisfactory," the second highest of four
possible ratings. From time to time, banking legislation has been proposed
that would require consideration of the Bank's CRA rating in connection with
applications by the Corporation or the Bank to the Federal Reserve Board or the
OCC for permission to engage in additional lines of business. The Corporation
cannot predict whether such legislation will be adopted, or its effect upon the
Bank and the Corporation if adopted. The federal regulatory agencies recently
issued proposed revisions to the rules governing CRA compliance. The proposed
rules are intended to simplify CRA compliance evaluations by establishing
performance-based criteria. The regulatory agencies have extended the time for
comment on, and consideration of, the proposed rules, and management is unable
to predict when, or in what form, such rules will be adopted, or the effect of
the rules on the Bank's CRA rating.
The OCC has enforcement powers with respect to national banks for
violations of federal laws or regulations that are similar to the powers of the
Federal Reserve Board with respect to bank holding companies and nonbanking
subsidiaries. See "Bank Holding Companies," above.
On December 21, 1993, an interagency policy statement was issued on
the allowance for loan and lease losses (the Policy Statement). The Policy
Statement requires that federally-insured depository institutions maintain an
allowance for loan and lease losses (ALLL) adequate to absorb
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credit losses associated with the loan and lease portfolio, including all
binding commitments to lend. The Policy Statement defines an adequate ALLL as
a level that is no less than the sum of the following items, given the
appropriate facts and circumstances as of the evaluation date:
(1) For loans and leases classified as substandard or doubtful,
all credit losses over the remaining effective lives of
those loans.
(2) For those loans that are not classified, all estimated
credit losses forecast for the upcoming twelve months.
(3) Amounts for estimated losses from transfer risk on
international loans.
Additionally, the Policy Statement provides that an adequate level of
ALLL should reflect an additional margin for imprecision inherent in most
estimates of expected credit losses.
The Policy Statement also provides guidance to examiners in evaluating
the adequacy of a bank's ALLL. Among other things, the Policy Statement
directs examiners to check the reasonableness of ALLL methodology by comparing
the reported ALLL against the sum of the following amounts:
(a) 50 percent of the portfolio that is classified doubtful.
(b) 15 percent of the portfolio that is classified substandard;
and
(c) For the portions of the portfolio that have not been
classified (including those loans designated special
mention), estimated credit losses over the upcoming twelve
months given the facts and circumstances as of the
evaluation date (based on the institutions's average annual
rate of net charge-offs experienced over the previous two or
three years on similar loans, adjusted for current
conditions and trends).
The Policy Statement specifies that the amount of ALLL determined by
the sum of the amounts above is neither a floor nor a "safe harbor" level for
an institution's ALLL. However, it is expected that examiners will review a
shortfall relative to this amount as indicating a need to more closely review
management's analysis to determine whether it is reasonable, supported by the
weight of reliable evidence and that all relevant factors have been
appropriately considered. The Company has reviewed the Policy Statement and
believes that it will not have a material impact on the level of the Company's
allowances for loan losses.
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Capital Adequacy Requirements
Both the Federal Reserve Board and the OCC have adopted similar, but
not identical, "risk-based" and "leverage" capital adequacy guidelines for bank
holding companies and national banks, respectively. Under the risk-based
capital guidelines, different categories of assets are assigned different risk
weights, ranging from zero percent for risk-free assets (e.g., cash) to 100%
for relatively high-risk assets (e.g., commercial loans). These risk weights
are multiplied by corresponding asset balances to determine a risk-adjusted
asset base. Certain off-balance sheet items (e.g., standby letters of credit)
are added to the risk-adjusted asset base. The minimum required ratio of total
capital to risk-weighted assets for both bank holding companies and national
banks is presently 8%. At least half of the total capital is required to be
"Tier 1 capital," consisting principally of common shareholders' equity, a
limited amount of perpetual preferred stock and minority interests in the
equity accounts of consolidated subsidiaries, less certain goodwill items. The
remainder (Tier 2 capital) may consist of a limited amount of subordinated
debt, certain hybrid capital instruments and other debt securities, preferred
stock and a limited amount of the general loan-loss allowance. As of December
31, 1993, the Corporation had a ratio of Tier 1 capital to risk-weighted assets
(Tier 1 risk-based capital ratio) of 15.75% and a ratio of total capital to
risk-weighted assets (total risk-based capital ratio) of 17.06%, while the Bank
had a Tier 1 risk-based capital ratio of 14.78% and a total risk-based capital
ratio of 16.09%.
The minimum Tier 1 leverage ratio, consisting of Tier 1 capital to
average adjusted total assets, is 3% for bank holding companies and national
banks that have the highest regulatory examination rating and are not
contemplating significant growth or expansion. All other bank holding
companies and national banks are expected to maintain a ratio of at least 1% to
2% or more above the stated minimum. As of December 31, 1993, the Corporation
had a Tier 1 leverage ratio of 9.95%, and the Bank's Tier 1 leverage ratio was
9.38%.
The OCC has adopted regulations under FDICIA establishing capital
categories for national banks and prompt corrective actions for
undercapitalized institutions. The regulations create five capital categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized. The following table shows
the minimum total risk-based capital, Tier 1 risk- based capital and Tier 1
leverage ratios, all of which must be satisfied for a bank to be classified as
well capitalized, adequately capitalized or undercapitalized, respectively,
together with the Bank's ratios at December 31, 1993:
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Minimum total Minimum Tier 1 Minimum
risk-based risk-based Tier 1
capital ratio capital ratio leverage ratio
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Well capitalized(1) 10.00% 6.00% 5.00%
Adequately capitalized 8.00% 4.00% 4.00%(2)
Undercapitalized 6.00% 4.00% 3.00%
City National Bank
(at December 31, 1993) 16.09% 14.78% 9.38%
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(1) A bank may not be classified as well capitalized if it is subject to a
specific agreement with the OCC to meet and maintain a specified level of
capital.
(2) 3% for institutions having a composite rating of "1" in the most recent OCC
examination.
If any one or more of a bank's ratios are below the minimum ratios
required to be classified as undercapitalized, it will be classified as
substantially undercapitalized or, if in addition its ratio of tangible equity
to total assets is 2% or less, it will be classified as critically
undercapitalized. A bank may be reclassified by the OCC to the next level
below that determined by the criteria described above if the OCC finds that it
is in an unsafe or unsound condition or if it has received a
less-than-satisfactory rating for any of the categories of asset quality,
management, earnings or liquidity in its most recent examination and the
deficiency has not been corrected, except that a bank cannot be reclassified as
critically undercapitalized for such reasons.
Under FDICIA and its implementing regulations, the OCC may subject
national banks to a broad range of restrictions and regulatory requirements. A
national bank may not pay management fees to any person having control of the
institution, nor, except under certain circumstances and with prior regulatory
approval, make any capital distribution if, after doing so, it would be
undercapitalized. Undercapitalized banks are subject to increased monitoring
by the OCC, are restricted in their asset growth, must obtain regulatory
approval for certain corporate activities, such as acquisitions, new branches
and new lines of business, and, in most cases, must submit to the OCC a plan to
bring their capital levels to the minimum required in order to be classified as
adequately capitalized. The OCC may not approve a capital restoration plan
unless the bank's holding company guarantees that the bank will comply with it.
Significantly and critically undercapitalized banks are subject to additional
mandatory and discretionary restrictions and, in the case of critically
undercapitalized institutions, must be placed into conservatorship or
receivership unless the OCC and the FDIC agree otherwise.
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial strength to its subsidiary banks and to commit
resources to support each such
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bank. In addition, a bank holding company is required to guarantee that its
subsidiary bank will comply with any capital restoration plan required under
FDICIA. The amount of such a guarantee is limited to the lesser of (i) 5% of
the bank's total assets at the time it became undercapitalized, or (ii) the
amount which is necessary (or would have been necessary) to bring the bank into
compliance with all applicable capital standards as of the time the bank fails
to comply with the capital restoration plan. A guaranty by the Corporation of
a capital restoration plan for the Bank would result in a priority claim to the
Corporation's assets ahead of the Corporation's other unsecured creditors and
shareholders that would be enforceable even in the event of the Corporation's
bankruptcy or the Bank's insolvency.
Regulatory Agreements
On November 18, 1992, the Bank entered into a written agreement with
the OCC (the Agreement) with respect to capital and other matters described
below, which replaced a memorandum of understanding dated June 26, 1991,
between the Bank and the OCC. The Agreement required the Bank to generate
through internal and external sources a minimum of $65 million in Tier 1
capital by June 30, 1993, so as to maintain a Tier 1 risk-based capital ratio
of at least 10% and a Tier 1 leverage ratio of at least 7%. In June 1993, the
Corporation completed an offering and sale of 12.7 million shares of common
stock (the Offering) at a price of $6.375 per share. The gross proceeds of the
Offering were $81.1 million before expenses of the issuance of $4.6 million.
Upon completion of the Offering, the Corporation contributed $65 million in
capital to the Bank to comply with the $65 million capital - raising
requirement in the Agreement with the OCC.
The Agreement also required the Bank to develop a three-year capital
plan and a three-year business plan and continue to improve its policies and
procedures in the lending and credit administration areas. Each of these
requirements was successfully met prior to December 31, 1993. As a result, on
January 21, 1994, the OCC lifted the Agreement.
On February 24, 1993, the Corporation entered into a memorandum of
understanding with the Federal Reserve Bank of San Francisco. The memorandum
of understanding required the Corporation to submit to the Federal Reserve Bank
a summary of measures to improve the Bank's financial condition and ensure the
Bank's compliance with the Agreement, a plan to ensure the Corporation's
maintenance of adequate consolidated capital levels commensurate with its risk
profile, and quarterly progress reports. Under the memorandum of
understanding, the Corporation
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was required to give prior notice to the Federal Reserve Bank of the
declaration of any cash dividends or the incurrence of debt, other than
operating expenses, and the Corporation was not permitted to repurchase any of
its outstanding stock without the Federal Reserve Bank's prior approval. In
February 1994, the Federal Reserve Bank of San Francisco notified the
Corporation that the memorandum of understanding was lifted.
ITEM 2. PROPERTIES
The Company has its principal offices in the City National Bank
Building, 400 North Roxbury Drive, Beverly Hills, California 90210, which the
Bank owns and occupies. As of December 31, 1993, the Bank and its subsidiaries
actively maintained premises composed of 22 banking offices, a computer center,
a regional data capture center, a warehouse, and certain other properties.
Since 1967, the Bank's Pershing Square Regional Office and a number of
Bank departments have been the major tenant of the office building located at
600 South Olive Street in downtown Los Angeles. The building was originally
developed and built by a partnership between a wholly-owned subsidiary of the
Bank, Citinational Bancorporation, and Buckeye Construction Co. and Buckeye
Realty and Management Corporation (two corporations then affiliated with Mr.
Bram Goldsmith, Chairman of the Board and Chief Executive Officer of the
Corporation and the Bank); since its completion, the building has been owned by
Citinational-Buckeye Building Co., a limited partnership of which Citinational
Bancorporation and Olive-Sixth Buckeye Co. are the only general partners, each
with a 29% partnership interest. Citinational Bancorporation has an additional
3% interest as a limited partner of Citinational-Buckeye Building Co.; the
remainder is held by other, unaffiliated limited partners. Olive-Sixth Buckeye
Co. is a limited partnership of which Mr. Goldsmith is a 49% general partner;
therefore, Mr. Goldsmith has an indirect 14% ownership interest in
Citinational-Buckeye Building Co. The remaining general partner and all
limited partners of Olive-Sixth Buckeye Co. are not affiliated with the
Corporation. Since 1990, Citinational-Buckeye Building Co. has managed the
building, which is expected to require capital investment of approximately $2.2
million over the next four years, the source of which is uncertain.
The major encumbrance on real properties owned directly by the Bank or
its subsidiaries is a deed of trust on the 600 South Olive Street building,
securing a note in favor of City National Bank on which the unpaid balance at
December 31, 1993, was $16,650,842.
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The Bank's subsidiary, Citinational Bancorporation, also owns two
buildings located on Olympic Boulevard in downtown Los Angeles, approximately
80,000 square feet of which is subject to a lease between Citinational
Bancorporation and Systematics Financial Services, Inc., that expires on
December 31, 2000.
Twenty additional branch locations throughout Southern California are
leased by the Bank at annual rentals (exclusive of operating charges and real
property taxes) of approximately $4,500,000, with expiration dates ranging from
1994 to 2016, exclusive of renewal options. The Northridge earthquake of
January 17, 1994, resulted in damage to several of the Bank's facilities, of
which two remain closed. Of these, one will be closed permanently as part of
the Bank's branch restructuring, and the Bank is negotiating for alternate
facilities to replace the other.
ITEM 3. LEGAL PROCEEDINGS
The Corporation and its subsidiaries are defendants in various pending
lawsuits claiming substantial amounts. Based on present knowledge, management
and in-house counsel are of the opinion that the final outcome of such lawsuits
will not have a material adverse effect upon the financial position or the
future results of its operations.
The Company is not aware of any material proceedings to which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of the voting securities of the Company, or any
associate of any such director, officer or security holder is a party adverse
to the Company or any of its subsidiaries or has a material interest adverse to
the Company or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no submission of matters to a vote of security holders
during the fourth quarter of the year ended December 31, 1993.
-13-
<PAGE> 15
EXECUTIVE OFFICERS OF THE REGISTRANT
Shown below are names and ages of all executive officers of the
Corporation and officers of the Bank who may be deemed to be executive officers
of the Corporation, with indication of all positions and offices with the
Corporation and the Bank. There was no family relationship among the executive
officers.
<TABLE>
<CAPTION>
Capacities in which served:
Present principal occupation and principal
Name Age occupation during the past five years
- ---------------- --- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Bram Goldsmith 71 Chairman of the Board and Chief Executive Officer, City National Bank and City National Corporation
George H. Benter, Jr. 52 President and Chief Operating Officer, City National Bank, since May, 1992; President, City National
Corporation, since February 1993; Vice Chairman and Chief Credit Officer, Security Pacific
Corporation (1991 to 1992), Vice Chairman, Security Pacific National Bank, prior to 1991
Steven D. Broidy 56 Vice Chairman and Chief Administrative Officer, City National Bank, since May 1992; Vice Chairman, City
National Corporation, since February 1993; Partner, Loeb and Loeb, October 1988 to 1992
Frank P. Pekny 50 Executive Vice President and Chief Financial Officer, City National Bank, since October 1992;
Executive Vice President and Treasurer/Chief Financial Officer, City National Corporation, since
December 1992; Executive Vice President, BankAmerica Corporation, April 1992 to September 1992;
Executive Vice President, Security Pacific Corporation, October 1990 to April 1992; Vice Chairman and
Chief Financial Officer, Security Pacific National Bank, October 1988 to April 1992
Charles D. Kenny 48 Executive Vice President, Secretary and General Counsel, City National Bank, since September 1992; and
Manager, Investment Management and Trust Services since October 1993; Executive Vice President,
Secretary and General Counsel, City National Corporation, since February 1993; Managing Director and
Chief Administrative Officer, World Cup U.S.A. 1994, Inc., June 1991 to September 1992; Executive
Vice President, Sanwa Bank California, January 1991 to June 1991, Executive Vice President, General
Counsel and Secretary, Union Bank, prior to June 1991
</TABLE>
-14-
<PAGE> 16
<TABLE>
<CAPTION>
Capacities in which served:
Present principal occupation and principal
Name Age occupation during the past five years
- ---------------- --- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert A. Moore 51 Executive Vice President and Manager, Credit Services, City National Bank, since April 1992; Senior
Vice President and Chief Credit Officer, Corporate Banking Group, Security Pacific National Bank,
1991 to April 1992; Senior Vice President, Wells Fargo Bank, 1988 to 1991
Jeffery L. Puchalski 38 Executive Vice President and Senior Risk Management Officer, Risk Management, City National Bank from
November 1991; Principal, The Secura Group, national bank and thrift consulting firm, from August 1988
Heng W. Chen 41 Senior Vice President, Finance, City National Bank from August 1988; Assistant Treasurer, City National
Corporation from April 1991
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information regarding the market for the Corporation's Common
Stock and related stockholder matters appearing under the caption "Market Data
on Shares of Common Stock" on page 33 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1993, is incorporated by reference
in this Annual Report on Form 10-K. Information regarding restrictions on the
Corporation's payment of dividends appearing under "Capital" and Note 12 to the
consolidated financial statements of the Company and its subsidiaries,
appearing on pages 20 and 49 respectively of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1993, are hereby incorporated by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended December 31,
1993, appearing under "Selected Financial Information" on page 7 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
1993, is incorporated by reference in this Annual Report on Form 10-K.
-15-
<PAGE> 17
The Corporation's dividend payout ratio for 1990 and 1989 was 47.4%
and 31.0%, respectively. Due to the Corporation's loss in 1991, the dividend
payout ratio for 1991 is not meaningful. The Corporation did not pay any
dividends in 1993 or 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item appearing on pages 8 through 33
of the Corporation's Annual Report to Shareholders for the year ended December
31, 1993, is incorporated by reference in this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Corporation and its
subsidiaries and the notes thereto, and the condensed financial statements of
the registrant (the Corporation), together with the report thereon of KPMG Peat
Marwick dated January 21, 1994, appearing on pages 35 through 53, and the
supplementary data under "1993 Quarterly Operating Results" and "1992 Quarterly
Operating Results" on page 34 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1993, together with the report of
Price Waterhouse dated January 13, 1993, are incorporated by reference in this
Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this item appearing in Item 4 of the
Registrant's Form 8-K/A dated August 25, 1993 is incorporated by reference in
this Annual Report on Form 10-K. There were no disagreements with accountants
on accounting and financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
To the extent not provided above, the information required by this
item appearing under the captions "Election of Directors" and "Compliance With
Section 16(a) of Securities Exchange Act of 1934" on pages 4 through 6 and 22
of the Registrant's Notice of Annual Meeting and Proxy Statement dated March
18, 1994, is incorporated by reference in this Form 10-K Annual Report. See
"Executive Officers of the Registrant," above.
-16-
<PAGE> 18
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item regarding executive compensation
appearing under the caption "Compensation of Directors and Executive Officers"
on pages 7 through 18 of the Registrant's Notice of Annual Meeting and Proxy
Statement dated March 18, 1994, is incorporated by reference in this Form 10-K
Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appearing under the captions
"Record Date and Number of Shares Outstanding; Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" on pages 2, 3 and 19
through 21 of the Registrant's Notice of Annual Meeting and Proxy Statement
dated March 18, 1994, is incorporated by reference in this Form 10-K Annual
Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appearing under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions with Management and Others" on page 14, 21 and 22 of the
Registrant's Notice of Annual Meeting and Proxy Statement dated March 18, 1994,
is incorporated by reference in this Form 10-K Annual Report.
-17-
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page in
Annual Report*
-------------
<S> <C> <C>
1. Financial Statements:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Consolidated Balance Sheet at December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . 36
Consolidated Statement of Operations for each of the
three years in the period ended December 31, 1993 . . . . . . . . . . . . . . . . . . . 37
Consolidated Statement of Cash Flows
for each of the three years in the period ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Consolidated Statement of Changes
in Shareholders' Equity for each of the three years
in the period ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . 39
Footnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-53
Condensed Balance Sheet (Parent Company)
at December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Condensed Statement of Operations (Parent Company) for each of the
three years in the period ended December 31, 1993 . . . . . . . . . . . . . . . . . . . 53
Condensed Statement of Cash Flows (Parent Company)
for each of the three years in the period
ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
*Incorporated by reference from the indicated pages of the 1993 Annual Report to Shareholders.
2. All other schedules and separate financial statements of 50% or less owned companies accounted for
by the equity method have been omitted because they are not applicable.
</TABLE>
-18-
<PAGE> 20
3. Exhibits (listed by numbers corresponding to Exhibit Table
of Item 601 in Regulation S-K)
<TABLE>
<CAPTION>
No.
--
<S> <C>
3.1 Certificate of Incorporation (This Exhibit is incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990.)
3.2 By-Laws, as amended to date
10.1 Data Processing Agreement by and between Systematics, Inc. and City National Bank dated January 1, 1991, as
amended (This Exhibit is incorporated by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.)
10.2 Employment Agreement made as of January 31, 1990, by and between Bram Goldsmith and City National Bank (This
Exhibit is incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December
31, 1991.)
10.2.1 Description of amendments of Bram Goldsmith employment agreement effective September 1, 1992 (This exhibit
is incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31,
1992.)
10.3 Split Dollar Life Insurance Agreement Collateral Assignment Plan between City National Bank and the Goldsmith
1980 Insurance Trust, dated as of June 13, 1980, as amended to date (This Exhibit is incorporated by
reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.)
10.4 Description of amendments to Bram Goldsmith employment agreement (This Exhibit is incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.)
10.5 Lease dated January 11, 1991, between Citinational-Buckeye Building Co. and City National Bank for rental of
space on the 14th floor on a month-to-basis, as amended (This Exhibit is incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991.)
10.6 Lease dated January 11, 1991, between Citinational-Buckeye Building Co. and City National Bank for rental of
space on the 20th floor until December 31, 1996, as amended (This Exhibit is incorporated by reference to the
Company's Annual Report in Form 10-K for the year ended December 31, 1991.)
</TABLE>
-19-
<PAGE> 21
<TABLE>
<CAPTION>
No.
--
<S> <C>
10.7 Lease dated September 30, 1991, between Citinational-Buckeye Building Co. and City National Bank for rental
of space on the 9th floor until December 31, 1996 (This Exhibit is incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.)
10.8 Lease dated March 6, 1991, between Citinational-Buckeye Building Co. and City National Bank for rental of
space on the 16th floor on a month-to-month basis, as amended (This Exhibit is incorporated by reference to
the Company's Annual Report in Form 10-K for the year ended December 31, 1991.)
10.10 City National Corporation 1985 Stock Option Plan, as amended to date (This Exhibit is incorporated by
reference to the Company's Annual Report in Form 10-K for the year ended December 31, 1991.)
10.11 Agreement By and Between City National Bank Beverly Hills, California and the Comptroller of the Currency,
dated November 18, 1992 (This Exhibit is incorporated by reference to the Registrant's Current Report in
Form 8-K dated November 18, 1992.)
10.11.1 Termination of the Formal Agreement, Office of the Comptroller of the Currency, dated January 21, 1994.
10.12 Memorandum of Understanding by and between City National Corporation and the Federal Reserve Bank of San
Francisco, dated February 24, 1993 (This exhibit is incorporated by reference to the Company's Annual Report
in Form 10-K for the year ended December 31, 1992.)
10.12.1 Letter from The Federal Reserve Bank of San Francisco to City National Bank dated February 23, 1994.
10.13 Asset Purchase Agreement by and between Systematics Financial Services, Inc. and City National Bank, dated
December 17, 1992 (This exhibit is incorporated by reference to the Company's Annual Report in Form 10-K for
the year ended December 31, 1992.)
10.14 Letter from City National Bank to George H. Benter, Jr., dated March 31, 1992 (This exhibit is incorporated
by reference to the Company's Annual Report in Form 10-K for the year ended December 31, 1992.)
</TABLE>
-20-
<PAGE> 22
<TABLE>
<CAPTION>
No.
--
<S> <C>
10.15 Letter from City National Bank to Steven D. Broidy, dated March 31, 1992 (This exhibit is incorporated by
reference to the Company's Annual Report in Form 10-K for the year ended December 31, 1992.)
10.17 Agreement by and among City National Corporation and the directors thereof, dated as of November 18, 1992
(This exhibit is incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.)
10.18 Asset Sale Agreement (Pool 1) by and between City National Bank as Seller and WHC-THREE Investors, L.P., as
Purchaser, dated November 1, 1993.
10.19 Asset Sale Agreement (Pools 2 Through 6) by and between City National Bank as Seller and WHC-THREE Investors,
L.P., as Purchaser, dated November 1, 1993.
10.20 Agreement for Separation From Employment and Release by and between Alexander L. Kyman and City National
Bank, dated November 3, 1993.
10.20.1 Letter from City National Bank to Alexander L. Kyman, dated November 3, 1993.
13 Pages 7 through 53 of Annual Report to Security Holders for the year ended December 31, 1993
13.1 Report of Price Waterhouse, dated January 13, 1993.
16 Letter from Price Waterhouse (This Exhibit is incorporated by reference to the Company's Current Report on
Form 8-K/A, dated August 25, 1993.)
21 Subsidiaries of the registrant
23.1 Consent of KMPG Peat Marwick
23.2 Consent of Price Waterhouse
</TABLE>
(b) During the calendar quarter ended December 31, 1993, the registrant
did not file any current reports on Form 8-K.
-21-
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
City National Corporation
-------------------------
(Registrant)
March 23, 1994 By /s/ Bram Goldsmith
------------------------
Bram Goldsmith, Chairman
of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------- ------------------------------ --------------
<S> <C> <C>
/s/ Bram Goldsmith Chairman of the Board, Chief March 23, 1994
- ----------------------------------- Executive Officer and Director
Bram Goldsmith
(Principal Executive Officer)
/s/ Frank P. Pekny Executive Vice President and March 23, 1994
- ----------------------------------- Treasurer/Chief Financial Officer
Frank P. Pekny
(Principal Financial Officer)
/s/ Heng W. Chen Assistant Treasurer March 23, 1994
- -----------------------------------
Heng W. Chen
(Principal Accounting Officer)
/s/ George H. Benter, Jr. President and Director March 23, 1994
- -----------------------------------
George H. Benter, Jr.
/s/ Steven D. Broidy Vice Chairman and Director March 23, 1994
- -----------------------------------
Steven D. Broidy
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C>
/s/ Richard L. Bloch Director March 23, 1994
- -----------------------------------
Richard L. Bloch
/s/ Mirion P. Bowers, M.D. Director March 23, 1994
- -----------------------------------
Mirion P. Bowers, M.D.
/s/ Stuart D. Buchalter Director March 23, 1994
- -----------------------------------
Stuart D. Buchalter
/s/ Russell D. Goldsmith Director March 23, 1994
- -----------------------------------
Russell D. Goldsmith
/s/ Burton S. Horwitch Director March 23, 1994
- -----------------------------------
Burton S. Horwitch
/s/ Charles E. Rickershauser, Jr. Director March 23, 1994
- -----------------------------------
Charles E. Rickershauser, Jr.
/s/ Edward Sanders Director March 23, 1994
- -----------------------------------
Edward Sanders
/s/ Andrea L. Van De Kamp Director March 23, 1994
- -----------------------------------
Andrea L. Van de Kamp
Director March 23, 1994
- -----------------------------------
Kenneth Ziffren
</TABLE>
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
3.2 By-Laws, as amended to date
10.11.1 Termination of the Formal Agreement, Office of the Comptroller of the Currency, dated January 21, 1994
10.12.1 Letter from The Federal Reserve Bank of San Francisco to City National Bank dated February 23, 1994.
10.18 Asset Sale Agreement (Pool 1) by and between City National Bank as Seller and WHC-THREE Investors, L.P., as
Purchaser, dated November 1, 1993.
10.19 Asset Sale Agreement (Pools 2 Through 6) by and between City National Bank as Seller and WHC-THREE Investors,
L.P., as Purchaser, dated November 1, 1993.
10.20 Agreement for Separation From Employment and Release by and between Alexander L. Kyman and City National Bank,
dated November 3, 1993.
10.20.1 Letter from City National Bank to Alexander L. Kyman, dated November 3, 1993.
13 Pages 7 through 53 of Annual Report to Security Holders for the year ended December 31, 1993.
13.1 Report of Price Waterhouse, dated January 13, 1993.
21 Subsidiaries of the registrant
23.1 Consent of KMPG Peat Marwick
23.2 Consent of Price Waterhouse
</TABLE>
<PAGE> 1
EXHIBIT 3.2
City National Corporation Bylaws
As amended to date
<PAGE> 2
EXHIBIT 3.2
CITY NATIONAL CORPORATION
BYLAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held in the City of Beverly Hills, State of California,
at such place as may be fixed from time to time by the board of directors, or
at such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders shall be held on
the third Tuesday of April, if not a legal holiday, and if a legal holiday,
then on the next secular day following at 4:00 P.M., or at such other date and
time as shall be designated from time to time by the board of directors and
stated in the notice of meeting, at which they shall elect by a plurality vote
a board of directors, and transact such other business as may be brought before
the meeting. (January 27, 1982)
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than fifty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in
<PAGE> 3
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be
called by the president or secretary at the request in writing of a majority of
the board of directors. Such request shall state the purpose or purposes of
the proposed meeting. (Amended January 22, 1986)
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten nor more then fifty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certification of incorporation. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides
for a longer period.
Section 11. Whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in connection with any
corporate action, by any provision of the statutes, the meeting and vote of
stockholders may be dispensed with if all of the stockholders who would have
been entitled to vote upon the action if such meeting were held shall consent
in writing to such corporate action being taken; or if the certificate of
incorporation authorizes the action to
2
<PAGE> 4
be taken with the written consent of the holders of less than all of the stock
who would have been entitled to vote upon the action if a meeting were held,
then on the written consent of the stockholders having not less than the
minimum percentage of the vote required by statute for the proposed corporate
action, and provided that prompt notice must be given to all stockholders of
the taking of corporate action without a meeting and by less than unanimous
written consent.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors which shall constitute
the whole board shall be not less than five nor more than twenty-five, all of
whom must be stockholders of this corporation. The first board shall consist
of three directors. Thereafter, within the limits above specified, the number
of directors shall be determined by resolution of the board of directors or by
the stockholders as provided in Section 1(b) below. The directors shall be
elected at the annual meeting of the stockholders, except as provided in
Section 2 of this ARTICLE, and each director elected shall hold office until
his successor is elected and qualified. (January 27, 1982)
Section 1. (b) Nominations for the election of directors may
be made by the board of directors or by any stockholder entitled to vote for
the election of directors. Such nominations other than by the board of
directors shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary of the Corporation
not less than 60 days prior to the first anniversary of the date of the last
meeting of the stockholders of the Corporation called for the election of
directors. (January 27, 1982)
Each notice shall set forth (i) the name, age, business
address and, if known, the residence address of each nominee proposed in such
notice; (ii) the principal occupation or employment of each such nominee; (iii)
the number of shares of stock of the Corporation which are beneficially owned
by such nominee and (iv) such other information as would be required by the
Federal Securities Law and the Rules and Regulations promulgated thereunder in
respect of an individual nominated as a director of the Corporation and for
whom proxies are solicited by the board of directors of the Corporation.
(January 27, 1982)
The Chairman of any meeting of stockholders may, if the fact
warrant, determine and declare to the meeting that a nomination was not in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded. (January 27, 1982)
Section 2. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at
the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), a Court of
competent jurisdiction
3
<PAGE> 5
may, upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed
by its board of directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time
be determined by the board.
Section 7. Special meetings of the board may be called by the
president on two days' notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of three directors.
Section 8. At all meetings of the board a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
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COMMITTEES OF DIRECTORS
Section 10. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Any such committee, to the extent provided in the resolution,
shall have and may exercise the powers of the board of directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
provided, however, that in the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the board of directors to
act at the meeting in the place of any such absent or disqualified member.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors.
Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any,
of attendance at each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
MANDATORY RETIREMENT
Section 13. All directors upon reaching the age of 72 years
shall thereupon be ineligible to stand for reelection to the Board and such
directorship shall automatically terminate effective upon the first to occur of
(a) resignation of such director pursuant to call therefor by the Chairman of
the Board; (b) the nomination and election to the Board of a successor or
replacement or (c) the attainment of such directors' 73rd birthday. The
provisions of this section shall apply to all present and future members of the
Board of Directors of this Association, except that such provisions shall not
apply to any contractual relationship relating to the employment or services of
any director with this Corporation or its subsidiary, City National Bank, that
may exist. January 24, 1979; February 28, 1990; January 22, 1992)
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these bylaws, notice is required to
be given to any director or stockholder,
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<PAGE> 7
it shall not be construed to mean personal notice, but such notice may be given
in writing, by mail addressed to such director or stockholder, at his address
as it appears on the records of the corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice is required to be given under
the provisions of the statues or of the certificate of incorporation or of
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by
the board of directors and shall be a chairman of the board, a president, a
vice president, a secretary and a chief financial officer/treasurer. The board
of directors may also choose additional vice presidents, and one or more
assistant secretaries and assistant chief financial officer/assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these bylaws otherwise provide. (Amended
January 12, 1977; December 16, 1992)
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a chairman of the board, a
president, one or more vice presidents, a secretary and a chief financial
officer/treasurer. (Amended January 12, 1977; December 16, 1992)
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board. (Amended January 12, 1977)
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors. (Amended January 12,
1977)
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualified. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy
occurring in any office of the corporation shall be filled by the board of
directors. (Amended January 12, 1977)
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board shall be the chief
executive officer of the corporation. He shall preside at all meetings of the
stockholders and the board of directors and shall be an ex-officio member of
all committees of the board of directors. (Amended January 12, 1977)
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<PAGE> 8
THE PRESIDENT
Section 7. The president shall, in the absence of the
chairman of the board, be the chief executive officer of the corporation and
shall preside at all meetings of stockholders and the board of directors. The
president shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice,
to the office of president, or imposed by these bylaws. He shall also have and
may exercise such further powers and duties as from time to time may be
conferred to or assigned to, him by the board of directors. (Amended January
12, 1977)
Section 8. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. (Amended
January 12, 1977)
THE VICE CHAIRMEN
Section 8.1 In the absence of the president or in the event
of his inability or refusal to act, the vice chairman (or in the event there be
more than one vice chairman, the vice chairmen in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The vice
chairmen shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe. (Amended April 20, 1993)
THE VICE PRESIDENTS
Section 9. In the absence of the president or any vice
chairman, if there be any, or in the event all are unable or refuse to act,
the vice president (or in the event there be more than one vice president, the
vice presidents in the order designated, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. Unless otherwise designated by the board of
directors, if there be vice presidents designated of different titles, the
relative authority shall first be executive vice president, then senior vice
president, and then vice president. The vice presidents shall perform such
other duties and have such other powers as the board of directors may from time
to time prescribe. (Amended January 12, 1977; April 20, 1993)
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the
board of directors or president, under whose supervision
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<PAGE> 9
he shall be. He shall have custody of the corporate seal of the corporation
and he, or an assistant secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature. (Amended January
12, 1977)
Section 11. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE CHIEF FINANCIAL OFFICER/TREASURER AND
ASSISTANT CHIEF FINANCIAL OFFICER/ASSISTANT TREASURERS
Section 12. The chief financial officer/treasurer shall have
the custody of the corporation funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all monies and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the board of directors. (Amended January 12, 1977; December 16, 1992)
Section 13. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as chief financial officer/treasurer and of the financial
condition of the corporation. (Amended January 12, 1977; December 16, 1992)
Section 14. If required by the board of directors, he shall
give the corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers money and other property
of whatever kind in his possession or under his control belonging to the
corporation. (Amended January 12, 1977)
Section 15. The assistant chief financial officer/assistant
treasurer, or if there shall be more than one, the assistant chief financial
officer/assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer/treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the chief financial officer/treasurer and shall perform such other duties
and have such other powers as the board of directors may from time to time
prescribe. (Amended January 12, 1977; December 16, 1992)
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ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice chairman of the board of directors, or the president
or a vice president and the chief financial officer/treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements, there may be set forth
on the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stock holder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. (Amended December 16, 1992)
Section 2. Where a certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or, (2) by a
registrar other than the corporation or its employee, any other signature on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
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certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
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ANNUAL STATEMENT
Section 3. The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other persons
or persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be the
calendar year. (Amended January 26, 1983)
SEAL
Section 6. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed
or new bylaws may be adopted by the stockholders or by the board of directors,
when such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting.
11
<PAGE> 1
EXHIBIT 10.11.1
Termination of the Formal Agreement,
Office of the Comptroller of the Currency,
dated January 21, 1994
<PAGE> 2
EXHIBIT 10.11.1
IN THE MATTER OF
CITY NATIONAL BANK
BEVERLY HILLS, CALIFORNIA
TERMINATION OF FORMAL AGREEMENT
UNITED STATES OF AMERICA
DEPARTMENT OF THE TREASURY
OFFICE OF THE COMPTROLLER OF
THE CURRENCY
<PAGE> 3
UNITED STATES OF AMERICA
DEPARTMENT OF THE TREASURY
OFFICE OF THE COMPTROLLER OF THE CURRENCY
IN THE MATTER OF )
CITY NATIONAL BANK )
BEVERLY HILLS, CALIFORNIA )
- -----------------------------------
TERMINATION OF THE FORMAL AGREEMENT
WHEREAS, in an effort to protect the depositors, other customers and
shareholders of the City National Bank, Beverly Hills, CA (BANK), and to ensure
the BANK's safe and sound operation, the BANK and the Comptroller of the
Currency of the United States of America (COMPTROLLER), entered into a Formal
Agreement, dated November 18, 1992; and
WHEREAS, the COMPTROLLER believes that the protection of the
depositors, other customers and shareholders of the BANK as well as its safe
and sound operation do not require the continued existence of said Formal
Agreement;
NOW, THEREFORE, the COMPTROLLER directs that the Formal Agreement
between the BANK and the COMPTROLLER be, and it hereby is, TERMINATED.
IN TESTIMONY WHEREOF, the undersigned, designated by the COMPTROLLER
as his authorized representative, has hereunto set his hand.
/s/ RUFUS O. BURNS, JR. 1-24-94
_______________________________ _______________________
Rufus O. Burns, Jr. Date
DISTRICT ADMINISTRATOR
Western District
or Designee
<PAGE> 1
EXHIBIT 10.12.1
Letter from The Federal Reserve Bank of San Francisco
to City National Bank dated February 23, 1994
<PAGE> 2
EXHIBIT 10.12.1
FEDERAL RESERVE BANK OF SAN FRANCISCO
101 MARKET STREET, SAN FRANCISCO, CALIFORNIA 94105
February 23, 1994
VIA HAND DELIVERY
- -----------------
Mr. Bram Goldsmith
Chairman of the Board
City National Corporation
400 North Roxbury Drive
Beverly Hills, California 90210
Dear Mr. Goldsmith:
This letter is in response to Executive Vice President and General
Counsel Charles D. Kenny's correspondence, dated January 24, 1994, addressed to
Vice President Terry S. Schwakopf. In that letter, Mr. Kenny requested that
the Memorandum of Understanding (MOU) dated February 24, 1993, between City
National Corporation and the Federal Reserve Bank of San Francisco be
terminated.
Accordingly, we hereby terminate the Memorandum of Understanding
effective the date of this letter, based upon:
1) our most recent review of key financial factors of the City
National Corporation as of December 31, 1993, which continue to reflect
favorable financial trends throughout the Corporation;
2) the Comptroller of the Currency's recent termination of its
formal agreement with the Corporation's subsidiary bank, City National Bank;
and
3) the Corporation's full compliance with the terms of the MOU.
If you have any questions, please feel free to contact me at (415)
974-2914 or Examining Officer Thomas J. Backer at (213) 974-2277.
Very truly yours,
/s/ Richard S. Campos
Richard S. Campos
Assistant Vice President
RSC:ml
<PAGE> 1
EXHIBIT 10.18
Asset Sale Agreement (Pool 1) by and between
City National Bank as Seller and
WHC-THREE Investors, L.P., as Purchaser,
dated November 1, 1993
<PAGE> 2
EXHIBIT 10.18
POOL 1
ASSET SALE AGREEMENT
BY AND BETWEEN
CITY NATIONAL BANK
AS SELLER
AND
WHC-THREE INVESTORS, L.P.
AS PURCHASER
DATED AS OF: NOVEMBER 1, 1993
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE OF THE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.1 PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.2 INITIAL PURCHASE PRICE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.3 MODIFICATIONS TO MORTGAGE LOAN AND REAL PROPERTY SCHEDULE . . . . . . . . . . . . . . . . 19
Section 2.4 FINANCING OF MORTGAGE LOANS AND REAL PROPERTY; SALE OF REAL PROPERTY . . . . . . . . . . 20
ARTICLE III DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.1 DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.2 DISTRIBUTION OF DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.1 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.2 TRANSFER AND RECORDATION TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.3 ESCROW ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.4 LIMITATIONS ON LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V DUE DILIGENCE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.1 DUE DILIGENCE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.2 DUE DILIGENCE REVIEW OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.3 SELLER'S COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.4 ACCEPTANCE OF ASSETS AND REMEDIES FOR DEFECTS . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.5 PROCEDURE IN RESPECT OF A STRUCTURAL DEFECT OR NATURAL CONDITION. . . . . . . . . . . . . 25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.1 PURCHASER'S REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.1 SURVIVING REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . 33
Section 7.2 DUE DILIGENCE REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . 35
Section 7.3 TERMINATION OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.4 SCOPE OF INVESTIGATION AND OTHER DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . 40
Section 7.5 ASSERTION OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VIII CERTAIN COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.1 SELLER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.1 MUTUAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.2 SELLER'S DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.3 PURCHASER'S CLOSING ITEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE X REPURCHASE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.1 MANDATORY REPURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.2 REPURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XI DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.1 PURCHASER'S DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.2 SELLER'S DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XII SUBSEQUENT DOCUMENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIII NOTICE OF MORTGAGOR CLAIMS OR LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIV FILES AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XV SALE OF REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XVI NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XVII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17.1 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17.2 RIGHTS CUMULATIVE; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17.3 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.4 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.5 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.6 PRIOR UNDERSTANDINGS; INTEGRATED AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.8 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.10 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.11 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.12 SELLER FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
ii
<PAGE> 5
TABLE OF EXHIBITS
<TABLE>
<S> <C> <C>
A. [ ] Mortgage Loan and Real Property Schedule
B. [ ] Asset Acceptance Certificate
C. [ ] Form of Assignment of Mortgage Loan
C-1. [ ] Assignment of Additional Collateral
D. [ ] Certificate of Defective Assets
E. [ ] Supplemental Certificate of Defective Assets
F. [ ] Deletion Certificate
G. [ ] Valuation Methodology
H. [ ] Valuation Certificate
I. [ ] Notice to Mortgagors
J. [ ] Real Property Sales Contract
K. [ ] Loan and Security Agreement
L. [ ] Interim Mortgage
M. [ ] Interim Mortgage Note
N. [ ] Grant Deed
</TABLE>
iii
<PAGE> 6
ASSET SALE AGREEMENT
This Asset Sale Agreement ("Agreement") is entered into as of the
first day of November, 1993, by and between CITY NATIONAL BANK, a national
banking association ("Seller") and WHC- THREE INVESTORS, L.P., a Delaware
limited partnership ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns certain Assets as defined in this Agreement; and
WHEREAS, Purchaser is a sophisticated and experienced purchaser of
mortgage loans and real property with access to expert technical and legal
advice with respect thereto; and
WHEREAS, Seller desires to sell the Assets listed on the Mortgage Loan
and Real Property Schedule, attached hereto at Exhibit A, all in accordance
with the terms and conditions set forth herein; and
WHEREAS, Purchaser desires to purchase the Assets;
NOW THEREFORE, in consideration of the mutual promises herein set
forth and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings indicated below:
"Acceptance Certificate" has the meaning given that term in Section
5.4(a) hereof.
"Additional Collateral Assignment" means the document to be delivered
to Purchaser on the Closing Date, in accordance with Section 9.2(f) hereof and
in the form attached hereto as Exhibit C-1.
"Additional Deposit" means an amount equal to two percent (2.0%) of
the aggregate Initial Purchase Price, which sum is to be delivered by Purchaser
to Seller in immediately available funds concurrently with the execution
hereof.
"Adjusted Purchase Price" means, with respect to an Asset, either (i)
the Initial Purchase Price, if no adjustment is required hereunder, or (ii) the
Initial Purchase Price as adjusted by any adjustment required pursuant to
Section 5.4 or Section 5.5 hereof, provided, however, in no event shall the
Adjusted Purchase Price exceed the Initial Purchase Price.
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<PAGE> 7
"Adjustment Date" shall mean the date ten (10) calendar days after the
later of (x) the day on which the last Due Diligence Period with respect to any
Asset terminates, or (y) if Purchaser has delivered to Seller a Certificate of
Defective Asset during the Due Diligence Period, the last day for Seller to
repurchase such Defective Asset under Section 10.1(a) hereof. With respect to
the representations and warranties made by Seller in Section 7.1(d) hereof, the
Adjustment Date shall in no event be later than the Surviving Representation
Expiration Date, except to the extent that a Certificate of Defective Asset has
been given in respect of a particular Asset, in which case the Adjustment Date
shall be ten (10) days after the last day of the Cure Period available in
connection with the respective Defect. In any of the above events, if such day
is not a Business Day, the Adjustment Date shall be the next Business Day
thereafter.
"Affiliate" means, with respect to any Person (herein the "Person
Specified"), any other Person that (i) directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with the Person Specified, (ii) is a director or officer of the Person
Specified or any Person covered by clause (i) above, (iii) is a partner,
beneficiary of a trust or owner of any stock or other evidence of beneficial
ownership of the Person Specified or any Person covered by clause (i) above, or
(iv) is related by blood (including grandparents of the Person Specified and of
his or her spouse and all lineal descendants of such grandparents), marriage or
close business association to the Person Specified or any Person covered by
clause (i) above, or to the spouse of any of the foregoing Persons. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting stock, by
contract or otherwise.
"Affiliate Purchaser" means Purchaser or a wholly-owned Affiliate of
the Purchaser, which, simultaneously with the execution of this Agreement, will
execute a Sales Contract with Seller covering all of the Real Property and,
prior to the Closing of the sale of any Real Property under the Sales Contract,
shall assign the right to purchase one or more parcels of the Real Property
designated "industrial" on the Mortgage Loan and Real Property Schedule to one
or more Qualified Affiliates on the one hand, and any one or more of the
remaining parcels of Real Property not designated "industrial" on the Mortgage
Loan and Real Property Schedule to one or more other Qualified Affiliates on
the other, for closing in accordance with the terms of the Sales Contract.
"Agreement" means this Asset Sale Agreement, including all addenda,
exhibits and schedules hereto, as the same may be amended, supplemented,
restated or modified.
"Applicable Rate" means a per annum rate of interest equal to the ask
yield published as of the Business Day immediately prior to the Closing Date in
the Wall Street Journal under Treasury Bonds, Notes & Bills corresponding to
the 6-7/8 Treasury Notes due in February 1994, based upon a 360-day year for
the actual number of days elapsed.
"Asset Data Sheet" means the document labeled "Asset Data Sheet" and
bearing the same pool number and Mortgage Loan number or Real Property number
as those of the corresponding Mortgage Loan or Real Property listed in the
Mortgage Loan and Real Property Schedule, which Asset Data Sheet appears as
part of the Due Diligence Materials, as such Asset Data Sheet has
2
<PAGE> 8
been amended, supplemented, corrected or otherwise modified on or before the
Due Diligence Cut-Off Date to the extent same has been provided to Purchaser or
described in writing to Purchaser and made available on or prior to the Due
Diligence Cut-Off Date.
"Asset Documents" means, with respect to each Mortgage Loan or Real
Property, as the case may be, all documents, agreements or instruments relating
to such Mortgage Loan or Real Property, including, but not limited to, the
Mortgage Note or Mortgage Notes secured by a Mortgage or Mortgages and each and
every collateral document or account or security instrument or agreement
securing or relating to such documents and the transactions evidenced thereby,
including, but not limited to, any Security Agreement, assignment of rents,
pledge agreement, guarantee, indemnification agreement, assignment of stock or
partnership units, title insurance policy, other insurance and other document,
agreement or instrument under which legal rights or obligations are created or
exist, if any, provided to Seller or its predecessor in interest to evidence or
secure such Mortgage Loan and held by Seller, whether or not identified by
Seller in the Due Diligence Materials, together with any assignment,
reinstatement, extension, endorsement or modification of any thereof and, with
respect to Real Property, evidence of Seller's ownership of same, whether by
foreclosure, deed in lieu of foreclosure, or otherwise.
"Asset File" with respect to any Asset means the set of files in the
possession of Seller relating to such Asset from which the Investor File is
derived and which Seller will deliver to Purchaser at the Closing, excluding
those documents reasonably determined by Seller to be of a privileged or
confidential nature, or that Seller reasonably and in good faith believes not
to be relevant to the analysis by Purchaser of the Assets, such as memoranda,
notes, analyses, summaries and correspondence by, between or among officers,
directors, employees or agents of Seller.
"Asset Proceeds" with respect to an Asset shall mean the sum of Cash
Flow plus Liquidation Proceeds.
"Assets" means the Mortgage Loans and Real Property offered for sale
under this Agreement.
"Asset Valuation Package" means the materials forming a part of the
Due Diligence Materials, which disclose the facts and assumptions used in
arriving at the Valuation of an Asset, and which materials were also included
in the package of materials distributed to Purchaser on or prior to the Due
Diligence Cut-Off Date, as the same has been amended, supplemented, corrected
or otherwise modified on or before the Due Diligence Cut-Off Date based upon
information provided to Purchaser or described in writing to Purchaser and made
available on request on or before the Due Diligence Cut-Off Date, and includes
with respect to each Asset an executive summary, property description, Asset
Data Sheet, property inspection report, valuation summary, underwriting
analysis, and any Disclosed Remedial Cost Estimate, all as more particularly
described in the Offering Memorandum.
"Business Day" means any day other than a Saturday, Sunday or day on
which banks in Los Angeles, California are authorized or obligated by law or
local proclamation to be closed.
3
<PAGE> 9
"Capital Expenditure" means an expenditure the full amount of which
would qualify as a "capital" item under the Internal Revenue Code of 1986, as
amended, as in effect on the date of the expenditure (i.e., any expense the
total cost of which may not be included as a deduction from gross income in the
year it is spent in accordance with the Internal Revenue Code of 1986, as
amended, in effect on the date of the expenditure or is treated as a
capitalized item under Generally Accepted Accounting Principles (as defined in
the Loan and Security Agreement), including, but not limited to, engineering,
legal, architectural and development expenses).
"Cash Flow" with respect to any particular Asset (and any particular
Due Date with respect to any Interim Mortgage Note) means the sum of all
income, revenues, fees, proceeds, reimbursements and payments from whatever
source received by or on behalf of Purchaser as holder of such Mortgage Loan or
the collateral therefor or as owner of any Real Property during the month
immediately preceding the calendar month in which a Due Date occurs (or with
respect to the calculation of the Repurchase Price, during any time after the
Cut-Off Date), including, without limitation, any principal payments, interest,
penalties, late charges and participations as well as any rents, leases,
revenues, fees, proceeds, reimbursements and payments received after ownership
of such collateral is acquired by or for the benefit of Purchaser, Seller or
both, whether through foreclosure, deed in lieu of foreclosure, or otherwise,
but not including the following:
(a) any amounts constituting Liquidation Proceeds; and
(b) interest actually paid on sums on deposit from time to time in
the Cash Collateral Account under the Loan and Security Agreement and any other
accounts or instruments in which Asset Proceeds are held.
Notwithstanding the foregoing, for the initial Due Date under any
Interim Mortgage Note, amounts constituting "Cash Flow" thereunder will relate
to amounts collected during the period from and after the Cut-Off Date and
received by or for the account of Purchaser or a Qualified Affiliate.
"Cash Portion of the Repurchase Price" with respect to a Deleted Asset
means an amount equal to the aggregate of:
(a) (i) the sum of the Downpayment Percentage multiplied by
the Adjusted Purchase Price of the Deleted Asset (subject to any reduction
pursuant to Article X hereof), plus interest thereon at the Applicable Rate
from the Cut-Off Date to the Repurchase Date, plus Prepayments (to the extent
not included below), plus
(ii) the sum of interest (A) at the Stated Interest Rate
on the Financed Portion of the Repurchase Price, from the Cut-Off Date to the
Repurchase Date, (B) at the Stated Interest Rate on Prepayments from the
Cut-Off Date to the first day of the month following the month of such
Prepayments and (C) at the Applicable Rate on Prepayments from the first day of
the month following the month of such Prepayments to the Repurchase Date, minus
4
<PAGE> 10
(iii) the sum of (A) Net Cash Flow allocable to such
Deleted Asset plus Net Liquidation Proceeds relating to such Deleted Asset with
respect to all periods from and after the Cut-Off Date (plus interest thereon
at the Applicable Rate from the first day of the month following receipt of
such Net Cash Flow or Net Liquidation Proceeds, as applicable, to the
Repurchase Date) received by or accrued for the account of Purchaser or any
Qualified Affiliate with respect to such Deleted Asset during such period, plus
(B) the amount of any payments due and unpaid under the Promissory Note and the
Loan and Security Agreement on the Repurchase Date, plus (C) to the extent not
included above, all sums paid or credited to Purchaser with respect to the
Deleted Asset pursuant to Section 8.1(d) hereof on the Closing Date or as part
of the adjustments on the Closing Date with interest thereon at the Applicable
Rate from the Cut-Off Date to the Repurchase Date; plus
(b) the sum of the following amounts actually expended by
Purchaser or any Qualified Affiliate with respect to such Deleted Asset and not
recovered from Net Cash Flow or Net Liquidation Proceeds of the underlying
Mortgaged Property or Real Property, as the case may be, or otherwise;
(i) one hundred percent (100%) of Permitted Real Estate
Tax Expenses; plus
(ii) one hundred percent (100%) of Permitted Insurance
Expenses,; plus
(iii) one hundred percent (100%) of Permitted Leasing
Commissions; plus
(iv) one hundred percent (100%) of unamortized Permitted
Tenant Improvement Expenses (as used herein, "unamortized" means the number
that results from dividing (i) that portion of the aggregate rent due under
such lease for the lease term remaining, by (ii) the aggregate rent due under
any lease from the inception of such lease through the expiration thereof);
plus
(v) to the extent not previously reimbursed, recovered or
otherwise included within the definition of Repurchase Price, Permitted Legal
Expenses, but only to the extent satisfactory evidence of payment is received
by Seller; plus
(vi) with respect to Surviving Representations and
Warranties only, one hundred percent (100%) of Capital Expenditures that have
been approved by Seller under the Loan and Security Agreement or, if not so
approved or if Seller-financing was not utilized in the Asset sale contemplated
hereby, that portion of Capital Expenditures that, in Seller's reasonable
discretion, meet the criteria set forth in the Loan and Security Agreement.
"Certificate of Defective Asset" means a fully and properly completed
and executed Certificate of Purchaser in the form attached hereto as Exhibit D
delivered to Seller in accordance with Section 5.4 or 5.5 hereof.
"Claim" means any claim, demand or action of any kind brought in a
legal proceeding.
5
<PAGE> 11
"Closing" means the purchase and sale of the Assets following the
payment of the Initial Purchase Price and the fulfillment or waiver of certain
conditions precedent to Closing specified in Article IX hereof.
"Closing Date" means the date of Closing, which shall be November 18,
1993, or any date mutually agreed upon in writing by Purchaser and Seller, but
in no event later than November 30, 1993.
"Control Number" means the number (however designated) that identifies
each Mortgage Loan and parcel of Real Property on the Mortgage Loan and Real
Property Schedule.
"Cure Period" means, with respect to a Defect in a Defective Asset,
the period ending on the date one hundred and fifty (150) days after Seller's
receipt from Purchaser of a Certificate of Defective Asset under Section 5.4 or
5.5 with respect to such Defect or such later date as may be agreed to in
writing by Purchaser and Seller.
"Current Fully Extended Maturity Date" means, with respect to a
Mortgage Loan, the maturity date, as such may have been extended or as such
extension may be available under the terms thereof as of the Closing Date as
set forth on the Mortgage Loan and Real Property Schedule. For purposes of the
surviving representations and warranties set forth in Section 7.1 hereof, if
the Current Fully Extended Maturity Date occurs prior to the Closing Date, the
Closing Date shall be deemed the Current Fully Extended Maturity Date.
"Cut-Off Date" means close of business on the day immediately
preceding the Closing Date, which shall be the date through which interest on
each Mortgage Loan and rents on each Real Property shall accrue for the benefit
of Seller.
"Default Notice" has the meaning given to that term in Section 11.1
hereof.
"Defect" means, with respect to Section 5.4 hereof, a breach of a
representation and warranty under Section 7.1 or 7.2 hereof or, with respect to
Section 5.5 hereof, a Structural Defect or Natural Condition that has a
material adverse effect on the value of the related Asset.
"Defective Asset" means an Asset as to which a Defect exists and as to
which Purchaser has timely delivered a Certificate of Defective Asset pursuant
to Section 5.4 or 5.5 hereof.
"Deleted Asset" means any Asset that is repurchased by Seller pursuant
to Article X hereof.
"Deposit" means the aggregate of any moneys remaining from Purchaser's
Due Diligence Deposit, plus the Initial Deposit and the Additional Deposit, all
with interest thereon until the Cut-Off Date.
"Disclosed Remedial Cost Estimate" has the meaning ascribed thereto in
Section 5.5 hereof.
6
<PAGE> 12
"Downpayment" shall mean (i) with respect to all of the Mortgage Loans
and Real Property purchased by Purchaser hereunder, the aggregate amount of
Eight Hundred and Eighty-Four Thousand Dollars ($884,000.00), i.e., the "Equity
Investment" of Purchaser on Purchaser's Statement of Offered Purchase Price
delivered pursuant to the Offering Memorandum that was accepted by Seller, and
(ii) with respect to any individual Mortgage Loan or Real Property, the
Downpayment Percentage multiplied by the Initial Purchase Price of such
Mortgage Loan or Real Property.
"Downpayment Percentage" shall mean twenty-five percent (25.0%), i.e.,
the Downpayment Percentage for all Assets as specified in the Statement of
Offered Purchase Price.
"Due Date" means the fifth day of each month or, if such fifth day is
not a Business Day, the following Business Day, beginning on January 5, 1994
the fifth day of the month immediately following the first full month after the
Closing Date.
"Due Diligence Contractor" means KPMG Peat Marwick.
"Due Diligence Cut-Off Date" means October 12 1993.
"Due Diligence Deposit" means the amount paid by Purchaser to Seller
pursuant to the Offering Memorandum for the opportunity to review the Investor
Due Diligence Packages, and from which Seller will deduct for its own account
all charges incurred by Purchaser in connection with its review of the Investor
Due Diligence Packages.
"Due Diligence Materials" with respect to any Asset means the
contents, as of the Due Diligence Cut-Off Date, of the Investor Due Diligence
Package and of the Investor File for such Asset, which either have been
provided to Purchaser or its agents or made available to the Purchaser or its
agents at the office of Seller in Los Angeles, California or such other
location in Los Angeles, California identified by Seller to Purchaser, as the
same may have been amended, modified, supplemented, added to or updated at any
time on or before the Due Diligence Cut-Off Date.
"Due Diligence Period" means the aggregate of the Pre-Offer Due
Diligence Period and the Post-Offer Due Diligence Period.
"Due Diligence Representation and Warranty" means any representation
and warranty under Section 7.2 hereof.
"Earnest Money Deposit" means the aggregate of the Initial Deposit and
the Additional Deposit, along with any monies remaining from Purchaser's Due
Diligence Deposit, as more fully described in Section 3.1 hereof.
"Financed Percentage" shall mean seventy-five percent (75.0%), i.e.,
one hundred percent (100%) minus the Downpayment Percentage.
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<PAGE> 13
"Financed Portion" shall mean the Initial Purchase Price minus the
Downpayment;provided, however, that if the Initial Purchase Price is adjusted
pursuant to Sections 5.4 and 5.5 hereof, the "Financed Portion" shall mean the
Adjusted Purchase Price minus the Downpayment with respect to such Mortgage
Loan, as such may be correspondingly adjusted.
"Financed Portion of the Repurchase Price" with respect to a Deleted
Asset means an amount equal to seventy-five percent (75.0%) of the Adjusted
Purchase Price of the Deleted Asset (subject to any reduction pursuant to
Article X hereof), less Prepayments, if any.
"Hazardous Substances" means: (i) those substances included within the
definitions of any one or more of the terms "hazardous substances", "hazardous
materials", and "toxic substances", in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq., 9657), the Resource, Conservation and Recovery Act of
1976, as amended (42 U.S.C. Section 6901 et seq.), and the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801 et seq.), and in the
regulations promulgated pursuant to said laws; (ii) those substances listed in
the United States Department of Transportation Table (49 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302, and amendments thereto);
(iii) such other substances, materials and wastes as are or become regulated
under applicable local, state or federal laws, or which are classified as
hazardous or toxic under federal, state or local laws or regulations; and (iv)
any materials, wastes or substances that are (a) petroleum; (b) friable
asbestos; (c) polychlorinated biphenyl; (d) designated as a "Hazardous
Substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section
1321) or designated as "toxic pollutants" subject to Section 307 of the Clean
Water Act (33 U.S.C. Section 1317); (e) flammable explosives; or (f)
radioactive materials.
"Initial Deposit" means an amount greater than or equal to two percent
(2.0%) of the aggregate Initial Purchase Price for all Assets for which
Purchaser submits an offer to purchase, which sum has been delivered by
Purchaser to Seller in immediately available funds concurrently with such
submission.
"Initial Purchase Price" has the meaning given to that term in Section
2.2 hereof.
"Interim Mortgage" means the mortgage, deed of trust or other security
instrument creating a lien upon a parcel of Real Property that secures the
related Interim Mortgage Note, which shall be in substantially the form
attached hereto as Exhibit L.
"Interim Mortgage Loan" means a mortgage loan which shall be secured
by a lien upon a parcel of Real Property that is a subject of the Sales
Contract. The Seller, as the current owner of the Real Property securing an
Interim Mortgage Loan, shall be the initial borrower/mortgagor and the
Purchaser shall be the named payee/mortgagee on the Interim Mortgage Loan.
"Interim Mortgage Note" means any note evidencing the Seller's
obligation under an Interim Mortgage Loan listed on the Mortgage Loan and Real
Property Schedule, which note shall be
8
<PAGE> 14
dated as of the Cut-Off Date, shall be in a principal amount equal to the
Initial Purchase Price of the related Real Property and shall be on the form
attached hereto as Exhibit M.
"Investor Due Diligence Package" with respect to any Asset means the
contents, as of the Due Diligence Cut-Off Date, of the "Investor Due Diligence
Package" as described in the Offering Memorandum, compiled by Seller's Due
Diligence Contractor for such Asset and provided to Purchaser or its agents,
including, but not limited to, a Portfolio Summary Spreadsheet, as such has
been updated through October 12, 1993, accountant's letter, portfolio
stratification, Asset Valuation Package, excerpts from appraisals, copies of
certain loan documentation and updated title reports prepared by the original
insurer, or one of like caliber licensed to do business in the jurisdiction in
which the Mortgaged Property or the Real Property is situated, and, if
available, operating statements, rent rolls and environmental reports, as all
of the above may be amended, modified, supplemented, added to or updated at any
time on or before the Due Diligence Cut-Off Date, to the extent such
amendments, supplements, modifications, additions or updates have been provided
or described in writing to Purchaser or its agents on or before the Due
Diligence Cut-Off Date.
"Investor File" with respect to any Asset means the file(s) compiled
by Seller's Due Diligence Contractor for such Asset, as described in the
Offering Memorandum, and made available for inspection by potential purchasers
or their agents at Seller's office or such other location as specified by
Seller to such potential purchasers, and comprised of those portions of the
Asset File for such Asset including, but not limited to, copies of the related
Asset Documents, title policy, appraisal, operating statement and rent roll, if
available, which formed the basis of the Asset Valuation Package for such
Asset, as the same may be amended, modified, supplemented, added to or updated
at any time on or before the Due Diligence Cut-Off Date, to the extent such
amendments, supplements, modifications, additions or updates have been provided
or described in writing to Purchaser or its agents on or before the Due
Diligence Cut-Off Date. Unless otherwise expressly provided therein, the
reports of third parties, including, without limitation, appraisals,
environmental assessments, operating or other information provided by
Mortgagors, their accountants, agents, or Affiliates, or engineering reports,
have been prepared for use solely by Seller and, in certain cases, its Due
Diligence Contractor and financial advisors. Such reports are included in each
Investor File for informational purposes only and should not be relied upon for
their accuracy or completeness. Purchaser shall have no right to rely upon the
conclusions or other data set forth in such reports and shall have no recourse
against Seller or its advisors, counsel or agents, including the preparers of
such reports, in the event of any errors therein or omissions therefrom.
"Land Parcel" means any of the Mortgaged Property relating to those
Mortgage Loans, or the parcels of Real Property relating to those Interim
Mortgage Loans, listed on the Mortgage Loan and Real Property Schedule attached
hereto and identified under the heading of "Property Type" as Land-Lots or
Land.
"Liquidation Proceeds" with respect to an Asset shall mean the
following received by or on behalf of or for the account of Purchaser as holder
of such Mortgage Loan or the collateral therefor or as owner of such Real
Property during the month immediately preceding the calendar
9
<PAGE> 15
month in which a Due Date occurs (or with respect to the calculation of the
Repurchase Price, during any time after the Cut-Off Date):
(a) all proceeds of liquidation, Refinancing (as defined
in the Loan and Security Agreement), sale or compromise, and payments
from whatever source received during the immediately preceding
calendar month in respect of the disposition or Refinancing of any
Mortgage Loan, or any of the collateral securing such Mortgage Loan,
or any Real Property, including, but not limited to, any full or
partial prepayment of principal, proceeds of any Mortgage Loan by any
third party lender secured by any Mortgaged Property or any Real
Property or any portion thereof, reimbursements, and payments received
after ownership of such collateral is acquired by or for the benefit
of Purchaser, Seller or both, whether through foreclosure, deed in
lieu of foreclosure, or otherwise;
(b) all recoveries during the immediately preceding
calendar month from Mortgagors of advances made by Purchaser for the
purpose of preserving the value of the Mortgage Loans and Mortgaged
Property to the extent such amounts were paid as Permitted Liquidation
Expenses;
(c) all insurance proceeds or condemnation proceeds
received during the immediately preceding calendar month in respect of
Mortgaged Properties or Real Property, other than insurance proceeds
applied or to be applied to the restoration or repair of Mortgaged
Property or Real Property; and
(d) all other amounts received in respect of the sale,
Refinancing, liquidation, compromise or other disposition of the
Assets, including, but not limited to, loan or brokerage fees charged
by Purchaser or any Affiliate Purchaser for Refinancing or selling any
Asset and reimbursements to Purchaser or any Affiliate Purchaser for
expenses other than amounts permitted to be paid by Purchaser as
Permitted Liquidation Expenses.
Notwithstanding the foregoing, for the initial Due Date, amounts
constituting "Liquidation Proceeds" under the Loan and Security Agreement will
relate to amounts collected during the period from and after the Cut-off Date
and received by or for the account of Purchaser or a Qualified Affiliate.
"Loan" means the loan made pursuant to the Loan and Security Agreement
and evidenced by the Promissory Note.
"Loan and Security Agreement" means, in connection with Seller's
financing of the sale transaction contemplated herein, the Loan and Security
Agreement made by and between Purchaser as borrower thereunder and Seller as
lender thereunder, or any of their respective Affiliates, and dated as of the
Closing Date, as such may be amended, supplemented, restated or otherwise
modified.
"Maximum Offer Percentage" means the number, expressed as a percentage
to four decimal places, designated by Seller with respect to any Asset as the
maximum percentage of the Initial
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Purchase Price that a potential purchaser may ascribe to such Asset in its
offer under the Offering Memorandum.
"Mortgage" means, with respect to a Mortgage Loan, a mortgage, deed of
trust or other security instrument creating a lien upon real property (or a
leasehold interest in Mortgaged Property, in the case of any leasehold Mortgage
Loan) and any other property described therein that secures a Mortgage Note,
together with any assignment, reinstatement, extension, endorsement or
modification of any thereof.
"Mortgage Assignments" means the document to be delivered to Purchaser
on the Closing Date, in accordance with Section 9.2(a) hereof and in the form
attached hereto as Exhibit C.
"Mortgaged Property" means the land, improvements, personal property
and other collateral securing a Mortgage Note under a Mortgage or Security
Agreement.
"Mortgage Loan" means each of the commercial mortgage loans, other
than any Interim Mortgage Loan, evidenced by a Mortgage Note and secured by a
Mortgage (which may be a blanket Mortgage) or Mortgages described on the
Mortgage Loan and Real Property Schedule, together with any related Mortgaged
Property or Mortgaged Properties acquired by or for the benefit of the
mortgagee or beneficiary thereunder whether through foreclosure, deed in lieu
of foreclosure or otherwise.
"Mortgage Loan and Real Property Schedule" means the schedule
identifying the Mortgage Loans and Real Property to be sold, transferred and
conveyed hereunder and which is attached hereto as Exhibit A, as such Mortgage
Loan and Real Property Schedule may be amended or modified from time to time in
accordance with the terms of this Agreement, including, but not limited to, the
result of a deletion of any Mortgage Loan hereunder that is a Defective Asset.
The Mortgage Loan and Real Property Schedule shall set forth the
following information concerning each Mortgage Loan and Real Property, as the
case may be:
(a) address of the Mortgaged Property or Real Property;
(b) type of Mortgaged Property or Real Property and popular name,
if any;
(c) number of units in the Mortgaged Property or Real Property;
(d) approximate square footage of the Mortgaged Property or Real
Property; and
(e) the Initial Purchase Price specifying the component parts
thereof, including the Offer Percentage and any adjustments to the Initial
Purchase Price pursuant to Sections 5.4, 5.5 and, as of the Closing Date,
8.1(d). The Mortgage Loan and Real Property Schedule shall be revised and
substituted from time to time to reflect any such adjustments.
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The Mortgage Loan and Real Property Schedule shall also set forth the
following additional information concerning each Mortgage Loan:
(a) name of Mortgagor;
(b) the original principal balance;
(c) the date the Mortgage Loan was made;
(d) unpaid principal balance as of close of business on September
30, 1993;
(e) last payment due date on or preceding October 1, 1993, in
respect to which a payment of interest was made;
(f) pool number, Control Number and Seller's loan number;
(g) the Current Fully Extended Maturity Date;
(h) current mortgage interest accrual and pay rates;
(i) as of September 30, 1993, the amount of (i) any deferred
interest (the cumulative excess of interest on the Mortgage Loan at the
interest accrual rate over the interest on the Mortgage Loan at the interest
pay rate), and (ii) any current accrued and unpaid interest in default
(excluding deferred interest); and
(j) priority of Mortgage lien (first or second).
"Mortgage Note" means, with respect to a Mortgage Loan, a promissory
note or notes, or other evidence of indebtedness with respect to such Mortgage
Loan, secured by a Mortgage or Mortgages, together with any assignment,
reinstatement, extension, endorsement or modification of any thereof.
"Mortgagor" means the obligor under a Mortgage Note and Mortgage.
"Natural Condition" means, with respect to a Mortgage Loan or Real
Property, as the case may be, only the following physical conditions existing
on or affecting a parcel of Mortgaged Property or Real Property which is also a
Land Parcel, that are naturally occurring in nature and are not caused by or
the result of human activities: Wetlands (which are defined by reference to
Executive Order 11990, Protection of Wetlands, or the Emergency Wetlands
Resources Act of 1986), habitation by Endangered Species (which are defined as
those species which are listed by the U. S. Government as threatened or
endangered plants and animals), Critical Habitat (as defined by the Endangered
Species Act), Undeveloped Floodplains (meaning primarily undeveloped areas
which are Floodplains, as defined by reference to Executive Order 11988,
Floodplain Management, and include only the 100-year or "Base" Floodplains),
Wild and Scenic Rivers (meaning those rivers which are designated as Wild and
Scenic Rivers under the Wild and
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Scenic Rivers Act), Wilderness Areas (meaning those areas designated as
Wilderness Areas under the Wilderness Act), Undeveloped Coastal Dunes and
Beaches (meaning those areas within coastal areas that fall within the scope of
the Coastal Zone Management Act and are primarily undeveloped), Undeveloped
Sole Source Aquifers (meaning primarily undeveloped areas within the boundaries
of aquifers designated by the U. S. Environmental Protection Agency under the
Safe Water Drinking Act as being Sole Source Aquifers), Natural Landmarks
(meaning those natural landmarks listed on the National Registry of Natural
Landmarks as published by the Natural Parks Service), Undeveloped Fifty Acre
Resource Lands (meaning undeveloped areas of more than fifty (50) acres in
size, and adjacent to, or contiguous with any lands managed by a governmental
agency primarily for wildlife, refuge, sanctuary, open space, recreational,
historical, cultural or natural resource conservation purposes, and have
natural, cultural, recreational or scientific values of special significance),
and Coastal Barrier Units (meaning those areas displaying undeveloped
attributes and designated as "Units" of the Coastal Barrier Resources System
under the Coastal Barrier Improvement Act of 1990).
"Net Cash Flow" with respect to the calculation of the Repurchase
Price for a Deleted Asset and with respect to payments due on each Due Date
under an Interim Mortgage Note shall mean Cash Flow with respect to such
Deleted Asset or Interim Mortgage Note less the following amounts:
(a) Ordinary and customary expenses attributable to and necessary
for the prudent management of the Deleted Asset;
(b) Advances by Purchaser pursuant to Section 5.2 of the Loan and
Security Agreement (including amounts paid by Purchaser as reimbursements of
Outstanding Lender Advances, as such term is defined in the Loan and Security
Agreement, and as may be required under the Promissory Note) to the extent paid
with respect to the Deleted Asset and recoverable from Cash Flow attributable
to the Deleted Asset with respect to which such advances were made; and
(c) Permitted Expenses, including but not limited to, amounts
deposited into the Estimated Accrual Account established under the Sales
Contract and Interim Mortgage with respect to the related Real Property,
but not less than zero.
"Net Liquidation Proceeds" with respect to an Asset shall mean
Liquidation Proceeds, less (a) Permitted Liquidation Expenses for such Asset
and (b) advances by Purchaser pursuant to Section 5.2 of the Loan and Security
Agreement with respect to such Asset that have not been recovered and for which
Purchaser has not otherwise been reimbursed.
"Offer Date" means October 20, 1993, the date on which offers were
due under the Offering Memorandum.
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"Offering Memorandum" means the Confidential Memorandum provided by
Seller to potential purchasers relating to the purchase of the Assets, along
with additional written supplements thereto, if any, from Seller to Purchaser.
"Offer Percentage" means the number, expressed as a percentage to four
decimal places, obtained by dividing the Initial Purchase Price with respect to
an Asset by the Valuation of such Asset, in each case as shown on the "Offer
Statement and Summary Sheet" and/or "Statement of Initial Purchase Price"
delivered with respect to such Asset pursuant to the Offering Memorandum, which
number shall in no event exceed the Maximum Offer Percentage.
"Payment in Full" means a payment in full or prepayment in full of any
Mortgage Loan prior to the Closing Date, which represent all amounts of
principal either then required to be paid under such Mortgage Loan or which are
paid under any offer of compromise or settlement which had been made by Seller
to any Mortgagor prior to the Due Diligence Cut-Off Date and which was
disclosed by Seller to Purchaser in writing prior to the Due Diligence Cut-Off
Date.
"Permitted Expenses" means ordinary and customary expenses
attributable and necessary for the prudent ownership, servicing or management
of a Deleted Asset or Interim Mortgage Loan. Notwithstanding the foregoing,
Permitted Expenses shall in no event include:
(a) Capital Expenditures;
(b) the principal or interest paid in connection with any
loan other than the Loan, whether secured or unsecured, except as expressly
approved by Seller;
(c) the payment of any expense more than one month prior
to the due date thereof;
(d) the cost of the Valuation of the Mortgage Loans,
Mortgaged Properties, Real Property and other Collateral (as defined in the
Loan and Security Agreement); and
(e) the amount of any penalties, assessments, fees or
other charges levied against Purchaser as the lender under a Mortgage Loan as
the result of its failure to service such Mortgage Loan or manage the related
Mortgaged Property in accordance with applicable federal or state laws, rules
or regulations or any defect in Purchaser's calculation of amounts due
thereunder.
"Permitted Foreclosure Costs" means those ordinary and customary costs
associated with the acquisition of Mortgaged Property by the mortgagee or
beneficiary under any Mortgage, whether by foreclosure, deed in lieu of
foreclosure or otherwise.
"Permitted Insurance Expenses" means amounts paid by Purchaser or any
Qualified Affiliate, or monthly payments into an escrow account maintained for
such purpose in an amount not to exceed one-twelfth (1/12th) of the annual
premium, for premiums for hazard and flood insurance on a Mortgaged Property,
having commercially reasonable terms, exclusions and deductible amounts,
provided that insurance premiums on Mortgaged Property shall be "Permitted
Insurance
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Expenses" only if the Mortgagor has failed to pay such premiums upon notice of
its failure to pay and as a result thereof, the failure of Purchaser or any
Qualified Affiliate to pay such premiums would render the Mortgaged Property
uninsured.
"Permitted Leasing Commissions" shall mean leasing commissions paid by
Purchaser or any Qualified Affiliate with respect to the leasing of all or any
part of the premises of any Real Property to Persons who are not Related
Parties of Purchaser or to Related Parties of Purchaser in accordance with
arrangements approved in advance by Seller in writing.
"Permitted Legal Expenses" means the reasonable legal fees and
disbursements, not to exceed $50,000, paid by Purchaser to an attorney
exclusively for contesting a claim by the maker or obligor of a Mortgage Loan
that the underlying Mortgage Note or Mortgage is not enforceable as represented
in Section 7.1(d)(iv) of the Asset Sale Agreement, provided that (i) the
attorney representing Purchaser is approved, in writing, by the Seller, and
(ii) the Seller has approved, in advance and in writing, Purchaser's
expenditure of fees and disbursements in connection with the contest of the
claim.
"Permitted Liquidation Expenses" means the following expenses paid by
or on behalf of Purchaser, Affiliate Purchaser or a Qualified Affiliate to
Persons who are (a) generally in the business of providing goods and services
of the type provided and (b) not Related Parties (as defined in the Loan and
Security Agreement) (unless Lender has given express written approval prior to
the provision of the goods or services), provided in any event that such
expenses are reasonable for the types of goods and services provided in the
geographic area in which such goods or services are provided and are not
deducted as Permitted Expenses:
(a) in the case of a sale of a Mortgaged Property, a Real Property
or a Subparcel thereof, ordinary and customary expenses of the transaction,
including reasonable legal, accounting and other professional fees and
brokerage commissions customarily paid by sellers of commercial properties of
the type sold in the geographic area in which the Mortgaged Property, Real
Property or Subparcel is located;
(b) ninety percent (90%) of Permitted Capital Expenses, as such
term is defined in the Loan and Security Agreement;
(c) ninety percent (90%) of unamortized Permitted Tenant
Improvement Expenses (as used herein, "unamortized" means the number that
results from dividing (i) that portion of the aggregate rent due under such
lease for the lease term remaining, by (ii) the aggregate rent due under any
lease from the inception of such lease through the expiration thereof);
(d) one hundred percent (100%) of Permitted Insurance Expenses;
(e) one hundred percent (100%) of Permitted Real Estate Tax
Expenses;
(f) ninety percent (90%) of unamortized Permitted Leasing
Commissions; plus (as used herein, "unamortized" means the number that results
from dividing (i) that portion of the aggregate
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rent due under such lease for the lease term remaining, by (ii) the aggregate
rent due under any lease from the inception of such lease through the
expiration thereof); and
(g) ninety percent (90%) of Permitted Foreclosure Costs, but only
to the extent satisfactory evidence of payment is received by Seller.
"Permitted Real Estate Tax Expenses" shall mean real estate taxes
approved in advance of payment by Seller in writing paid by Purchaser or any
Qualified Affiliate with respect to any Real Property or, if not paid by the
Mortgagor thereunder, a Mortgaged Property.
"Permitted Tenant Improvement Expense" means any expense incurred by
Purchaser to provide physical improvement to a tenant's space. Any Permitted
Tenant Improvement Expense shall be certified by a certificate of an officer of
Purchaser stating that the related physical improvements and rents are at
market levels.
"Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Portfolio Summary Spreadsheet" means the Lotus 1-2-3-based
spreadsheet entitled "Portfolio Summary Spreadsheet" and dated October 12,
1993.
"Post-Offer Due Diligence Period" means that period commencing with
the date hereof and ending, with respect to any Asset, ninety (90) days
thereafter, unless sooner terminated by delivery by Purchaser of an Acceptance
Certificate.
"Pre-Offer Due Diligence Period" means that period commencing with the
date on which the Investor Due Diligence Package is made available to Purchaser
and ending on the Offer Date.
"Prepayment" means, with respect to any Mortgage Loan that is a
Deleted Asset, the amount of any payments of principal of such Mortgage Loan
that has been applied to the outstanding principal balance of the Promissory
Note.
"Promissory Note" means that certain promissory note dated as of the
Closing Date by Purchaser as borrower in favor of Seller as lender, in
substantially the form attached as Exhibit A to the Loan and Security Agreement
issued pursuant to Section 2.1 of the Loan and Security Agreement. The term
"Promissory Note" shall include such replacement Promissory Note and all
additional replacements, extensions, amendments, endorsements, allonges and
other modifications of the Promissory Note and all substitutions therefor in
accordance with the Loan and Security Agreement.
"Purchaser" has the meaning set forth in the caption of this Agreement
and shall include its successors and assigns.
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"Purchaser's Cure Estimate" has the meaning given to that term in
Section 5.4(b) hereof.
"Qualified Affiliate" means an Affiliate of Purchaser which is a
separate single purpose corporation or limited partnership formed for the sole
purpose of owning, managing and disposing of one or more parcels of Real
Property. Purchaser shall cause a separate Qualified Affiliate or Qualified
Affiliates to take title to the Real Property designated "industrial" on the
Mortgage Loan and Real Property Schedule on the one hand, and another Qualified
Affiliate or Qualified Affiliates to take title to any one or more parcels of
the remaining Real Property not designated "industrial" on the Mortgage Loan
and Real Property Schedule on the other. Except as otherwise approved in
writing by Seller and except as otherwise permitted under the Loan and Security
Agreement, each Qualified Affiliate shall be an Affiliate of Purchaser that is
a corporation or partnership wholly-owned, directly or indirectly, by all of
the stockholders or partners of Purchaser or by individuals or entities that
own, directly or indirectly, all of the stock or partnership interests in
Purchaser, all to the same extent and in the same proportion as the ownership
interest of such stockholders, partners, individuals or entities of Purchaser.
"Real Property" means a parcel or parcels of land or a leasehold
estate, including all improvements, fixtures, easements and other appurtenances
owned by Seller and described on the Mortgage Loan and Real Property Schedule,
which, at the time of Closing, will either be sold in fee or, at Purchaser's
option, be encumbered by an Interim Mortgage Loan.
"Real Property Sales Contract" means, with respect to the Real
Property, the purchase and sale contract by and between Seller and Purchaser
or, if Seller financing is to be utilized or otherwise at Purchaser's option,
Affiliate Purchaser, to be executed concurrently herewith, substantially in the
form attached hereto as Exhibit J, modified as necessary to reflect an all cash
sale transaction.
"Repurchase Date" means the date on which any Defective Asset is
repurchased pursuant to this Agreement.
"Repurchase Price" with respect to a Defective Asset means the Cash
Portion of the Repurchase Price plus the Financed Portion of the Repurchase
Price.
"Revalued Asset" means each of the Assets that has been revalued in
accordance with Section 5.5(b) hereof, due to the discovery of a Structural
Defect or Natural Condition in the related Mortgaged Property or Real Property,
as the case may be, and that Seller has not subsequently elected to repurchase
pursuant to Section 5.5(a)(i) hereof.
"Sales Contract" means the Real Property Sales Contract.
"Security Agreement" means any security agreement creating a lien upon
personal property described therein which secures a Mortgage Note.
"Seller" means City National Bank, a national banking association.
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"Seller-Approved Contractor" means an engineering or contracting firm
qualified to make such determination as may be required under Section 5.5
hereof, and which is selected by Purchaser and identified to Seller in writing
at the time Purchaser is notified that it has submitted a successful offer and
which shall not have been reasonably disapproved by Seller within five (5)
Business Days thereafter.
"Stated Interest Rate" means the interest due on the Loan under the
Promissory Note.
"Structural Defect" has the meaning given to that term in Section 5.5
hereof.
"Supplemental Certificate of Defective Asset" shall have the meaning
ascribed thereto in Section 5.4(b) hereof.
"Surviving Representation Expiration Date" means, (i) with respect to
each Mortgage Loan to which a Surviving Representation and Warranty applies,
that date which is the earlier to occur of (a) one year after the Current Fully
Extended Maturity Date of such Mortgage Loan, unless written notice of a Claim
is alleged by the Mortgagor within such one year period, in which event, the
Surviving Representation Expiration Date, as it relates to such Claim only,
shall be extended until the condition giving rise to such Claim is finally
resolved or such Claim becomes a Defect, or (b) the date on which such Mortgage
Loan is compromised, renegotiated or restructured, or the related Mortgaged
Property is acquired by Purchaser by foreclosure, deed in lieu of foreclosure
or otherwise, provided that, in the event Purchaser acquires such Mortgaged
Property by means of a trustee's sale in a non-judicial foreclosure, the
Surviving Representation Expiration Date for the representation made by Seller
under Section 7.1(d)(ix) hereof shall be the date that is one (1) year after
the Current Fully Extended Maturity Date of such Mortgage Loan and, (ii) with
respect to each Asset that is Real Property to which a Surviving Representation
and Warranty applies, one year after the date on which title to such Real
Property passes to Purchaser, Affiliate Purchaser, or a Qualified Affiliate, as
the case may be.
"Surviving Representation and Warranty" means any representation and
warranty under Section 7.1 hereof.
"Valuation" means (i) with respect to any Revalued Asset, a value
assigned to such Revalued Asset determined in accordance with this Agreement by
the Valuation Agent according to the method set forth in Exhibit G attached
hereto and evidenced by a Valuation Report prepared pursuant to such Exhibit G
and delivered to Seller, and (ii) with respect to any other Asset, the
"Valuation" of such Asset as set forth in the Mortgage Loan and Real Property
Schedule.
"Valuation Agent" means KPMG Peat Marwick or another nationally
recognized expert in the Valuation of Mortgage Loans and Real Property, as
chosen by Purchaser, subject to the reasonable approval of Seller.
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ARTICLE II
PURCHASE AND SALE OF THE ASSETS
Section 2.1 PURCHASE AND SALE.
Subject to the terms and provisions set forth in this Agreement, on
the Closing Date, Purchaser shall purchase the Mortgage Loans (other than any
Mortgage Loan with respect to which Seller has received Payment in Full prior
to the Closing Date, in which case Purchaser shall receive a credit against the
Initial Purchase Price in the amount of such Payment in Full) and the Real
Property from Seller and Seller shall sell, transfer, assign and convey to
Purchaser such Mortgage Loans, together with all related Asset Documents to
the extent assignable and the servicing of such Mortgage Loans, and the Real
Property, together with all related Asset Documents to the extent assignable.
Section 2.2 INITIAL PURCHASE PRICE OF ASSETS.
The purchase price of each Asset at the time of the Closing shall be
as set forth with respect to such Asset on the Mortgage Loan and Real Property
Schedule (the "Initial Purchase Price"), subject to adjustment in accordance
with Section 2.3 hereof. The Initial Purchase Price for each Asset shall be
paid by Purchaser to Seller on the Closing Date as follows:
(a) Seller shall credit to Purchaser the Deposit toward the
aggregate Initial Purchase Price for all Assets purchased; and
(b) Purchaser shall remit to Seller in immediately available
funds, an amount equal to (i) the aggregate Initial Purchase Price
[plus applicable interest on the Financed Portion from the Cut-Off
Date through the last day of the month in which the Closing occurs],
less (ii) the sum of (A) the amount credited pursuant to Section
2.2(a) hereof, (B) other amounts, if any, then required to be credited
to the Purchaser pursuant to Section 8.1(d) hereof[, and (C) the
principal amount of the Promissory Note]; and
(c) For each Mortgage Loan for which no payment default exists as
of the Cut-Off Date, Purchaser shall remit to Seller in immediately
available funds an amount equal to interest currently due and unpaid
thereon (excluding any deferred interest and contingent interest) from
and including the immediately preceding payment date with respect to
such Mortgage Loan to but not including the Cut-Off Date.
Section 2.3 MODIFICATIONS TO MORTGAGE LOAN AND REAL PROPERTY
SCHEDULE.
Purchaser and Seller shall amend the Mortgage Loan and Real Property
Schedule to adjust the Initial Purchase Price as required to reflect any
adjustment pursuant to Section 5.4 or 5.5 hereof.
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Section 2.4 FINANCING OF MORTGAGE LOANS AND REAL PROPERTY; SALE
OF REAL PROPERTY.
Seller financing of the purchase by Purchaser of the Assets will be
available subject to the terms and conditions set forth in a Loan and Security
Agreement in substantially the form attached hereto as Exhibit K. The sale of
the Real Property shall be effected, at Purchaser's option (i) concurrently
herewith through the execution and delivery by Seller and Purchaser of the
Sales Contract, or (ii) through a three- stage process commencing with (a) the
concurrent execution and delivery by Seller and Affiliate Purchaser of the
Sales Contract, (b) the delivery by Seller to Purchaser of an Interim Mortgage
on the Closing Date, and (c) the subsequent reconveyance of the Interim
Mortgage to Seller, along with the originally executed Interim Mortgage Note
marked "Paid", concurrently with the conveyance of the Real Property to one or
more Qualified Affiliates not later than the last day of the Due Diligence
Period pursuant to the terms of the Sales Contract, all as further described in
the Offering Memorandum.
ARTICLE III
DEPOSIT
Section 3.1 DEPOSIT. Upon execution hereof, Seller shall
acknowledge that it has received from Purchaser an amount equal to $141,440.00,
not less than four percent (4.0%) of the Initial Purchase Price, which amount
is comprised of the Initial Deposit, the Additional Deposit and any monies
remaining from Purchaser's Due Diligence Deposit (the "Earnest Money Deposit").
The Earnest Money Deposit shall be deposited by Seller in an interest-bearing
account at Seller's Beverly Hills branch (the "Deposit Account"). The Earnest
Money Deposit, together with any interest earned thereon from the Offer Date to
the Closing Date, shall hereinafter be referred to as the "Deposit".
Section 3.2 DISTRIBUTION OF DEPOSIT.
The Deposit shall be held by the Seller until (a) Closing occurs under
this Agreement, in which event the Deposit shall be applied on account of the
Initial Purchase Price, in accordance with Section 2.2(a) herein, or (b) this
Agreement has been terminated, in which event the Deposit will be paid to
Purchaser or retained by Seller in accordance with Section 11.1 or Section 11.2
hereof, as the case may be.
ARTICLE IV
CLOSING
Section 4.1 CLOSING.
The Closing shall be held on the Closing Date, at 10:00 a.m., at such
place as is selected by Seller. The time of the Closing may be changed as the
parties may mutually agree upon on or before the Closing Date.
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Section 4.2 TRANSFER AND RECORDATION TAXES.
At or prior to Closing, all transfer, filing and recording fees and
taxes, costs and expenses, and any state or county documentary taxes, if any,
with respect to the filing or recording of any conveyance document or
instrument contemplated hereby shall be paid by Seller. Purchaser, Affiliate
Purchaser or Qualified Affiliate shall pay, when due and payable, all transfer,
filing and recording fees and taxes, and costs and expenses, if any, with
respect to the filing or recording of any documents or instruments relating to
the financing of any Parcel of Real Property and the cost of recording
corrective instruments, pursuant hereto or to the Sales Contract, except for
those related to any Interim Mortgage or deed to any Real Property, which
Seller shall pay.
Except as otherwise expressly provided herein, whether or not the
transactions contemplated hereunder are completed, Purchaser shall pay all of
its Closing and due diligence expenses and its expenses in negotiating and
carrying out its obligations under this Asset Sale Agreement, including the
costs of its counsel, all of the costs of title or other insurance which is not
presently in force or otherwise provided, or other due diligence Purchaser may
desire to undertake and all of the expenses of Purchaser relating to this
Agreement.
Section 4.3 ESCROW ACCOUNTS. At Closing, all escrows held and
account records reflecting amounts held in escrow by or on behalf of Seller for
taxes, governmental assessments and insurance, deposits, security deposits,
replacement reserves or other funds relating to the Assets and then held by or
on behalf of Seller, including any accounts described in Section 8.1(d) hereof,
shall be assigned, transferred and paid over to the Purchaser. All such funds
transferred to and held by Purchaser shall be applied by Purchaser for their
designated purposes for the designated Mortgaged Property, in accordance with
the applicable Mortgage, or Real Property, as the case may be.
Section 4.4 LIMITATIONS ON LIABILITY. The parties hereto
acknowledge, confirm and agree that Purchaser shall have no claims and Seller
shall have no liability, whatever, as a result of or otherwise in connection
with any notice of default not being filed or being filed or any actions or
failure to act in connection with any default, bankruptcy, request for
modification or otherwise under any Mortgage Loan, except to the extent that
such may be deemed a violation of Seller's obligations under Section 8.1(f)
hereof; nor shall any of same be deemed a Defect or otherwise trigger any
requirement to repurchase any Mortgage Loan, unless any such action or inaction
shall constitute a breach by Seller of any representation or warranty set forth
in Article VII hereof.
ARTICLE V
DUE DILIGENCE PERIOD
Section 5.1 DUE DILIGENCE PERIOD.
Seller and Purchaser acknowledge that while Purchaser has had time to
conduct some due diligence, this Agreement is being executed and delivered
prior to the Closing Date and prior to Purchaser having as much time as
Purchaser might desire to conduct a due diligence review of the Assets,
including the underlying Mortgaged Properties. Seller and Purchaser agree,
therefore, that Purchaser may conduct additional due diligence in respect of
the Assets, including the Mortgaged
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Properties, until the termination of the Due Diligence Period, solely for the
purpose of confirming Seller's Due Diligence Representations and Warranties.
Prior to the Closing Date, however, Purchaser shall not contact the Mortgagors
or any guarantor of any Mortgage Loan or any junior or senior lienors or any
tenants of any Mortgaged Property or Real Property, as the case may be, or any
officer, employee or agent of any thereof except upon the prior consent of
Seller. Purchaser agrees that it will perform its due diligence review in good
faith during the Due Diligence Period.
Section 5.2 DUE DILIGENCE REVIEW OF ASSETS.
During the Pre-Offer Due Diligence Period through the Due Diligence
Cut-Off Date for each Asset listed on the Mortgage Loan and Real Property
Schedule, Seller or Seller's Due Diligence Contractor has provided Purchaser
with the related Investor Due Diligence Package and Seller has provided
Purchaser access, during normal business hours upon reasonable prior request,
to the related Investor File. Purchaser shall conduct, at its own expense,
such additional analysis and investigation of the Mortgage Loans, the Mortgaged
Properties and the Real Property as it deems necessary and appropriate. Under
no circumstances will any amounts expended by Purchaser for due diligence be
reimbursed or credited to or against the Initial Purchase Price.
Section 5.3 SELLER'S COOPERATION.
Seller agrees to cooperate with Purchaser during remainder of the Due
Diligence Period and shall provide Purchaser access to Seller's Asset Files and
any such non-privileged data or other materials that are reasonably related to
Purchaser's evaluation of the Asset it is reviewing and are obtainable by
Seller on a reasonable basis, provided that Seller shall not be obligated to
incur any material cost or expense (unless, with respect to any cost or
expense, a Person satisfactory to Seller in its sole discretion agrees to
promptly reimburse or indemnify Seller in a manner acceptable to Seller, in
Seller's sole discretion, for such cost or expense) or any liability as a
result of such cooperation; provided that the foregoing limitation shall not
reduce or limit Seller's representations and warranties under this Agreement.
Section 5.4 ACCEPTANCE OF ASSETS AND REMEDIES FOR DEFECTS.
Purchaser shall have the right either to accept an Asset as described
in subsection (a) below or, in the event of a Defect in an Asset, to notify
Seller in writing of such Defect as set forth in subsection (b) below.
(a) ASSET ACCEPTANCE. After completion of its due
diligence review of any Asset, Purchaser may finally accept such Asset for
purchase hereunder prior to the termination of the Due Diligence Period by
delivering to the Seller a certificate ("Acceptance Certificate") in the form
attached hereto as Exhibit B identifying each Asset being accepted.
Once an Asset is accepted hereunder, Purchaser's rights to
require Seller to repurchase such Asset or to cure a Defect in such Asset shall
terminate, except in the event of a breach of a Surviving Representation and
Warranty. Purchaser's failure to deliver a Certificate of Defective Asset with
respect to any Asset by the last day of the Due Diligence Period shall be
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deemed to be an acceptance of such Asset, subject to Purchaser's rights to
require Seller to make an election to cure the Defect in, reduce the Initial
Purchase Price of, or repurchase, such Asset on account of any Defect arising
from a Surviving Representation and Warranty in accordance with Section
5.4(b)(ii), Section 5.4(c) and Article X hereof.
(b) PURCHASER'S CLAIM OF BREACH OF REPRESENTATION AND
WARRANTY. In order to claim a Defect resulting from a breach of a
representation and warranty with respect to an Asset, Purchaser shall execute
and deliver to Seller a completed Certificate of Defective Asset no later than
(i) the last day of the Due Diligence Period with respect to all Due Diligence
Representations and Warranties under Section 7.2 hereof and with respect to a
Defect relating to any Surviving Representation and Warranty of which Purchaser
is then aware, or (ii) the earlier of (x) thirty (30) days following the
discovery by Purchaser or (y) the Surviving Representation Expiration Date with
respect to a Defect relating to a Surviving Representation and Warranty of
which Purchaser was not aware on or before the last day of the Due Diligence
Period. The completed Certificate of Defective Asset shall set forth (A) the
identity of the Asset, (B) the exact nature of the claimed Defect and the
manner in which the claimed Defect has a material adverse effect on the value
of the related Asset, (C) the section or subsection of this Agreement under
which such Defect is claimed, and (D) detailed evidence of the existence of the
Defect, including, but not limited to, the identity of, and any copy of any
materials provided by, any third party that performed any analysis or provided
any cure estimate or any other information with respect to such claimed Defect.
Within fifteen (15) days after delivery of any Certificate of Defective Asset,
Purchaser shall execute and deliver to Seller an additional Certificate of
Defective Asset (the "Supplemental Certificate of Defective Asset"), in
substantially the form as Exhibit E hereto, indicating (X) whether, in
Purchaser's reasonable judgment, the Defect is curable or is not susceptible to
cure, (Y) if Purchaser reasonably judges the Defect to be curable, Purchaser's
detailed description of the proposed cure and reasonable detailed estimate of
the cost to repair or otherwise cure such Defect ("Purchaser's Cure Estimate")
together with a copy of any supporting information prepared by any third party
expert, and (Z) the amount by which Purchaser would have reduced the Initial
Purchase Price with respect to such Asset had Purchaser been aware of such
Defect on the Offer Date (the "Reduction to the Initial Purchase Price").
(c) REMEDIES FOR BREACHES OF REPRESENTATIONS AND WARRANTIES.
In the event a Defective Asset exists and Purchaser has fulfilled the
conditions to the claim of Defect as set forth in Section 5.4(b) above, Seller
shall have the options specified in Section 5.4(d) below. Failure of Purchaser
to provide the proper Certificate of Defective Asset to Seller for each Asset
by no later than the time provided in Section 5.4(b) above for a Defective
Asset shall for all purposes terminate and extinguish any rights of Purchaser
to require Seller to make an election to cure the Defect in, reduce the Initial
Purchase Price of, or repurchase, such Asset; provided, however, that Purchaser
shall have a reasonable opportunity to supplement a Certificate of Defective
Asset if Seller reasonably determines that such certificate was not properly
completed.
If Purchaser, upon purchase of the related Asset, has title
insurance that provides coverage with respect to any condition that might
otherwise constitute a Defect, Purchaser shall seek recourse with respect to
such condition under such title insurance policy and such condition shall not
be considered a Defect. In order to preserve its rights under this Section 5.4
with respect
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to any such condition during the period in which Purchaser is pursuing its
obligations hereunder to seek recourse against such title policy, Purchaser may
submit a Certificate of Defective Asset in accordance with Section 5.4(b) with
respect to any such Asset for which Purchaser reasonably believes it had title
insurance at the time of purchase of such Asset, and, if coverage thereunder is
subsequently determined not to have existed through no fault of Purchaser,
whether by its action or inaction, the sixty (60) day time period under Section
5.4(d) for Seller to make its elections thereunder shall commence as of the
date of such determination.
(d) PROCEDURE FOR SELLER'S ELECTION OF REMEDY WITH RESPECT TO
A CERTIFICATE OF DEFECTIVE ASSET. In the event Purchaser delivers a
Certificate of Defective Asset as provided in Section 5.4(b) above, Seller
shall, no later than sixty (60) days after receipt of such Certificate, notify
Purchaser in writing that (i) Seller disputes (x) the existence of such Defect
or (y) the reasonableness of Purchaser's Cure Estimate or (z), if Purchaser has
stated that it believes such Defect is not curable, such statement, and in any
of such cases, the basis for any such position, including, if appropriate and
then available without undue delay or expense, evidence that no Defect exists
or that such Defect is susceptible to cure (which denial shall not be
dispositive as to the existence or absence of a Defect, whether with respect to
the susceptibility of such Defect to cure or the reasonableness of Purchaser's
Cure Estimate); or (ii) Seller intends to attempt to cure such Defect within
the Cure Period; or (iii) Seller has elected, at its option, to reduce the
Initial Purchase Price with respect to such Asset by either the amount
specified by Purchaser as Purchaser's Cure Estimate or the Reduction to the
Initial Purchase Price, respectively, as set forth in Section 5.4(b), which
amount shall be rebated to Purchaser not later than thirty (30) days after
delivery of Seller's notice to Purchaser of such election; or (iv) Seller has
elected to repurchase the Asset from Purchaser at the Repurchase Price; or (v)
with respect to Real Property to which Purchaser or a Qualified Affiliate, as
the case may be, has not yet taken title, Seller has elected to pay all sums
due under any Interim Mortgage Loan relating to such Real Property then
existing and terminate the Sales Contract with respect thereto. If Seller
fails to make the required election within said sixty (60) day period,
Purchaser shall send a second demand to Seller, which shall state that should
Seller fail to timely respond within five (5) Business Days as to its election,
Seller shall be deemed to have agreed to repurchase the Asset. In the event
Seller then shall fail to timely respond to such second demand, Seller shall be
required to repurchase the Asset at the Repurchase Price. Failure to so send
such second demand to Seller shall not diminish Purchaser's rights hereunder
except that the period within which Seller must make an election hereunder
shall be extended until five (5) days from the date such second demand is
actually delivered to Seller.
At least thirty (30) days, but no more than forty (40) days
prior to the end of the Cure Period, if Purchaser had previously received
notification from Seller (i) that Seller intended to attempt to cure the
Defective Asset and Purchaser has not received notification from Seller (or is
not otherwise aware) that the Defect has been cured or (ii) that Seller expects
that the Defect in the Asset will be cured by the end of the Cure Period,
Purchaser shall send a Deletion Certificate, in substantially the form attached
hereto as Exhibit F, to Seller stating that such Defective Asset will be
subject to repurchase at the Repurchase Price if such Defect has not been cured
within the Cure Period. Failure to so send such Deletion Certificate to Seller
shall not diminish Purchaser's rights hereunder except that the Cure Period
shall be extended until thirty (30) days from the date such Deletion
Certificate is actually delivered to Seller.
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Section 5.5 PROCEDURE IN RESPECT OF A STRUCTURAL DEFECT OR
NATURAL CONDITION. In response to a Certificate of Defective Asset with
respect to a Structural Defect (as such term is defined below) or Natural
Condition, all as provided in Section 5.5(a)(i) below, if Seller elects to
repair or otherwise cure such Structural Defect or incur additional engineering
or entitlement costs with respect to a Natural Condition, Seller shall be
obligated to pay for such repairs or other costs only to the extent that the
cost thereof exceeds (i) any amount to repair or cure identified in the Asset
Valuation Package or otherwise provided in writing to Purchaser on or before
the Due Diligence Cut-Off Date (the "Disclosed Remedial Cost Estimate") plus
(ii) the greater of two percent (2.0%) of the Initial Purchase Price of the
Asset, as shown on the Mortgage Loan and Real Property Schedule, or Fifty
Thousand Dollars ($50,000). A Structural Defect or Natural Condition shall not
give rise to any obligations of Seller hereunder without Purchaser's delivery
to Seller during the Due Diligence Period of sufficient specific information as
to the nature of the Structural Defect or Natural Condition, the estimated cost
to cure the Structural Defect or Natural Condition, the effect of the
Structural Defect or Natural Condition upon the use of the Mortgaged Property
and other information relevant under the circumstances for Seller to make its
election based upon the information submitted as part of the Certificate of
Defective Asset in respect of a Mortgage Loan.
(a)(i) Purchaser shall be entitled to deliver a Certificate
of Defective Asset with respect to a Structural Defect or Natural Condition in
the event that during the Due Diligence Period Purchaser discovers the
existence of either one or more defects in the improvements, fixtures (other
than carpet and floor coverings) or mechanical systems (including, but not
limited to, electrical, plumbing, elevator and heating, ventilation and air
conditioning) comprising a Mortgaged Property or Real Property ("Structural
Defect") or one or more Natural Conditions that, in either case, existed prior
to the Closing Date and either (A)(i) was not disclosed in the Due Diligence
Materials or otherwise provided in writing to Purchaser on or before the Due
Diligence Cut-Off Date, (ii) was not actually known to Purchaser prior to the
Offer Date (and Purchaser shall be deemed to have known about such Structural
Defect or Natural Condition if same is apparent from a physical inspection of
the Mortgaged Property or Real Property, as the case may be, by a person who is
not an expert on such Natural Conditions or Structural Defects), and (iii) (X)
with respect to a Structural Defect, would require the investment of not less
than the greater of two percent (2.0%) of the Initial Purchase Price of the
Asset, as shown on the Mortgage Loan and Real Property Schedule, or Fifty
Thousand Dollars ($50,000) to repair or otherwise cure, or (Y) with respect to
a Natural Condition, would be the sole cause of an increase in the cost to
develop the portion of the Mortgaged Property or Real Property, as the case may
be, intended to be developed (for the use indicated in the Due Diligence Report
or otherwise provided in writing to Purchaser on or before the Due Diligence
Cut-Off Date) of not less than the greater of two percent (2.0%) of the Initial
Purchase Price of the Asset, as shown on the Mortgage Loan and Real Property
Schedule, or Fifty Thousand Dollars ($50,000), or would require the investment
of not less than (a) the Disclosed Remedial Cost Estimate plus (b) the greater
of two percent (2.0%) of the Initial Purchase Price of the Asset, as shown on
the Mortgage Loan and Real Property Schedule, or Fifty Thousand Dollars
($50,000) to be expended to remove or negate the effects of same (in compliance
with all applicable laws, rules and regulations), as determined by a Seller-
Approved Contractor, or (B)(i) was disclosed in the Due Diligence Materials for
the related Asset, and (ii)(X) with respect to a Structural Defect, would
require the investment of not less than (a) the Disclosed Remedial
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Cost Estimate plus (b) the greater of two percent (2.0%) of the Initial
Purchase Price of the Asset, as shown on the Mortgage Loan and Real Property
Schedule, or Fifty Thousand Dollars ($50,000) net of any amount thereof
recoverable from third parties to be expended to repair or otherwise cure same,
as determined by a Seller-Approved Contractor, or (Y) with respect to a Natural
Condition, would be the sole cause of an increase in the cost to develop the
portion of the Mortgaged Property or Real Property, as the case may be,
intended to be developed (for the use indicated in the Due Diligence Materials,
or otherwise provided in writing to Purchaser on or before the Due Diligence
Cut-Off Date) of not less than (a) the Disclosed Remedial Cost Estimate plus
(b) the greater of two percent (2.0%) of the Initial Purchase Price of the
Asset, as shown on the Mortgage Loan and Real Property Schedule, or Fifty
Thousand Dollars ($50,000) or would require the investment of not less than (a)
the Disclosed Remedial Cost Estimate plus (b) the greater of two percent (2.0%)
of the Initial Purchase Price of the Asset, as shown on the Mortgage Loan and
Real Property Schedule, or Fifty Thousand Dollars ($50,000) to be expended to
remove or negate the effects of same (in compliance with all applicable laws,
rules and regulations), all as determined by a Seller-Approved Contractor.
Seller shall, in response to its receipt of a Certificate of Defective
Asset from Purchaser with respect to a Structural Defect or Natural Condition,
at Seller's sole option, elect within thirty (30) days after receipt of such
Certificate of Defective Asset either to (W) with respect to a Structural
Defect, repair or otherwise cure such Structural Defect, or, with respect to a
Natural Condition, remove or negate the effects of such Natural Condition;
provided, however, that even if Seller elects to repair or otherwise cure such
Structural Defect or remove or negate the effects of such Natural Condition,
Seller shall be obligated to pay for the cost thereof only to the extent that
same exceeds (i) the Disclosed Remedial Cost Estimate plus (ii) the greater of
two percent (2.0%) of the Initial Purchase Price of the Asset, as shown on the
Mortgage Loan and Real Property Schedule, or Fifty Thousand Dollars ($50,000),
or (X) repurchase the Asset at the Repurchase Price as provided in Section 10.2
hereof, or (Y) with respect to Real Property to which Purchaser, Affiliate
Purchaser or a Qualified Affiliate, as the case may be, has not yet taken
title, pay all sums due under any Interim Mortgage Loan relating to such Real
Property then existing and terminate the Sales Contract with respect thereto,
or (Z) permit Purchaser to revalue the Asset as described hereunder. Seller's
obligation to make such election shall be conditioned upon Purchaser's delivery
to Seller of sufficient specific information as to the nature of the Structural
Defect or Natural Condition, the estimated cost to cure the Structural Defect
or, with respect to a Natural Condition, the cost to remove or negate the
effects of same, the effect of the Structural Defect or Natural Condition upon
the use or development of the Mortgaged Property or Real Property, as the case
may be, and other information relevant under the circumstances for Seller to
determine whether there is a Structural Defect or Natural Condition and to make
the elections and other determinations required hereunder, along with the
aggregate of (i) the Disclosed Remedial Cost Estimate plus (ii) the greater of
two percent (2.0%) of the Initial Purchase Price of the Asset, as shown on the
Mortgage Loan and Real Property Schedule, or Fifty Thousand Dollars ($50,000),
with respect to such Structural Defect or Natural Condition, which amount may
be held in escrow, until such time as Seller has made its election whether to
cure, repurchase or revalue the Defective Asset, for use by Seller in its
efforts to cure or negate the effect of such Structural Defect or Natural
Condition.
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(ii) If Seller elects to permit Purchaser to revalue the
Asset in accordance with Section 5.5(a)(i) hereof, Purchaser shall retain a
Valuation Agent to revalue such Asset as of the Closing Date.
(iii) If Seller elects to permit Purchaser to revalue the
Asset in accordance with Section 5.5(a)(i) hereof, the Asset shall be revalued
in accordance with the valuation process described in Paragraph (b) below.
At least thirty (30) days, but no more than forty (40) days,
prior to the end of the Cure Period, if Purchaser had previously received
notification from Seller (i) that Seller intended to attempt to cure the
Defective Asset and Purchaser has not received notification from Seller (or is
not otherwise aware) that the Defect has been cured or (ii) that Seller expects
that the Defect in the Asset will be cured by the end of the Cure Period,
Purchaser shall send a deletion certificate, in substantially the form attached
hereto as Exhibit F ("Deletion Certificate"), to Seller stating that such
Defective Asset will be subject to repurchase at the Repurchase Price if such
Defect has not been cured within the Cure Period. Failure to so send such
Deletion Certificate to Seller shall not diminish Purchaser's rights hereunder
except that the Cure Period shall be extended until thirty (30) days from the
date such Deletion Certificate is actually delivered to Seller.
(b) Any revaluation of the Assets under this Section 5.5
shall be effected through a valuation process for each Asset as follows:
(i) Purchaser shall promptly appoint the
Valuation Agent to determine the Valuation of each Revalued Asset
("Valuation" herein) and shall notify Seller of its selection. The
Valuation Agent shall render a report (the "Valuation Report") as to
the Valuation of the Revalued Asset addressed to Seller and Purchaser
within ninety (90) days of appointment.
(ii) In the event that the designated Valuation
Agent is not eligible or capable of providing a Valuation in
accordance with this Section 5.5, Seller shall designate a new
Valuation Agent.
(iii) With regard to any Valuation Report rendered
under this Section 5.5(b), except as provided in Section 5.5(c) below,
the fees and other costs of the Valuation Agent shall be borne
one-half by Purchaser and one-half by Seller.
(iv) Purchaser shall instruct the Valuation Agent
appointed hereunder that in making its determination of the Valuation
of any Asset as of the Closing Date, the Valuation Agent shall follow
the instructions specified on Exhibit G attached hereto, taking into
account the assumptions (and only such assumptions, except to the
extent that the Valuation Agent finds it reasonably necessary to
modify one or more assumptions and then only upon the prior written
consent of Purchaser and Seller) set forth in this Section 5.5(b)
hereof.
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(v) Upon determination of the Valuation in
accordance with the foregoing, the Valuation Agent shall execute a
valuation certificate in substantially the form attached hereto as
Exhibit H (the "Valuation Certificate") indicating the Valuation. The
product of the Valuation multiplied by the Offer Percentage shall be
inserted as the Adjusted Purchase Price for each Revalued Asset on the
Mortgage Loan and Real Property Schedule in accordance with Section
2.3 hereof and shall be used to calculate the Adjusted Purchase Price.
For all Assets which are not Revalued Assets, the Adjusted Purchase
Price shall be the Initial Purchase Price.
(vi) With respect to any Interim Mortgage Loan,
the Valuation Agent, pursuant to the valuation process outlined in
this Section 5.5, will be instructed to value the underlying Mortgaged
Property. The value determined to be the value of the underlying
Mortgaged Property shall be deemed the Valuation for purposes of
calculating the Adjusted Purchase Price.
(vii) In the event of the adjustment between the
Initial Purchase Price and the Adjusted Purchase Price (the amount of
such adjustment herein, a "Shortfall"), Seller and Purchaser shall
take all necessary action to amend the Asset Documents, Loan and
Security Agreement and related documents to reflect the Shortfall; and
an amount equal to twenty-five percent (25.0%) of the aggregate amount
of any such Shortfall plus interest on the Shortfall from the Cut-Off
Date to the Revaluation Adjustment Date, as such term is defined in
the Loan and Security Agreement, at the Applicable Rate shall be
refunded to Purchaser within ten (10) Business Days after the
determination of same has been made and the balance of the aggregate
amount of the Shortfall shall be held by Seller to be applied toward
the next principal payment to be made by Purchaser in connection with
Seller's financing of the sale transaction contemplated hereby.
(viii) The Valuation Agent shall be instructed to
use all assumptions used in determining the Valuation of the Asset, as
reflected in the Due Diligence Materials, or with respect to any Asset
or parcel of Mortgaged Property for which Seller's Valuation was not
contained in the Due Diligence Materials, which assumptions are (i)
reasonable as of July 1, 1993 and (ii) consistent with the assumptions
used in those Valuations performed by Seller which were contained in
the Due Diligence Materials, and shall be applied in following the
instructions described in Exhibit G, unless the calculations pursuant
to a particular instruction would have yielded a different result if
the Valuation Agent that determined the value as reflected in the Due
Diligence Materials had considered the Structural Defect or Natural
Condition in performing such calculations.
(ix) If a calculation pursuant to a particular
instruction in Exhibit G would yield a different result if the
Valuation Agent modified the assumptions used in performing the
required calculation (1) to reflect the cost to (X) repair or
otherwise cure the Structural Defect or (Y) remove or otherwise negate
the effect of a Natural Condition (but only to the extent (with
respect to both (X) and (Y) above) that the cost thereof exceeds (i)
the Disclosed Remedial Cost Estimate plus (ii) the greater of two
percent (2.0%) of the Initial Purchase Price of the Asset, as shown on
the Mortgage Loan and Real Property Schedule,
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or Fifty Thousand Dollars ($50,000), net of any amount thereof
recoverable from third parties), that would cause the value of the
Asset to be reduced by more than (i) the Disclosed Remedial Cost
Estimate plus (ii) the greater of two percent (2.0%) of the Initial
Purchase Price of the Asset, as shown on the Mortgage Loan and Real
Property Schedule, or Fifty Thousand Dollars ($50,000), for, with
respect to a Structural Defect, the repair or cure of such Structural
Defect or, with respect to a Natural Condition, the removal or
negation of the effects of such Natural Condition and, in both cases,
net of any amount thereof recoverable from third parties (such as
tenants, insurers, contractors or bondsmen) or other participants, or
(2) in the alternative, to reflect the permanent reduction (X) with
respect to a Structural Defect, in net rental income that would cause
the value of the Asset to be reduced by more than (i) the Disclosed
Remedial Cost Estimate plus (ii) the greater of two percent (2.0%) of
the Initial Purchase Price of the Asset, as shown on the Mortgage Loan
and Real Property Schedule, or Fifty Thousand Dollars ($50,000), for
the repair or cure of such Defect that would result if such repair or
other cure were not performed, or (Y) with respect to a Natural
Condition, in the value of the Asset to be reduced by more than (i)
the Disclosed Remedial Cost Estimate plus (ii) the greater of two
percent (2.0%) of the Initial Purchase Price of the Asset, as shown on
the Mortgage Loan and Real Property Schedule, or Fifty Thousand
Dollars ($50,000), for the cost to remove or negate the effects of the
Natural Condition, if the Natural Condition was not removed or its
effects not negated, then in both the situation of a Structural Defect
or a Natural Condition, the Valuation Agent shall be instructed to
modify the assumptions or calculations at issue as described in clause
(1) or (2) using the modification method that would yield the lesser
adjustment in the Valuation of the Asset. No other assumption or
calculation shall be modified by the Valuation Agent unless Seller and
Purchaser grant their prior written consent.
(x) The assumed cost to repair or otherwise cure
the Structural Defect or to remove or negate the effect of the Natural
Condition applied under the method described in clause (1) of Section
5.5(a)(iii)(B) above, shall be provided by an engineering firm
reasonably acceptable to Seller and qualified to make such a
determination and shall be based upon reasonable estimates as to cost
for goods and services necessary to (X) with respect to a Structural
Defect, cure the Structural Defect so as to render the defective
structure serviceable for the uses for which the improvements or
fixtures were designed or (Y) with respect to a Natural Condition,
render the Mortgaged Property or Real Property, as the case may be (or
portion thereof), in a condition suitable for development (for the use
indicated in the Due Diligence Materials or otherwise provided in
writing to Purchaser on or before the Due Diligence Cut-Off Date).
(xi) Improvements, fixtures or mechanical systems
shall not be deemed to have a Structural Defect (1) solely by reason
of the failure of the improvements, fixtures or mechanical systems to
have a design or function satisfactory for a new or unintended use or
purpose, (2) solely by reason of the wear and tear associated with the
operation of such improvements, fixture or mechanical system, unless
the wear and tear is in excess of that which could reasonably be
expected based on a limited sight inspection and the inspection report
contained in the Investor Due Diligence Package, (3) solely by reason
of deferred
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maintenance, (4) solely by reason of having outlived its useful life
or its functional utility, (5) solely by reason of the requirements of
any law, rule, regulation or code relating to such improvements,
fixtures or mechanical systems which were promulgated, amended,
supplemented or otherwise passed or modified after the earlier of the
date of (i) construction of the improvements on the Mortgaged Property
or Real Property, (ii) the issuance of the certificate of occupancy
with respect to such Mortgaged Property or Real Property or (iii) the
origination of the related Mortgage Loan, including, but not limited
to, the Americans With Disabilities Act of 1990 (as set forth in
Chapter 126 of Title 42 of the United States Code), or (6) solely by
reason of any combination of the foregoing.
(xii) A Natural Condition shall not be deemed to be
the sole cause of an increase in the cost to develop Mortgaged
Property or Real Property, as the case may be, to the extent any other
reason exists independent of such Natural Condition which prohibits,
restricts or increases the cost to develop the Mortgaged Property or
Real Property, as the case may be (other than the existence of laws,
rules or regulations which prohibit or impose obligations in
connection with the development of land on which a Natural Condition
exists).
(c) Seller shall have the right to elect, within sixty
(60) days of receipt of the Valuation Certificate, at its sole option, to
repurchase the Asset for the Repurchase Price within ninety (90) days after
receipt of the Valuation Certificate in lieu of making an adjustment in the
Initial Purchase Price of any Asset under this Section 5.5. In the event
Seller repurchases any such Asset, Seller shall reimburse Purchaser for its
reasonable out-of-pocket costs incurred in employing the Valuation Agent to
render the Valuation Certificate. If Seller elects to repurchase an Asset
pursuant to this Section 5.5(c), such Asset shall be treated as a Deleted Asset
and shall not be deemed to be or be treated as a Revalued Asset.
(d) Notwithstanding anything contained herein to the
contrary, Purchaser shall only be entitled to deliver a Certificate of
Defective Asset (i) with respect to an Asset having a Structural Defect if the
cost to repair such Structural Defect would require the investment of more than
(a) the Disclosed Remedial Cost Estimate plus (b) the greater of (x) Fifty
Thousand Dollars ($50,000), or (y) two percent (2.0%) of the Initial Purchase
Price for the applicable Asset (net of any amounts recoverable from third
parties), or (ii) with respect to an Asset on which a Natural Condition exists,
such Natural Condition would be the sole cause of an increase in the cost to
develop the portion of the Mortgaged Property or Real Property, as the case may
be, intended to be developed (for the use indicated in the Due Diligence
Materials or otherwise provided in writing to Purchaser on or before the Due
Diligence Cut-Off Date) of more than (a) the Disclosed Remedial Cost Estimate
plus (b) the greater of (x) Fifty Thousand Dollars ($50,000) or (y) two percent
(2.0%) of the Initial Purchase Price for the applicable Asset (net of any
amounts recoverable from third parties) to be expended to remove or negate the
effects of such Natural Condition, in both the case of a Structural Defect and
a Natural Condition, as determined by a Seller-Approved Contractor (and such
Asset shall not be deemed a Defective Asset or to have a Defect unless the
conditions for delivering a Certificate of Defective Asset are satisfied with
respect thereto.)
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 6.1 PURCHASER'S REPRESENTATIONS.
Each of the following representations and warranties by Purchaser is
true and correct as of the date of delivery of this Agreement and shall be true
and correct on the Closing Date:
(a) AUTHORITY; BINDING ON PURCHASER; ENFORCEABILITY.
Purchaser is a limited partnership and is duly formed, validly existing and in
good standing under the laws of Delaware. Purchaser has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
has the power and authority to execute, deliver and perform this Agreement, and
all related documents and all the transactions contemplated hereby, including,
but not limited to the authority to purchase and acquire the Assets and
servicing thereof in accordance with this Agreement, has duly authorized,
executed and delivered this Agreement and, assuming due authorization,
execution and delivery by each other party hereto, this Agreement and all the
obligations of Purchaser hereunder are the legal, valid and binding obligations
of Purchaser, enforceable in accordance with the terms of this Agreement,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(b) CONFLICT WITH EXISTING LAWS OR CONTRACTS. The
execution and delivery of this Agreement and the performance of its obligations
hereunder by Purchaser will not conflict with any provision of any law or
regulation to which Purchaser is subject; or conflict with or result in a
breach of or constitute a default under any of the terms, conditions or
provisions of any organizational document of Purchaser or any agreement or
instrument to which Purchaser is a party or by which it is bound, or any order
or decree applicable to Purchaser; or result in the creation or imposition of
any lien on any of its assets or property which would materially and adversely
affect the ability of Purchaser to carry out the terms of this Agreement.
Purchaser will obtain any consent, approval, authorization or order of any
court or governmental agency or body required for the execution, delivery and
performance by Purchaser of this Agreement.
(c) DECISION TO PURCHASE. Purchaser is a sophisticated
investor and its offer and decision to purchase the Assets are based upon its
own independent expert evaluations of the Offering Memorandum, the Due
Diligence Materials, the Asset Documents and other materials deemed relevant by
Purchaser and its agents. Purchaser has not relied in entering into this
Agreement upon any oral or written information from Seller or any of its
employees, Affiliates, agents or representatives, other than the Offering
Memorandum, the Due Diligence Materials, the Asset Documents and the
representations and warranties of Seller contained herein. Purchaser further
acknowledges that no employee or representative of Seller has been authorized
to make, and that Purchaser has not relied upon, any statements or
representations other than those specifically contained in this Agreement.
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(d) COMPLIANCE WITH REQUIREMENTS OF OFFERING MEMORANDUM.
Purchaser (i) complied fully and on a timely basis with all requirements set
forth in the Offering Memorandum with respect to its successful offer to
purchase Assets described in such Offering Memorandum, which compliance
included, but was not limited to, the taking of all actions required to be
taken pursuant to the Offering Memorandum on a timely basis and the refraining
from taking any actions prohibited pursuant to the Offering Memorandum and (ii)
complied fully and on a timely basis with all terms and conditions of the
Confidentiality Agreement executed by Purchaser in order to qualify as a
prospective purchaser under the Offering Memorandum, which compliance included,
but was not limited to, the taking of all actions required to be taken pursuant
to the Confidentiality Agreement on a timely basis and the refraining from
taking any actions prohibited pursuant to the Confidentiality Agreement.
Without limiting the foregoing, neither Purchaser nor any of its Affiliates or
agents has communicated with any Mortgagor or guarantor with respect to any
Asset, or any other party to the transaction contemplated herein, including any
junior or senior lienors on or tenants of the Mortgaged Property or the Real
Property, other than a property manager of the Real Property, if any, or any of
their respective officers, employees or agents, without the prior written
consent of Seller.
(e) INCUMBENCY CERTIFICATE. Purchaser has delivered to
Seller an incumbency certificate identifying the officers of Purchaser
authorized to execute this Agreement and all certificates or other
communications which have been or may be delivered hereunder, together with a
specimen signature of each such officer.
(f) INSOLVENCY OF PURCHASER. Purchaser is not insolvent
or bankrupt and there is no pending or threatened insolvency or bankruptcy
proceeding of any kind affecting Purchaser or any of its assets, properties or
business.
(g) VALUATION ASSUMPTIONS. Purchaser acknowledges that
the Valuations set forth in the Mortgage Loan and Real Property Schedule were
developed within the context of a portfolio sale by Seller's Valuation Agent
for the sole purpose of allocating the Initial Purchase Price among the
individual Assets in order to provide a method of determining the Repurchase
Price or Adjusted Purchase Price in the event any Asset is repurchased or
revalued. There are certain standard assumptions as to the timing and amounts
of future cash flows, applicable capitalization and discount rates, timing of
foreclosures and bankruptcies and other factors that might be different if the
Assets had not been valued in the context of this portfolio sale. Purchaser
agrees that the use of the Valuations for any purpose other than their intended
use as described herein and the disclosure of such Valuations to third parties
without Seller's prior consent is strictly prohibited.
(h) OBLIGATIONS ASSUMED. At the Closing, Purchaser shall
purchase and assume, without recourse or warranty, except as specifically set
forth herein, all of Seller's right, title and interest in and to, and
obligations in respect of, the Mortgage Loans, and Purchaser covenants and
agrees that, with respect to such purchase and assumption, it will perform each
and every obligation of Seller to be performed from and after the Closing Date,
as set forth in such documents, including, but not limited to, those
obligations under outstanding letters of credit and in respect of undisbursed
funds, if any, under Mortgage Notes, to the extent and only to the extent that
such
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letters of credit, undisbursed funds and other obligations were fully disclosed
to Purchaser in writing prior to the Closing.
(i) OPINION OF PURCHASER'S COUNSEL. Purchaser shall
deliver on the Closing Date an opinion of counsel for Purchaser (who may be an
employee of Purchaser) opining as to the power, authority and legal right of
Purchaser to execute and deliver the Loan and Security Agreement and all
associated documents entered into by and between Purchaser and Seller or any of
their respective Affiliates, and to perform and observe the terms and
conditions of such instruments, and as to all other things that Seller
reasonably may request in connection therewith, all in form and substance
satisfactory to Seller.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 7.1 SURVIVING REPRESENTATIONS AND WARRANTIES OF SELLER.
Each of the following representations and warranties of Seller is true
and correct as of the date of delivery of this Agreement and shall be true and
correct in all material respects on the Closing Date:
(a) AUTHORITY; BINDING ON SELLER; ENFORCEABILITY. Seller
has taken all necessary action to authorize its execution, delivery and
performance of this Agreement, has the power and authority to execute, deliver
and perform this Agreement and all the transactions contemplated hereby,
including but not limited to the authority to sell, assign and transfer the
Assets in accordance with this Agreement, has duly authorized, executed and
delivered this Agreement and, assuming due authorization, execution and
delivery by each other party hereto, this Agreement and all the obligations of
Seller hereunder are the legal, valid and binding obligations of Seller,
enforceable in accordance with the terms of this Agreement, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) CONFLICT WITH EXISTING LAWS OR CONTRACTS. The
execution and delivery of this Agreement and the performance of its obligations
hereunder by Seller will not conflict with any provision of any law or
regulation to which Seller is subject or conflict with or result in a breach of
or constitute a default under any of the terms, conditions or provisions of any
agreement or instrument to which Seller is a party or by which it is bound or
any order or decree applicable to Seller or result in the creation or
imposition of any lien on any of its assets or property, in each case in any
manner which would adversely affect the ability of Seller to carry out the
terms of this Agreement; and Seller has obtained any consent, approval,
authorization or order of any court or governmental agency or body required for
the execution, delivery and performance by Seller of this Agreement.
(c) LEGAL ACTION AGAINST SELLER. There is no action,
suit or proceeding pending against Seller in any court or by or before any
other governmental agency or instrumentality which
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would adversely affect the ability of Seller to carry out the transactions
contemplated by this Agreement, except as disclosed with respect to any
particular Asset in the Due Diligence Materials or otherwise disclosed to
Purchaser in writing on or before the Due Diligence Cut-Off Date.
(d) REPRESENTATIONS AND WARRANTIES REGARDING THE ASSETS.
Subject to the provisions of Section 7.4 hereof, Seller hereby represents and
warrants that, as to each Mortgage Loan, and the Real Property where indicated,
the following representations and warranties are true and correct in all
respects as of the date of delivery of this Agreement, or as otherwise
specified, and shall be true and correct in all respects as of the Closing
Date:
(i) NO DEFENSE BY MAKER. Except as set forth in
the Due Diligence Materials or otherwise disclosed to Purchaser in writing on
or before the Due Diligence Cut-Off Date, Seller has neither taken an action
nor failed to take an action which would give the Mortgagor a valid defense to
the payment in full of the Mortgage Loan that arises from applicable local,
state or federal laws, regulations and other requirements pertaining to usury
or any other requirements of any federal, state or local law relating to the
origination of such Mortgage Loan, including, but not limited to,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws.
(ii) NO COUNTERCLAIMS. Except as set forth in the
Due Diligence Materials or otherwise disclosed to Purchaser in writing on or
before the Due Diligence Cut-Off Date, such Mortgage Loan is not subject to any
right of rescission, set-off, abatement, diminution, counterclaim or defense
that adversely affects the ability of Seller or its assigns to enforce the
provisions of the Mortgage Note or the Mortgage or realize against the
Mortgaged Property subject to such Mortgage, and no such claims have been
asserted as of the date hereof with respect to the Mortgage Loan, and if so
asserted, have either been withdrawn or released.
(iii) AMOUNT OF LOAN. The outstanding principal
amount of the Mortgage Loan as of the Due Diligence Cut-Off Date was not less
than such amount as set forth in the Mortgage Loan and Real Property Schedule
and the current interest rate, current required monthly payment, and the
Current Fully Extended Maturity Date of the Mortgage Loan are as set forth in
the Mortgage Loan and Real Property Schedule.
(iv) ENFORCEABILITY. The Mortgage Note and the
related Mortgage are each the legal, valid and binding obligation of the maker
or obligor thereof, and contain customary and enforceable provisions that, in
the event of a breach of a provision thereof, will enable the holder to bring
an action or proceeding to foreclose the lien of the Mortgage in accordance
with California law, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or law).
(v) SELLER'S OWNERSHIP AND RIGHT TO SELL. Seller
is the sole owner and holder of the Mortgage Loan and the Real Property and has
the right to sell the Mortgage Loan and the Real Property free and clear of any
valid claims of third parties.
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(vi) NO MODIFICATION. Seller has not modified the
related Mortgage or Mortgage Note (in the form contained in the Investor File),
or satisfied, cancelled or subordinated such Mortgage or Mortgage Note in whole
or in part or released all or any portion of the Mortgaged Property from the
lien of the Mortgage, or executed any instrument of release, cancellation or
satisfaction, except by written instrument as disclosed in the Due Diligence
Materials or otherwise disclosed to Purchaser in writing on or before the Due
Diligence Cut-Off Date.
(vii) DISBURSEMENT OF LOAN PROCEEDS. The Mortgagor
does not have the right to disbursement of additional loan proceeds or future
advances with respect to the Mortgage Loan except as such right is disclosed in
the Portfolio Summary Spreadsheet contained in the Due Diligence Materials or
otherwise disclosed to Purchaser in writing on or before the Due Diligence
Cut-Off Date.
(viii) CROSS-COLLATERALIZATION. The Mortgage Loan
is not cross collateralized with any other mortgage loan except as such cross
collateralization is disclosed in the Portfolio Summary Spreadsheet contained
in the Due Diligence Materials or otherwise disclosed to Purchaser in writing
on or before the Due Diligence Cut-Off Date.
(ix) TRUSTEE'S SALE SET-ASIDE. Seller has taken
no action that would give the Mortgagor a valid claim to set aside a
non-judicial foreclosure of the related Mortgage.
(e) INCUMBENCY CERTIFICATE. Seller has delivered to
Purchaser an incumbency certificate identifying the officers of Seller
authorized to execute this Agreement and all certificates or other
communications which have been or may be delivered hereunder, together with a
specimen signature of each such officer.
Section 7.2 DUE DILIGENCE REPRESENTATIONS AND WARRANTIES OF
SELLER.
Subject to the provisions of Section 7.4 hereof, Seller hereby
represents and warrants that, as to each Mortgage Loan or Real Property, as
indicated below, the following representations and warranties are true and
correct in all material respects as of the date of delivery of this Agreement,
or as otherwise specified, and shall be true and correct in all material
respects as of the Closing Date:
(a) DUE DILIGENCE MATERIALS. As of the Due Diligence
Cut-Off Date, the Asset Data Sheet, Portfolio Summary Spreadsheet and document
inventory, all of which are contained in the Investor Due Diligence Package,
reflect accurately in all respects the information set forth in the Asset File
with respect to such Asset, provided that such Due Diligence Materials purport
only to reflect information as it appears on the face of the documents and
other papers in such Asset File and does not purport to verify the accuracy of
the facts recited in such documents and other papers.
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(b) VALIDITY OF COLLATERAL DOCUMENTS. Each Security
Agreement related to each Mortgage Loan and referenced in the Due Diligence
Materials creates a valid security interest in the property described therein.
(c) ASSET DOCUMENTS. The copies of the grant deed in
respect of the Real Property, and the Mortgage Note and Mortgage and any
documents modifying the terms of the Mortgage Note and Mortgage included in the
Due Diligence Materials are true and correct copies of the documents they
purport to be and have not been superseded, amended, modified, cancelled or
otherwise changed in any respect except as set forth in the Due Diligence
Materials or otherwise disclosed to Purchaser in writing on or before the Due
Diligence Cut-Off Date.
(d) CONDEMNATION. To the Best of Seller's Knowledge (as
hereafter defined), there is no pending or threatened condemnation proceeding
or similar proceeding affecting the Mortgaged Property or the Real Property, as
the case may be, or any part thereof which could have an adverse effect upon
the use of that Mortgaged Property or the Real Property for its intended
purposes, except as set forth in the Due Diligence Materials or otherwise
disclosed to Purchaser in writing on or before the Due Diligence Cut-Off Date.
As used herein, "to the Best of Seller's Knowledge" means, as to any Asset,
knowledge as to which Seller has received written notice or which is the actual
present knowledge of the current officers of Seller who are primarily
responsible for such Asset, as the case may be, without any independent
investigation or inquiry whatsoever, and expressly excluding any knowledge of
any other former officer of Seller.
(e) LITIGATION. To the Best of Seller's Knowledge as of
the Due Diligence Cut-Off Date, there is no litigation, proceeding or
governmental investigation pending, or any order, injunction or decree
outstanding, existing or relating to any Asset or the related Mortgaged
Property which could have an adverse effect upon such Asset, except as set
forth in the Due Diligence Materials or otherwise disclosed to Purchaser in
writing on or before the Due Diligence Cut-Off Date.
(f) COMPLIANCE WITH LAWS. To the Best of Seller's
Knowledge and except as disclosed in the Due Diligence Materials or otherwise
disclosed to Purchaser in writing on or before the Due Diligence Cut-Off Date,
(i) no currently applicable zoning, building, or other federal, state or
municipal law, ordinance, regulation, or any restrictive covenant is currently
violated by the current maintenance, operation, occupancy, or use of any of the
Mortgaged Property or the Real Property, as the case may be, in its present
manner such that the violation would adversely affect the current operation,
occupancy or other use of the Mortgaged Property or the Real Property and (ii)
all licenses, permits, inspections, authorizations, certifications and
approvals required by all governmental authorities having jurisdiction over the
current operation of the Mortgaged Property and the Real Property have been
performed or issued and paid for and are in full force and effect.
(g) TITLE INSURANCE. A valid and enforceable ALTA or
CLTA policy of title insurance or CLTA owner's binder, as the case may be, or
any other form customarily approved by institutional investors in the
jurisdiction in which the Mortgaged Property or Real Property is located has
been issued by and is the binding obligation of a title insurer qualified to do
business
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in the jurisdiction where the Mortgaged Property or Real Property is located
and, with respect to the Mortgaged Property, in an amount not less than the
principal amount of the Mortgage Note secured by such Mortgaged Property at
origination and, with respect to the Real Property, in an amount not less than
the current appraised value of such Real Property or the amount of the original
Mortgage Note that had been secured by such Real Property, whichever is less,
and such policy is presently in full force and effect and all premiums with
respect thereto have been paid in full. With respect to each Mortgage Loan,
each such title insurance policy insures Seller and its successors and assigns
that the Mortgage securing such Mortgage Loan is a valid first lien on the
Mortgaged Property (or that such Mortgage has the lien priority noted on the
Mortgage Loan and Real Property Schedule) and is otherwise free and clear of
encumbrances, liens and exceptions having priority over the lien of the
Mortgage, subject only to those exceptions set forth in the Due Diligence
Materials, and such exceptions are customarily acceptable to institutional
lenders in the jurisdiction in which the Mortgaged Property is located. Seller
has not, by its action or inaction, adversely affected any of its rights under
any such title insurance policy or the priority of any such Mortgage as insured
by such title insurance policy. With respect to each Interim Mortgage Loan,
Purchaser can obtain during the Due Diligence Period, upon the payment of the
applicable premium, a valid and enforceable policy of title insurance, from a
title insurer qualified to do busines in the jurisdiction where the Real
Property is located, in an amount not less than the Initial Purchase Price for
such Asset. Such policy of title insurance shall insure Purchaser and its
assigns that such Interim Mortgage is a valid and enforceable first or, with
respect to those Assets specifically identified in the Due Diligence Materials
as being subject to an existing first lien, second lien on the Real Property
described therein and such Real Property is otherwise free and clear of
encumbrances, liens, and exceptions having priority over the lien of such
Interim Mortgage, subject only to those exceptions set forth in the Due
Diligence Materials. No title exceptions contained in any such policy of title
insurance adversely interfere with the current use of the related Mortgaged
Property or Real Property, except as otherwise disclosed in the Due Diligence
Materials or to Purchaser in writing on or before the Due Diligence Cut-Off
Date.
(h) REAL ESTATE TAXES. As of the Due Diligence Cut-Off
Date, there were no unpaid real property taxes due and payable against the
related Mortgaged Property or Real Property except as disclosed in the Due
Diligence Materials or otherwise disclosed to Purchaser in writing on or before
the Due Diligence Cut-Off Date. For the purpose of this representation and
warranty (and otherwise as used in this Agreement with respect to whether real
property taxes are "due and payable"), real estate taxes shall not be deemed to
be due and payable until the Business Day immediately preceding the date on
which such taxes would become delinquent.
(i) FLOOD INSURANCE. If, upon origination of the
Mortgage Loan or the original obligation secured by the Real Property, the
Mortgaged Property or the Real Property was in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and the flood insurance described below has been made
available), a flood insurance policy covering improved Mortgaged Property and
Real Property only and meeting the requirements of the current guidelines of
the Federal Insurance Administrator is in effect with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least
of (A) the unpaid principal balance of the Mortgage Loan, (B) the full
insurable value of the
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Mortgaged Property or the Real Property, as the case may be, or (C) the maximum
amount of insurance which was available under the Flood Disaster Protection Act
of 1973.
(j) HAZARD INSURANCE. The Mortgage Loan obligates the
Mortgagor thereunder to maintain a hazard insurance policy with a standard
mortgagee clause at the Mortgagor's cost and expense and there is maintained
such a policy, in an amount not less than the lesser of (x) ninety percent
(90%) of the full replacement cost of the Mortgaged Property or (y) the current
balance of such Mortgage Loan, irrespective of whether evidence of such policy
is available for review in the Investor Due Diligence Package. No notice of
claims therefor or lapse in coverage has been received by Seller with respect
to any Mortgaged Property, except as set forth in the Due Diligence Materials
or otherwise disclosed to Purchaser in writing on or before the Due Diligence
Cut-Off Date.
(k) ENVIRONMENTAL MATTERS. Either a Phase I or a Phase
II environmental inspection report was, to the extent such is available,
provided to Purchaser with regard to the Mortgaged Property or the Real
Property, as the case may be, prior to the Due Diligence Cut-Off Date. No
material amount of Hazardous Substances affects any Asset in excess of the
quantities disclosed in the environmental inspection report for such Asset
delivered to Purchaser, if any. For purposes of this Section 7.2(k) only,
"material" shall mean any amount of Hazardous Substances in violation of law or
equal to or in excess of actionable amounts set forth in any applicable or
relevant environmental regulation, requirement, guideline, policy or standard
promulgated by any local, state or federal governmental entity, or the presence
of friable asbestos with respect to any Asset, in excess of the amounts
commonly used by like property owners in compliance with such environmental
laws to maintain, landscape and operate their properties, and that cannot be
remediated for a cost equal to or less than the greater of (i) two percent
(2.0%) of the Initial Purchase Price of the Asset, as shown on the Mortgage
Loan and Real Property Schedule, or (ii) Twenty-Five Thousand Dollars ($25,000)
plus any remediation amount identified in such environmental inspection report.
Without limiting any other provision of this Agreement, Seller is not and shall
not be responsible or liable in any manner whatsoever for any information or
condition disclosed or failed to be disclosed by any environmental inspection
report delivered hereunder. For purposes hereof, the Summary of Site
Assessment and Site Remediation Activities dated December 1992 delivered to
Purchaser in respect of Asset No. 30 shall be deemed to be a Phase II
environmental inspection report hereunder.
(l) OUTSTANDING CONTRACTS. In respect of all Real
Property to be conveyed to Purchaser or a Qualified Affiliate, as the case may
be, at the end of the Due Diligence Period, there will be no leases or
management, service, supply, security, maintenance or similar contracts with
respect to such Real Property other than (i) leases that were in place as of
the Due Diligence Cut-Off Date and are reflected in the Due Diligence Materials
or, if executed after the Due Diligence Cut-Off Date, were made with the
express consent of Purchaser or pursuant to Purchaser's written guidelines
delivered to Seller, and (ii) those contracts that may be terminated upon no
more than thirty (30) days' notice or that have been approved by Purchaser or
Affiliate Purchaser in writing.
(m) OBLIGATIONS RESPECTING LEASES. To the Best of
Seller's Knowledge in respect of Real Property only and to the extent not
previously disclosed to Purchaser in writing, Seller has received no notice of
any breach of any lease; there are no brokerage commissions payable with
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respect to any lease; and there are no contracts running with the land that are
not terminable upon thirty (30) days' notice.
(n) LEASEHOLD LOANS. Except as disclosed on the Mortgage
Loan and Real Property Schedule, there are no ground leases affecting the
Mortgaged Property or any part thereof. To the Best of Seller's Knowledge with
respect to each leasehold loan described on the Mortgage Loan and Real Property
Schedule, except as otherwise disclosed in the Due Diligence Materials:
(i) the ground lease described in the related
Mortgage is valid and enforceable, is in full force and effect, and is binding
upon the parties thereto and their respective successors and assigns, in
accordance with the terms of such ground lease; provided, however, with respect
to Asset No. 21, in the event that Purchaser fails to obtain a waiver or
consent from the ground lessor with regard to the assignment of the Mortgage to
Purchaser (notwithstanding the diligent efforts of Purchaser to obtain such
waiver or consent), such failure shall be deemed a Defect.
(ii) each such ground lease has not been modified,
amended or extended;
(iii) the Mortgagor, as the lessee under each such
ground lease, has performed all obligations under the ground lease to be
performed by the ground tenant;
(iv) neither the ground lessor nor Mortgagor, as
lessee under any such ground lease, is in default under such ground lease;
(v) each such ground lease (or memorandum
thereof) has been recorded in the land records in the jurisdiction in which the
Mortgaged Property is located purporting to create the leasehold estate prior
the recordation of the Mortgage related to such Mortgaged Property; and
(vi) each such ground lease contains leasehold
mortgage loan provisions customarily required by institutional lenders in the
jurisdiction in which the Mortgaged Property is located.
Section 7.3 TERMINATION OF REPRESENTATIONS AND WARRANTIES.
Each of the Surviving Representations and Warranties in Section 7.1
hereof shall survive the Closing and shall terminate on the Surviving
Representation Expiration Date. Each of the Due Diligence Representations and
Warranties in Section 7.2 hereof shall terminate upon the termination of the
Due Diligence Period, as such may terminate by the earlier to occur of the
expiration of time (without prior delivery of a Certificate of Defective Asset)
or the delivery to Seller of an Acceptance Certificate with respect to any
Asset as provided in Section 5.4(a) hereof; except, however, in the event
Purchaser is unable to gain access to any Mortgaged Property in order to
perform its environmental due diligence, the Due Diligence Period for the
representation and warranty made by Seller in Section 7.2(k) shall survive for
a period of ninety (90) days beyond
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the date on which Purchaser first becomes able to gain such access. The
Surviving Representations and Warranties shall survive termination of any Due
Diligence Period and the Closing, except as described above, subject to
Purchaser's obligation to deliver a Certificate of Defective Asset with respect
to a Defect arising from a Surviving Representation and Warranty within the
period provided in Section 5.4(b) hereof.
Section 7.4 SCOPE OF INVESTIGATION AND OTHER DUE DILIGENCE.
Seller has made certain representations and warranties with respect to
the Assets in Sections 7.1 and 7.2. Seller's investigation and other due
diligence with respect to the Assets has been limited. Seller has not verified
whether the representations and warranties are true and correct. Seller and
Purchaser understand that if Seller's representations and warranties are
breached, that the Purchaser is limited to the exercise of its rights and the
remedies expressly set forth herein. In no event shall a breach of a
representation and warranty in this Article VII be used as evidence of or
deemed to constitute bad faith, misconduct or fraud even in the event that it
is shown that Seller, any Affiliate thereof or any of their respective
directors, employees, officers or agents knew or should have known of the
existence of information which was inconsistent with any of the representations
and warranties provided in this Article VII.
Section 7.5 ASSERTION OF CLAIMS.
In the event and at such time as a Claim is brought by a Mortgagor in
respect of any of the Assets, the adverse resolution of which would constitute
a breach of any representation or warranty made by Seller in this Article VII,
Seller, at its option, may (i) participate (at its sole cost and expense) with
Purchaser in the defense of such Claim and in the negotiation of any reasonable
settlement or compromise thereof, or (ii) repurchase, at the Repurchase Price,
the Asset subject to such Claim, or (iii) both.Notwithstanding the foregoing,
Seller's right to elect to repurchase an Asset under this Section 7.5 shall be
terminated and any such election so made shall be null and void, in the event
that Purchaser delivers to Seller in writing an absolute waiver of such breach
and of any right Purchaser may have under this Agreement to deliver a
Certificate of Defective Asset with respect to such Asset (each, a "Release
Notice") and upon Seller's receipt of such Release Notice, Seller shall be
relieved of all obligation to repurchase or provide any of the other remedies
for a Defective Asset provided under this Agreement with respect to such Asset.
If a Release Notice has not been delivered and Seller and Purchaser disagree
over the terms of one or more settlement proposals with respect to such Claim,
Seller may notify Purchaser that Seller intends to repurchase the Asset subject
to such Claim, in which event, if Seller reasonably determines and so notifies
Purchaser that such settlement or compromise must be entered into prior to the
repurchase of such Asset (e.g., if such settlement or compromise offer would
expire and Purchaser and Seller could not effect a repurchase prior to such
expiration), and Purchaser immediately thereafter fails to send a Release
Notice, Purchaser shall enter into such settlement or compromise for the
benefit of Seller (provided Seller advances any funds required in connection
with such settlement) as Seller shall direct.The Repurchase Price shall not be
affected by such settlement or compromise and Seller shall indemnify, defend,
and hold Purchaser harmless from and against any liability or losses relating
to such settlement or compromise. In the event Purchaser delivers a Release
Notice with respect to such Asset, and Purchaser obtains a release of any and
all claims against Seller arising
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out of such Claim, Purchaser shall have the right to settle such Claim and
Seller's right to participate in such setttlement shall terminate. Nothing in
this Section 7.5 shall affect Seller's right to defend itself in respect of any
Claim that may be brought against Seller.
ARTICLE VIII
CERTAIN COVENANTS OF SELLER
Section 8.1 SELLER COVENANTS.
Seller covenants and agrees with Purchaser as follows, it being
understood and agreed that each of the following covenants and agreements, with
the exception of the covenants set forth in Sections 8.1(a), (b), (c), (d), (e)
and (g) which shall survive the Closing, shall terminate upon the Closing Date:
(a) ACCESS TO RECORDS. From and after the date of its
execution of this Agreement, Seller shall make available to Purchaser or cause
to be made available to Purchaser for its inspection, copying and reproduction,
all non-confidential books and records of the type included in the Asset File
that are maintained by, through or for Seller and are related to the Assets.
(b) NOTICE TO MORTGAGORS. At the request of Purchaser,
Seller shall cooperate with Purchaser in notifying on and after the Closing
Date each maker or obligor, or its successors or assigns, under a Mortgage Loan
of the assignment thereof from Seller to Purchaser. Such notification shall be
made by letter prepared by Purchaser in substantially the form attached hereto
as Exhibit I or as mutually agreed by Seller and Purchaser.
(c) NOTICE TO TENANTS. With respect to any tenant then
sending its rent directly to Seller, at the request of Purchaser, Seller shall
cooperate with Purchaser, after the Closing Date as to the Mortgage Loans and
any Real Property conveyed on the Closing Date, and on and after each Real
Property Closing Date, as such term is defined in the Sales Contract as to any
Real Property not conveyed on the Closing Date, in notifying each tenant with
respect to any Mortgaged Property, or any Real Property, of the assignment of
the Real Property or the Mortgage Loan secured by such Mortgaged Property, as
the case may be, from Seller to Purchaser. Such notification shall be by
letter prepared by Purchaser in a form mutually agreed by Seller and Purchaser.
(d) CERTAIN PAYMENTS.
(i) At the Closing, Purchaser shall receive credit (the
"Section 8.1(d) Credit"), in the amount, and applied in the manner, determined
by this subsection 8.1(d). The amount of the Section 8.1(d) Credit shall be
equal to the sum of the following three amounts (the "Creditable Amounts"):
(A) Any of the following amounts which are
actually received by Seller after the Due Diligence Cut-Off Date and on or
before the Closing Date -- any principal payments or
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prepayments, including Payment in Full, on a Mortgage Loan of any kind or
character, including proceeds from any compromises and settlements.
(B) Any of the following amounts which are
actually received by Seller after the Due Diligence Cut-Off Date and on or
before the Closing Date -- any net proceeds of the sale of any Mortgage Loan or
the sale or condemnation of any Mortgaged Property or Real Property, or hazard
insurance proceeds not applied to restore the Mortgaged Property or Real
Property or payable to a prior lienor.
(C) Any of the following amounts which are
actually received by Seller on or before the Closing Date, regardless of when
they are or have been received by Seller -- the interest component of regular
scheduled payments, and prepayments of interest, on the Mortgage Loans, to the
extent such payments and prepayments are attributable to periods commencing on
or after the Cut-Off Date.
(ii) The amount of the Section 8.1(d) Credit shall be
applied as follows:
(A) If the Loan and Security Agreement has not
been executed, the entire Section 8.1(d) Credit shall be applied against the
cash due from Purchaser at the Closing.
(B) If the Loan and Security Agreement has been
executed, the following two adjustments shall be made:
(1) Purchaser shall be deemed to have
made a prepayment on account of the Promissory Note in an amount equal to the
amount that would be required to be paid under the Loan and Security Agreement
if Purchaser, rather than Seller, had received the Creditable Amounts on the
day after the Closing (the "Section 8.1 Deemed Prepayment").
(2) Purchaser shall receive a credit
against the Cash Portion of the Purchase Price equal to the excess, if any, of
the amount of the Section 8.1(d) Credit over the amount of the Section 8.1
Deemed Prepayment.
(iii) With respect to amounts held by a bankruptcy court,
bankruptcy trustee, bankruptcy debtor-in-possession, receiver in foreclosure or
similar third party, or similar account or pursuant to a cash collateral order
or any other account maintained for the benefit of any Asset, and any amounts
actually or constructively received by Seller or Purchaser: (i) if the
existence of same was disclosed in the Due Diligence Materials, Seller's
interest in same shall be assigned to Purchaser along with all of the other
Assets and Asset Documents to be assigned hereunder or, if received by Seller
it shall be paid or credited to Purchaser promptly after receipt thereof, or
(ii) if the existence of same was not disclosed in the Due Diligence Materials,
Seller's interest in same shall be assigned to Purchaser along with all of the
other Assets and Asset Documents to be assigned hereunder and Purchaser shall
pay to Seller at the Closing or as soon thereafter as the amount held as of the
Cut-Off Date is known, the value of said amount determined by Seller in the
manner provided in Exhibit G hereto, utilizing the same assumptions utilized in
the Due Diligence Materials (i.e., assuming said amount is received on the
projected recovery date and is
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discounted from that date to the Cut-Off Date). The amount payable to Seller
pursuant to (ii) above shall not exceed the sum Seller could retain if said sum
was received immediately prior to the Closing Date.
(iv) [text deleted in original]
(v) Any and all payments received by Seller after the
Closing Date that would have been included in the Creditable Amounts if
received by Seller on or before the Closing Date shall be applied in accordance
with the terms of the Loan and Security Agreement.
(e) INSURANCE. At the request of Purchaser, Seller shall
cooperate with Purchaser in the preparation and mailing by Purchaser to each
hazard and casualty insurer, and to the writing agent for each flood hazard
insurer, for the Assets a request for an endorsement of its policy of insurance
effective on the Closing Date showing Purchaser as the mortgagee or insured
named therein, as the case may be, together with instructions that such
endorsement be forwarded directly to Purchaser, at the address herein specified
for notices.
(f) SERVICING. With respect to the Mortgage Loans from
the date hereof until the Closing Date, Seller shall service and administer the
Mortgage Loans in the manner in which it was servicing such Mortgage Loans
immediately prior to the date hereof. Without the prior written consent of the
Purchaser, Seller shall not, except as required by law or as a prudent lender,
or by the terms of the Asset Documents relating to such Mortgage Loans, or
pursuant to previously negotiated settlement or similar contracts entered into
or pending as of the Offer Date and disclosed to Purchaser in writing on or
before the Offer Date, (i) release any collateral or any party from any
liability on or with respect to the Mortgage Loans, (ii) compromise or settle
any claims of any kind or character with respect to the Mortgage Loans, (iii)
initiate, complete or otherwise take any action with respect to a foreclosure
on any of the Mortgaged Property, except to the extent in Seller's reasonable
judgment such actions are required pursuant to actions taken prior to the Offer
Date, (iv) sell or encumber, or contract to sell or encumber, the Mortgage
Loans, or any portion thereof or any interest therein, or (v) agree to any
amendments or modifications to any such Mortgage Loan. Seller as servicer,
however, may notify Purchaser in the event that an action under (i), (ii),
(iii), (iv), or (v) above should be taken in order to enhance or protect the
value of the Mortgage Loans. In such event, Seller shall be absolved of any
responsibility it may have to take such action unless written consent to such
action has been promptly received by Seller. Upon request of Purchaser, Seller
shall disclose to Purchaser the status of any Mortgage Loan foreclosure in
progress and any actions taken in connection therewith as of the Offer Date.
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[SECTION 8.1(d)(iv)]
(iv) All amounts of delinquent or current interest
received by Purchaser after the Closing Date on account of a Mortgage Loan with
respect to which a payment default exists as of the Cut-Off Date (that is,
there are delinquent amounts due under the Mortgage Loan) shall be applied by
Purchaser first against delinquent or current interest due on account of such
Mortgage Loan after the Cut-Off Date (in any order determined by Purchaser),
and then on account of any delinquent interest due under such Mortgage Loan as
of the Cut-Off Date. Amounts received by Purchaser and applied on account of
delinquent interest due under a Mortgage Loan as of the Cut-Off Date shall be
remitted by Purchaser to Seller promptly after receipt by Purchaser. Seller
agrees that Purchaser shall have no obligation to treat any payments received
by Purchaser as pre-Cut-Off Date interest, except to the extent agreed to by
Purchaser and Mortgagor or as required by applicable law.
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(g) COOPERATION. From and after the Closing Date, Seller
shall in general cooperate with Purchaser, and Purchaser shall cooperate with
Seller, in connection with any litigation or other matter involving the Assets,
but Seller shall not be required to institute any lawsuit or (unless a Person
satisfactory to Seller in Seller's sole discretion agrees to promptly reimburse
Seller or shall indemnify Seller in a manner satisfactory to Seller in Seller's
sole discretion with respect to any such expense) to expend any material sums
of money in connection with such cooperation. On and after the Closing Date,
Seller shall promptly deliver, forward and remit to Purchaser any and all
bills, invoices, insurance policies, letters, documents and other
correspondence or communications of a non-confidential nature relating to the
Assets which are received by Seller.
(h) ENDORSEMENT OF MORTGAGE NOTE. It is hereby
understood and agreed that an endorsement by Seller of a Mortgage Note "without
recourse" and "without any representation or warranty, express or implied,"
whether such endorsement is made on or after the Closing Date, is not intended
to diminish, alter or negate in any way Seller's representations, warranties or
obligations set forth in this Agreement, including but not limited to, the
representations and warranties set forth in Article VII of this Agreement, or
constitute a waiver by Purchaser of, or a limitation or modification on, any of
the rights or remedies under this Agreement. To the extent Purchaser,
following the earlier to occur of the date on which an Asset is accepted by
Purchaser or the expiration of the Due Diligence Period with respect to a
Mortgage Loan, provides evidence reasonably satisfactory to Seller that the use
of an allonge to assign such Mortgage Note, and not an endorsement directly on
the Mortgage Note, has adversely affected the marketability of such Mortgage
Note or that an endorsement is required under applicable law, Purchaser may
request in writing that Seller endorse the Mortgage Note and in connection
therewith, Purchaser shall prepare such endorsement (which shall be identical
in all respects to the allonge delivered at Closing), deliver the original
Morgage Note to Seller and pay all reasonable costs and expenses of Seller in
connection therewith (including, without limitation, reasonable attorneys' fees
and disbursements). Upon satisfaction of the foregoing conditions, Seller
shall sign an endorsement of the Mortgage Note as aforementioned.
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING
The respective obligations of Purchaser and Seller to complete the
purchase and sale of the Assets pursuant to this Agreement are subject to the
fulfillment on or prior to the Closing Date of each of the following additional
conditions to be fulfilled by the other, unless the same is specifically waived
in writing by the party for whose benefit the same is to be fulfilled.
Provided that all conditions to Closing have been satisfied, Purchaser shall be
obligated to purchase the Assets at the Closing for the Initial Purchase Price
irrespective of the fact that Seller or Purchaser may have knowledge that one
or more breaches of Seller's representations and warranties hereunder may
exist. Purchaser's purchase of the Assets as to which such breaches or
conditions are discovered prior to the Closing shall not operate as a waiver of
Purchaser's rights under Section 5.4 or 5.5 hereof.
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Section 9.1 MUTUAL OBLIGATIONS.
(a) PERFORMANCE OF COVENANTS. Seller and Purchaser each
shall have performed all of its covenants and agreements contained herein which
are required to be performed by it on or prior to the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. All of the
respective representations and warranties of Seller in Sections 7.1(a), (b),
and (c) hereof and of Purchaser in Section 6.1 hereof shall be true in all
material respects at and as if made on the Closing Date.
(c) GOVERNMENTAL APPROVALS. All requisite federal, state
and local governmental and regulatory approvals relating to the transactions
contemplated hereby, if any, shall have been obtained.
(d) CORPORATE APPROVALS. Seller and Purchaser shall each
provide the other with certified copies of corporate resolutions approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, together with customary certificates of
incumbency and certificates of good standing, as the others or its counsel may
reasonably require.
Section 9.2 SELLER'S DOCUMENTS.
Seller agrees to execute, deliver and/or provide to Purchaser the
following items, to be delivered at the Closing at the office of Seller or at
such other location as Seller may designate:
(a) For each Mortgage Loan, to be delivered at Closing at
the offices of Seller or such other location(s) as Seller determines, the
original Mortgage Note duly endorsed by means of an allonge by Seller to
Purchaser, without recourse (except as otherwise provided in this Agreement);
the Mortgage; and an assignment of such Mortgage in the form attached hereto as
Exhibit C with such modifications as shall be customary and appropriate under
local laws for recording in the land records in the jurisdiction in which the
related Mortgage Property is located (the "Mortgage Assignment"), transferring
and conveying Seller's rights thereunder, as well as its rights, title and
interest in the Asset Documents of which such Mortgage Note and Mortgage are a
part;
(b) For each Asset, to be delivered at the Closing at the
offices of Seller or such other locations(s) as Seller determines, the
additional Asset Documents and all account histories, payment records and other
documents comprising the Asset File for each Asset, including, but not limited
to, assignments in blank of Seller's rights under any letter of credit,
certificates of deposit or other escrows or deposits and instructions to
insurers, financial institutions or others to the extent necessary to provide
Purchaser with the right to enforce such Asset Documents. Any fees or charges
incurred by Seller in transporting the additional Asset Documents from the
location designated by Seller or in taking other steps at Purchaser's request
under this Section 9.2(b) shall be paid by Purchaser;
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(c) Such other assignments, instruments of transfer, and
other documents held by Seller as Purchaser may reasonably require and prepare
in order to complete the transactions specifically contemplated hereunder
including, but not limited to, the assignment of any UCC-1 financing statement
for the Mortgage Loans which currently exists for the benefit of Seller;
(d) A certificate of Seller reaffirming, subject to the
provisions and limitations of Section 7.4, all representations and warranties
of Seller under Section 7.1, as of the Closing Date; provided, however, that
recourse thereunder shall be limited as set forth in this Agreement;
(e) Corporate resolutions, certificates of incumbency and
certificates of good standing with respect to Seller as may be required by
Purchaser or its counsel pursuant to Section 9.1(d);
(f) For each Mortgage Loan, to be delivered at Closing at
the offices of Seller or such other location(s) as Seller determines, an
assignment of additional collateral for each Mortgage Loan, prepared by
Purchaser, in the form of Exhibit C-1 (the "Additional Collateral Assignment"),
transferring and conveying to Purchaser Seller's rights thereunder and a Notice
to Mortgagor in the form of Exhibit I, prepared by Purchaser;
(g) For each Interim Mortgage Loan, an executed Interim
Mortgage Note and Interim Mortgage in substantially the forms attached hereto
as Exhibit L and Exhibit M (each dated as of the Cut-Off Date); and
(h) The Loan and Security Agreement substantially in the
form attached hereto as Exhibit K.
Section 9.3 PURCHASER'S CLOSING ITEMS.
Purchaser agrees to execute, deliver and/or provide to Seller the
following at Closing:
(a) The portion of the Initial Purchase Price, and other
amounts required under Sections 2.2(b) and (c) hereof, due to be paid by
Purchaser to Seller on the Closing Date;
(b) A certificate of Purchaser reaffirming all
representations and warranties of Purchaser under Section 6.1 as of the Closing
Date; and
(c) Corporate resolutions, certificates of incumbency and
certificates of good standing with respect to Purchaser as may be required by
Seller or its counsel pursuant to Section 9.1(d)[; and].
(d) The Loan and Security Agreement substantially in the
form attached hereto as Exhibit K and a promissory note in an amount equal to
the Financed Portion and all other instruments required under the Loan and
Security Agreement; and
(e) An opinion of Purchaser's counsel as described in
Section 6.1(i) hereof.
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ARTICLE X
REPURCHASE BY SELLER
Section 10.1 MANDATORY REPURCHASE.
Seller shall be required to repurchase, for the Repurchase Price with
respect thereto, any Defective Asset that Seller either (i) has elected to
repurchase under Section 5.4 or 5.5 hereof, or (ii) is required to repurchase
as a result of its failure to cure the Defect under Section 5.4 or 5.5 hereof
within the time periods prescribed therefor, and subject to the following terms
and conditions:
(a) If Seller has elected to repurchase any Asset, the
Repurchase Date for a Defective Asset shall be specified in such election and
shall be a date occurring on or before the date thirty (30) days following the
date of Seller's election to repurchase such Asset. If Seller is deemed to
have elected to repurchase any Asset, the Repurchase Date thereof shall be
ninety (90) days after Seller's receipt of a timely Certificate of Defective
Asset for any Defective Asset If Seller has elected to cure a Defect and such
cure has not been effected, the Repurchase Date for such Defective Asset shall
be thirty (30) days after the expiration of the Cure Period for such Defective
Asset. In any of the above cases, if such ninetieth (90th) day or thirtieth
(30th) is not a Business Day, the Repurchase Date shall be the first Business
Day thereafter.
(b) On the Repurchase Date, Purchaser shall convey, or
cause Affiliate Purchaser or a Qualified Affiliate, as the case may be, to
convey to Seller all right, title and interest in and to the Defective Asset
pursuant to a note endorsement by allonge and a mortgage assignment with
respect to a Mortgage Loan, or grant deed (or other appropriate form of deed)
with respect to Real Property, as the case may be, and other appropriate
documents, and shall make all deliveries and take any other actions on
substantially the same terms and conditions under which Seller had conveyed
such Asset to Purchaser at the Closing, except to the extent of the Defect
giving rise to the subject repurchase and except as otherwise provided in
Section 10.2 hereof. If Purchaser or any Affiliate of Purchaser owns the
Mortgaged Property at the Repurchase Date, whether through foreclosure, deed in
lieu of foreclosure or otherwise, Purchaser shall convey or cause its Affiliate
to convey to Seller all right, title and interest in and to such Mortgaged
Property, pursuant to a grant deed (or other appropriate form of deed), and
other appropriate documents, and shall make all deliveries and take all other
actions on substantially the same terms and conditions under which Seller had
conveyed the related Mortgage Loan to Purchaser under the Mortgage Assignment,
modified in a manner reasonably acceptable to Seller to reflect the fact that
Mortgaged Property is being conveyed instead of a Mortgage Loan, and provided
that the Mortgaged Property shall be so reconveyed in substantially the same
condition it was in when Seller conveyed the related Mortgage Loan to Purchaser
pursuant thereto; provided, however, that if the Defective Asset is required to
be repurchased and Seller has conveyed to a Qualified Affiliate Real Property,
Qualified Affiliate shall be obligated to reconvey or cause to be reconveyed,
such Defective Real Property to Seller substantially in the same condition
under which Seller had conveyed such Real Property to Qualified Affiliate
pursuant hereto.
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(c) For purposes of this Agreement, conveying such
Mortgaged Property or Real Property, as the case may be, in substantially the
same condition shall mean that (i) the physical condition of such property
shall be the same (normal wear and tear excepted), other than in respect of a
fully insured casualty loss, in which event the insurance proceeds shall be
assigned to Seller, (ii) the condition of title to any such Asset and all
related collateral shall be the same as conveyed, except for any changes
thereto such as ownership, which customarily can be expected to occur as a
result of exercising remedies under the related Mortgage Loan, (iii) the
collateral for such Asset is the same, except to the extent that any of such
collateral (including escrows and deposits) was expended for its intended
purposes or otherwise in a prudent manner for the related property, in
accordance with customary servicing standards of prudent institutional
servicers of similar types of Mortgage Loans or Mortgaged Properties, and (iv)
there are no Claims of any parties against Seller that were the result of
actions of Purchaser or any agents, successors or assigns thereof, other than
those as to which Seller shall have received a written indemnification in form
and substance acceptable to Seller from a party whose financial condition is
satisfactory to Seller for purposes of the indemnification. Purchaser
acknowledges and agrees that Purchaser shall indemnify and hold harmless Seller
and its Affiliates from and against any Claim directly or indirectly arising
out of or attributable to the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal, or presence of a
Hazardous Substance on, under, or about any Mortgaged Property or Real Property
that is to be repurchased hereunder while Purchaser owned, operated, managed or
controlled such Mortgaged Property or Real Property, except to the extent that
such Claim arises from Seller's breach of the representation made in Section
7.2(k) hereof.
Section 10.2 REPURCHASE PRICE.
The repurchase of any Asset by Seller pursuant to Sections 5.4, 5.5
and 10.1 hereof shall be at the Repurchase Price for such Asset.
If a Defective Asset has any defect that did not exist when such Asset
was conveyed to Purchaser, Seller may offset against the Repurchase Price the
amount, determined in Seller's reasonable judgment, necessary to accurately and
reasonably compensate Seller for the loss of value resulting from the defect.
In particular, Seller may reduce the amount of the Repurchase Price by the
reduction in the value of a Defective Asset attributable to any (i) failure of
Purchaser to service a Mortgage Loan in accordance with applicable law and
prudent mortgage loan servicing standards for similar commercial Mortgage Loans
or Mortgaged Property, as the case may be, or (ii) failure to reconvey the
Mortgaged Property or Real Property, as the case may be, to Seller in a
condition that is in substantially the same condition on the date of conveyance
determined as provided in Section 10.1(b) hereof (except as may have been
approved by Seller in writing), (iii) failure of Purchaser to reconvey the
Defective Asset to Seller without any encumbrances other than those
encumbrances in existence on the Closing Date, or (iv) any other defect that
did not exist when such Asset was conveyed to Purchaser, whether or not
attributable to the action or inaction or fault of Purchaser. Notwithstanding
the foregoing, the reduction in the Repurchase Price shall not be subject to
any such offset if the reduction in the value of the Defective Asset was (x)
the direct result of actions taken by Purchaser in good faith as the result of
non-negligent judgments made by it in the servicing and enforcement of a
Mortgage Loan, and the disposition of the Mortgage Loan and the underlying
Mortgaged Property, if any, or the disposition of the Real Property, as the
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case may be, provided that Purchaser observes prudent commercial mortgage loan
servicing standards for similar Mortgage Loans or Mortgaged Property, as the
case may be, or (y) with respect to subparagraphs (ii), (iii) and (iv) hereof,
such reduction in value did not result from any action or inaction of
Purchaser, whether direct or indirect, during any period in which such Asset
was held by Purchaser, except that nothing in this paragraph shall limit the
rights of Seller under Section 10.1 hereof.
ARTICLE XI
DEFAULT
Section 11.1 PURCHASER'S DEFAULT.
In the event Purchaser shall default in its obligations to purchase
any Asset or breach a representation or warranty or covenant hereunder, or
otherwise fail to perform its obligations under this Agreement prior to the
Closing hereunder, the Deposit shall be retained by Seller (after notice and
lapse of time as described below), and Seller may avail itself of any rights
and remedies it may have at law or in equity, or under this Agreement with
respect to any such Purchaser default or breach of representations or
warranties. Upon written notification to Purchaser that Seller has declared a
default hereunder, and specifying the grounds for such declaration (the
"Default Notice"), Purchaser shall have five (5) calendar days after receipt of
the Default Notice to notify Seller, in writing, that Purchaser disputes that a
default exists, and state the grounds for such dispute by Purchaser. If
Purchaser does not notify Seller that a dispute exists within such five (5)
calendar day period, Seller shall be unconditionally entitled to retain the
Deposit. If Purchaser sends notice of a dispute to Seller within the
appropriate time period, Seller shall continue to hold such funds as the
Deposit in accordance with the resolution of the dispute. The successful party
or parties shall be reimbursed for all expenses, including reasonable
attorneys' fees incurred in connection with any successful action brought under
this Section 11.1.
Section 11.2 SELLER'S DEFAULT.
In the event Seller shall default in its obligations hereunder, then,
if prior to Closing, the Deposit shall be returned to Purchaser by Seller
(after notice and lapse of time as described below) and Purchaser shall not be
entitled to monetary damages, except for direct out- of-pocket expenses proved
by Purchaser to have been expended by delivering to Seller documentary evidence
thereof satisfactory to Seller, but may avail itself of its equitable rights.
Upon written notification to Seller that Purchaser has declared a default of
Seller hereunder and specifying the grounds for such declaration (the
"Purchaser Default Notice"), Seller shall have five (5) calendar days after
receipt of the Purchaser Default Notice to notify Purchaser in writing that
Seller disputes that a default exists and state the grounds for such dispute by
Seller. If Seller does not notify Purchaser that a dispute exists within such
five (5) calendar day period, Seller shall turn over all amounts held by it
hereunder to Purchaser. If Seller sends notice of a dispute to Purchaser
within the appropriate time period, Seller shall continue to hold such funds as
the Deposit in accordance with this Agreement until such time as the dispute
has been resolved. The Deposit shall then be disbursed in accordance with the
resolution of the dispute. The successful party or parties shall be
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reimbursed for all expenses, including reasonable attorneys' fees, incurred in
connection with any successful action brought under this Section 11.2.
If such Seller default occurs subsequent to Closing, Purchaser may
avail itself of any rights that Purchaser may have at law or in equity or under
this Agreement, provided, however, that Purchaser's sole remedy for any Defect
in the Assets is to require Seller to elect a remedy for the Assets in
accordance with Section 5.4 or 5.5 hereof. Purchaser shall be reimbursed for
all expenses, including reasonable attorneys' fees, incurred in connection with
any successful action brought under this Section 11.2. Purchaser shall have no
right to consequential damages from Seller.
With respect to a default by Seller which, with regard to this
Agreement, does not have a material adverse impact on Purchaser, Purchaser
shall have no remedy. In no event shall Purchaser have the right to offset
amounts due to Seller under any contract or agreement with Purchaser or any
Affiliate of Purchaser or to offset amounts due to Seller against any damages
on account of default by Seller hereunder.
ARTICLE XII
SUBSEQUENT DOCUMENTATION
At any time, and from time to time hereafter, upon the reasonable
request of Purchaser, and without payment of further consideration to Seller,
other than reimbursement for Seller's out-of-pocket expenses, Seller will do,
execute, acknowledge and deliver, and will cause to be done, executed,
acknowledged and delivered, all such further assignments, transfers,
conveyances, confirmations of powers of attorney issued at Closing and
assurances as may be required in order to better assign, transfer, grant,
convey, assure and confirm to Purchaser, or to collect and reduce to
possession, the Assets as provided for herein.
ARTICLE XIII
NOTICE OF MORTGAGOR CLAIMS OR LITIGATION
Purchaser shall promptly notify Seller of any Claim, threatened Claim,
or litigation filed by a Mortgagor against Seller which arises from or relates
to the Mortgage Loans purchased hereunder.
ARTICLE XIV
FILES AND RECORDS
After the transfer of documents or files to Purchaser pursuant to the
terms of this Agreement, Purchaser agrees that Seller at its expense, shall
have the continuing right to use, inspect, and make extracts from or copies of
any such documents or records, upon reasonable prior notice to Purchaser.
Purchaser further agrees to allow Seller at its expense, the temporary
possession, custody and use of original documents for any lawful purpose and
upon reasonable terms and conditions and upon reasonable prior notice to
Purchaser, and Seller shall indemnify Purchaser for any material costs
resulting from the loss or misuse of any such documents while in Seller's
possession. Before destruction or disposition of any documents or files
transferred
50
<PAGE> 57
hereunder, Purchaser shall attempt to give reasonable notice to Seller and to
allow Seller, at its expense, to recover the same from Purchaser.
ARTICLE XV
SALE OF REAL PROPERTY
In the event that prior to the Closing Date hereunder Seller
forecloses upon a Mortgage Loan or otherwise acquires title to the Mortgaged
Property, subject, however, to Section 8.1(f) hereof, Seller and Purchaser
agree to amend this Agreement and the Mortgage Loan and Real Property Schedule
as appropriate to provide for the sale and transfer of such Mortgaged Property
by Seller to Purchaser[ or, if Seller financing is utilized to effect the sale
hereunder or otherwise at Purchaser's option, an Affiliate Purchaser or a
Qualified Affiliate] in lieu of the related Mortgage Loan.
ARTICLE XVI
NOTICES
Unless otherwise provided for herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered, if sent by registered or
certified mail (return receipt requested), (b) when delivered, if delivered
personally, (c) when transmitted, if sent by facsimile if a confirmation of
transmission is produced by the sending machine (and a copy of each facsimile
promptly shall be sent by ordinary mail) or (d) on the following Business Day,
if sent by overnight mail or overnight courier, in each case to the parties at
the following addresses or facsimile numbers (or at such other addresses or
facsimile numbers as shall be specified by like notice):
(a) If to Seller, at:
City National Bank
Risk Management
606 S. Olive Street, 9th Floor
Los Angeles, CA 90014
Attention: Jeffery Puchalski, Executive Vice President
Fax: (213) 629-3677
with a copy to:
City National Bank
Legal Department
9701 Wilshire Blvd., Ninth Floor
Beverly Hills, CA 90212-2050
Attention: Office of the General Counsel
Fax: (310) 273-5859
51
<PAGE> 58
(b) If to Purchaser, at:
WHC-THREE Investors, L.P.
c/o WHC-THREE Investors, Inc.
85 Broad Street, 19th Floor
New York, NY 10004
Attention: Neil Hasson
Richard Georgi
Fax: (212) 902-3000
with a copy to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: Mark M. Katz, Esq.
Fax: (202) 857-6395
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication within any corporation or firm to the persons designated to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 SEVERABILITY.
Each part of this Agreement is intended to be severable. If any term,
covenant, condition or provision hereof is unlawful, invalid, or unenforceable
for any reason whatsoever, and such illegality, invalidity, or unenforceability
does not affect the remaining parts of this Agreement, then all such remaining
parts hereof shall be valid and enforceable and have full force and effect as
if the invalid or unenforceable part had not been included.
Section 17.2 RIGHTS CUMULATIVE; WAIVERS.
Except as otherwise expressly provided herein, the rights of each of
the parties under this Agreement are cumulative and may be exercised as often
as any party considers appropriate. The rights of each of the parties
hereunder shall not be capable of being waived or varied otherwise than by an
express waiver or variation in writing. Failure to exercise or any delay in
exercising any of such rights also shall not operate as a waiver or variation
of that or any other such right. Defective or partial exercise of any of such
rights shall not preclude any other or further exercise of that or any other
such right. No act or course of conduct or negotiation on the part of any
party
52
<PAGE> 59
shall in any way preclude such party from exercising any such right or
constitute a suspension or any variation of any such right.
Section 17.3 HEADINGS.
The headings contained in this Agreement are inserted for convenience
only and shall not affect the meaning or interpretations of this Agreement or
any provision hereof.
Section 17.4 CONSTRUCTION.
Unless the context otherwise requires, singular nouns and pronouns,
when used herein, shall be deemed to include the plural of such noun or pronoun
and pronouns of one gender shall be deemed to include the equivalent pronoun of
the other gender.
Section 17.5 ASSIGNMENT.
This Agreement and the terms, covenants, conditions, provisions,
obligations, undertakings, rights and benefits hereof, including the Addenda,
Exhibits and Schedules hereof, shall be binding upon, and shall inure to the
benefit of, the undersigned parties and their respective heirs, executors,
administrators, representatives, successors, and assigns. In no event may
Purchaser assign its rights or obligations hereunder without the prior written
consent of Seller, except to a lender as collateral for the financing or
refinancing of the acquisition of the Assets as provided herein, an Affiliate
of Purchaser or a Qualified Affiliate, or as otherwise may be contemplated
herein.
Notwithstanding the foregoing sentence, at or prior to Closing,
Purchaser shall have the right to assign this Agreement and the Sales Contract
to a partnership or other entity (the "Permitted Assignee") in which not less
than fifty percent (50%) of the interests are owned or controlled, directly or
indirectly, by the stockholders or partners of Purchaser, or by individuals or
entities that own, directly or indirectly, all of the stock or partnership
interests in Purchaser. From and after the date this Agreement is assigned to
and assumed by the Permitted Assignee, the Permitted Assignee (and not
Purchaser) shall be the Purchaser for all purposes of this Agreement and the
Sales Contract, and Seller agrees that Purchaser shall have no obligations or
liabilities under this Agreement or the Sales Contract and after such date
except to the extent of its ownership interest in the Permitted Assignee,
Seller agrees that it will look solely to the Permitted Assignee (rather than
to Purchaser) for the performance of all obligations of Purchaser under this
Agreement and the Sales Contract except to the extent of Purchaser's ownership
interest in the Permitted Assignee. In the event Purchaser assigns this
Agreement and the Sales Contract to the Permitted Assignee, any default by the
Permitted Assignee under either document prior to and including the Closing
that remains uncured shall be deemed a default by Purchaser under all other
asset sale and real property sale agreements between Purchaser and Seller.
Section 17.6 PRIOR UNDERSTANDINGS; INTEGRATED AGREEMENTS.
This Agreement supersedes any and all prior discussions and agreements
between Seller and Purchaser with respect to the purchase of the Assets and
other matters continued herein, and this
53
<PAGE> 60
Agreement contains the sole, final and complete expression and understanding
between Seller and Purchaser with respect to the transactions contemplated
herein, except for those documents executed and delivered by Purchaser prior to
the execution hereof titled Due Diligence Deposit and Review Agreement and the
Confidentiality Agreement. This Agreement shall not be altered or modified
except by a subsequent writing, signed by Purchaser and Seller.
Section 17.7 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall constitute one and the same instrument, and either party hereto may
execute this Agreement by signing any such counterpart.
Section 17.8 SURVIVAL.
Each and every Surviving Representation and Warranty made by Seller,
each representation and warranty made herein by Purchaser and each covenant
made herein by Purchaser or Seller shall survive the Closing and shall not
merge into any document executed as part of Closing, but instead shall be
independently enforceable except to the extent expressly limited in this
Agreement.
Section 17.9 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
Section 17.10 NO THIRD PARTY BENEFICIARIES.
No person, firm or other entity other than the parties hereto (and
their successors and assigns) shall have any rights or claims under this
Agreement. No brokerage commission shall be payable to any party in connection
with the sale of the Assets except such sales commissions as Seller may
previously have agreed in writing to pay certain third parties, which will be
payable by Seller.
Section 17.11 ARBITRATION.
Any controversy or claim between Purchaser and Seller arising out of
or relating to this Agreement or any actions or conduct of either in connection
therewith (including, but not limited to, any claim based on or arising from an
alleged tort) shall at the request of Purchaser or Seller be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall resolve all claims
and defenses or other matters in dispute in accordance with applicable law,
including, but not limited to, all statutes of limitation. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be entered in any court
having jurisdiction. No provision of this
54
<PAGE> 61
Agreement shall limit the right of either Purchaser or Seller to exercise
self-help remedies such as setoff, or obtaining provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding. The institution and
maintenance of any action for judicial relief or pursuit of provisional or
ancillary remedies shall not constitute a waiver of the right of either
Purchaser or Seller to submit the controversy or claim to arbitration if the
other party contests such action for judicial relief.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION"
PROVISION OF THIS AGREEMENT DECIDED BY NEUTRAL ARBITRATION AS PROVIDED
BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS
TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING
IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHT TO DISCOVERY
AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION" PROVISIONS. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. THE UNDERSIGNED
HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION" PROVISION TO
NEUTRAL ARBITRATION.
/s/ DTH /s/ JP
- --------------------------- ---------------------------
PURCHASER'S INITIALS SELLER'S INITIALS
Section 17.12 SELLER FINANCING.
Seller and Purchaser have not reached final agreement over the terms
and conditions of the Seller financing which Seller has offered to Purchaser in
connection with this transaction. Accordingly, Seller and Purchaser
acknowledge that the Loan and Security Agreement attached as Exhibit K does not
represent the final agreement of the parties. In the event Seller and
Purchaser do not reach agreement over the terms of such financing (for any
reason) on or before November 8, 1993, (i) this Agreement and the Sales
Contract shall remain in full force and effect on the basis of an "all cash"
transaction, (ii) neither party shall be deemed to be in default as a result of
the failure to reach agreement over the terms of the Loan and Security
Agreement and the Seller financing, (iii) all references in this Agreement and
the Sales Contract to the Loan and Security Agreement and all provisions
relating to a Seller financed sale shall be deemed deleted, (iv) the Initial
Purchase Price shall automatically reduce to the amount Purchaser submitted on
the Offer Date as its "all cash" Initial Purchase Price, and (v) Seller and
Purchaser shall promptly enter into an amendment to this Agreement, the Sales
Contract, and all supporting documents as necessary, including a revised
Mortgage Loan and Real Property Schedule, to reflect such modifications and
conforming changes to reflect the terms and conditions of an all cash
transaction.
55
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first day of November, 1993.
"Purchaser" WHC-THREE INVESTORS, L.P.,
a Delaware limited partnership
By: WHC-THREE INVESTORS, INC.,
a Delaware corporation,
general partner
By: /s/ David T. Hamamoto
--------------------------
Its: Vice President
--------------------------
"Seller" CITY NATIONAL BANK, a national
banking association
By: /s/ Jeffery Puchalski
-------------------------------
Its: Executive Vice President
-------------------------------
56
<PAGE> 63
<TABLE>
<S> <C>
EXHIBIT "A" Page 1
POOL 1 11/05/93
mtrp056.wk3
</TABLE>
CITY NATIONAL BANK
MORTGAGE LOAN AND REAL PROPERTY SCHEDULE
<TABLE>
<CAPTION>
Asset Pool Loan
# No. Asset Name No. Borrowers Name Street Address City
- ----- ---- -------------- ------ -------------- ---------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
56.00 1 453 Barrington 118 NAP 453 Barrington Avenue Brentwood
- ----- ---- -------------- ------ -------------- ---------------------- ---------
Total
</TABLE>
<PAGE> 64
<TABLE>
CITY NATIONAL BANK EXHIBIT "A" PAGE 2
Mortgage Loan and Real Property Schedule 11/05/93
Asset Pool Property
# No. Asset Name County State Zip Code Type
- ---- ---- -------------- ----------- ----- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
56.00 1 453 Barrington Los Angeles CA 90049 Condominiums
- ---- ---- -------------- ----------- ----- -------- ------------
Original Loan Accrued and Uncollected Amount
Loan Balance Deferred Late Owed Lien
Balance (as of 9/30/93) Interest Charges (as of 9/30/93) Position
------- --------------- ----------- ----------- --------------- --------
<C> <C> <C> <C> <C> <C>
NAP 5,330,725 NAP NAP 5,330,725 REO
------- --------------- ----------- ----------- --------------- --------
Total $0 $5,330,725 $0 $0 $5,330,725
------- --------------- ----------- ----------- --------------- --------
</TABLE>
<PAGE> 65
EXHIBIT "A"
CITY NATIONAL BANK PAGE 3
MORTGAGE LOAN AND REAL PROPERTY SCHEDULE 11/05/93
<TABLE>
<CAPTION>
Superior Original Interest Last Current Approximate
Asset Pool Lien Note Maturity Paid To Transaction Accrual Saleable/
# No. Asset Name Balance Date Date Date Date Rate Rentable SF
- ----- ---- --------------- -------- -------- --------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56.00 1 453 Barrington 0 REO REO NAP NAP REO 32,523
- ----- ----- -------------- -------- -------- --------- -------- ----------- -------- ------------
TOTAL $0 32,523
- ----- -------- ------------
</TABLE>
<TABLE>
<CAPTION>
Approx.
Land No. of Seller's
Acreage Units DIV
------- ------ ----------
<S> <C> <C>
0.00 18 $4,051,513
------ ------ ----------
0.00 18 $4,051,513
------ ------ ----------
</TABLE>
<PAGE> 66
EXHIBIT "A"
Page 4
11/05/93
CITY NATIONAL BANK
MORTGAGE LOAN AND REAL PROPERTY SCHEDULE
<TABLE>
<CAPTION>
Initial Adjusted
Asset Pool Purchase Offer Purchase
# No. Asset Name Price (IPP) Percentage Price (APP) Comments
- ----- ---- ----------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
56.00 1 453 Barrington 3,536,000.00 87.2760% 3,536,000.00
- ----- ---- ----------- ------------ ---------- ------------- ----------
Total 3,536,000.00 87.2760% 3,536,000.00
- ----- ---- ----------- ------------ ---------- ------------- ----------
</TABLE>
<PAGE> 67
Exhibit B to
Asset Sale Agreement
FORM OF
ASSET ACCEPTANCE CERTIFICATE
____________________________________________________, the Purchaser under
that certain Asset Sale Agreement (the "Agreement"), by and among CITY NATIONAL
BANK, a national banking association, as Seller,
______________________________________________________
____________________________________________________________, as Escrow Agent,
and ___________________________________________________________________ as
Purchaser, dated as of ___________________, 1993, hereby certifies that it
finally, irrevocably and unconditionally accepts the Asset, identified as
[specify pool number and name of Asset], in accordance with Section 5.4(a) of
the Agreement.
Dated the _______ day of _______________________, 1993.
PURCHASER:
________________________________________
[Corporation/Partnership]
By:____________________________________
Its:___________________________________
<PAGE> 68
Recording Requested By And When
Recorded Mail To:
_______________________________
_______________________________
_______________________________
__________________, CA ________
Attn: _________________________
_________________________
- ----------------- Space Above This Line for Recorder's Use -----------------
FORM OF
MORTGAGE ASSIGNMENT
ASSIGNMENT OF MORTGAGE
LOAN FROM SELLER TO PURCHASER
CITY NATIONAL BANK, a national banking association ("Assignor"), for
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby absolutely sells, transfers, assigns, delivers,
sets-over and conveys to___________________________________________________, a
[corporation/partnership] ("Assignee"), without recourse:
The mortgage or deed of trust loan or loans identified on Attachment A
hereto (the "Mortgage Loan"), including the promissory note(s)
evidencing any and all liens and security interests securing the
payment of the Mortgage Loan and all documents and instruments
evidencing, securing or relating to the Mortgage Loan, including, but
not limited to, the beneficial interest or mortgagee's interest under
the mortgage(s) or deed(s) of trust, and any other documents recorded
in the real property or chattel records of the jurisdiction in which
the real property or personal property securing such Mortgage Loan is
located (to which records reference is made for all purposes) as such
documents are more particularly described and referenced onAttachment
B hereto.
This Assignment of Mortgage shall be governed by the laws of the State
of California.
TO HAVE AND TO HOLD the Mortgage Loan, together with all and singular
the rights and privileges thereunto in any wise belonging unto Assignee, its
successors and assigns, forever.
Dated: __________________, 1993 CITY NATIONAL BANK, a national
banking association
By: ________________________
Its: ________________________
Exhibit C to
Asset Sale Agreement
<PAGE> 69
Exhibit C to
Asset Sale Agreement
STATE OF )
) SS.
COUNTY OF )
On ____________________, 19___ before me _________________________________
Date Name, Title of Officer,
e.g., "Jane Doe, Notary Public"
personally appeared ____________________________________________________________
Name(s) of Signer(s)
/ / personally known to me -OR- / / proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s)
is/are subscribed to the within instrument
and acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the entity
upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
[SEAL] ___________________________________________
NOTARY PUBLIC
<PAGE> 70
Exhibit C to
Asset Sale Agreement
ATTACHMENT A TO
MORTGAGE ASSIGNMENT
DESCRIPTION OF MORTGAGE LOAN
Name of Borrower:
Principal Amount of Note:
Current Fully Extended Maturity Date:
Control No.:
Type of Collateral:
<PAGE> 71
Exhibit C to
Asset Sale Agreement
ATTACHMENT B TO
MORTGAGE ASSIGNMENT
DESCRIPTION OF SECURITY DOCUMENTS
<PAGE> 72
EXHIBIT C-1 TO THE
ASSET SALE AGREEMENT
Asset No. __________
ASSIGNMENT OF ADDITIONAL COLLATERAL
CITY NATIONAL BANK, a national banking association ("Assignor"), for
good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, hereby absolutely sells, transfers, assigns, endorses,
delivers, sets-over and conveys to WHC-THREE INVESTORS, L.P., a Delaware
limited partnership ("Assignee"), without representation, warranty or recourse,
the following:
(a) the mortgage note (the "Mortgage Note") identified on Exhibit A
attached hereto, together with any and all amendments, supplements,
restatements and modifications thereto (collectively, the "Mortgage
Loan");
(b) all documents, agreements and instruments evidencing, securing or
relating to the Mortgage Loan, including, without limitation, pledge
agreements, guarantees, security agreements, financing statements,
indemnity agreements, loan agreements, assignments of management
agreements and assignment of stock or partnership units ("Collateral
Loan Documents"), which includes, but is not limited to, the Collateral
Loan Documents identified on Exhibit B attached hereto;
(c) all property and other interests securing or relating to the
Mortgage Loan, and all proceeds thereof, including without limitation,
all rights, titles, interests, claims, escrows, accounts, letters of
credit, title insurance policies, casualty insurance policies (except
to the extent of any blanket policies carried by Assignor), flood
hazard insurance policies, performance bonds, demands, certificates of
deposit, causes of action, proofs of claim and judgments, claims and
actions against guarantors
<PAGE> 73
and any other collateral arising out of
and/or executed and/or delivered in or to
or with respect to the Mortgage Loan (the
"Additional Collateral"), which includes,
but is not limited to, the Additional
Collateral identified on Exhibit B attached
hereto; and
(d) any other documents, agreements,
instruments or property and all proceeds
thereof, relating to the Mortgage Loan or
any other agreements or instruments
evidencing or securing such Mortgage Loan
and held by Assignor or a third party on
behalf of Assignor (the "Other Collateral
Loan Documents").
This Assignment shall not be recorded.
TO HAVE AND TO HOLD the Mortgage Loan, the Mortgage Note, the
Collateral Loan Documents, the Additional Collateral and the Other Collateral
Loan Documents, together with all and singular the rights and privileges
thereunto in any way belonging unto Assignee, its successors and assigns,
forever.
Assignor does hereby confirm and ratify the sale, transfer, assignment,
delivery, setting over and conveyance of the Mortgage Loan, the Mortgage Note,
the Collateral Loan Documents, the Additional Collateral and the Other
Collateral Loan Documents to Assignee.
Dated as of November 17, 1993.
ASSIGNOR:
CITY NATIONAL BANK,
a national banking association
By: ________________________________
Name: ________________________
Title: ________________________
<PAGE> 74
EXHIBIT A TO
ASSIGNMENT OF ADDITIONAL COLLATERAL
<PAGE> 75
EXHIBIT B
[IDENTIFIES UNRECORDED ADDITIONAL COLLATERAL]
<PAGE> 76
Exhibit D to
Asset Sale Agreement
FORM OF
CERTIFICATE OF DEFECTIVE ASSETS
Pursuant to Section 5.4(b) of that certain Asset Sale Agreement (the
"Agreement") by and among CITY NATIONAL BANK, a national banking association as
Seller, ____________________________________________________, as Escrow Agent
and _____________________________________________________________, as
Purchaser, the undersigned hereby certifies to Seller that the Mortgage Loan
identified below is a Defective Mortgage Loan, as that term is defined in the
Agreement. The Mortgage Loan has a Defect since it breaches the representation
and warranty more particularly described as follows, or has a Structural Defect
more particularly described as follows and the effect of the claimed Defect(s)
on the value of the Mortgage Loan is materially adverse as indicated below
[attach additional pages as necessary]:
A. Identity of Mortgage Loan
________________________________________________
[Specify pool number and name of Mortgage Loan.]
B. Detailed description of condition giving rise to, or
nature of, the claimed Defect or Structural Defect and
state why any claimed Defect has a material adverse effect
on the value of the related Mortgage Loan.
C. Identify section and subsections of the Agreement under
which the Defect or Structural Defect is claimed.
D. Provided detailed evidence of the existence of the Defect
including, but not limited to, the identity of, and a copy
of any materials provided by, any third party which
performed any analysis or provided any cure estimate or
any other information with respect to such claimed
Defect.
Dated: _______________________, 1993.
PURCHASER:
______________________________________
By:___________________________________
Its:__________________________________
<PAGE> 77
Exhibit E to
Asset Sale Agreement
FORM OF
SUPPLEMENTAL CERTIFICATE OF DEFECTIVE ASSETS
Pursuant to Section 5.4(b) of that certain Asset Sale Agreement (the
"Agreement") by and among CITY NATIONAL BANK, a national banking association as
Seller, ______________________________________________________________________
____________________________________, as Escrow Agent and ____________________
____________________________________, as Purchaser, the undersigned hereby
certifies to Seller that the Mortgage Loan identified below is a Defective
Mortgage Loan, as that term is defined in the Agreement. The Mortgage Loan has
a Defect since it breaches the representation and warranty more particularly
described as follows, or has a Structural Defect more particularly described as
follows and the effect of the claimed Defect(s) on the value of the Mortgage
Loan is materially adverse as indicated below [attach additional pages as
necessary]:
A. State whether in Purchaser's reasonable judgment the
Defect is curable or non-curable.
B. If, in Purchaser's reasonable judgment, the Defect is
curable, provide a detailed description of the proposed
cure and reasonable detailed estimated itemized cost of
repair or other cure ("Purchaser's Cure Estimate") and
attach supporting information prepared by third party
expert.
C. If this certificate is delivered no later than the last
day of the Due Diligence Period, state the dollar amount,
or percentage of Initial Purchase Price, by which
Purchaser would have reduced the Initial Purchase Price
with respect to such Mortgage Loan, had Purchaser been
aware of such Defect on the Offer Date.
Dated: ___________________, 199__
PURCHASER:
_______________________________________
By:____________________________________
Its:___________________________________
<PAGE> 78
Exhibit F to
Asset Sale Agreement
FORM OF
DELETION CERTIFICATE
Pursuant to Section 5.4(d) of that certain Asset Sale Agreement (the
"Asset Sale Agreement") by and between ________________________________________
______________________________________________________, as Purchaser, and CITY
NATIONAL BANK, a national banking association, as Seller, the undersigned
hereby certifies to Seller as follows:
1. On ____________________________, 199___, Purchaser
delivered to Seller a Certificate of Defective Mortgage Loan with regard to the
Mortgage Loan identified as Control No. ____________ on the Mortgage Loan and
Real Property Schedule attached as Exhibit D to the Asset Sale Agreement.
2. Seller has not cured the Defect in such Mortgage Loan.
3. Such Mortgage Loan will be subject to repurchase at the
Repurchase Price as provided in Section 10.2 of the Asset Sale Agreement if
such Defect has not been cured within the Cure Period.
4. All capitalized terms used herein and not defined shall
have the meaning assigned to them in the Asset Sale Agreement.
Dated the ____________ day of ___________________________, 199___.
PURCHASER:
________________________________________
[Corporation/Partnership]
By:____________________________________
Its:____________________________________
<PAGE> 79
Exhibit G to
Asset Sale Agreement
CITY NATIONAL BANK
COMMERCIAL MORTGAGE LOAN AND REAL PROPERTY SALE
VALUATION METHODOLOGY
I. DUE DILIGENCE PROCESS
Asset information was extracted from loan files. The asset
information was recorded on Data Sheets which provided a history of the loan
transaction and the current status of the loan or real estate owned (REO).
Utilizing the information recorded on the data sheets, the property inspections
and the market analyses, underwriting and valuation took place. The
methodology and procedures presented are not intended to and do not comply with
generally accepted accounting and auditing procedures and, therefore, no
opinion was expressed in that regard. Likewise, the methodology and procedures
do not meet the Uniform Standards of Professional Appraisal Practice for
preparation of a market value appraisal as defined by the Appraisal Standards
Board of the Appraisal Foundation and should not be relied on to replace or
augment appraisal information.
II. VALUATION METHODOLOGY
The RTC Valuation Methodology for Portfolio Sales of Commercial
Mortgages and Real Estate Owned, otherwise known as "Appendix H," was utilized
as the primary standard for arriving at the various factors applied to each
asset in underwriting and valuation. These standards were modified where the
Financial Advisor, market conditions or the Due Diligence Contractor determined
that reasons existed for changing any one or more of the following factors.
Otherwise the following standards were utilized in arriving at the stated
Derived Investment Value (DIV) also known as "Valuation" in the Offering
Memorandum.
III. UNDERWRITING AND VALUATION ASSUMPTIONS FOR ALL ASSETS
Discount rates were established for each type of property and the
methodology used in valuation of the asset. The discount rates assumed for
each property type and valuation methodology are as follows:
VALUATION METHODOLOGY
<TABLE>
<CAPTION>
IMMEDIATE PERFORMING
PROPERTY TYPE DEFAULT FUTURE DEFAULT REO LOANS
------------- --------- -------------- --- ----------
<S> <C> <C> <C> <C>
Multifamily 14% 13.5% 12% 500(1)
</TABLE>
____________________
(1) Basis points over Treasuries of comparable maturities.
1
<PAGE> 80
Exhibit G to
Asset Sale Agreement
<TABLE>
<CAPTION>
IMMEDIATE PERFORMING
PROPERTY TYPE DEFAULT FUTURE DEFAULT REO LOANS
------------- --------- -------------- --- ----------
<S> <C> <C> <C> <C>
Commercial 16% 15.5% 14% 600
Entitled Land 20% 19% 17% NAP
Raw Land 22% 21% 18% NAP
</TABLE>
The above discount rates were adjusted up or down 200 basis points
based on whether there were 2nd Lien or Wrap Notes. Adjustments were made as
available information justified making such adjustments. In the cases where a
different discount rate was used, the justification was documented in the
underwriting and valuation summaries.
IV. PERFORMING LOANS VALUATION METHODOLOGY
4.1 Loans were valued in accordance with Seller guidelines as
the lesser of the following:
4.1.1 Face amount of the loan balance as of
08/03/93; or
4.1.2 Present value of the cash flows of the loan
assuming the discount rates noted in Section III.
4.2 To calculate expected cash flows for the loans, the
following assumptions were used:
4.2.1 interest rates at current stated interest
rate, or at stated interest rates at time of maturity;
4.2.2 principal payments assumed to be made as
scheduled, including balloon payments;
4.2.3 adjustable rate loans assumed a constant
interest rate environment; and
4.2.4 extension options assumed loan was extended
at contractual terms.
V. CASH FLOW METHODOLOGY
For all property types, the methodology for valuing real estate owned
(REO) and for real estate collateralizing permanent mortgage loans was a
discounted cash flow concept. DIVs were calculated based upon the discounted
value of the estimated future net cash flows. The valuation period was assumed
to begin July 1, 1993. Estimated revenue and expenses were projected based
2
<PAGE> 81
Exhibit G to
Asset Sale Agreement
upon analysis of existing property operations as well as limited research into
the competitive market.
DIVs on land were generated by utilizing comparable land sales within
the market area and to the extent practical a land residual analysis was
prepared.
5.1 Revenue
5.1.1 Rental rates were based on a comparison of
historical actual, street rents at the subject property and street rents at
comparable properties. Street rents were obtained from the inspections of each
property. Office and retail rents for occupied space were based on actual
rents so long as actuals were in line with market rents. Rents for vacant
space were based on current market rents. Rental rates were effective rents
adjusted for free rent and other concessions that may be amortized over the
term of the lease. Rental rates were assumed to increase no more than four
percent (4.0%) per year. Lease renewals were projected at fifty percent (50%)
on commercial and retail properties unless otherwise justified.
5.1.2 Stabilization was defined as occupancy at
which similar properties within the subject market were able to maintain.
Non-stabilized property occupancy was projected at market levels within the
submarket. Any vacancies existing after the date of stabilization were assumed
to be permanent.
5.1.3 Other income was based upon historical
revenues where available. When not available, industry standards were used.
5.2 Operating Expenses
5.2.1 In all cases, the following expenses were
utilized in estimating operating expenses for each property. They were:
a. property taxes;
b. insurance;
c. general and administrative;
d. utilities;
e. repairs and maintenance;
f. property management;
g. ground rents, if applicable;
3
<PAGE> 82
Exhibit G to
Asset Sale Agreement
h. miscellaneous/all other; and
i. reserves.
Where available, actual property data were used in
estimating operating expenses. When actual data were not available, IREM,
and/or area surveys and other reliable sources were used. Operating expenses
were assumed to increase at four percent (4.0%) per annum.
5.2.2 Property tax information was based on current
assessed value, however minimum annual increases were projected at two percent
(2.0%).
5.2.3 Property management fees were projected as
five percent (5.0%) of effective gross income with a minimum acceptable of
three percent (3.0%) of gross potential income.
There were other factors that influenced the
valuation process depending on type of property. In general the condition of
the property had an impact on valuation. Deferred maintenance and required
capital expenditures had an impact on total operating expenses and net cash
flow.
5.3 Upon recovery of the property, a 12-month marketing period
was assumed in order to sell the property:
5.4 Terminal capitalization rates varied by property type,
location and special market circumstances. The assumed capitalization rates
used for each property type within the portfolio were as follows:
<TABLE>
<S> <C>
Multifamily . . . . . . . . . . . . . . . . . . 9/0%
Retail . . . . . . . . . . . . . . . . . . . . 10.5%
Office . . . . . . . . . . . . . . . . . . . . 11.0%
Industrial . . . . . . . . . . . . . . . . . . 11.0%
</TABLE>
The capitalization rates above were adjusted upwards or
downwards if market conditions warranted.
Selling and closing costs were projected at six percent
(6.0)% for all properties.
5.5 Land
The DIV for Land was valued utilizing primarily sales
comparable information and, to the extent practical, a land residual analysis
was prepared. Where specific information was available to support lot sales,
that information was utilized in the overall value.
4
<PAGE> 83
Exhibit G to
Asset Sale Agreement
5.5.1 Revenue
No revenue other than sales proceeds was assumed. No land
within the portfolio had significant income streams from which to compute cash
flow information.
5.5.2 Expenses
Annual operating expenses were estimated based upon
historical information when available. Operating expenses considered in the
valuation were:
a. property taxes;
b. insurance (an estimate of $25 per
acre was used with a minimum of $250
per year and maximum of $3,000 per
year unless more accurate
information was available); and
c. ground maintenance and security (a
minimum amount of $10,000 per year
was used unless more accurate
information was available).
All operating expenses were assumed to increase a minimum
of [four] percent (4.0%) per year. In no event were property taxes increased
less than [two] percent (2.0%).
5.6 Estimated Net Sales Proceeds
Capitalized NOI and appraisal information, comparable
sales, and to the extent practical, a land residual analysis, to establish the
current value of the property. Where appraisal information was considered
inadequate, recent sales comparables were used.
VI. NON-PERFORMING LOAN VALUATION METHODOLOGY
Mortgage loans that have matured and are currently not paying or are
anticipated to default during the term of the loan or at maturity were valued
at the lesser of:
6.1 Face amount of the loan; or
6.2 Present Value of the Estimated Future Cash Flows of the
loan (Future Default), assuming the discount rates in Section III; or
6.3 Present Value of the Cash Flows from the underlying
collateral adjusted for timing and cost of foreclosure (Immediate Default).
5
<PAGE> 84
Exhibit G to
Asset Sale Agreement
Loan cash flows under item 6.2 were equal to contractual loan payments
through default, payments received during bankruptcy/foreclosure proceedings,
and property cash flows through sale.
VII. DEFAULT ASSUMPTIONS
7.1 Default Date
It was assumed that default would occur when the property
could no longer support the required payment or the loan matured and the
terminal value did not support the payoff of the loan. This could be caused by
economic changes, changes in payment requirements, interest rates or
maturities.
7.2 Timing of Foreclosure and Bankruptcy
On the Default Date, the holder of the note was assumed to
initiate foreclosure proceedings and exercise all rights and remedies
available. The borrower is likely to exercise certain defense tactics,
including bankruptcy, designed to delay the lender's ability to recover the
collateral. Even though most of the assets are owned by single purpose,
limited debt entities, borrowers have had increasing success in stalling the
resolution of these cases through several techniques. The most common
technique is the filing of an inadequate plan of reorganization. It was
assumed that bankruptcy is filed in all foreclosure cases and that the holder
of the note is successful in recovering the property.
Foreclosure timing varies based on state laws and whether
legal action may be pursued through judicial or non-judicial proceedings. It
has been assumed that foreclosure and bankruptcy proceedings will take, on
average, 15 months as California is a non-judicial foreclosure state. This
period is adjusted to reflect those cases where the recovery period may be less
than the average, such as the case of negotiated Deed in Liens and lengthen the
case of multiple assets.
7.3 Cash Flow During Foreclosure/Bankruptcy
During the default period and the bankruptcy proceedings,
the borrower may have the ability to retain the cash flow from the property
rather than remit it to the holder of the note.
The note holder can defend rights to the property cash
flow by either appointing a receiver or obtaining a Cash Collateral Order
(CCO). It has been assumed that, in either case, this defense will take, on
average, ninety (90) days from the bankruptcy filing date.
The level of Property Cash Flow during the receiver/CCO
period will be reduced by one of two things. First, if a receiver has been
appointed, the receiver will collect all of the cash flow, but will charge a
fee for his services. Second, if a receiver is not appointed it will be
assumed that the borrower will have adequate control to reduce cash flow by
overstating
6
<PAGE> 85
Exhibit G to
Asset Sale Agreement
expenses or understating rents. In either case it was assumed that only
eighty-five percent (85%) of cash flow was turned over to the court. It is
further assumed that the court collects the cash flow during
foreclosure/bankruptcy and the lender receives the cash flow at termination of
the proceedings.
7.4 Legal Expenses
Legal expenses incurred in bankruptcy and foreclosure were
assumed to be the greater of [five] percent (5.0%) of collateral value with a
minimum of or [$50,000.00] with a cap of [$300,000.00]. Legal expenses were
adjusted for multiple entity borrowers and some very large balance loans.
7.5 Guarantees
It was assumed that no collections would be made or
guaranteed.
7.6 Recovery
On the Recovery Date, the holder of the note was assumed
to have received all funds accumulated in accordance with CCO. Legal fees,
delinquent real estate taxes, senior debts and deferred maintenance had the
effect of reducing the amount of recovery.
7
<PAGE> 86
Exhibit H to
Asset Sale Agreement
FORM OF
VALUATION CERTIFICATE
Pursuant to Section 5.4 of that certain Asset Sale Agreement (the
"Agreement"), by and between ______________________________________________
("Purchaser"), ________________________________ ("Purchaser"), and CITY
NATIONAL BANK, a national banking association ("Seller"), the undersigned firm,
appointed pursuant to Section 5.5(b)(i) of the Purchase Agreement ("Valuation
Agent"), hereby represents that (i) it prepared estimated cash flows and
present value calculations regarding the [Mortgage Loan/Real Property] listed
as Control Number _____ on the Mortgage Loan and Real Property Schedule
attached to the Agreement as Exhibit A thereto (the "Valuation"); (ii) the
Valuation Reports thereon are attached hereto and reference is made to them for
their content; and (iii) the procedures by which the Valuation was prepared,
the estimates and the assumptions, including any provided or prescribed by
Seller, upon which the Valuation was prepared, and the limitations attending
any use of the Valuation, are described in the Valuation Report, and in Exhibit
G to the Agreement, copies of which are attached to this Valuation Certificate,
and reference is made to the Valuation Report and Exhibit G for their content.
The undersigned firm hereby represents that copies of this Valuation
Certificate and attachments hereto have been delivered to Purchaser as of the
date hereof. The undersigned Purchaser hereby represents that it has received
such copies of this Valuation Certificate and attachments hereto as of the date
hereof and that Purchaser is familiar with their contents.
Dated the ________ day of _______________________, 1993.
PURCHASER VALUATION AGENT
By: ___________________________ By:_________________________________
Its: ___________________________ Its:_________________________________
<PAGE> 87
Exhibit I to
Asset Sale Agreement
FORM OF
NOTICE TO MORTGAGORS
_________________________, 199___
[Name and Address of Mortgagor]
Subject: City National Bank
Property Name:
Loan No.:
Original Loan Amount: $________________
Note Dated:
Gentlemen:
The above mortgage loan ("Loan") has been sold and conveyed to
______________________________________________________________________________
("Purchaser") by CITY NATIONAL BANK, a national banking association. Purchaser
has designated [A LOCKBOX] [A DEPOSITORY ACCOUNT] for the collection of
interest, principal, escrows and other charges under the Loan. In order to
receive credit for payments under the Loan, all payments should be made in
accordance with the directions set forth in this letter.
You are hereby irrevocably and unconditionally authorized and
directed that each payment of interest, principal, escrows or any other charge
by you under the Loan is to be made in the form of a check made payable to the
order of:
______________________________________________________________________________
______________________________________________________________________________
and delivered to the following address:
______________________________________________________________________________
______________________________________________________________________________
Payments that are not made in accordance with this authorization
and direction will not be credited to payment of such interest, principal,
escrows or other charges under the Loan until otherwise properly directed.
Please contact Purchaser at the address and phone number given below if you
have any questions or comments on this matter:
[Corporation/Partnership]:
______________________________________________________________________________
1
<PAGE> 88
Exhibit I to
Asset Sale Agreement
______________________________________________________________________________
______________________________________________________________________________
Telephone: _________________________
Attention: _________________________
Thank you for your cooperation.
CITY NATIONAL BANK, a
national banking association
By: ____________________________
Its: ___________________________
2
<PAGE> 89
Exhibit J to
Asset Sale Agreement
REAL PROPERTY SALES CONTRACT
THIS REAL PROPERTY SALES CONTRACT (the "Contract") is made and entered
into as of the first day of November, 1993, by and between (i) WHC-THREE
Investors, L.P., a Delaware limited partnership having an office at c/o
WHC-THREE Investors, Inc., 85 Broad Street, 19th Floor, New York, New York
10004 ("Affiliate Purchaser"); and (ii) CITY NATIONAL BANK, a national banking
association ("Seller"). Capitalized terms not otherwise defined herein shall
have as their meaning the definition ascribed to such terms in the Asset Sale
Agreement of even date herewith (the "Asset Sale Agreement").
W I T N E S S E T H:
WHEREAS, Seller is the owner (i) in fee simple of certain parcels of
commercial land, including all improvements, fixtures, easements and other
appurtenances and (ii) leasehold estates, if any, each of which will, as of the
Closing Date, be encumbered by Interim Mortgage Loans (each a "Parcel of Real
Property" and collectively, the "Real Property"), as further described in
Exhibit "A" attached hereto and incorporated herein by reference; and
WHEREAS, Seller, and Affiliate Purchaser (the "Purchaser"), have on
the date hereof entered into the Asset Sale Agreement, whereby Purchaser agreed
to purchase certain Mortgage Loans and to cause Affiliate Purchaser to purchase
certain Real Property from Seller pursuant to the terms and conditions set
forth in the Asset Sale Agreement and Purchaser and Seller have agreed to enter
into a Loan and Security Agreement (the "Loan and Security Agreement") for the
financing of the sale of the aforementioned Mortgage Loans and Real Property;
and
WHEREAS, Seller has agreed to sell the Real Property to Affiliate
Purchaser and Affiliate Purchaser has agreed to purchase said Real Property
from Seller, at the price and upon the terms and conditions hereinafter set
forth; and
WHEREAS, Affiliate Purchaser has agreed that Seller will continue to
own and manage the Real Property prior to the Real Property Closing Date, but
shall amend the existing management contracts with the managing agents for the
Real Property to reflect Seller's and Affiliate Purchaser's agreement regarding
the management of the Real Property from said date until the dates Affiliate
Purchaser or its assignee takes title to each Parcel of Real Property as more
particularly described herein;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1
<PAGE> 90
Exhibit J to
Asset Sale Agreement
1. PURCHASE AND SALE OF REAL PROPERTY.
1.1 On the Real Property Closing Date (as defined in
Section 3 hereof) for each Parcel of Real Property, and subject to the terms
and conditions set forth in this Contract and the Asset Sale Agreement, Seller
agrees to sell, assign, transfer and deliver to Affiliate Purchaser or a
Qualified Affiliate, and Affiliate Purchaser, on behalf of itself and the
Qualified Affiliate, agrees to purchase, acquire and accept such Parcel or
Parcels of the Real Property from Seller.
1.2 In addition to the Real Property, this sale includes
all of Seller's (herein, "Owner") right, title and interest in and to the
following:
1.2.1 All easements, covenants and other rights
appurtenant to said Real Property, and all right, title and interest, if any,
in and to any land lying in the bed of any street, road, avenue or alley, open
or closed, in front of or adjoining said Real Property and to the center line
thereof;
1.2.2 All furniture, fixtures, equipment and other
personal property (except items owned by tenants) which are now, or may
hereafter prior to the Real Property Closing Date be placed in or attached to
the Real Property;
1.2.3 To the extent same may be transferred under
applicable law without consent (unless obtained by Purchaser), all licenses,
permits and authorizations presently issued in connection with the operation of
all or any part of the Real Property or necessary to operate the Real Property
as it is presently being operated;
1.2.4 To the extent same may be assigned without
consent (unless obtained by Purchaser), all warranties, if any, issued to the
Owner by any manufacturers and contractors in connection with construction or
installation of equipment included as part of the Real Property;
1.2.5 To the extent assignable and same are to be
assigned hereunder (at the election of Affiliate Purchaser) to Affiliate
Purchaser or a Qualified Affiliate at the Real Property Closing Date for each
Parcel of Real Property, all service, supply and maintenance contracts (if any)
held by the Owner with respect to the Real Property and its mechanical
equipment, elevators and other elements;
1.2.6 To the extent assignable without consent
(unless obtained by Purchaser) all trade names and general intangibles relating
solely to the Real Property;
1.2.7 To the extent assignable, all leases of all
or any part of the Real Property; and
2
<PAGE> 91
Exhibit J to
Asset Sale Agreement
1.2.8 All other rights, privileges and
appurtenances to which Affiliate Purchaser may be entitled under the Contract
or the Asset Sale Agreement, including but not limited to tenant security
deposits to the extent held by Owner, utility capacity, utility reservation
deposits and refunds in connection therewith; and
1.2.9 Hazard insurance and condemnation proceeds
received by Owner and payable to Purchaser pursuant to Section 8.1(d) of the
Asset Sale Agreement with respect to the Real Property and not applied to
amounts due on the Mortgage Loan or to the repair of the Real Property.
2. PURCHASE PRICE.
The purchase price of each Parcel of Real Property shall be the
Initial Purchase Price consisting of the sum of One Hundred Dollars U.S.
($100.00) cash plus taking title thereto in satisfaction of the debt owing on
the respective Interim Mortgage (as hereinafter defined) (collectively, the
"Purchase Price"), subject to adjustment as set forth below, and shall be paid
as follows:
2.1 The Initial Purchase Price, One Hundred Dollars
($100.00), shall be paid, in cash or by bank wire transfer for each Parcel of
Real Property, payable on the Real Property Closing Date as such term is
defined below.
2.2 One or more Qualified Affiliates shall take title to
the Real Property designated "industrial" on the Mortgage Loan and Real
Property Schedule, as such term is defined in the Asset Sale Agreement, which,
as of the date hereof, shall be subject to one or more Interim Mortgage Notes,
as such term is defined in the Asset Sale Agreement, and Interim Mortgages, as
such term is defined in the Asset Sale Agreement, in favor of Purchaser, and
another Qualified Affiliate or Qualified Affiliates shall take title to the
remaining Real Property not designated "industrial" on the Mortgage Loan and
Real Property Schedule, which, as of the date hereof, shall be subject to one
or more Interim Mortgage Notes and Interim Mortgages, each of which Interim
Mortgage Loans is in the principal amount shown on Exhibit C hereto, with
interest thereon payable at the Applicable Rate, as such principal may be
adjusted to reflect the Adjusted Purchase Price of each Parcel of Real
Property, and payable monthly. Concurrently with the transfer of title to a
Qualified Affiliate with respect to each Parcel of Real Property, the Interim
Mortgage Note shall be marked Paid in Full and, along with the Interim
Mortgage, reconveyed to Seller.
3. REAL PROPERTY CLOSING DATE.
3.1 The closing of the purchase and sale for each Parcel
of Real Property (each, a "Real Property Closing Date") shall occur no later
than the last day of the month in which the following date occurs: the earlier
of (i) ten (10) calendar days after the termination of the Due Diligence Period
for the related Interim Mortgage Loan unless a Certificate of Defective Asset
under the Asset Sale Agreement has been delivered to Seller prior to the
3
<PAGE> 92
Exhibit J to
Asset Sale Agreement
expiration of the Due Diligence Period, in which event the Real Property
Closing Date for such Parcel of Real Property shall be extended until the
Defect listed in such Certificate of Defective Asset is cured; or (ii) thirty
(30) days after the date Seller receives an Acceptance Certificate for the
Interim Mortgage Loan secured by or related to the Real Property. On each Real
Property Closing Date, Seller shall deliver to the Qualified Affiliate a deed
in substantially the form attached to the Asset Sale Agreement as Exhibit N.
The conveyance under such deed shall be made subject to a lien in favor of
Seller in an amount equal to seventy-five percent (75%) of the Adjusted
Purchase Price of the related Real Property, evidenced by a mortgage in the
form of Exhibit M to the Loan and Security Agreement.
Affiliate Purchaser or its assignee Qualified Affiliate shall have the
option to purchase any Parcel of Real Property prior to the aforementioned date
upon ten (10) days' prior written notice, provided however, that Seller shall
not be required to close the sale of Real Properties more than once per month.
Each such closing (collectively, the "Real Property Closing") shall be held at
the offices of Seller's counsel, or at such other place that Seller and
Affiliate Purchaser or any Qualified Affiliate that will take title to the Real
Property, as the case may be, may agree.
3.2 The following items of expense shall be adjusted as
of midnight of the day immediately preceding the Real Property Closing Date for
each Parcel of Real Property:
3.2.1 Real estate taxes with respect to each Parcel
of Real Property. If the rate or amount of such taxes shall not be fixed prior
to the Real Property Closing Date, the adjustment thereof at each Real Property
Closing Date shall be upon the basis of the rate for the preceding fiscal year
applied to the latest assessed valuation (or other basis of valuation) and the
same shall be further adjusted when the rate and valuation for the current
fiscal year is fixed. Affiliate Purchaser or any Qualified Affiliate that will
take title to the Real Property shall receive a credit for the amount of all
unpaid assessments (whether special or general) that have been levied or are
payable with respect to any Parcel of Real Property prior to the Real Property
Closing Date with respect to such Parcel of Real Property and that have not
been deposited into the Estimated Accrual Account under Section 3.3 below;
3.2.2 Water and sewer service charges, and charges
for all other public utilities (if any);
3.2.3 Rents, provided, however, that (A) Purchaser,
Affiliate Purchaser or any Qualified Affiliate that will take title to the Real
Property shall receive a credit for any rents paid to Seller by tenants of each
Parcel of Real Property for rent applicable to the period from each Real
Property Closing Date and thereafter, and (B) in the event that prior to each
Real Property Closing Date, Seller is unable to collect all rents due and owing
for any period after the Due Diligence Cut-Off Date and prior to the Closing
Date, Purchaser, Affiliate Purchaser or the Qualified Affiliate shall use its
best efforts (but shall not be obligated to institute or prosecute any
litigation) to collect such amounts from tenants and pay the same to Seller.
Any such payments relating to any period after the Closing Date and prior to
such Real Property Closing Date shall be paid to Seller for the benefit of
Purchaser as amounts due under the related
4
<PAGE> 93
Exhibit J to
Asset Sale Agreement
Interim Mortgage. Any rent collected by Purchaser, Affiliate Purchaser or the
Qualified Affiliate from a tenant who owes delinquent rent as of each Real
Property Closing Date will first be credited to rent accruing on and after each
Real Property Closing Date and due as of the date of its collection until such
rents are fully current and further provided that nothing contained herein
shall preclude Seller from using efforts to collect such delinquent amounts
from tenants. Purchaser, Affiliate Purchaser or the Qualified Affiliate shall
also receive a credit for the amount of all tenant security, pet and/or other
deposits actually held by Seller with respect to each Parcel of Real Property
(or same shall actually be transferred);
3.2.4 Hazard insurance premiums on any insurance
policies that are transferred to Purchaser, Affiliate Purchaser or the
Qualified Affiliate; and
3.2.5 Gas, oil and all other private utilities.
The adjustments described in this subparagraph shall be paid on each
Real Property Closing Date in cash or by certified or cashier's check. If the
amount of any of the adjustments described in this subparagraph cannot be
determined on each Real Property Closing Date, the adjustment therefor shall be
made within thirty (30) days after each such Real Property Closing Date by
certified or cashier's check. In making the adjustments required by this
subparagraph, Seller shall be entitled to a credit for all amounts prepaid as
of each Real Property Closing Date and any period after each Real Property
Closing Date, and Seller shall be charged with any unpaid charges for the
period prior to each Real Property Closing Date.
3.3 In the event an Interim Mortgage is utilized, the Seller
covenants and agrees (i) to pay, for the purpose of establishing an escrow
account to be held by Seller for the benefit of Purchaser, Affiliate Purchaser
or a Qualified Affiliate (the "Estimated Accrual Account") (which account shall
not bear interest), an initial amount equal to the Proration Amount, as such
term is hereafter defined; and (ii) thereafter to continue to pay into the
Estimated Accrual Account monthly to the extent available from Cash Flow, on
each and every monthly payment date, one-twelfth (1/12th) of the estimated
annual real estate taxes, assessments and hazard insurance premiums on the Real
Property, as Permitted Expenses. The amount of such real estate taxes,
assessments and hazard insurance premiums, when unknown, shall be reasonably
estimated by Seller. Such deposits shall be used by Seller or, if such real
estate taxes, assessments and hazard insurance premiums are payable after the
Real Property Closing Date,such Estimated Accrual Account shall be assigned to
Purchaser and used by Purchaser, Affiliate Purchaser or Qualified Affiliate to
pay such real estate taxes, assessments, and hazard insurance premiums when
due. The enforceability of the covenants relating to the Seller's payment of
real estate taxes, assessments and hazard insurance premiums herein otherwise
provided shall not be affected except insofar as those obligations have been
met by compliance with this Section 3.3. As used herein, "Proration Amount"
means that amount of real estate taxes, assessments and hazard insurance
premiums which would be payable by Seller if the Real Property were transferred
to Purchaser, Affiliate Purchaser or a Qualified Affiliate on the Closing Date.
5
<PAGE> 94
Exhibit J to
Asset Sale Agreement
3.4 Affiliate Purchaser or Qualified Affiliate shall pay,
when due and payable, all transfer, filing and recording fees and taxes, and
costs and expenses, if any, with respect to the filing or recording of any
documents or instruments relating to the financing of any Parcel of Real
Property and the cost of recording corrective instruments, pursuant hereto or
to the Asset Sale Agreement, except for those related to any Interim Mortgage
or deed to any Real Property, which Seller shall pay.
Except as otherwise expressly provided herein, whether or not the
transactions contemplated hereunder are completed, Affiliate Purchaser or
Qualified Affiliate shall pay all of its closing and due diligence expenses and
its expenses in negotiating and carrying out its obligations under this Sales
Contract, including the costs of its counsel, all of the costs of title or
other insurance which is not presently in force or otherwise provided by Seller
or other due diligence Affiliate Purchaser or Qualified Affiliate may desire to
undertake and all of the expenses of Affiliate Purchaser or Qualified Affiliate
relating to this Contract.
3.5 To the extent set forth in Paragraph 1 (and in the
case of 3.5.1, 3.5.4 and 3.5.5, in a form reasonably acceptable to the parties
to this Contract)the following documents shall be delivered to each Affiliate
Purchaser or Qualified Affiliate on each Real Property Closing Date for the
Parcel of Real Property being purchased:
3.5.1 A duly executed and acknowledged assignment
of all landlord's interest in tenant leases affecting the Parcel of Real
Property;
3.5.2 A current rent roll for the Parcel of Real
Property (to be used for proration purposes only and to the extent available);
3.5.3 Such utility bills, tax statements, water,
sewer and other service bills, and insurance bills as are available for
purposes of determining amounts set forth in Section 3.2 hereof and to the
extent available;
3.5.4 A general assignment of all assignable (w)
existing warranties of the Real Property, (x) contracts and agreements
affecting the Real Property, (y) trade names relating solely to the Parcel of
Real Property and (z) any and all other intangible property included in this
sale pursuant to Paragraph 1; and
3.5.5 A bill of sale covering all personal property
for the Parcel of Real Property, together with such other documents as are
appropriate to convey, transfer or assign any interest that the Seller may have
to the other items described in Section 1.2 hereof.
3.6 Affiliate Purchaser or any Qualified Affiliate shall
have its counsel deliver to Seller the following legal opinions as of the Real
Property Closing Date for each Parcel of Real Property:
6
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Exhibit J to
Asset Sale Agreement
3.6.1 Affiliate Purchaser or, if Affiliate
Purchaser has assigned its rights hereunder to a Qualified Affiliate, such
Qualified Affiliate, is duly formed and validly existing and in good standing
under the laws of the State of its incorporation or formation;
3.6.2 (A) Affiliate Purchaser or, if Affiliate
Purchaser has assigned its rights hereunder to a Qualified Affiliate, such
Qualified Affiliate, as the assignee of the Affiliate Purchaser, has full and
absolute power and authority to assume, as the case may be, this Contract and
Affiliate Purchaser's obligations hereunder and to enter into the Assignment
and Assumption of Sales Contract substantially in the form attached hereto as
Exhibit B and to perform its obligations thereunder, and (B) the Asset Sale
Agreement, the Assignment and Assumption of Sales Contract, if applicable, the
above referenced documents and any other ancillary documents delivered pursuant
hereto will constitute binding and enforceable obligations of the Qualified
Affiliate or Affiliate Purchaser, as the case may be, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
enforcement of creditor's rights generally and by general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity);
3.6.3 If Affiliate Purchaser has assigned its
rights hereunder to a Qualified Affiliate, the Qualified Affiliate has been
duly authorized by all requisite action to assume the Sales Contract, and
Affiliate Purchaser's obligations hereunder, and to execute the Assignment and
Assumption of Sales Contract and any other documents that such Qualified
Affiliate is required to execute pursuant to the Asset Sale Agreement and the
Loan and Security Agreement;
3.6.4 Affiliate Purchaser and, if Affiliate
Purchaser has assigned its rights hereunder to a Qualified Affiliate, such
Qualified Affiliate, have all the requisite governmental approvals of any kind,
including without limitation, licenses, permits and authorizations, if any,
required to manage the Real Property and perform the obligations under this
Contract, the Interim Mortgage and any amendments thereto; and
3.6.5 The Qualified Affiliate is qualified to
transact business in the State of California and all jurisdictions in which its
ownership of real property or its conduct of business requires such
authorization.
3.6.6 The Qualified Affiliate is a "Qualified
Affiliate" as that term is defined herein and in the Asset Sale Agreement and
has satisfied all conditions in the Asset Sale Agreement to its qualification
as a Qualified Affiliate. Such legal opinion may rely on certificates of
executive officers or other officers in possession of the official records of
the entities in question. Instead of delivering a legal opinion as to the
foregoing, Affiliate Purchaser or the Qualified Affiliate may deliver other
evidence reasonably satisfactory to Seller.
7
<PAGE> 96
Exhibit J to
Asset Sale Agreement
4. ADDITIONAL OBLIGATIONS OF SELLER.
4.1 Since Section 6 hereof conditions the obligations of
Affiliate Purchaser to acquire the Real Property hereunder only upon
satisfaction by Seller of its representations and warranties under Sections 7.1
and 7.2 of the Asset Sale Agreement (or acceptance of the related Mortgage Loan
by an affiliate of Affiliate Purchaser thereunder), which representations and
warranties include items related to the condition of title to each Parcel of
Real Property, other than as specifically provided herein, there are no further
obligations of Seller or conditions precedent to each Real Property Closing
under this Agreement.
4.2 At each Real Property Closing, Seller shall execute
and deliver to Affiliate Purchaser or Qualified Affiliate a deed, in the form
attached as Exhibit N to the Asset Sale Agreement (and with respect to any
leasehold estate, the appropriate transfer documentation, without
representation or warranty), in recordable form, which conveys indefeasible
title to the Parcel of Real Property in fee simple, good and marketable, of
record and in fact (but subject to those exceptions, conditions and facts
permitted by the Asset Sale Agreement or agreed to by Qualified Affiliate or
Affiliate Purchaser) and insurable by a nationally recognized title insurance
company. With respect to any such leasehold estate, Affiliate Purchaser or
Qualified Affiliate shall assume, in writing, all of the obligations of Seller
under the lease arising and incurred on and after such Real Property Closing
Date.
4.3 For each Parcel of Real Property, from the date of
execution of this Contract until the earlier to occur of either the Real
Property Closing Date or the date, if any, on which Seller is no longer
obligated to sell such Parcel of the Real Property hereunder, Seller covenants
and agrees as follows:
4.3.1 Seller shall not cause or permit, without the
prior written consent of Affiliate Purchaser or Qualified Affiliate or as
expressly permitted by the management agreement relating to the management of
the specified Parcel of Real Property, as such may have been amended to reflect
Seller's and Affiliate Purchaser's agreement regarding the management of such
Real Property, any of the following (except with respect to default by tenants,
casualty or condemnation or restoration associated therewith or required to
protect or preserve the Parcel of Real Property and improvements thereon):
(a) Any changes, amendments or waivers
of any lease that would result in a material adverse effect to Affiliate
Purchaser or a Qualified Affiliate including (x) a material reduction in
payments under a lease covering all or any portion of any Parcel of Real
Property, (y) any additional material obligation to be imposed on the landlord
thereunder (other than in the ordinary course of business), or (z) an extension
of (or option to extend) the term of such lease beyond six months from the
Closing Date under the Asset Sale Agreement;
(b) the execution of any new lease of
any portion of the Parcel of Real Property that is not, in the reasonable
judgment of the Seller, commercially
8
<PAGE> 97
Exhibit J to
Asset Sale Agreement
reasonable or would have a term (including any options to extend) extending
such lease beyond six months from the Closing Date under the Asset Sale
Agreement; and
(c) the conveyance, contracting to
convey, assigning, pledging or other encumbering of the Parcel of Real Property
or any of the future rents or other charges payable under any leases covering
all or any portion of the Parcel of the Real Property.
4.3.2 Seller hereby authorizes Affiliate Purchaser,
its assignee Qualified Affiliate and their respective representatives to appear
and contest any ad valorem tax valuations or assessments with respect to the
Parcel of Real Property so long as such is done at the sole cost and expense of
Affiliate Purchaser or its assignee Qualified Affiliate.
4.4 For each Parcel of the Real Property from the date of
execution of this Contract until the Real Property Closing Date, Seller
covenants and agrees to operate, manage and maintain such Real Property in
conformity with customary prudent industry management standards of owners of
similar real properties who act in a prudent manner.
5. ASSIGNMENT TO QUALIFIED AFFILIATE.
5.1 Affiliate Purchaser shall, except as otherwise agreed
by Seller, in writing, prior to any Real Property Closing Date, assign its
rights, interests, duties and obligations under this Contract with respect to
the Real Property to not less than two Qualified Affiliates (one or more
Qualified Affiliates shall take title to all of the Real Property designated
"industrial" on the Mortgage Loan and Real Property Schedule, and one or more
other Qualified Affiliates shall take title to the remaining Real Property not
designated "industrial" on the Mortgage Loan and Real Property Schedule), which
shall assume, in writing, such duties and obligations. The assignment and
assumption of the rights, interests, duties and obligations under this Contract
with respect to each Parcel or Parcels of Real Property to a Qualified
Affiliate shall be substantially in the form attached hereto as Exhibit B.
5.2 In the event that Seller is providing financing under
the Loan and Security Agreement, Seller shall require that one or more
Qualified Affiliates will acquire one or more Parcels of Real Property
designated "industrial" on the Mortgage Loan and Real Property Schedule, and
one or more other Qualified Affiliates that do not hold any Real Property
designated "industrial" on such schedule acquire one or more of the remaining
parcels of Real Property.
6. CONDITION TO OBLIGATION TO PURCHASE OR SELL.
6.1 Condition to Purchaser's Obligation to Purchase.
Seller and Purchaser each shall have performed all of its covenants and
agreements required to be performed by it under the Asset Sale Agreement prior
to the Closing Date. Neither Purchaser, Affiliate Purchaser nor any Qualified
Affiliate shall be obligated to acquire any Parcel of Real Property hereunder
in the event that Purchaser has properly and timely delivered to Seller a
Certificate of Defective Asset prior to the expiration of the Due Diligence
Period for the related Asset declaring
9
<PAGE> 98
Exhibit J to
Asset Sale Agreement
that the related Asset is a Defective Asset under the Asset Sale Agreement and
Seller has not (i) cured such Defect within the period provided under the Asset
Sale Agreement, or (ii) established that no Defect exists, or (iii)
repurchased the related Asset pursuant to Section 10.1 of the Asset Sale
Agreement, or (iv) reduced the Initial Purchase Price with respect to such
Asset by either the amount specified by Purchaser as Purchaser's Cure Estimate
or the Reduction to the Initial Purchase Price, or (v) deleted the Interim
Mortgage securing such Parcel of Real Property pursuant to the Asset Sale
Agreement.
6.2 Condition to Seller's Obligation to Sell. Seller's
obligation to sell any Parcel of Real Property under this Contract shall
terminate if the related Asset has been deleted from the Mortgage Loan and Real
Property Schedule in accordance with Section 10.1 of the Asset Sale Agreement
and, upon such deletion, neither Seller nor Affiliate Purchaser or any
Qualified Affiliate shall have any further obligations under this Contract with
respect to such Parcel of Real Property. Seller's obligation to sell any
Parcel of Real Property shall be suspended during any period in which Purchaser
shall be in default under the Asset Sale Agreement. Seller's liability with
regard to such termination of Seller's obligations to sell a particular Parcel
of Real Property under this Contract shall be limited to its repurchase
obligations and the remedies for breach of that obligation under the Asset Sale
Agreement.
7. REPRESENTATIONS AND WARRANTIES OF AFFILIATE PURCHASER.
Affiliate Purchaser represents and warrants to Seller that the
representations and warranties stated in Section 6.1 of the Asset Sale
Agreement are true and correct as of the date of this Contract and shall be
true and correct on each Real Property Closing Date, each as though made by
Affiliate Purchaser.
8. DISCLAIMER OF WARRANTIES.
Affiliate Purchaser acknowledges on its own behalf and on behalf of
any assignee Qualified Affiliate that, except for the representations and
warranties included in the Asset Sale Agreement, neither Seller nor any
attorney, agent, employee or representative of Seller has made any
representation or warranty whatsoever, express or implied, regarding the
subject matter of this sale, or any part thereof, including, without limiting
the generality of the foregoing, representations or warranties as to the
physical nature or condition of the premises or the personal property for each
Parcel of Real Property transferred hereunder, or their fitness or suitability
for any use, except as expressly set forth in the Asset Sale Agreement or this
Contract, and that Affiliate Purchaser, in executing, delivering and performing
this Contract, does not rely upon any statement made or information given,
directly or indirectly, verbally or in writing, to any individual, firm or
corporation other than as provided in the representations and warranties in
Sections 7.1 and 7.2 of the Asset Sale Agreement. Possession of the Real
Property shall be delivered in "as is" condition as of each Real Property
Closing Date, subject only to the provisions of Sections 9 and 10 hereof.
10
<PAGE> 99
Exhibit J to
Asset Sale Agreement
9. RISK OF LOSS.
Seller shall bear the risk of loss of each Parcel of Real Property
during the period from the date hereof until the Closing Date under the Asset
Sale Agreement (also referred to in this Section 9 as the "Closing"). In the
event of damage to any Parcel of Real Property by fire or other casualty, act
of God or any other event prior to the Closing, Seller shall be deemed to have
satisfied its obligations to convey the Real Property hereunder in accordance
herewith if (a) Seller shall repair or pay for the cost of repair or
restoration of the Real Property caused by such casualty damage, (b) if the
insurance proceeds in respect of such damage are received prior to the Closing
Date under the Asset Sale Agreement, Seller shall pay or credit the amount of
the insurance proceeds, as well as any unpaid claims or rights in connection
with such casualty, together with any uninsured amount, against the Adjusted
Purchase Price of the Assets under the Asset Sale Agreement as provided
therein, (c) if the insurance proceeds described in subparagraph (b) above are
received after the Closing Date under the Asset Sale Agreement and on or before
the applicable Real Property Closing Date, Seller shall assign such insurance
proceeds to Affiliate Purchaser or its assignee Qualified Affiliate at the Real
Property Closing and pay or credit to Purchaser any uninsured amount, or (d) if
such insurance proceeds are not received by Seller on or before the applicable
Real Property Closing Date, Seller shall assign its right to receive such
insurance proceeds to Affiliate Purchaser or its assignee Qualified Affiliate
at such Real Property Closing and pay or credit to Purchaser any uninsured
amount. The insurance proceeds described in the preceding sentence shall
include, but not be limited to, any proceeds (a) payable as of the date hereof
or (b) paid prior to the date hereof and shall be limited to the proceeds not
expended for the repair of such damage or to protect and preserve the damaged
property. Prior to the Real Property Closing Date, Affiliate Purchaser or its
assignee Qualified Affiliate shall have the right to participate in the
negotiations and settlement of any casualty-related claim and any decision
regarding the reconstruction or renovation of any improvement on the Real
Property.
Seller shall have the option to terminate this Contract with respect
to any Real Property and to delete the related Mortgage Loan under the Asset
Sale Agreement in the event of an uninsured loss or a loss valued at more than
thirty percent (30%) of the Adjusted Purchase Price of the related Interim
Mortgage Loan under the Asset Sale Agreement. Notwithstanding the foregoing,
however, Affiliate Purchaser shall have the right, at its option, to rescind
and revoke any such termination by Seller by delivering written notice to
Seller, within thirty (30) days after Affiliate Purchaser's receipt of such
termination notice, provided that Affiliate Purchaser agrees to take the Real
Property in "as is" condition and to relieve Seller of any obligation to pay
for the costs of any repair or restoration of the Real Property or any other
damages related to or arising as the result of or with respect to such loss or
to assign any insurance proceeds received by Seller with respect to such Real
Property.
Purchaser shall bear the risk of loss of the Real Property after the
Closing.
11
<PAGE> 100
Exhibit J to
Asset Sale Agreement
10. CONDEMNATION.
Seller agrees to give Affiliate Purchaser written notice of any action
or proceeding instituted or pending, in eminent domain or for condemnation
affecting any material part of any Parcel of Real Property, promptly after
Seller's receipt thereof. If, prior to the Real Property Closing Date for such
Parcel of Real Property, all or any part of such Parcel of Real Property is
taken by condemnation or eminent domain proceeding or other transfer in lieu
thereof, this Contract shall remain in full force and effect, and Seller will
pay to Affiliate Purchaser or its assignee Qualified Affiliate at the Real
Property Closing for such Parcel of Real Property an amount equal to the net
proceeds received by Seller from such condemnation. However, if by the Real
Property Closing Date for any such Parcel of Real Property, Seller has not
received the condemnation proceeds, then the parties shall consummate this
transaction on the Real Property Closing Date for such Parcel of Real Property
and Seller will at such Real Property Closing assign to Affiliate Purchaser or
its assignee Qualified Affiliate all rights of Seller to the condemnation award
and to all other rights or claims arising out of or in connection with any such
eminent domain or condemnation action or proceeding. Notwithstanding the
foregoing, nothing contained in this Section 10 shall impair Purchaser's and/or
Affiliate Purchaser's exercise of their rights in the event of a breach of
Section 7.2(d) of the Asset Sale Agreement.
11. DEFAULT BY AFFILIATE PURCHASER.
In the event Affiliate Purchaser or its assignee Qualified Affiliate
shall default in its obligations to purchase any Parcel of Real Property
hereunder or otherwise breaches this Contract, then: (i) such default or
breach shall constitute an Event of Default under the terms and conditions of
the Asset Sale Agreement, and (ii) for any default or breach hereunder
occurring up to and including the Closing Date under the Asset Sale Agreement,
Seller shall be limited to the remedies set forth in Section 11.1 of the Asset
Sale Agreement, and for any default or breach hereunder occurring after the
Closing Date under the Asset Sale Agreement, Seller may avail itself of any
legal or equitable rights (including, without limitation, the right of specific
performance and/or money damages) which Seller may have at law or in equity or
under this Contract and under the Asset Sale Agreement. Seller shall be
reimbursed by Affiliate Purchaser or its assignee Qualified Affiliate for all
expenses, including reasonable attorneys' fees, incurred in connection with any
action brought under this Section 11 with respect to any default or breach
hereunder occurring after the Closing Date under the Asset Sale Agreement.
12. DEFAULT BY SELLER.
In the event Seller shall default in its obligations hereunder, then,
if prior to Closing under the Asset Sale Agreement, the Deposit shall be
returned to Purchaser and neither Purchaser, Affiliate Purchaser nor its
assignee Qualified Affiliate shall be entitled to monetary damages, except for
direct out-of-pocket expenses proved by Purchaser to have been expended by
delivering to Seller documentary evidence thereof satisfactory to Seller, but
may seek any equitable rights that may be available. If such default occurs
after the Closing under the Asset Sale Agreement, Purchaser, Affiliate
Purchaser or its assignee Qualified Affiliate may seek any legal or equitable
12
<PAGE> 101
Exhibit J to
Asset Sale Agreement
rights (including, without limitation, the right of specific performance and to
monetary damages) that may be available at law or in equity or under this
Contract or the Asset Sale Agreement, subject to the limitations set forth in
Section 11.2 of the Asset Sale Agreement. Purchaser, Affiliate Purchaser or
its assignee Qualified Affiliate, as the case may be, shall be reimbursed for
all expenses, including reasonable attorneys' fees, incurred in connection with
any successful action brought under this Section 12.
13. BROKER.
Each party hereto represents to the other that it has not dealt with
any broker or other party entitled to receive a commission or finder's fee in
connection with the execution of this Contract or the conveyance of the Real
Property. Each party hereto each covenants and agrees to indemnify, defend and
hold the other harmless from and against any and all loss, cost, damage and
expense (including attorneys' fees and charges) suffered or incurred by Seller,
in any capacity, in connection with a breach of the foregoing representation.
14. WAIVER OF CONDITIONS.
Each party hereto reserves the right to waive any of the terms or
conditions of this Contract which are for the benefit of such party and to
consummate the transaction contemplated hereby in accordance with the terms and
conditions of this Contract which have not been so waived. Any such waiver
must be in writing signed by the party so waiving any of such terms or
conditions.
15. ASSIGNMENT.
Except as specifically provided in Paragraph 5 above or in the Asset
Sale Agreement, neither Affiliate Purchaser nor its assignee Qualified
Affiliate shall have the right to assign its rights, interests, duties and
obligations in and to this Contract or with respect to any Parcel of Real
Property to any party other than a Qualified Affiliate without the prior
written consent of the Seller.
16. NOTICES.
Unless otherwise provided for herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered, if sent by registered or
certified mail (return receipt requested), (b) when delivered, if delivered
personally, (c) when transmitted, if sent by facsimile if a confirmation of
transmission is produced by the sending machine (and a copy of each facsimile
promptly thereafter sent by ordinary mail), or (d) on the following Business
Day, if sent by overnight mail or overnight courier, in each case to the
parties at the following addresses or facsimile numbers (or at such other
addresses or facsimile numbers as shall be specified by like notice):
13
<PAGE> 102
Exhibit J to
Asset Sale Agreement
(a) If to Seller:
City National Bank
Executive Management
606 S. Olive Street, Suite 900
Los Angeles, CA 90014
Attention: Jeffery Puchalski,
Executive Vice President
Fax: (213) 629-3677
with a copy to:
City National Bank
Legal Department
9701 Wilshire Boulevard, 9th Floor
Beverly Hills, CA 90212-2050
Attention: Office of the General Counsel
Fax: (310) 273-5859
(b) If to Purchaser, at
WHC-THREE Investors, L.P.
c/o WHC-THREE Investors, Inc.
85 Broad Street, 19th Floor
New York, NY 10004
Attention: Neil Hasson
Fax: (212) 902-3000
with a copy to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Ave., N.W.
Washington, D.C. 20036-5339
Attention: Mark M. Katz, Esq.
Fax: (202) 857-6395
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication within any corporation or firm to the persons designated to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
14
<PAGE> 103
Exhibit J to
Asset Sale Agreement
17. ENTIRE AGREEMENT.
This Contract is part of several agreements entered into by and among
Seller, Purchaser and Affiliate Purchaser. This Contract shall be construed in
accordance with the agreements set forth in the Asset Sale Agreement, the Loan
and Security Agreement and such other documents as are deemed necessary by the
parties.
18. PARTIAL INVALIDITY.
If any terms, covenants or conditions of this Contract shall be held
invalid or unenforceable, the remainder of this Contract shall nevertheless
survive and be binding upon the parties hereto.
19. GOVERNING LAW; ARBITRATION.
19.1 GOVERNING LAW. This contract shall be governed by,
and construed and interpreted in accordance with the laws of the State of
California.
19.1 ARBITRATION. Any controversy or claim between
Affiliate Purchaser and, upon the assumption hereof by Qualified Affiliate,
Qualified Affiliate and Seller arising out of or relating to this Contract or
any actions or conduct of either in connection therewith (including, but not
limited to, any claim based on or arising from an alleged tort) shall at the
request of Affiliate Purchaser or Qualified Affiliate, as the case may be, or
Seller be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Contract, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall resolve all claims and defenses or other matters in dispute
in accordance with applicable law, including, but not limited to, all statutes
of limitation. Any controversy concerning whether an issue is arbitrable shall
be determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. No provision of this Contract shall
limit the right of either Affiliate Purchaser or Qualified Affiliate, as the
case may be, or Seller to exercise self-help remedies such as setoff, or
obtaining provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The institution and maintenance of any action for judicial relief
or pursuit of provisional or ancillary remedies shall not constitute a waiver
of the right of either Affiliate Purchaser or Qualified Affiliate, as the case
may be, or Seller to submit the controversy or claim to arbitration if the
other party contests such action for judicial relief.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION"
PROVISION OF THIS AGREEMENT DECIDED BY NEUTRAL ARBITRATION AS PROVIDED
BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS
TO HAVE THE DISPUTE LITIGATED
15
<PAGE> 104
Exhibit J to
Asset Sale Agreement
IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHT TO DISCOVERY AND APPEAL, UNLESS SUCH
RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION" PROVISIONS. IF
YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION,
YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY. THE UNDERSIGNED HAVE READ
AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT
OF THE MATTERS INCLUDED IN THE "ARBITRATION" PROVISION TO NEUTRAL
ARBITRATION.
______________________________ ______________________________
AFFILIATE PURCHASER'S INITIALS SELLER'S INITIALS
20. SURVIVAL.
Unless provided herein to the contrary, the provisions of this
Contract and the representations and warranties herein shall survive the
conveyance of title and payment of the Purchase Price and shall not be merged
therein.
21. RIGHT OF INSPECTION.
During such time as the Interim Mortgage remains outstanding, Seller
shall have the right to inspect the Real Property. Affiliate Purchaser and any
Qualified Affiliate shall have the right to inspect each Parcel of Real
Property prior to the Real Property Closing Date for each Parcel of Real
Property.
16
<PAGE> 105
Exhibit J to
Asset Sale Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AFFILIATE PURCHASER: WHC-THREE INVESTORS, L.P.,
a Delaware limited partnership
By: WHC-THREE INVESTORS, INC.,
a Delaware corporation,
general partner
By: ________________________________
Its: _______________________________
SELLER:
CITY NATIONAL BANK, a
national banking association,
By: ________________________________
Its: _______________________________
17
<PAGE> 106
Exhibit J to
Asset Sale Agreement
INDEX OF EXHIBITS
Exhibit A - Description of Real Property
Exhibit B - Form of Assignment to and Assumption
by Qualified Affiliate
Exhibit C - Schedule of Interim Mortgage Loans
18
<PAGE> 107
Exhibit J to
Asset Sale Agreement
EXHIBIT A TO SALES CONTRACT
19
<PAGE> 108
EXHIBIT A
Legal Description - Asset No. 56
PARCEL 1:
LOT 1 OF TRACT NO. 46505, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1178 PAGES 9 THROUGH 10
INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT UNITS 101 THROUGH 104 INCLUSIVE, 201 THROUGH 204 INCLUSIVE, 301 THROUGH
305 INCLUSIVE, 401 THROUGH 405 INCLUSIVE AND UNIT 1 AS SHOWN AND DEFINED ON THE
CONDOMINIUM PLAN RECORDED APRIL 9, 1992 AS INSTRUMENT NO. 92-625972.
PARCEL 2:
UNITS 101 THROUGH 104 INCLUSIVE, 201 THROUGH 204 INCLUSIVE, 301 THROUGH 305
INCLUSIVE, 401 THROUGH 405 INCLUSIVE AND UNIT NO. 1 AS SHOWN AND DEFINED ON THE
CONDOMINIUM PLAN ABOVE MENTIONED.
PARCEL 3:
AN EXCLUSIVE, PERPETUAL, APPURTENANT EASEMENT FOR THE CONSTRUCTION, ENJOYMENT,
USE, MAINTENANCE, REPAIR, IMPROVEMENT AND REPLACEMENT OF THAT CERTAIN GARDEN
WALL AND SUBTERRANEAN PARKING LOT WALL AND RELATED IMPROVEMENTS LOCATED WITHIN,
BELOW THE SURFACE, FOR ALL ADDITIONAL USES THAT ARE REASONABLY NECESSARY OR
INCIDENTAL THERETO, OVER THE FOLLOWING DESCRIBED PROPERTY:
THAT PORTION OF LOT 21 OF TRACT NO. 10199, IN THE CITY OF LOS ANGELES, COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 176 PAGES 15
AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE MOST NORTHERLY CORNER OF LOT 1 OF TRACT NO. 46505, AS PER MAP
RECORDED IN BOOK 1178 PAGES 9 AND 10, IN THE OFFICE OF THE COUNTY RECORDER, AND
BEING ALSO THE NORTHWEST CORNER OF LOT 1 OF TRACT 34730, AS PER MAP RECORDED IN
BOOK 938 PAGES 86 AND 87, IN OFFICE OF SAID COUNTY; SAID POINT OF COMMENCEMENT
BEING ON THE MOST NORTHERLY LINE OF SAID TRACT NO. 46505; THENCE ALONG SAID
NORTHERLY LINE SOUTH 72 DEGREES 53 MINUTES 33 SECONDS WEST 28.30 FEET TO THE
TRUE POINT OF BEGINNING OF THIS DESCRIPTION; THENCE ALONG SAID MOST NORTHERLY
LINE SOUTH 72 DEGREES 53 MINUTES 33 SECONDS WEST 149.90 FEET; THENCE NORTH 17
DEGREES 06 MINUTES 27 SECONDS WEST 1.80 FEET; THENCE NORTH 73 DEGREES 34
MINUTES 50 SECONDS EAST 149.91 FEET TO THE TRUE POINT OF BEGINNING, AS CONVEYED
BY DEED RECORDED SEPTEMBER 20, 1993 AS INSTRUMENT NO. 93- 1830430.
<PAGE> 109
Exhibit J to
Asset Sale Agreement
EXHIBIT B TO SALES CONTRACT
FORM OF ASSIGNMENT TO AND ASSUMPTION BY
QUALIFIED AFFILIATE OF REAL PROPERTY SALES CONTRACT
FOR VALUE RECEIVED, as of the ____ day of ________________________,
1994, the undersigned, ___________________________________, a
_______________________________________________ corporation (the "Assignor"),
hereby assigns, transfers, sets over, grants and conveys unto
______________________________________________, a _________________________
[corporation/partnership], its successors and assigns (the "Assignee") all of
its right, title, privilege and interest in and to that certain Real Property
Sales Contract dated _____________________________, 1993 between the Assignor
and City National Bank.
In consideration of this Assignment, Assignee shall pay to Assignor
the sum of $_____________________.
Assignee hereby accepts this Assignment and assumes all of the
obligations of Assignor under the aforementioned Sales Contract from and after
the date hereof.
This Assignment shall be binding upon and shall inure to the benefit
of Assignor and Assignee and their respective successors and assigns.
The Assignee hereby accepts the foregoing Assignment, and agrees to
perform each and every duty and obligation of the Assignor incurred as of the
date hereof and hereafter relating to the subject matter of this Assignment, as
fully and completely as though the Assignee was the party named as the Assignor
in the instruments hereby assigned.
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned
has executed this Assignment under seal as of the day and year first
hereinabove written.
WITNESS/ATTEST: ASSIGNOR:
_____________________________________
[Corporation/Partnership]
______________________________ By: _________________________________
[corporate seal]
Its: ________________________________
(Signatures continued on next page)
20
<PAGE> 110
Exhibit J to
Asset Sale Agreement
(Signatures continued from previous page)
WITNESS/ATTEST: ASSIGNEE:
_____________________________________
[Corporation/Partnership]
__________________________________ By: _________________________________
[corporate seal]
Its: ________________________________
21
<PAGE> 111
Exhibit J to
Asset Sale Agreement
EXHIBIT C TO REAL PROPERTY SALES CONTRACT
Schedule of Interim Mortgage Loans
22
<PAGE> 112
CITY NATIONAL BANK
SCHEDULE OF INTERIM MORTGAGE LOANS
EXHIBIT C
POOL 1
<TABLE>
<CAPTION>
Interim
Asset Pool Mortgage
# No. Asset Name Street Address City County State Zip Code Amount
- ----- ---- ---------- -------------- ---- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
56.00 1 453 Barrington 453 Barrington Avenue Brentwood Los Angeles CA 90049 3,536,000.00
------------
TOTAL 3,536,000.00
============
</TABLE>
<PAGE> 113
Exhibit L to
Asset Sale Agreement
Form of
INTERIM MORTGAGE
(Exhibit L continued on next page)
<PAGE> 114
Recording Requested By And When |
Recorded Mail To: |
|
|
|
Attn: |
|
|
- -----------------------------------------------------------------------------
Space Above this Line for Recorder's Use
Form of
INTERIM MORTGAGE
DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This Deed of Trust, Assignment of Rents and Security Agreement (the
"Mortgage") is made this ___ day of 1993, between CITY NATIONAL BANK, A
NATIONAL BANKING ASSOCIATION, herein called TRUSTOR, whose address is 606 S.
Olive Street, 20th Floor, Los Angeles, CA, CHICAGO TITLE INSURANCE COMPANY, a
California corporation, herein called TRUSTEE, and _________, California
______________, herein called BENEFICIARY. Unless otherwise defined herein,
each capitalized term used in this Mortgage shall have the same meaning
ascribed thereto in the Loan and Security Agreement or the Interim Mortgage
Note, both of even date herewith.
Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to TRUSTEE IN TRUST,
WITH POWER OF SALE, that property in __________________________ County,
California, described in Exhibit A attached hereto and made a part hereof (the
"Land"):
TOGETHER with all right, title and interest of Trustor, including any
after-acquired title or reversion, in and to any strips and/or gores and/or the
beds of the ways, streets, avenues, and alleys adjoining the Land; and
TOGETHER with all and singular the tenements, hereditaments,
easements, appurtenances, mineral rights, air, development and zoning rights,
working interests, passage, water rights, water courses, riparian rights,
utility commitments and/or reservations, permits, other rights, liberties and
privileges thereof or in any way now or hereafter appertaining to the Land,
including any homestead or other claim at law or in equity, as well as any
after-acquired title, franchise or license and reversion and reversions and
remainder and remainders thereof; and
TOGETHER with all buildings and improvements of every kind and
description now or hereafter erected or placed thereon (collectively, the
"Improvements"), and all materials now or hereafter owned by Trustor intended
for construction, reconstruction, alterations and repairs of the Improvements
now or hereafter erected thereon, all of which materials shall be deemed to be
included within the Property hereby conveyed immediately upon the delivery
thereof to the Land, and all fixtures and articles of personal property now or
hereafter owned by the Trustor and attached to or contained in and used in
connection with the Land or the Improvements, including, but not limited to,
the Equipment (as defined in Section 6.2 below); and all spare parts, renewals,
or replacements thereof or articles in substitution therefor, whether or not
the same are or shall
Exhibit L to the
Asset Sale Agreement
1
<PAGE> 115
be attached to said building or buildings in any manner; and all proceeds
thereof; it being mutually agreed that all the aforesaid property owned by
Trustor and placed by it on the Land shall so far as permitted by law, be
deemed to be fixtures and affixed to the realty and encumbered by this
Mortgage; and
TOGETHER with all judgments, insurance proceeds, awards of damages and
settlements hereafter made as a result or in lieu of any taking, permanent or
temporary, of the Land and the Improvements or any part thereof under the power
of eminent domain, or by deed in lieu thereof, or for any damage, whether
caused by such taking or otherwise, to the Land and the Improvements or any
part thereof, and all insurance policies and insurance proceeds pertaining to
the Land and the Improvements, as hereinafter defined, and all awards and
payments that shall become payable with respect to any damage to the Land and
the Improvements or any part thereof; and
TOGETHER with any and all other, further or additional right, title,
or interest in or to any of the foregoing described collateral, which may at
any time hereafter be acquired by Trustor (or any entity in any way related to
Trustor).
The aggregate of the Land, the Improvements, the Equipment and all of
the other rights and interests described above is hereinafter collectively
referred to as the "Property."
In addition to the foregoing, Trustor hereby absolutely and
unconditionally assigns to Beneficiary, as a present assignment and not as an
assignment for security purposes, all leases of the Land and/or the
Improvements, or any parts thereof, now or hereafter entered into and all
right, title and interests of Trustor thereunder, and all of the rents, issues
and profits of the Land and/or the Improvements, as more fully provided in
Section 6.1 below.
This Mortgage is made for the purpose of securing:
1. Performance of each agreement of Trustor herein contained, and
repayment of any funds advanced by Beneficiary or Trustee or which Beneficiary
or Trustee become obligated to advance under this Mortgage.
2. Payment of the indebtedness evidenced by one Interim Mortgage Note of
even date herewith, and any extension or renewal thereof, in the principal sum
of $________________________ executed by Trustor in favor of Beneficiary or
order.
3. Payment of such further sums as the then record owner of the Property
hereafter may borrow from Beneficiary, when evidenced by a promissory note or
notes reciting it is so secured.
TO PROTECT THE SECURITY OF THIS MORTGAGE, TRUSTOR COVENANTS TO AND AGREES WITH
BENEFICIARY AS FOLLOWS:
4. Trustor shall, with respect to the Property:
4.1 Keep the Property in good condition and repair;
4.2 Not remove or demolish any building or other structure;
Exhibit L to the
2 Asset Sale Agreement
<PAGE> 116
4.3 Complete or restore promptly and in good and workmanlike
manner any building or other structure which may be constructed, damaged or
destroyed and pay when due all claims for labor performed and materials
furnished therefor;
4.4 Comply with all laws affecting the Property or requiring any
alterations or improvements to be made thereon;
4.5 Not commit, suffer or permit waste;
4.6 Not commit, suffer or permit any act upon the Property in
violation of law, including but not limited to all Federal, state and local
statutes, ordinances or regulations relating to hazardous or toxic waste;
4.7 Cultivate, irrigate, fertilize, fumigate, prune and do all
other acts which from the character or use of the Property may be reasonably
necessary to maintain its value, the specific enumerations herein not excluding
the general;
4.8 Provide, maintain and deliver to Beneficiary such evidence of
insurance coverage as is satisfactory to and with loss payable to Beneficiary.
4.9 Appear in and defend any action or proceeding purporting to
affect the security hereof or the rights or powers of Beneficiary or Trustee;
and pay all costs and expenses, including cost of evidence of title and
attorneys' fees in a reasonable sum, in any such action or proceeding in which
Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to
foreclose this Mortgage.
4.10 Pay at least ten (10) days before delinquency all taxes and
assessments affecting the Property, including assessments on appurtenant water
stock;
4.11 Pay when due, all encumbrances, charges and liens which appear
to be prior or superior to the lien created by this Mortgage, together with any
interest, costs or other sums secured thereby;
4.12 Cure within the time specified in any lease or sublease, or
immediately if not specified, any defaults or breaches thereof and do all acts
necessary to insure that any such lease or sublease remain in full force and
effect;
4.13 With respect to any property described above which is less
than a fee-simple estate, including but not limited to a leasehold estate:
4.13.1 Trustor shall cure within the time specified in the
above-described lease, or other agreement, or immediately if
not specified therein, any default or breaches thereof and to
do all acts necessary to insure the above-described lease or
other agreement remains in full force and effect;
4.13.2 Trustor shall not voluntarily terminate, surrender or
subordinate any leasehold or other estate encumbered hereby
and any attempt by Trustor to do so shall be wholly void and
without any force and effect.
5. Trustor covenants and agrees that to effectuate the terms and
conditions of this Mortgage:
5.1 Trustor shall, upon reasonable notice by Beneficiary, during
normal business hours or at such other time if reasonably required, permit
Beneficiary, and any of its agents or employees to inspect the Property and
copy such records of Trustor that pertain to the Property, whether or not
located at the Property.
5.2 Should Trustor fail to make any payment or to do any act as
herein provided, then Beneficiary or Trustee, but without obligation so to do
and without notice to or demand upon Trustor and without releasing Trustor from
any obligation hereof, may: make or do the same in
Exhibit L to the
3 Asset Sale Agreement
<PAGE> 117
such manner and to such extent as either may deem necessary to protect the
security hereof, Beneficiary or Trustee being authorized to enter upon the
Property for such purposes; appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Beneficiary
or Trustee; pay, purchase, contest or compromise any encumbrance, charge or
lien which in the judgment of either appears to be prior or superior hereto;
and, in exercising any such powers, pay necessary expenses, employ counsel and
pay his reasonable fees. Trustor shall pay immediately and without demand all
sums so expended by Beneficiary or Trustee, with interest from date of
expenditure at the amount set forth in the obligation secured hereby, or if the
obligation secured hereby does not specify a rate of interest, at a rate of
interest equal to the Trustor's Prime Rate as it may exists from time to time
plus three percent (3.0%) but in no event less than ten percent (10.0%) per
annum.
5.3 Trustor agrees to indemnify and hold Beneficiary, and any of
its successors in interest, harmless from any waste or violations of law,
including but not limited to all Federal, state and local statutes, ordinances
or regulations relating to hazardous or toxic wastes.
5.4 Any award of damages in connection with any condemnation for
public use of or injury to the Property is hereby assigned and shall be paid to
Beneficiary who shall apply said moneys in reduction of the principal amount of
the indebtedness secured to the extent necessary to render its security
unimpaired. If the obligation secured hereby includes obligations to reimburse
the Beneficiary for moneys the Beneficiary is committed to advance to Trustor
or third persons in the future, said award of damages shall be held as
collateral for such reimbursement obligation in lieu of the property which is
condemned. In the event of a partial taking in condemnation, the proceeds
shall be apportioned in accord with the provisions of California Code of Civil
Procedure Section 1265.225, as it is in effect at the time of the award. An
action for inverse condemnation shall be deemed an action for condemnation
under this paragraph.
5.5 Insurance proceeds shall be held, in trust, by Beneficiary and
applied to the reasonable costs of repair and restoration of the Property if
such proceeds, together with funds supplied by Trustor, are sufficient to
restore the Property in such a manner that the Beneficiary's security interest
hereunder remains unimpaired. If the insurance proceeds, together with funds
supplied by Trustor, are not sufficient to restore the Property in such a
manner that the Beneficiary's security interest hereunder remains unimpaired,
said proceeds, at the option of Beneficiary, may be applied to the obligation
secured hereby or to restoration of the Property. If Trustor disagrees with
Beneficiary's disposition of insurance proceeds hereunder, Trustor agrees to
submit the matter to binding arbitration before a three-member panel (or
one-member panel if the insurance proceeds are less than $200,000) of the
American Arbitration Association pursuant to the rules and regulations of the
American Arbitration Association. The arbitrators shall also apportion the
costs of arbitration, including attorneys' fees, to the extent each party has
prevailed.
5.6 Trustor covenants and agrees (i) to pay, for the purpose of
establishing an escrow account (the "Estimated Accrual Account") to be held by
Trustor for the benefit of Beneficiary (which account shall not bear interest),
an initial amount equal to the Proration Amount, as such term is defined below,
and (ii) thereafter to continue to pay into the Estimated Accrual Account
monthly to the extent available from Cash Flow, on each and every monthly
payment date, One-Twelfth (1/12th) of the estimated annual real estate taxes,
assessments and hazard insurance premiums on the Property, as Permitted
Expenses. The amount of such real estate taxes, assessments and hazard
insurance premiums, when unknown, shall be reasonably estimated by Trustor).
Such deposits shall be used by Trustor or, if title to the Real Property has
been then transferred, Beneficiary to pay such real estate taxes, assessments,
and hazard insurance
Exhibit L to the
4 Asset Sale Agreement
<PAGE> 118
premiums when due. The enforceability of the covenants relating to Trustor's
payment of real estate taxes, assessments and hazard insurance premiums herein
otherwise provided shall not be affected except insofar as those obligations
have been met by compliance with this Section 5.6. As used herein, "Proration
Amount" means that amount of real estate taxes, assessments and hazard
insurance premiums which would be payable by Beneficiary as Seller if the Real
Property were transferred to Beneficiary as Purchaser on the Closing Date.
6. Trustor hereby assigns to Beneficiary the following additional rights
and interests:
6.1 All leases, whether written or oral, and all other agreements
for use or occupancy of any portions of the Land and/or the Improvements,
together with any and all extensions and renewals thereof and any and all
further leases, lettings or agreements (including, but not limited to,
subleases thereof and tenancies following attornment) upon or covering use of
occupancy of all or any part of the Land and/or the Improvements, together with
any and all guarantees of any lessee's performance under any of said leases or
other agreements; and the immediate and continuing right, power and authority,
during the continuance of these Trusts, to collect the rents, issues and
profits of the Property, reserving unto Trustor the right, prior to any default
by Trustor in payment of any indebtedness secured hereby or in performance of
any agreement hereunder, to collect and retain such rents, issues and profits
as they become due and payable. Upon any such default, Beneficiary may at any
time without notice, either in person, by agent, or by a receiver to be
appointed by a court, and without regard to the adequacy of any security for
the indebtedness hereby secured, enter upon and take possession of the Property
or any part thereof, in its own name sue for or otherwise collect such rents,
issues and profits, including those past due and unpaid, and apply the same,
less costs and expenses of operation and collection, including reasonable
attorneys' fees, upon any indebtedness secured hereby, and in such order as
Beneficiary may determine. The entering upon and taking possession of the Land
and the Improvements, the collection of such rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any default or notice
of default hereunder or invalidate any act done pursuant to such notice. The
absolute assignment of leases, rents, issues and profits contained in this
Section 6.1 constitutes an absolute, unconditional and present transfer of
Trustor's interest in existing and future leases, rents, issues and profits
with respect to the Property described in this Mortgage effective upon the
execution and delivery of this Mortgage and such assignment is not intended to
be, and shall not be construed to be, a conditional assignment or an assignment
for security purposes only; and
6.2 A security interest under the applicable Uniform Commercial
Code in and to the following Property (hereinafter referred to as the
"Collateral"), as additional security for the payment and performance of the
obligations secured by this Mortgage:
6.2.1 All of the personal property of any kind whatsoever
(excluding all such Property which is owned by occupancy tenants of the Trustor
and installed for the purposes of their tenancy if such occupancy tenant has
the right to remove the same at or before the expiration of the term of the
applicable lease), including, but not limited to, all materials, machinery,
apparatus, equipment, furnishings, furniture, fixtures and all other goods,
chattels and articles of personal Property including, without limitation, all
building materials and supplies, all construction equipment, all medical
equipment and supplies, furniture, rugs and carpets, linens and bedding
materials, televisions, radios and other sound equipment, kitchen fixtures,
utensils, and all cooking and serving equipment, furnaces, boilers, oil
burners, refrigeration, air conditioning and sprinkler systems, awnings,
screens, window shades, draperies, motors, dynamos, incinerators, plants
Exhibit L to the
5 Asset Sale Agreement
<PAGE> 119
and shrubbery, and all other equipment, machinery, appliances, fittings and
fixtures, whether personal Property, inventory or fixtures, whether now owned
or hereafter from time to time acquired by the Trustor, together with all
substitutions, replacements, additions, attachments, accessories, accretions,
their component parts thereto or thereof, all other items of like Property
(collectively, the "Equipment").
6.2.2 All accounts and contract rights covering or relating
to any or all thereof, including any proceeds and products thereof, whether now
in existence or hereafter arising, and relating to, situated or located on, or
used or usable in connection with, the construction, maintenance or operation
of the Property and all receipts, earnings, revenues, rents, issues, profits,
avails and other income due to or received by Trustor from the operation,
ownership or leasing of the improvements or any part thereof and all rights to
receive the same, whether in the form of accounts receivable or otherwise.
6.2.3 All judgments, insurance proceeds, awards of damages
and settlements hereafter made as a result or in lieu of any taking, permanent
or temporary, of the Property or any part thereof under the power of eminent
domain, or by deed in lieu thereof, or for any damage, whether caused by such
taking or otherwise, to the Property or any part thereof, and all insurance
policies and insurance proceeds pertaining to the Property and all awards and
payments that shall become payable with respect to any damage to the Property
or any part thereof.
6.2.4 All construction contracts, purchase orders,
subcontracts, architectural and engineering contracts, the Approved Plans and
Specifications, all building permits, any bonds in favor of Trustor, and all
other contracts, agreements, permits, authorizations, or guarantees of work,
material or performance in any way relating to the construction of the
Improvements, now existing or arising at any time hereafter during the term of
the Loan, including all amendments, modifications, replacements and/or
additions to any of the foregoing.
6.2.5 Any and all other, further, or additional right,
title, or interest in or to any of the foregoing described collateral, which
may at any time hereafter be accrued by the Trustor (or any entity in any way
related to Trustor or any of its partners), to secure payment of the Note, as
well as to secure the performance by the Trustor of its obligations under this
Mortgage.
6.3 Incident thereto, Trustor agrees with Beneficiary as follows:
6.3.1 Trustor warrants and represents that:
6.3.2 At its option, Beneficiary may, but shall not be
required to, discharge taxes, liens or security interests or other encumbrances
at any time levied or placed on the Collateral; may, but shall not be required
to, pay for insurance on the Collateral; and may, but shall not be required to,
pay for the maintenance and preservation of the Collateral. Trustor agrees to
reimburse Beneficiary on demand for any payment made, or any expense incurred,
by Beneficiary pursuant to the foregoing authorization together with interest
thereon at the rate set forth in the Note, from the date incurred until
reimbursed by Trustor. Until default, Trustor may have possession of the
Collateral and use it at all times as personal Property and for business
purposes, and in a lawful manner not inconsistent with the provisions hereof
and not inconsistent with any policy of insurance thereon.
6.3.3 Upon any Event of Default and at any time thereafter,
Beneficiary may exercise, in addition to but not in replacement of any remedy
set forth in Section 11 below, all of the rights and remedies of a Secured
Party under the Uniform Commercial Code of the state in which the Collateral is
located or otherwise as provided by law, including, without limitation, the
Exhibit L to the
6 Asset Sale Agreement
<PAGE> 120
right to sell all or any part of the Collateral at public or private sale. In
any case where Beneficiary determines to give notice of any sales or other
dispositions of Collateral, the mailing of notice to Trustor at least ten (10)
days before any sale or other disposition, conclusively shall be deemed
reasonable notice thereof.
Expenses of retaking, holding, preparing for sale, selling or
the like shall include Beneficiary's attorneys' fees and legal expenses and are
secured hereby as part of said obligations. If the proceeds realized from
disposition of the Collateral shall fail to satisfy Trustor's obligations
(including the expenses mentioned above) Trustor shall immediately pay any
deficiency balance to Beneficiary.
6.3.4 In the event Beneficiary elects to dispose of the
Collateral by public sale, it shall advertise for sale under this Mortgage, by
notice of such sale published in some newspaper published in the jurisdiction
where the Collateral is located for such number of times as is required by all
applicable laws and rules of the jurisdiction in which the Collateral is
located, giving notice of the time, place and terms of such sale. Beneficiary
may, at its option, sell the Collateral as a whole or in parcels and such sale
may be held at the courthouse door in the jurisdiction where the Collateral is
located, at the place where the Collateral is located, or at any other
commercially reasonable place, all at the option of Beneficiary, but in no
event shall it be necessary that the Collateral be present at the sale.
6.3.5 Upon the occurrence of an Event of Default,
Beneficiary may enter upon the Property to take possession of the Property and
the Collateral, or at its option may require Trustor to assemble the Collateral
at any place designated by Beneficiary reasonably convenient to the parties.
If necessary to obtain the possession provided for above, Beneficiary may
invoke any and all available legal remedies to dispossess Trustor, including
without limitation, one or more actions for forcible entry and detainer,
trespass to try title, restitution and appointment of a receiver.
6.3.6 Trustor will do all acts requested by the
Beneficiary, including but not limited to the execution and filing of all
instruments (such as security agreements, financing statements, and
continuation statements) necessary to establish, maintain and continue
perfected the security interests of Beneficiary in the Collateral, will
promptly on demand pay all costs of any searches deemed necessary by
Beneficiary to establish and determine the validity and the priority of the
security interest of Beneficiary, and also all other claims and charges which
in the opinion of Beneficiary might prejudice, imperil or otherwise affect the
Collateral or Beneficiary's security interest therein.
6.3.7 No waiver by Beneficiary of any default shall operate
as a waiver of any other default or of the same default on a future occasion.
All rights of Beneficiary hereunder shall inure to the benefit of its
successors and assigns; and all obligations of Trustor shall bind its
successors and assigns.
6.3.8 No delay or failure on the part of Beneficiary in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by Beneficiary of any right or remedy shall operate
as a waiver thereof, or the exercise of any other right or remedy.
6.3.9 Trustor further specifically agrees that, in any
exercise of the rights of Beneficiary under this or any other instrument, any
combination or all of the Property, rights or security given to secure
Trustor's indebtedness to Beneficiary may be offered for sale for one total
price, and the proceeds of any such sale accounted for in one account without
distinction between
Exhibit L to the
7 Asset Sale Agreement
<PAGE> 121
the items of security or without assigning to them any proportion of such
proceeds, Trustor hereby waiving the application of any doctrine of
marshalling.
7. Trustor or any other person legally entitled thereto agrees to pay
$60.00 for any statement provided for by law in effect at the date hereof
regarding the obligation secured hereby.
7.3.1.1 Trustor is the lawful owner of such Collateral and
is, or when it acquires same it will be, in possession of the same free and
clear from any lien, security interest or encumbrance; no Financing Statement
or other notice of lien agreement or lien is on file or record at any public
office which relates to any of the Collateral or which could through general
language relate thereto; Trustor has good right to pledge, sell, consign,
assign, transfer and create a security interest in the same; and Trustor at its
cost and expense will protect and defend the security interest created herein
and the Collateral against all adverse claims that any of the Collateral has
ceased to be personal Property;
7.3.1.2 The Collateral shall continue to be free from all
pledges, liens, encumbrances and security interests or other claims in favor of
others; and the Trustor shall warrant, and, at the Beneficiary's request,
defend the same from all claims and demands of all persons;
7.3.1.3 The Collateral will only be used by Trustor in the
construction, maintenance and operation of the Property, and will not be held
for sale, lease or transfer to others, or otherwise disposed of by the Trustor
without the written consent of the Beneficiary, except as may be specifically
permitted herein;
7.3.1.4 The tangible Collateral will be located at the
Property, and the Collateral will not be removed therefrom without the prior
written consent of the Beneficiary unless Collateral is immediately replaced
with similar items owned by the Trustor and which are of equal or greater
value; and
7.3.1.5 Trustor will, at its own cost and expense, keep the
Collateral in as good and substantial order, repair and condition as the same
is in at this date, or as the same is when acquired, reasonable wear and tear
alone excepted, making replacements when and as necessary, and, in this
connection, Beneficiary hereby gives its written consent to the removal by
Trustor of the same, or any part thereof, from the Property if such removal is
necessary so to do in connection with Trustor's fulfilling of its obligations
under this subsection 6.3.1.5, and if the priority of its security interest
therein will not be materially jeopardized.
7.0.1 Trustor agrees that Beneficiary, or its agents, may enter upon
the Property at any time, and from time to time, for the purpose of inspecting
the Collateral, and any and all records pertaining thereto. Trustor agrees to
notify Beneficiary promptly of any change in its mailing address or principal
place of business, in order that a prompt refiling of any outstanding notices
may be made, if necessary. Trustor also is to advise Beneficiary, within thirty
(30) days, of any new facts which, under applicable provisions of law, would
affect the priority of the security interest granted to Beneficiary by this
instrument.
8. Beneficiary, or any successor in ownership of any indebtedness secured
hereby, may from time to time, by instrument in writing, substitute a successor
or successors to any Trustee named herein or acting hereunder, which
instrument, executed by Beneficiary and duly acknowledged and recorded in the
office of the recorder of the county or counties where the Property is
situated, shall be conclusive proof of proper substitution of such successor
Trustee or Trustees, who shall, without conveyance from Trustee predecessor,
succeed to all its title, estate, rights, powers and duties. Said
Exhibit L to the
8 Asset Sale Agreement
<PAGE> 122
instrument must contain the name of the original Trustor, Trustee and
Beneficiary hereunder, the book and page where this Mortgage is recorded and
the name and address of the new Trustee.
9. At any time or from time to time, without liability therefor and
without notice, upon written request of Beneficiary and presentation of this
Mortgage and the evidence of the obligation secured hereby for endorsement, and
without affecting the personal liability of any person for payment of the
indebtedness secured hereby, Trustee may: reconvey any part of the Property;
consent to the making of any map or plat thereof; join in granting any easement
thereon; or join in any extension agreement or any agreement subordinating the
lien or charge hereof.
10. Upon written request of Beneficiary stating that all sums secured
hereby have been paid, if applicable, Beneficiary's statement that no further
commitment exists to make future advances or extend credit, and upon surrender
of this Mortgage and the evidence of the obligation secured hereby to Trustee
for cancellation and retention and upon payment of its fees, Trustee shall
reconvey, without warranty, the Property then held hereunder. Upon written
request of Beneficiary, if less than all sums secured hereby have been paid,
Trustee shall reconvey, without warranty, the portion of the Property then held
hereunder specified by Beneficiary. The recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof. The
grantee in such reconveyance may be described as "the person or persons legally
entitled thereto." Five (5) years after issuance of such full reconveyance,
Trustee may destroy the evidence of indebtedness and this Mortgage (unless
directed in such request to retain them).
11. Upon default by Trustor in payment of any indebtedness secured hereby
or in performance of any agreement hereunder, the following provisions shall
apply:
11.1 Beneficiary may declare all sums secured hereby immediately
due and payable by delivery to Trustee of written declaration of default and
demand for sale and of written notice of default and of election to cause to be
sold the Property, which notice Trustee shall cause to be filed for record.
Beneficiary also shall deposit with Trustee this Mortgage, the evidence of the
obligation secured hereby and all documents evidencing expenditures secured
hereby.
11.2 To the extent the obligation secured hereby arises from a
commitment of Beneficiary to make future advances either to Trustor or a third
party or extend credit subsequent to the recordation of a notice of default
hereunder, the sums secured hereby shall also include the amount of such
commitment to make future advances or extend credit, and subject to
acceleration as provided in the previous paragraph. The Trustee shall pay such
amount at such time as it pays all other sums secured hereby and the
Beneficiary shall hold same as additional collateral for the obligation secured
hereby, at such interest as is available to Beneficiary's customers in an
insured deposit account with no restrictions on withdrawal.
11.3 After the lapse of such time as may then be required by law
following the recordation of said notice of default, and notice of sale having
been given as then required by law, Trustee, without demand on Trustor, shall
sell the Property at the time and place fixed by it in said notice of sale,
either as a whole or in separate parcels, and in such order as it may
determine, at public auction to the highest bidder for cash in lawful money of
the United States, payable at the time of sale. Trustee may postpone sale of
all or any portion of the Property by public announcement at such time and
place of sale, and from time to time thereafter may postpone sale by public
announcement at the time fixed by the preceding postponement. Trustee shall
deliver to such purchaser its deed conveying the Property so sold, but without
any covenant or warranty,
Exhibit L to the
9 Asset Sale Agreement
<PAGE> 123
express or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Trustor,
Trustee or Beneficiary may purchase at such sale.
11.4 If the Property consists of more than one lot or parcel, the
lots or parcels may be sold separately, together or in any combination, at the
sole discretion of Beneficiary. Trustor waives the right to direct the order
in which the Property may be sold when it consists of more than one lot or
parcel. The order of sale of the Property when it consists of more than one
lot or parcel shall be at the sole discretion of the Beneficiary.
11.5 After deducting all costs, fees and expenses of Trustee and of
this Trust, including cost of evidence of title in connection with sale,
Trustee shall apply the proceeds of sale to payment of: all sums expended
under the terms hereof, not then repaid, with accrued interest at the amount
allowed by law in effect at the date hereof; all other sums then secured
hereby; and the remainder, if any, to the person or persons legally entitled
thereto.
12. This Mortgage applies to, inures to the benefit of, and binds all
parties hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns. The term "Beneficiary" shall mean the owner and
holder, including pledgees, of the evidence of the obligation secured hereby,
whether or not named as Beneficiary herein. In this Mortgage, whenever the
context so requires, the masculine gender includes the feminine and/or neuter,
and the singular number includes the plural. By accepting payment of any sum
secured hereby after its due date, Beneficiary does not waive its right either
to require prompt payment when due of all other sums so secured or to declare
default for failure so to pay.
13. That Trustee accepts this Trust when this Mortgage, duly executed and
acknowledged, is made a public record as provided by law. Trustee is not
obligated to notify any party hereto of pending sale under any other Mortgage
or of any action or proceeding in which Trustor, Beneficiary or Trustee shall
be a party unless brought by Trustee.
14. SHOULD TRUSTOR OR ITS SUCCESSOR IN INTEREST WITHOUT THE PRIOR WRITTEN
CONSENT OF BENEFICIARY, SELL, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATE, ASSIGN
OR ENCUMBER ITS INTEREST IN THE PROPERTY (OR ANY PART THEREOF), WHETHER
VOLUNTARILY OR INVOLUNTARILY, THEN BENEFICIARY MAY AT ITS ELECTION DECLARE ALL
SUMS SECURED HEREBY IMMEDIATELY DUE AND PAYABLE. THIS PROVISION SHALL APPLY TO
EACH AND EVERY SALE, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR
ENCUMBRANCE REGARDLESS WHETHER OR NOT BENEFICIARY HAS CONSENTED TO, OR WAIVED,
ITS RIGHT HEREUNDER, WHETHER BY ACTION OR NON-ACTION, IN CONNECTION WITH ANY
PREVIOUS SALE, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR
ENCUMBRANCE, WHETHER ONE OR MORE.
15. ANYTHING CONTAINED IN ANY PROVISION OF THIS MORTGAGE OR THE INTERIM
MORTGAGE NOTE SECURED HEREBY TO THE CONTRARY NOTWITHSTANDING, IF ANY
FORECLOSURE PROCEEDING IS BROUGHT UNDER THE PROVISIONS OF THIS MORTGAGE OR IF
ANY OTHER ACTION IS BROUGHT TO ENFORCE THE PROVISIONS OF THIS MORTGAGE OR THE
INTERIM MORTGAGE NOTE SECURED HEREBY, BENEFICIARY SHALL NOT BE ENTITLED TO TAKE
ANY
Exhibit L to the
10 Asset Sale Agreement
<PAGE> 124
ACTION TO PROCURE ANY MONEY JUDGMENT IN PERSONAM OR ANY DEFICIENCY DECREE
AGAINST TRUSTOR EXCEPT TO THE EXTENT OF TRUSTOR'S INTEREST IN THE PROPERTY OR
THE COLLATERAL; PROVIDED, HOWEVER, THAT NOTHING IN THE PROVISIONS OF THIS
MORTGAGE SHALL BE DEEMED TO LIMIT OR IMPAIR THE ENFORCEMENT AGAINST THE
PROPERTY OR THE COLLATERAL OR ANY OTHER COLLATERAL WHICH MAY FROM TIME TO TIME
TO BE GIVEN TO BENEFICIARY, OR HELD BY TRUSTOR IN TRUST ON BEHALF OF
BENEFICIARY, AS SECURITY FOR THE PERFORMANCE OF TRUSTOR'S OBLIGATIONS HEREUNDER
OR UNDER THE PROVISIONS OF THE INTERIM MORTGAGE NOTE SECURED HEREBY OR ANY
OTHER INSTRUMENT EXECUTED IN CONNECTION HEREWITH, OR TO LIMIT OR IMPAIR THE
RIGHTS AND REMEDIES OF BENEFICIARY THEREUNDER OR UNDER ANY OF THE PROVISIONS
THEREOF; AND PROVIDED FURTHER, THAT TRUSTOR SHALL REMAIN LIABLE TO ACCOUNT FOR
THE USE OF THE NET PROPERTY PROCEEDS RECEIVED BY TRUSTOR AND NOT APPLIED ON A
CURRENT BASIS AS RECEIVED BY TRUSTOR IN ACCORDANCE WITH THE PROVISIONS OF THIS
MORTGAGE AND THE INTERIM MORTGAGE NOTE SECURED HEREBY.
16. The undersigned Trustor requests that a copy of any Notice of Default
and of any Notice of Sale hereunder be mailed to him at his address
hereinbefore set forth.
Signature of Trustor
CITY NATIONAL BANK,
a national banking association
By: _______________________________________
Its: _____________________________________
Exhibit L to the
11 Asset Sale Agreement
<PAGE> 125
Exhibit M to
Asset Sale Agreement
Form of
INTERIM MORTGAGE NOTE
$____________________ November ____, 1993
(Initial Loan Amount)
FOR VALUE RECEIVED, the undersigned, CITY NATIONAL BANK, a national
banking association ("Grantor"), promises to pay to the order of ____________
__________________________________________________, offices located at
__________________ __________________________, County of ________________,
State of __________________ ("Grantee"), the principal sum of
_______________________________________________________ DOLLARS U.S.
($________________)*, together with interest thereon from the date hereof on
any outstanding balance of principal plus any amounts added to the principal
amount hereof, until paid, including interest at the rate or rates hereinafter
set forth. This note ("Note") is secured by a deed of trust of even date
herewith between Grantor and Grantee ("Interim Mortgage"). Capitalized terms
not defined herein or in the Interim Mortgage or in Exhibit A hereto shall have
the meanings set forth in the Asset Sale Agreement.
Interest on the outstanding principal balance of this Note shall
accrue at a per annum rate equal to the ask yield published in the Wall Street
Journal under Treasury Bonds, Notes & Bills as of the Business Day immediately
prior to the Closing Date corresponding to the 6-7/8 Treasury Notes due in
February 1994, ("Applicable Rate"), based upon a 360-day year for the actual
number of days elapsed. The Applicable Rate shall be paid from Net Cash Flow,
which amount shall be payable on the first day of each month, or, if such first
day is not a Business Day, then on the following Business Day ("Due Date");
provided, however, that in the event Net Cash Flow for the calendar month
immediately preceding the Due Date is insufficient to pay in full the accrued
interest on any Due Date, such accrued and unpaid interest shall thereafter
accrue interest at the Applicable Rate and be paid in accordance herewith.
The amount due hereunder on each Due Date shall be equal to the sum of
(i) Net Property Proceeds plus (ii) Late Charges and Outstanding Lender
Advances, together with accrued interest thereon at a rate equal to two percent
(2.0%) per annum in excess of the Applicable Rate then in effect under this
Note, but in no event in excess of the maximum permissible interest rate under
applicable law (the "Default Rate"). All payments received hereon shall be
applied first, to Late Charges and Outstanding Lender Advances, together with
accrued interest thereon at the Default Rate; second, to interest at the
Default Rate on any delinquent amounts due and payable hereunder; third, to the
payment of delinquent amounts; fourth, to Interest at the Applicable Rate on
the outstanding principal balance hereof that accrued during the immediately
preceding month, plus accrued and unpaid Interest at the Applicable Rate on
amounts that accrued and were not paid (due to an insufficiency in Net Property
Proceeds and not to any delinquency) for periods
1
<PAGE> 126
Exhibit M to
Asset Sale Agreement
prior to the month immediately preceding the Due Date; and fifth, to reduce the
outstanding principal balance. Principal, Late Charges, accrued interest,
repayment of Outstanding Lender Advances and any other sums secured by the
Interim Mortgage shall be due and payable in all events on __________________,
1994, subject to extension for up to ________ months, if Purchaser under the
Asset Sale Agreement has delivered a Certificate of Defective Asset to Seller
thereunder, and Seller has elected to cure or revalue the Defective Asset (the
"Maturity Date").
All payments due hereunder shall be remitted to Grantee in lawful
currency of the United States of America in federal or other funds currently
due and immediately available with all charges prepaid, as follows:
[Insert Account Information]
or, upon prior written notice by Grantee, to such other accounts or designees
as Grantee shall from time to time request.
In the event that any payment or part of any payment due hereunder is
not made on the date the same as due, the full amount outstanding hereunder
shall bear interest at the Default Rate until such amount is paid, subject to
the right to accrue unpaid Interest to the extent that Net Property Proceeds
for the month immediately preceding any Due Date are not sufficient to pay such
Interest.
In the event that any payment or part of any payment due hereunder is
not made within five (5) days after the date when the same is due, Grantor
shall pay to Grantee a late charge equal to five percent (5%) of the late
payment ("Late Charge"), which Late Charge shall bear interest at the Default
Rate if not paid when due [subject to the right to accrue unpaid Interest to
the extent that Net Property Proceeds for the month immediately preceding any
Due Date are not sufficient to pay such Interest]. This charge shall be in
addition to any other sums due hereunder and any other rights or remedies the
holder of this Note may have.
Grantor shall have the right to prepay the principal balance of this
Note in whole upon receipt of a Certificate of Defective Asset at any time
during the term of this Note without penalty or premium upon the remittance to
Grantee of all amounts due hereunder, and upon the satisfaction by Borrower of
all obligations required for the release of the Mortgage Loan evidenced hereby
from the lien of the Loan and Security Agreement.
[This language will be added to the related Interim Mortgage.]
Grantee acknowledges that in the making of the Interim Mortgage Loan
evidenced hereby and secured by the Interim Mortgage, Grantee is relying to a
material extent upon the creditworthiness and business expertise of the
Grantor. Therefore, in order to protect Grantee, Grantor agrees that if
Grantor sells, conveys, transfers, disposes of or leases (except as to those
leases of space in improvements which do not provide for an option to purchase)
the Property or any portion thereof, either voluntarily, involuntarily, or
otherwise or enters into an agreement so
2
<PAGE> 127
Exhibit M to
Asset Sale Agreement
to do without the prior written consent of Grantee, Grantor shall, not less
than thirty (30) days prior to any such event, notify Grantee in writing of the
occurrence of such event, and Grantee, whether or not it receives such notice,
upon the occurrence of any one or more of such events, shall have the right to
declare the then current outstanding principal of this Note immediately due and
payable, together with all accrued interest and unpaid interest and other
amounts due hereunder, which shall be applied, after being applied to payment
of all other sums secured hereby then due and payable in such order as Grantee
may determine, to the reduction of the outstanding principal balance of this
Note. The foregoing right to accelerate the indebtedness may be exercised at
any time in Grantee's sole discretion after the occurrence of any event
described above and the acceptance of one or more installments from any person
thereafter shall not constitute a waiver of Grantee's right.
Notwithstanding the foregoing, after the execution hereof, Grantor
shall convey the Property to a Qualified Affiliate as the purchaser thereof in
accordance with the terms of the Interim Mortgage and the Sales Contract and
Grantor's obligations hereunder shall be satisfied in full. Then and in such
event, Grantor shall be relieved of any and all liability whatsoever hereunder.
Subject to the terms of the Interim Mortgage and the Sales Contract, Grantor
shall have such one-time right to transfer the Property to a Qualified
Affiliate, provided that Grantor is not in default hereunder or under the
Interim Mortgage.
This Note is secured by the Interim Mortgage. All of the terms,
covenants, provisions, conditions, stipulations, promises and agreements
contained in the Interim Mortgage to be kept, observed and performed by Grantor
therein are hereby made a part of this Note and are incorporated herein by this
reference to the same extent, and with the same force and effect, as if they
were fully set forth herein, and Grantor promises and agrees to keep, observe
and perform them, or cause them to be kept, observed and performed, strictly in
accordance with the terms and provisions thereof.
Grantor hereby expressly agrees that (i) if default be made in the
payment of any installment of accrued interest, or principal, or in the payment
of Late Charges or the repayment of Outstanding Lender Advances due under this
Note and such default shall continue uncorrected; or (ii) if default be made in
the performance of or compliance with the terms, covenants and conditions of
this Note, the Interim Mortgage securing this Note, the Loan and Security
Agreement, the Promissory Note as defined in the Loan and Security Agreement,
or any other instrument or collateral related thereto and such default shall
continue uncorrected beyond any applicable grace or cure period then, and in
any or all such events, the entire outstanding principal balance and accrued
interest, and all other sums evidenced by this Note and secured by the Interim
Mortgage, shall at once be and become due and payable at the option of the
holder of this Note without further notice or demand.
The failure of Grantee to exercise the option for acceleration of
maturity of this Note or of foreclosure during any default or to exercise any
other option granted to it hereunder, or under the Interim Mortgage, in any one
or more instances, or the acceptance by Grantee of partial payments or partial
performance, shall not constitute a waiver of any such default, but such
options
3
<PAGE> 128
Exhibit M to
Asset Sale Agreement
shall remain continuously in force during the pendency of the default. Time is
of the essence hereof, and any failure to declare a default hereunder or to
accelerate this Note or to impose Late Charges or interest at the Default Rate,
notwithstanding that one or more payments due hereunder have not been remitted
on a timely basis, shall not constitute a waiver of Grantee's right to declare
such a default or to impose Late Charges and interest at the Default Rate.
It is expressly stipulated and agreed to be the intent of Grantor and
the holder of this Note at all times to comply with the applicable usury and
other applicable law of the State of California. If the laws of the State of
California or of the United States of America are revised, repealed or
judicially interpreted so as to render usurious any amount called for under
this Note or any document securing payment of this Note, including, but not
limited to, the Interim Mortgage, or contracted for, charged or received with
respect to the Interim Mortgage Loan evidenced by this Note, or if exercise by
the holder of this Note of the option herein contained to accelerate the
maturity of this Note or if any prepayment by Grantor results in Grantor's
having paid any interest in excess of that permitted by law, then it is
Grantor's and the holder's express intent that all excess amounts theretofore
collected by the holder of this Note be credited to the principal balance of
this Note in inverse order of maturity of the installments of principal (or, if
this Note has been paid in full, refunded to Grantor), and the provisions of
this Note and all documents securing the payment of this Note, including, but
not limited to, the Interim Mortgage, shall immediately be deemed reformed and
the amounts thereafter collectible hereunder and thereunder reduced, without
the necessity of execution of any new document, so as to comply with applicable
law, but so as to permit the recovery of the fullest amount otherwise called
for hereunder and thereunder.
It is further agreed that, without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note and under such other documents securing payment of this Note, or
which are interpreted for the purpose of determining whether such rate would
exceed the maximum lawful contract rate, shall be made, to the extent permitted
by the law of the State of California, by amortizing, prorating, allocating and
spreading during the period of the full stated term of the Interim Mortgage
Loan evidenced by this Note, all interest at any time contracted for, charged
or received from Grantor or otherwise by the holder of this Note.
In the event it shall become necessary to employ counsel to collect
this obligation or to protect the security herefor, Grantor agrees to pay
reasonable attorneys' fees, whether suit be brought or not, and all other costs
and expenses actually and reasonable incurred by the holder of this Note in
connection with collection, the protection of the security for the debt
evidenced hereby or the enforcement of each and every covenant and agreement by
the Grantor, or of any remedies herein given to secure this Note, or any
instrument collateralized or related thereto or the enforcement of any
guaranty.
The undersigned and any endorsers, guarantors or sureties jointly and
severally waive presentment, protest and demand, notice of protest, notice of
intent to accelerate, notice of acceleration, demand and dishonor, and
nonpayment of this Note and any and all lack of diligence or delays in the
collection or enforcement hereunder may be extended from time to time without
notice to any party and without in any way affecting the liability of the
undersigned or any
4
<PAGE> 129
Exhibit M to
Asset Sale Agreement
endorsers, guarantor or surety hereof. This Note shall be binding on Grantor
and Grantor's successors and assigns.
Grantor hereby represents and warrants that it is a business or
commercial entity and that the Interim Mortgage Loan evidenced hereby was made
and transacted solely for the purpose of carrying on or acquiring a business or
commercial investment.
THE VALIDITY AND CONSTRUCTION OF THIS NOTE AND ALL MATTERS PERTAINING
HERETO ARE TO BE DETERMINED ACCORDING TO THE LAW OF THE STATE OF CALIFORNIA.
In the event any provision of this Note (or any part of any provision)
is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note, but this Note shall be construed as if such invalid,
illegal or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal or unenforceable.
This Note may not be changed orally, but only by an agreement in
writing signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.
Anything contained in any provision of this Note or the Interim
Mortgage to the contrary notwithstanding, if any foreclosure proceeding is
brought under the provisions of the Interim Mortgage or if any other action is
brought under the provisions of the Interim Mortgage or if any other action is
brought to enforce provisions of the Interim Mortgage or those of this Note,
the holder hereof shall not be entitled to take any action to procure any money
judgment in personam or any deficiency decree against the Grantor except to the
extent of its interest in the Property or Collateral (as such term is defined
in the Interim Mortgage); provided, however, that nothing in the provision of
this Note shall be deemed to limit or impair the enforcement against the
Property or Collateral covered by the Interim Mortgage or any other collateral
which may from time to time be given to Grantee, or held by Grantor in trust on
behalf of Grantee; as security for the performance of the Grantor's obligations
hereunder or under the provisions of this Note and the Interim Mortgage or any
other instrument executed in connection therewith, or to limit or impair the
rights and remedies of Grantee thereunder or under any of the provisions
thereof; and provided further, that the Grantor shall remain liable to account
for the use of the Property Proceeds received by Grantor and not applied on a
current basis as received by Grantor in accordance with the provisions of this
Note and the Interim Mortgage.
* * * * * *
5
<PAGE> 130
Exhibit M to
Asset Sale Agreement
IN WITNESS WHEREOF, Grantor has caused this Note to be executed by
___________________________, its _______________________, and its corporate
seal to be affixed hereto, and does hereby deliver this instrument as its act
and deed effective on the date first above written.
CITY NATIONAL BANK, a national
banking association
By: ________________________________
Its: _______________________________
6
<PAGE> 131
Exhibit N to
Asset Sale Agreement
Form of
GRANT DEED
[Exhibit N omitted from original]
<PAGE> 1
EXHIBIT 10.19
Asset Sale Agreement (Pools 2 Through 6) by and between
City National Bank as Seller and
WHC-THREE Investors, L.P., as Purchaser,
dated November 1, 1993
<PAGE> 2
EXHIBIT 10.19
POOLS 2 THROUGH 6
ASSET SALE AGREEMENT
BY AND BETWEEN
CITY NATIONAL BANK
AS SELLER
AND
WHC-THREE INVESTORS, L.P.
AS PURCHASER
DATED AS OF: NOVEMBER 1, 1993
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE OF THE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.1 PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.2 INITIAL PURCHASE PRICE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.3 MODIFICATIONS TO MORTGAGE LOAN AND REAL PROPERTY SCHEDULE . . . . . . . . . . . . . . . . 19
Section 2.4 FINANCING OF MORTGAGE LOANS AND REAL PROPERTY; SALE OF REAL PROPERTY . . . . . . . . . . 20
ARTICLE III DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.1 DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.2 DISTRIBUTION OF DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.1 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.2 TRANSFER AND RECORDATION TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.3 ESCROW ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.4 LIMITATIONS ON LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V DUE DILIGENCE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.1 DUE DILIGENCE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.2 DUE DILIGENCE REVIEW OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.3 SELLER'S COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.4 ACCEPTANCE OF ASSETS AND REMEDIES FOR DEFECTS . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.5 PROCEDURE IN RESPECT OF A STRUCTURAL DEFECT OR NATURAL CONDITION . . . . . . . . . . . . 25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.1 PURCHASER'S REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.1 SURVIVING REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . 33
Section 7.2 DUE DILIGENCE REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . 35
Section 7.3 TERMINATION OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.4 SCOPE OF INVESTIGATION AND OTHER DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . 40
Section 7.5 ASSERTION OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII CERTAIN COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.1 SELLER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.1 MUTUAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.2 SELLER'S DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.3 PURCHASER'S CLOSING ITEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE X REPURCHASE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.1 MANDATORY REPURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.2 REPURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XI DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.1 PURCHASER'S DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.2 SELLER'S DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XII SUBSEQUENT DOCUMENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIII NOTICE OF MORTGAGOR CLAIMS OR LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIV FILES AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XV SALE OF REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XVI NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XVII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17.1 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17.2 RIGHTS CUMULATIVE; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17.3 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.4 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.5 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.6 PRIOR UNDERSTANDINGS; INTEGRATED AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.8 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.10 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.11 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17.12 SELLER FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
ii
<PAGE> 5
TABLE OF EXHIBITS
<TABLE>
<S> <<C> <C>
A. [ ] Mortgage Loan and Real Property Schedule
B. [ ] Asset Acceptance Certificate
C. [ ] Form of Assignment of Mortgage Loan
C-1. [ ] Assignment of Additional Collateral
D. [ ] Certificate of Defective Assets
E. [ ] Supplemental Certificate of Defective Assets
F. [ ] Deletion Certificate
G. [ ] Valuation Methodology
H. [ ] Valuation Certificate
I. [ ] Notice to Mortgagors
J. [ ] Real Property Sales Contract
K. [ ] Loan and Security Agreement
L. [ ] Interim Mortgage
M. [ ] Interim Mortgage Note
N. [ ] Grant Deed
</TABLE>
iii
<PAGE> 6
ASSET SALE AGREEMENT
This Asset Sale Agreement ("Agreement") is entered into as of the
first day of November, 1993, by and between CITY NATIONAL BANK, a national
banking association ("Seller") and WHC- THREE INVESTORS, L.P., a Delaware
limited partnership ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns certain Assets as defined in this Agreement; and
WHEREAS, Purchaser is a sophisticated and experienced purchaser of
mortgage loans and real property with access to expert technical and legal
advice with respect thereto; and
WHEREAS, Seller desires to sell the Assets listed on the Mortgage Loan
and Real Property Schedule, attached hereto at Exhibit A, all in accordance
with the terms and conditions set forth herein; and
WHEREAS, Purchaser desires to purchase the Assets;
NOW THEREFORE, in consideration of the mutual promises herein set
forth and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings indicated below:
"Acceptance Certificate" has the meaning given that term in Section
5.4(a) hereof.
"Additional Collateral Assignment" means the document to be delivered
to Purchaser on the Closing Date, in accordance with Section 9.2(f) hereof and
in the form attached hereto as Exhibit C-1.
"Additional Deposit" means an amount equal to two percent (2.0%) of
the aggregate Initial Purchase Price, which sum is to be delivered by Purchaser
to Seller in immediately available funds concurrently with the execution
hereof.
"Adjusted Purchase Price" means, with respect to an Asset, either (i)
the Initial Purchase Price, if no adjustment is required hereunder, or (ii) the
Initial Purchase Price as adjusted by any adjustment required pursuant to
Section 5.4 or Section 5.5 hereof, provided, however, in no event shall the
Adjusted Purchase Price exceed the Initial Purchase Price.
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<PAGE> 7
"Adjustment Date" shall mean the date ten (10) calendar days after the
later of (x) the day on which the last Due Diligence Period with respect to any
Asset terminates, or (y) if Purchaser has delivered to Seller a Certificate of
Defective Asset during the Due Diligence Period, the last day for Seller to
repurchase such Defective Asset under Section 10.1(a) hereof. With respect to
the representations and warranties made by Seller in Section 7.1(d) hereof, the
Adjustment Date shall in no event be later than the Surviving Representation
Expiration Date, except to the extent that a Certificate of Defective Asset has
been given in respect of a particular Asset, in which case the Adjustment Date
shall be ten (10) days after the last day of the Cure Period available in
connection with the respective Defect. In any of the above events, if such day
is not a Business Day, the Adjustment Date shall be the next Business Day
thereafter.
"Affiliate" means, with respect to any Person (herein the "Person
Specified"), any other Person that (i) directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with the Person Specified, (ii) is a director or officer of the Person
Specified or any Person covered by clause (i) above, (iii) is a partner,
beneficiary of a trust or owner of any stock or other evidence of beneficial
ownership of the Person Specified or any Person covered by clause (i) above, or
(iv) is related by blood (including grandparents of the Person Specified and of
his or her spouse and all lineal descendants of such grandparents), marriage or
close business association to the Person Specified or any Person covered by
clause (i) above, or to the spouse of any of the foregoing Persons. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting stock, by
contract or otherwise.
"Affiliate Purchaser" means Purchaser or a wholly-owned Affiliate of
the Purchaser, which, simultaneously with the execution of this Agreement, will
execute a Sales Contract with Seller covering all of the Real Property and,
prior to the Closing of the sale of any Real Property under the Sales Contract,
shall assign the right to purchase one or more parcels of the Real Property
designated "industrial" on the Mortgage Loan and Real Property Schedule to one
or more Qualified Affiliates on the one hand, and any one or more of the
remaining parcels of Real Property not designated "industrial" on the Mortgage
Loan and Real Property Schedule to one or more other Qualified Affiliates on
the other, for closing in accordance with the terms of the Sales Contract.
"Agreement" means this Asset Sale Agreement, including all addenda,
exhibits and schedules hereto, as the same may be amended, supplemented,
restated or modified.
"Applicable Rate" means a per annum rate of interest equal to the ask
yield published as of the Business Day immediately prior to the Closing Date in
the Wall Street Journal under Treasury Bonds, Notes & Bills corresponding to
the 6-7/8 Treasury Notes due in February 1994, based upon a 360-day year for
the actual number of days elapsed.
"Asset Data Sheet" means the document labeled "Asset Data Sheet" and
bearing the same pool number and Mortgage Loan number or Real Property number
as those of the corresponding Mortgage Loan or Real Property listed in the
Mortgage Loan and Real Property Schedule, which Asset Data Sheet appears as
part of the Due Diligence Materials, as such Asset Data Sheet has
2
<PAGE> 8
been amended, supplemented, corrected or otherwise modified on or before the
Due Diligence Cut-Off Date to the extent same has been provided to Purchaser or
described in writing to Purchaser and made available on or prior to the Due
Diligence Cut-Off Date.
"Asset Documents" means, with respect to each Mortgage Loan or Real
Property, as the case may be, all documents, agreements or instruments relating
to such Mortgage Loan or Real Property, including, but not limited to, the
Mortgage Note or Mortgage Notes secured by a Mortgage or Mortgages and each and
every collateral document or account or security instrument or agreement
securing or relating to such documents and the transactions evidenced thereby,
including, but not limited to, any Security Agreement, assignment of rents,
pledge agreement, guarantee, indemnification agreement, assignment of stock or
partnership units, title insurance policy, other insurance and other document,
agreement or instrument under which legal rights or obligations are created or
exist, if any, provided to Seller or its predecessor in interest to evidence or
secure such Mortgage Loan and held by Seller, whether or not identified by
Seller in the Due Diligence Materials, together with any assignment,
reinstatement, extension, endorsement or modification of any thereof and, with
respect to Real Property, evidence of Seller's ownership of same, whether by
foreclosure, deed in lieu of foreclosure, or otherwise.
"Asset File" with respect to any Asset means the set of files in the
possession of Seller relating to such Asset from which the Investor File is
derived and which Seller will deliver to Purchaser at the Closing, excluding
those documents reasonably determined by Seller to be of a privileged or
confidential nature, or that Seller reasonably and in good faith believes not
to be relevant to the analysis by Purchaser of the Assets, such as memoranda,
notes, analyses, summaries and correspondence by, between or among officers,
directors, employees or agents of Seller.
"Asset Proceeds" with respect to an Asset shall mean the sum of Cash
Flow plus Liquidation Proceeds.
"Assets" means the Mortgage Loans and Real Property offered for sale
under this Agreement.
"Asset Valuation Package" means the materials forming a part of the
Due Diligence Materials, which disclose the facts and assumptions used in
arriving at the Valuation of an Asset, and which materials were also included
in the package of materials distributed to Purchaser on or prior to the Due
Diligence Cut-Off Date, as the same has been amended, supplemented, corrected
or otherwise modified on or before the Due Diligence Cut-Off Date based upon
information provided to Purchaser or described in writing to Purchaser and made
available on request on or before the Due Diligence Cut-Off Date, and includes
with respect to each Asset an executive summary, property description, Asset
Data Sheet, property inspection report, valuation summary, underwriting
analysis, and any Disclosed Remedial Cost Estimate, all as more particularly
described in the Offering Memorandum.
"Business Day" means any day other than a Saturday, Sunday or day on
which banks in Los Angeles, California are authorized or obligated by law or
local proclamation to be closed.
3
<PAGE> 9
"Capital Expenditure" means an expenditure the full amount of which
would qualify as a "capital" item under the Internal Revenue Code of 1986, as
amended, as in effect on the date of the expenditure (i.e., any expense the
total cost of which may not be included as a deduction from gross income in the
year it is spent in accordance with the Internal Revenue Code of 1986, as
amended, in effect on the date of the expenditure or is treated as a
capitalized item under Generally Accepted Accounting Principles (as defined in
the Loan and Security Agreement), including, but not limited to, engineering,
legal, architectural and development expenses).
"Cash Flow" with respect to any particular Asset (and any particular
Due Date with respect to any Interim Mortgage Note) means the sum of all
income, revenues, fees, proceeds, reimbursements and payments from whatever
source received by or on behalf of Purchaser as holder of such Mortgage Loan or
the collateral therefor or as owner of any Real Property during the month
immediately preceding the calendar month in which a Due Date occurs (or with
respect to the calculation of the Repurchase Price, during any time after the
Cut-Off Date), including, without limitation, any principal payments, interest,
penalties, late charges and participations as well as any rents, leases,
revenues, fees, proceeds, reimbursements and payments received after ownership
of such collateral is acquired by or for the benefit of Purchaser, Seller or
both, whether through foreclosure, deed in lieu of foreclosure, or otherwise,
but not including the following:
(a) any amounts constituting Liquidation Proceeds; and
(b) interest actually paid on sums on deposit from time to time in
the Cash Collateral Account under the Loan and Security Agreement and any other
accounts or instruments in which Asset Proceeds are held.
Notwithstanding the foregoing, for the initial Due Date under any
Interim Mortgage Note, amounts constituting "Cash Flow" thereunder will relate
to amounts collected during the period from and after the Cut-Off Date and
received by or for the account of Purchaser or a Qualified Affiliate.
"Cash Portion of the Repurchase Price" with respect to a Deleted Asset
means an amount equal to the aggregate of:
(a) (i) the sum of the Downpayment Percentage multiplied by
the Adjusted Purchase Price of the Deleted Asset (subject to any reduction
pursuant to Article X hereof), plus interest thereon at the Applicable Rate
from the Cut-Off Date to the Repurchase Date, plus Prepayments (to the extent
not included below), plus
(ii) the sum of interest (A) at the Stated Interest Rate
on the Financed Portion of the Repurchase Price, from the Cut-Off Date to the
Repurchase Date, (B) at the Stated Interest Rate on Prepayments from the
Cut-Off Date to the first day of the month following the month of such
Prepayments and (C) at the Applicable Rate on Prepayments from the first day of
the month following the month of such Prepayments to the Repurchase Date, minus
4
<PAGE> 10
(iii) the sum of (A) Net Cash Flow allocable to such
Deleted Asset plus Net Liquidation Proceeds relating to such Deleted Asset with
respect to all periods from and after the Cut-Off Date (plus interest thereon
at the Applicable Rate from the first day of the month following receipt of
such Net Cash Flow or Net Liquidation Proceeds, as applicable, to the
Repurchase Date) received by or accrued for the account of Purchaser or any
Qualified Affiliate with respect to such Deleted Asset during such period, plus
(B) the amount of any payments due and unpaid under the Promissory Note and the
Loan and Security Agreement on the Repurchase Date, plus (C) to the extent not
included above, all sums paid or credited to Purchaser with respect to the
Deleted Asset pursuant to Section 8.1(d) hereof on the Closing Date or as part
of the adjustments on the Closing Date with interest thereon at the Applicable
Rate from the Cut-Off Date to the Repurchase Date; plus
(b) the sum of the following amounts actually expended by
Purchaser or any Qualified Affiliate with respect to such Deleted Asset and not
recovered from Net Cash Flow or Net Liquidation Proceeds of the underlying
Mortgaged Property or Real Property, as the case may be, or otherwise;
(i) one hundred percent (100%) of Permitted Real Estate
Tax Expenses; plus
(ii) one hundred percent (100%) of Permitted Insurance
Expenses,; plus
(iii) one hundred percent (100%) of Permitted Leasing
Commissions; plus
(iv) one hundred percent (100%) of unamortized Permitted
Tenant Improvement Expenses (as used herein, "unamortized" means the number
that results from dividing (i) that portion of the aggregate rent due under
such lease for the lease term remaining, by (ii) the aggregate rent due under
any lease from the inception of such lease through the expiration thereof);
plus
(v) to the extent not previously reimbursed, recovered or
otherwise included within the definition of Repurchase Price, Permitted Legal
Expenses, but only to the extent satisfactory evidence of payment is received
by Seller; plus
(vi) with respect to Surviving Representations and
Warranties only, one hundred percent (100%) of Capital Expenditures that have
been approved by Seller under the Loan and Security Agreement or, if not so
approved or if Seller-financing was not utilized in the Asset sale contemplated
hereby, that portion of Capital Expenditures that, in Seller's reasonable
discretion, meet the criteria set forth in the Loan and Security Agreement.
"Certificate of Defective Asset" means a fully and properly completed
and executed Certificate of Purchaser in the form attached hereto as Exhibit D
delivered to Seller in accordance with Section 5.4 or 5.5 hereof.
"Claim" means any claim, demand or action of any kind brought in a
legal proceeding.
5
<PAGE> 11
"Closing" means the purchase and sale of the Assets following the
payment of the Initial Purchase Price and the fulfillment or waiver of certain
conditions precedent to Closing specified in Article IX hereof.
"Closing Date" means the date of Closing, which shall be November 18,
1993, or any date mutually agreed upon in writing by Purchaser and Seller, but
in no event later than November 30, 1993.
"Control Number" means the number (however designated) that identifies
each Mortgage Loan and parcel of Real Property on the Mortgage Loan and Real
Property Schedule.
"Cure Period" means, with respect to a Defect in a Defective Asset,
the period ending on the date one hundred and fifty (150) days after Seller's
receipt from Purchaser of a Certificate of Defective Asset under Section 5.4 or
5.5 with respect to such Defect or such later date as may be agreed to in
writing by Purchaser and Seller.
"Current Fully Extended Maturity Date" means, with respect to a
Mortgage Loan, the maturity date, as such may have been extended or as such
extension may be available under the terms thereof as of the Closing Date as
set forth on the Mortgage Loan and Real Property Schedule. For purposes of the
surviving representations and warranties set forth in Section 7.1 hereof, if
the Current Fully Extended Maturity Date occurs prior to the Closing Date, the
Closing Date shall be deemed the Current Fully Extended Maturity Date.
"Cut-Off Date" means close of business on the day immediately
preceding the Closing Date, which shall be the date through which interest on
each Mortgage Loan and rents on each Real Property shall accrue for the benefit
of Seller.
"Default Notice" has the meaning given to that term in Section 11.1
hereof.
"Defect" means, with respect to Section 5.4 hereof, a breach of a
representation and warranty under Section 7.1 or 7.2 hereof or, with respect to
Section 5.5 hereof, a Structural Defect or Natural Condition that has a
material adverse effect on the value of the related Asset.
"Defective Asset" means an Asset as to which a Defect exists and as to
which Purchaser has timely delivered a Certificate of Defective Asset pursuant
to Section 5.4 or 5.5 hereof.
"Deleted Asset" means any Asset that is repurchased by Seller pursuant
to Article X hereof.
"Deposit" means the aggregate of any moneys remaining from Purchaser's
Due Diligence Deposit, plus the Initial Deposit and the Additional Deposit, all
with interest thereon until the Cut-Off Date.
"Disclosed Remedial Cost Estimate" has the meaning ascribed thereto in
Section 5.5 hereof.
6
<PAGE> 12
"Downpayment" shall mean (i) with respect to all of the Mortgage Loans
and Real Property purchased by Purchaser hereunder, the aggregate amount of
Eighteen Million Two Hundred Fifty-Two Thousand Three Hundred Nine Dollars
($18,252,309), i.e., the "Equity Investment" of Purchaser on Purchaser's
Statement of Offered Purchase Price delivered pursuant to the Offering
Memorandum that was accepted by Seller, and (ii) with respect to any individual
Mortgage Loan or Real Property, the Downpayment Percentage multiplied by the
Initial Purchase Price of such Mortgage Loan or Real Property.
"Downpayment Percentage" shall mean twenty-five percent (25.0%), i.e.,
the Downpayment Percentage for all Assets as specified in the Statement of
Offered Purchase Price.
"Due Date" means the fifth day of each month or, if such fifth day is
not a Business Day, the following Business Day, beginning on January 5, 1994
the fifth day of the month immediately following the first full month after the
Closing Date.
"Due Diligence Contractor" means KPMG Peat Marwick.
"Due Diligence Cut-Off Date" means October 12 1993.
"Due Diligence Deposit" means the amount paid by Purchaser to Seller
pursuant to the Offering Memorandum for the opportunity to review the Investor
Due Diligence Packages, and from which Seller will deduct for its own account
all charges incurred by Purchaser in connection with its review of the Investor
Due Diligence Packages.
"Due Diligence Materials" with respect to any Asset means the
contents, as of the Due Diligence Cut-Off Date, of the Investor Due Diligence
Package and of the Investor File for such Asset, which either have been
provided to Purchaser or its agents or made available to the Purchaser or its
agents at the office of Seller in Los Angeles, California or such other
location in Los Angeles, California identified by Seller to Purchaser, as the
same may have been amended, modified, supplemented, added to or updated at any
time on or before the Due Diligence Cut-Off Date.
"Due Diligence Period" means the aggregate of the Pre-Offer Due
Diligence Period and the Post-Offer Due Diligence Period.
"Due Diligence Representation and Warranty" means any representation
and warranty under Section 7.2 hereof.
"Earnest Money Deposit" means the aggregate of the Initial Deposit and
the Additional Deposit, along with any monies remaining from Purchaser's Due
Diligence Deposit, as more fully described in Section 3.1 hereof.
"Financed Percentage" shall mean seventy-five percent (75.0%), i.e.,
one hundred percent (100%) minus the Downpayment Percentage.
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<PAGE> 13
"Financed Portion" shall mean the Initial Purchase Price minus the
Downpayment; provided, however, that if the Initial Purchase Price is adjusted
pursuant to Sections 5.4 and 5.5 hereof, the "Financed Portion" shall mean the
Adjusted Purchase Price minus the Downpayment with respect to such Mortgage
Loan, as such may be correspondingly adjusted.
"Financed Portion of the Repurchase Price" with respect to a Deleted
Asset means an amount equal to seventy-five percent (75.0%) of the Adjusted
Purchase Price of the Deleted Asset (subject to any reduction pursuant to
Article X hereof), less Prepayments, if any.
"Hazardous Substances" means: (i) those substances included within the
definitions of any one or more of the terms "hazardous substances", "hazardous
materials", and "toxic substances", in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq., 9657), the Resource, Conservation and Recovery Act of
1976, as amended (42 U.S.C. Section 6901 et seq.), and the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801 et seq.), and in the
regulations promulgated pursuant to said laws; (ii) those substances listed in
the United States Department of Transportation Table (49 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302, and amendments thereto);
(iii) such other substances, materials and wastes as are or become regulated
under applicable local, state or federal laws, or which are classified as
hazardous or toxic under federal, state or local laws or regulations; and (iv)
any materials, wastes or substances that are (a) petroleum; (b) friable
asbestos; (c) polychlorinated biphenyl; (d) designated as a "Hazardous
Substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section
1321) or designated as "toxic pollutants" subject to Section 307 of the Clean
Water Act (33 U.S.C. Section 1317); (e) flammable explosives; or (f)
radioactive materials.
"Initial Deposit" means an amount greater than or equal to two percent
(2.0%) of the aggregate Initial Purchase Price for all Assets for which
Purchaser submits an offer to purchase, which sum has been delivered by
Purchaser to Seller in immediately available funds concurrently with such
submission.
"Initial Purchase Price" has the meaning given to that term in Section
2.2 hereof.
"Interim Mortgage" means the mortgage, deed of trust or other security
instrument creating a lien upon a parcel of Real Property that secures the
related Interim Mortgage Note, which shall be in substantially the form
attached hereto as Exhibit L.
"Interim Mortgage Loan" means a mortgage loan which shall be secured
by a lien upon a parcel of Real Property that is a subject of the Sales
Contract. The Seller, as the current owner of the Real Property securing an
Interim Mortgage Loan, shall be the initial borrower/mortgagor and the
Purchaser shall be the named payee/mortgagee on the Interim Mortgage Loan.
"Interim Mortgage Note" means any note evidencing the Seller's
obligation under an Interim Mortgage Loan listed on the Mortgage Loan and Real
Property Schedule, which note shall be
8
<PAGE> 14
dated as of the Cut-Off Date, shall be in a principal amount equal to the
Initial Purchase Price of the related Real Property and shall be on the form
attached hereto as Exhibit M.
"Investor Due Diligence Package" with respect to any Asset means the
contents, as of the Due Diligence Cut-Off Date, of the "Investor Due Diligence
Package" as described in the Offering Memorandum, compiled by Seller's Due
Diligence Contractor for such Asset and provided to Purchaser or its agents,
including, but not limited to, a Portfolio Summary Spreadsheet, as such has
been updated through October 12, 1993, accountant's letter, portfolio
stratification, Asset Valuation Package, excerpts from appraisals, copies of
certain loan documentation and updated title reports prepared by the original
insurer, or one of like caliber licensed to do business in the jurisdiction in
which the Mortgaged Property or the Real Property is situated, and, if
available, operating statements, rent rolls and environmental reports, as all
of the above may be amended, modified, supplemented, added to or updated at any
time on or before the Due Diligence Cut-Off Date, to the extent such
amendments, supplements, modifications, additions or updates have been provided
or described in writing to Purchaser or its agents on or before the Due
Diligence Cut-Off Date.
"Investor File" with respect to any Asset means the file(s) compiled
by Seller's Due Diligence Contractor for such Asset, as described in the
Offering Memorandum, and made available for inspection by potential purchasers
or their agents at Seller's office or such other location as specified by
Seller to such potential purchasers, and comprised of those portions of the
Asset File for such Asset including, but not limited to, copies of the related
Asset Documents, title policy, appraisal, operating statement and rent roll, if
available, which formed the basis of the Asset Valuation Package for such
Asset, as the same may be amended, modified, supplemented, added to or updated
at any time on or before the Due Diligence Cut-Off Date, to the extent such
amendments, supplements, modifications, additions or updates have been provided
or described in writing to Purchaser or its agents on or before the Due
Diligence Cut-Off Date. Unless otherwise expressly provided therein, the
reports of third parties, including, without limitation, appraisals,
environmental assessments, operating or other information provided by
Mortgagors, their accountants, agents, or Affiliates, or engineering reports,
have been prepared for use solely by Seller and, in certain cases, its Due
Diligence Contractor and financial advisors. Such reports are included in each
Investor File for informational purposes only and should not be relied upon for
their accuracy or completeness. Purchaser shall have no right to rely upon the
conclusions or other data set forth in such reports and shall have no recourse
against Seller or its advisors, counsel or agents, including the preparers of
such reports, in the event of any errors therein or omissions therefrom.
"Land Parcel" means any of the Mortgaged Property relating to those
Mortgage Loans, or the parcels of Real Property relating to those Interim
Mortgage Loans, listed on the Mortgage Loan and Real Property Schedule attached
hereto and identified under the heading of "Property Type" as Land-Lots or
Land.
"Liquidation Proceeds" with respect to an Asset shall mean the
following received by or on behalf of or for the account of Purchaser as holder
of such Mortgage Loan or the collateral therefor or as owner of such Real
Property during the month immediately preceding the calendar
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month in which a Due Date occurs (or with respect to the calculation of the
Repurchase Price, during any time after the Cut-Off Date):
(a) all proceeds of liquidation, Refinancing (as defined
in the Loan and Security Agreement), sale or compromise, and payments
from whatever source received during the immediately preceding
calendar month in respect of the disposition or Refinancing of any
Mortgage Loan, or any of the collateral securing such Mortgage Loan,
or any Real Property, including, but not limited to, any full or
partial prepayment of principal, proceeds of any Mortgage Loan by any
third party lender secured by any Mortgaged Property or any Real
Property or any portion thereof, reimbursements, and payments received
after ownership of such collateral is acquired by or for the benefit
of Purchaser, Seller or both, whether through foreclosure, deed in
lieu of foreclosure, or otherwise;
(b) all recoveries during the immediately preceding
calendar month from Mortgagors of advances made by Purchaser for the
purpose of preserving the value of the Mortgage Loans and Mortgaged
Property to the extent such amounts were paid as Permitted Liquidation
Expenses;
(c) all insurance proceeds or condemnation proceeds
received during the immediately preceding calendar month in respect of
Mortgaged Properties or Real Property, other than insurance proceeds
applied or to be applied to the restoration or repair of Mortgaged
Property or Real Property; and
(d) all other amounts received in respect of the sale,
Refinancing, liquidation, compromise or other disposition of the
Assets, including, but not limited to, loan or brokerage fees charged
by Purchaser or any Affiliate Purchaser for Refinancing or selling any
Asset and reimbursements to Purchaser or any Affiliate Purchaser for
expenses other than amounts permitted to be paid by Purchaser as
Permitted Liquidation Expenses.
Notwithstanding the foregoing, for the initial Due Date, amounts
constituting "Liquidation Proceeds" under the Loan and Security Agreement will
relate to amounts collected during the period from and after the Cut-off Date
and received by or for the account of Purchaser or a Qualified Affiliate.
"Loan" means the loan made pursuant to the Loan and Security Agreement
and evidenced by the Promissory Note.
"Loan and Security Agreement" means, in connection with Seller's
financing of the sale transaction contemplated herein, the Loan and Security
Agreement made by and between Purchaser as borrower thereunder and Seller as
lender thereunder, or any of their respective Affiliates, and dated as of the
Closing Date, as such may be amended, supplemented, restated or otherwise
modified.
"Maximum Offer Percentage" means the number, expressed as a percentage
to four decimal places, designated by Seller with respect to any Asset as the
maximum percentage of the Initial
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Purchase Price that a potential purchaser may ascribe to such Asset in its
offer under the Offering Memorandum.
"Mortgage" means, with respect to a Mortgage Loan, a mortgage, deed of
trust or other security instrument creating a lien upon real property (or a
leasehold interest in Mortgaged Property, in the case of any leasehold Mortgage
Loan) and any other property described therein that secures a Mortgage Note,
together with any assignment, reinstatement, extension, endorsement or
modification of any thereof.
"Mortgage Assignments" means the document to be delivered to Purchaser
on the Closing Date, in accordance with Section 9.2(a) hereof and in the form
attached hereto as Exhibit C.
"Mortgaged Property" means the land, improvements, personal property
and other collateral securing a Mortgage Note under a Mortgage or Security
Agreement.
"Mortgage Loan" means each of the commercial mortgage loans, other
than any Interim Mortgage Loan, evidenced by a Mortgage Note and secured by a
Mortgage (which may be a blanket Mortgage) or Mortgages described on the
Mortgage Loan and Real Property Schedule, together with any related Mortgaged
Property or Mortgaged Properties acquired by or for the benefit of the
mortgagee or beneficiary thereunder whether through foreclosure, deed in lieu
of foreclosure or otherwise.
"Mortgage Loan and Real Property Schedule" means the schedule
identifying the Mortgage Loans and Real Property to be sold, transferred and
conveyed hereunder and which is attached hereto as Exhibit A, as such Mortgage
Loan and Real Property Schedule may be amended or modified from time to time in
accordance with the terms of this Agreement, including, but not limited to, the
result of a deletion of any Mortgage Loan hereunder that is a Defective Asset.
The Mortgage Loan and Real Property Schedule shall set forth the
following information concerning each Mortgage Loan and Real Property, as the
case may be:
(a) address of the Mortgaged Property or Real Property;
(b) type of Mortgaged Property or Real Property and popular name,
if any;
(c) number of units in the Mortgaged Property or Real Property;
(d) approximate square footage of the Mortgaged Property or Real
Property; and
(e) the Initial Purchase Price specifying the component parts
thereof, including the Offer Percentage and any adjustments to the Initial
Purchase Price pursuant to Sections 5.4, 5.5 and, as of the Closing Date,
8.1(d). The Mortgage Loan and Real Property Schedule shall be revised and
substituted from time to time to reflect any such adjustments.
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The Mortgage Loan and Real Property Schedule shall also set forth the
following additional information concerning each Mortgage Loan:
(a) name of Mortgagor;
(b) the original principal balance;
(c) the date the Mortgage Loan was made;
(d) unpaid principal balance as of close of business on September
30, 1993;
(e) last payment due date on or preceding October 1, 1993, in
respect to which a payment of interest was made;
(f) pool number, Control Number and Seller's loan number;
(g) the Current Fully Extended Maturity Date;
(h) current mortgage interest accrual and pay rates;
(i) as of September 30, 1993, the amount of (i) any deferred
interest (the cumulative excess of interest on the Mortgage Loan at the
interest accrual rate over the interest on the Mortgage Loan at the interest
pay rate), and (ii) any current accrued and unpaid interest in default
(excluding deferred interest); and
(j) priority of Mortgage lien (first or second).
"Mortgage Note" means, with respect to a Mortgage Loan, a promissory
note or notes, or other evidence of indebtedness with respect to such Mortgage
Loan, secured by a Mortgage or Mortgages, together with any assignment,
reinstatement, extension, endorsement or modification of any thereof.
"Mortgagor" means the obligor under a Mortgage Note and Mortgage.
"Natural Condition" means, with respect to a Mortgage Loan or Real
Property, as the case may be, only the following physical conditions existing
on or affecting a parcel of Mortgaged Property or Real Property which is also a
Land Parcel, that are naturally occurring in nature and are not caused by or
the result of human activities: Wetlands (which are defined by reference to
Executive Order 11990, Protection of Wetlands, or the Emergency Wetlands
Resources Act of 1986), habitation by Endangered Species (which are defined as
those species which are listed by the U. S. Government as threatened or
endangered plants and animals), Critical Habitat (as defined by the Endangered
Species Act), Undeveloped Floodplains (meaning primarily undeveloped areas
which are Floodplains, as defined by reference to Executive Order 11988,
Floodplain Management, and include only the 100-year or "Base" Floodplains),
Wild and Scenic Rivers (meaning those rivers which are designated as Wild and
Scenic Rivers under the Wild and
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Scenic Rivers Act), Wilderness Areas (meaning those areas designated as
Wilderness Areas under the Wilderness Act), Undeveloped Coastal Dunes and
Beaches (meaning those areas within coastal areas that fall within the scope of
the Coastal Zone Management Act and are primarily undeveloped), Undeveloped
Sole Source Aquifers (meaning primarily undeveloped areas within the boundaries
of aquifers designated by the U. S. Environmental Protection Agency under the
Safe Water Drinking Act as being Sole Source Aquifers), Natural Landmarks
(meaning those natural landmarks listed on the National Registry of Natural
Landmarks as published by the Natural Parks Service), Undeveloped Fifty Acre
Resource Lands (meaning undeveloped areas of more than fifty (50) acres in
size, and adjacent to, or contiguous with any lands managed by a governmental
agency primarily for wildlife, refuge, sanctuary, open space, recreational,
historical, cultural or natural resource conservation purposes, and have
natural, cultural, recreational or scientific values of special significance),
and Coastal Barrier Units (meaning those areas displaying undeveloped
attributes and designated as "Units" of the Coastal Barrier Resources System
under the Coastal Barrier Improvement Act of 1990).
"Net Cash Flow" with respect to the calculation of the Repurchase
Price for a Deleted Asset and with respect to payments due on each Due Date
under an Interim Mortgage Note shall mean Cash Flow with respect to such
Deleted Asset or Interim Mortgage Note less the following amounts:
(a) Ordinary and customary expenses attributable to and necessary
for the prudent management of the Deleted Asset;
(b) Advances by Purchaser pursuant to Section 5.2 of the Loan and
Security Agreement (including amounts paid by Purchaser as reimbursements of
Outstanding Lender Advances, as such term is defined in the Loan and Security
Agreement, and as may be required under the Promissory Note) to the extent paid
with respect to the Deleted Asset and recoverable from Cash Flow attributable
to the Deleted Asset with respect to which such advances were made; and
(c) Permitted Expenses, including but not limited to, amounts
deposited into the Estimated Accrual Account established under the Sales
Contract and Interim Mortgage with respect to the related Real Property,
but not less than zero.
"Net Liquidation Proceeds" with respect to an Asset shall mean
Liquidation Proceeds, less (a) Permitted Liquidation Expenses for such Asset
and (b) advances by Purchaser pursuant to Section 5.2 of the Loan and Security
Agreement with respect to such Asset that have not been recovered and for which
Purchaser has not otherwise been reimbursed.
"Offer Date" means October 20, 1993, the date on which offers were
due under the Offering Memorandum.
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"Offering Memorandum" means the Confidential Memorandum provided by
Seller to potential purchasers relating to the purchase of the Assets, along
with additional written supplements thereto, if any, from Seller to Purchaser.
"Offer Percentage" means the number, expressed as a percentage to four
decimal places, obtained by dividing the Initial Purchase Price with respect to
an Asset by the Valuation of such Asset, in each case as shown on the "Offer
Statement and Summary Sheet" and/or "Statement of Initial Purchase Price"
delivered with respect to such Asset pursuant to the Offering Memorandum, which
number shall in no event exceed the Maximum Offer Percentage.
"Payment in Full" means a payment in full or prepayment in full of any
Mortgage Loan prior to the Closing Date, which represent all amounts of
principal either then required to be paid under such Mortgage Loan or which are
paid under any offer of compromise or settlement which had been made by Seller
to any Mortgagor prior to the Due Diligence Cut-Off Date and which was
disclosed by Seller to Purchaser in writing prior to the Due Diligence Cut-Off
Date.
"Permitted Expenses" means ordinary and customary expenses
attributable and necessary for the prudent ownership, servicing or management
of a Deleted Asset or Interim Mortgage Loan. Notwithstanding the foregoing,
Permitted Expenses shall in no event include:
(a) Capital Expenditures;
(b) the principal or interest paid in connection with any
loan other than the Loan, whether secured or unsecured, except as expressly
approved by Seller;
(c) the payment of any expense more than one month prior
to the due date thereof;
(d) the cost of the Valuation of the Mortgage Loans,
Mortgaged Properties, Real Property and other Collateral (as defined in the
Loan and Security Agreement); and
(e) the amount of any penalties, assessments, fees or
other charges levied against Purchaser as the lender under a Mortgage Loan as
the result of its failure to service such Mortgage Loan or manage the related
Mortgaged Property in accordance with applicable federal or state laws, rules
or regulations or any defect in Purchaser's calculation of amounts due
thereunder.
"Permitted Foreclosure Costs" means those ordinary and customary costs
associated with the acquisition of Mortgaged Property by the mortgagee or
beneficiary under any Mortgage, whether by foreclosure, deed in lieu of
foreclosure or otherwise.
"Permitted Insurance Expenses" means amounts paid by Purchaser or any
Qualified Affiliate, or monthly payments into an escrow account maintained for
such purpose in an amount not to exceed one-twelfth (1/12th) of the annual
premium, for premiums for hazard and flood insurance on a Mortgaged Property,
having commercially reasonable terms, exclusions and deductible amounts,
provided that insurance premiums on Mortgaged Property shall be "Permitted
Insurance
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Expenses" only if the Mortgagor has failed to pay such premiums upon notice of
its failure to pay and as a result thereof, the failure of Purchaser or any
Qualified Affiliate to pay such premiums would render the Mortgaged Property
uninsured.
"Permitted Leasing Commissions" shall mean leasing commissions paid by
Purchaser or any Qualified Affiliate with respect to the leasing of all or any
part of the premises of any Real Property to Persons who are not Related
Parties of Purchaser or to Related Parties of Purchaser in accordance with
arrangements approved in advance by Seller in writing.
"Permitted Legal Expenses" means the reasonable legal fees and
disbursements, not to exceed $50,000, paid by Purchaser to an attorney
exclusively for contesting a claim by the maker or obligor of a Mortgage Loan
that the underlying Mortgage Note or Mortgage is not enforceable as represented
in Section 7.1(d)(iv) of the Asset Sale Agreement, provided that (i) the
attorney representing Purchaser is approved, in writing, by the Seller, and
(ii) the Seller has approved, in advance and in writing, Purchaser's
expenditure of fees and disbursements in connection with the contest of the
claim.
"Permitted Liquidation Expenses" means the following expenses paid by
or on behalf of Purchaser, Affiliate Purchaser or a Qualified Affiliate to
Persons who are (a) generally in the business of providing goods and services
of the type provided and (b) not Related Parties (as defined in the Loan and
Security Agreement) (unless Lender has given express written approval prior to
the provision of the goods or services), provided in any event that such
expenses are reasonable for the types of goods and services provided in the
geographic area in which such goods or services are provided and are not
deducted as Permitted Expenses:
(a) in the case of a sale of a Mortgaged Property, a Real Property
or a Subparcel thereof, ordinary and customary expenses of the transaction,
including reasonable legal, accounting and other professional fees and
brokerage commissions customarily paid by sellers of commercial properties of
the type sold in the geographic area in which the Mortgaged Property, Real
Property or Subparcel is located;
(b) ninety percent (90%) of Permitted Capital Expenses, as such
term is defined in the Loan and Security Agreement;
(c) ninety percent (90%) of unamortized Permitted Tenant
Improvement Expenses (as used herein, "unamortized" means the number that
results from dividing (i) that portion of the aggregate rent due under such
lease for the lease term remaining, by (ii) the aggregate rent due under any
lease from the inception of such lease through the expiration thereof);
(d) one hundred percent (100%) of Permitted Insurance Expenses;
(e) one hundred percent (100%) of Permitted Real Estate Tax
Expenses;
(f) ninety percent (90%) of unamortized Permitted Leasing
Commissions; plus (as used herein, "unamortized" means the number that results
from dividing (i) that portion of the aggregate
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rent due under such lease for the lease term remaining, by (ii) the aggregate
rent due under any lease from the inception of such lease through the
expiration thereof); and
(g) ninety percent (90%) of Permitted Foreclosure Costs, but only
to the extent satisfactory evidence of payment is received by Seller.
"Permitted Real Estate Tax Expenses" shall mean real estate taxes
approved in advance of payment by Seller in writing paid by Purchaser or any
Qualified Affiliate with respect to any Real Property or, if not paid by the
Mortgagor thereunder, a Mortgaged Property.
"Permitted Tenant Improvement Expense" means any expense incurred by
Purchaser to provide physical improvement to a tenant's space. Any Permitted
Tenant Improvement Expense shall be certified by a certificate of an officer of
Purchaser stating that the related physical improvements and rents are at
market levels.
"Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Portfolio Summary Spreadsheet" means the Lotus 1-2-3-based
spreadsheet entitled "Portfolio Summary Spreadsheet" and dated October 12,
1993.
"Post-Offer Due Diligence Period" means that period commencing with
the date hereof and ending, with respect to any Asset, ninety (90) days
thereafter, unless sooner terminated by delivery by Purchaser of an Acceptance
Certificate.
"Pre-Offer Due Diligence Period" means that period commencing with the
date on which the Investor Due Diligence Package is made available to Purchaser
and ending on the Offer Date.
"Prepayment" means, with respect to any Mortgage Loan that is a
Deleted Asset, the amount of any payments of principal of such Mortgage Loan
that has been applied to the outstanding principal balance of the Promissory
Note.
"Promissory Note" means that certain promissory note dated as of the
Closing Date by Purchaser as borrower in favor of Seller as lender, in
substantially the form attached as Exhibit A to the Loan and Security Agreement
issued pursuant to Section 2.1 of the Loan and Security Agreement. The term
"Promissory Note" shall include such replacement Promissory Note and all
additional replacements, extensions, amendments, endorsements, allonges and
other modifications of the Promissory Note and all substitutions therefor in
accordance with the Loan and Security Agreement.
"Purchaser" has the meaning set forth in the caption of this Agreement
and shall include its successors and assigns.
"Purchaser's Cure Estimate" has the meaning given to that term in
Section 5.4(b) hereof.
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"Qualified Affiliate" means an Affiliate of Purchaser which is a
separate single purpose corporation or limited partnership formed for the sole
purpose of owning, managing and disposing of one or more parcels of Real
Property. Purchaser shall cause a separate Qualified Affiliate or Qualified
Affiliates to take title to the Real Property designated "industrial" on the
Mortgage Loan and Real Property Schedule on the one hand, and another Qualified
Affiliate or Qualified Affiliates to take title to any one or more parcels of
the remaining Real Property not designated "industrial" on the Mortgage Loan
and Real Property Schedule on the other. Except as otherwise approved in
writing by Seller and except as otherwise permitted under the Loan and Security
Agreement, each Qualified Affiliate shall be an Affiliate of Purchaser that is
a corporation or partnership wholly-owned, directly or indirectly, by all of
the stockholders or partners of Purchaser or by individuals or entities that
own, directly or indirectly, all of the stock or partnership interests in
Purchaser, all to the same extent and in the same proportion as the ownership
interest of such stockholders, partners, individuals or entities of Purchaser.
"Real Property" means a parcel or parcels of land or a leasehold
estate, including all improvements, fixtures, easements and other appurtenances
owned by Seller and described on the Mortgage Loan and Real Property Schedule,
which, at the time of Closing, will either be sold in fee or, at Purchaser's
option, be encumbered by an Interim Mortgage Loan.
"Real Property Sales Contract" means, with respect to the Real
Property, the purchase and sale contract by and between Seller and Purchaser
or, if Seller financing is to be utilized or otherwise at Purchaser's option,
Affiliate Purchaser, to be executed concurrently herewith, substantially in the
form attached hereto as Exhibit J, modified as necessary to reflect an all cash
sale transaction.
"Repurchase Date" means the date on which any Defective Asset is
repurchased pursuant to this Agreement.
"Repurchase Price" with respect to a Defective Asset means the Cash
Portion of the Repurchase Price plus the Financed Portion of the Repurchase
Price.
"Revalued Asset" means each of the Assets that has been revalued in
accordance with Section 5.5(b) hereof, due to the discovery of a Structural
Defect or Natural Condition in the related Mortgaged Property or Real Property,
as the case may be, and that Seller has not subsequently elected to repurchase
pursuant to Section 5.5(a)(i) hereof.
"Sales Contract" means the Real Property Sales Contract.
"Security Agreement" means any security agreement creating a lien upon
personal property described therein which secures a Mortgage Note.
"Seller" means City National Bank, a national banking association.
"Seller-Approved Contractor" means an engineering or contracting firm
qualified to make such determination as may be required under Section 5.5
hereof, and which is selected by
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Purchaser and identified to Seller in writing at the time Purchaser is notified
that it has submitted a successful offer and which shall not have been
reasonably disapproved by Seller within five (5) Business Days thereafter.
"Stated Interest Rate" means the interest due on the Loan under the
Promissory Note.
"Structural Defect" has the meaning given to that term in Section 5.5
hereof.
"Supplemental Certificate of Defective Asset" shall have the meaning
ascribed thereto in Section 5.4(b) hereof.
"Surviving Representation Expiration Date" means, (i) with respect to
each Mortgage Loan to which a Surviving Representation and Warranty applies,
that date which is the earlier to occur of (a) one year after the Current Fully
Extended Maturity Date of such Mortgage Loan, unless written notice of a Claim
is alleged by the Mortgagor within such one year period, in which event, the
Surviving Representation Expiration Date, as it relates to such Claim only,
shall be extended until the condition giving rise to such Claim is finally
resolved or such Claim becomes a Defect, or (b) the date on which such Mortgage
Loan is compromised, renegotiated or restructured, or the related Mortgaged
Property is acquired by Purchaser by foreclosure, deed in lieu of foreclosure
or otherwise, provided that, in the event Purchaser acquires such Mortgaged
Property by means of a trustee's sale in a non-judicial foreclosure, the
Surviving Representation Expiration Date for the representation made by Seller
under Section 7.1(d)(ix) hereof shall be the date that is one (1) year after
the Current Fully Extended Maturity Date of such Mortgage Loan and, (ii) with
respect to each Asset that is Real Property to which a Surviving Representation
and Warranty applies, one year after the date on which title to such Real
Property passes to Purchaser, Affiliate Purchaser, or a Qualified Affiliate, as
the case may be.
"Surviving Representation and Warranty" means any representation and
warranty under Section 7.1 hereof.
"Valuation" means (i) with respect to any Revalued Asset, a value
assigned to such Revalued Asset determined in accordance with this Agreement by
the Valuation Agent according to the method set forth in Exhibit G attached
hereto and evidenced by a Valuation Report prepared pursuant to such Exhibit G
and delivered to Seller, and (ii) with respect to any other Asset, the
"Valuation" of such Asset as set forth in the Mortgage Loan and Real Property
Schedule.
"Valuation Agent" means KPMG Peat Marwick or another nationally
recognized expert in the Valuation of Mortgage Loans and Real Property, as
chosen by Purchaser, subject to the reasonable approval of Seller.
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ARTICLE II
PURCHASE AND SALE OF THE ASSETS
Section 2.1 PURCHASE AND SALE.
Subject to the terms and provisions set forth in this Agreement, on
the Closing Date, Purchaser shall purchase the Mortgage Loans (other than any
Mortgage Loan with respect to which Seller has received Payment in Full prior
to the Closing Date, in which case Purchaser shall receive a credit against the
Initial Purchase Price in the amount of such Payment in Full) and the Real
Property from Seller and Seller shall sell, transfer, assign and convey to
Purchaser such Mortgage Loans, together with all related Asset Documents to
the extent assignable and the servicing of such Mortgage Loans, and the Real
Property, together with all related Asset Documents to the extent assignable.
Section 2.2 INITIAL PURCHASE PRICE OF ASSETS.
The purchase price of each Asset at the time of the Closing shall be
as set forth with respect to such Asset on the Mortgage Loan and Real Property
Schedule (the "Initial Purchase Price"), subject to adjustment in accordance
with Section 2.3 hereof. The Initial Purchase Price for each Asset shall be
paid by Purchaser to Seller on the Closing Date as follows:
(a) Seller shall credit to Purchaser the Deposit toward the
aggregate Initial Purchase Price for all Assets purchased; and
(b) Purchaser shall remit to Seller in immediately available
funds, an amount equal to (i) the aggregate Initial Purchase Price
[plus applicable interest on the Financed Portion from the Cut-Off
Date through the last day of the month in which the Closing occurs],
less (ii) the sum of (A) the amount credited pursuant to Section
2.2(a) hereof, (B) other amounts, if any, then required to be credited
to the Purchaser pursuant to Section 8.1(d) hereof[, and (C) the
principal amount of the Promissory Note]; and
(c) For each Mortgage Loan for which no payment default exists as
of the Cut-Off Date, Purchaser shall remit to Seller in immediately
available funds an amount equal to interest currently due and unpaid
thereon (excluding any deferred interest and contingent interest) from
and including the immediately preceding payment date with respect to
such Mortgage Loan to but not including the Cut-Off Date.
Section 2.3 MODIFICATIONS TO MORTGAGE LOAN AND REAL PROPERTY
SCHEDULE.
Purchaser and Seller shall amend the Mortgage Loan and Real Property
Schedule to adjust the Initial Purchase Price as required to reflect any
adjustment pursuant to Section 5.4 or 5.5 hereof.
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Section 2.4 FINANCING OF MORTGAGE LOANS AND REAL PROPERTY; SALE
OF REAL PROPERTY.
Seller financing of the purchase by Purchaser of the Assets will be
available subject to the terms and conditions set forth in a Loan and Security
Agreement in substantially the form attached hereto as Exhibit K. The sale of
the Real Property shall be effected, at Purchaser's option (i) concurrently
herewith through the execution and delivery by Seller and Purchaser of the
Sales Contract, or (ii) through a three- stage process commencing with (a) the
concurrent execution and delivery by Seller and Affiliate Purchaser of the
Sales Contract, (b) the delivery by Seller to Purchaser of an Interim Mortgage
on the Closing Date, and (c) the subsequent reconveyance of the Interim
Mortgage to Seller, along with the originally executed Interim Mortgage Note
marked "Paid", concurrently with the conveyance of the Real Property to one or
more Qualified Affiliates not later than the last day of the Due Diligence
Period pursuant to the terms of the Sales Contract, all as further described in
the Offering Memorandum.
ARTICLE III
DEPOSIT
Section 3.1 DEPOSIT. Upon execution hereof, Seller shall
acknowledge that it has received from Purchaser an amount equal to
$2,920,369.00, not less than four percent (4.0%) of the Initial Purchase Price,
which amount is comprised of the Initial Deposit, the Additional Deposit and
any monies remaining from Purchaser's Due Diligence Deposit (the "Earnest Money
Deposit"). The Earnest Money Deposit shall be deposited by Seller in an
interest-bearing account at Seller's Beverly Hills branch (the "Deposit
Account"). The Earnest Money Deposit, together with any interest earned
thereon from the Offer Date to the Closing Date, shall hereinafter be referred
to as the "Deposit".
Section 3.2 DISTRIBUTION OF DEPOSIT.
The Deposit shall be held by the Seller until (a) Closing occurs under
this Agreement, in which event the Deposit shall be applied on account of the
Initial Purchase Price, in accordance with Section 2.2(a) herein, or (b) this
Agreement has been terminated, in which event the Deposit will be paid to
Purchaser or retained by Seller in accordance with Section 11.1 or Section 11.2
hereof, as the case may be.
ARTICLE IV
CLOSING
Section 4.1 CLOSING.
The Closing shall be held on the Closing Date, at 10:00 a.m., at such
place as is selected by Seller. The time of the Closing may be changed as the
parties may mutually agree upon on or before the Closing Date.
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Section 4.2 TRANSFER AND RECORDATION TAXES.
At or prior to Closing, all transfer, filing and recording fees and
taxes, costs and expenses, and any state or county documentary taxes, if any,
with respect to the filing or recording of any conveyance document or
instrument contemplated hereby shall be paid by Seller. Purchaser, Affiliate
Purchaser or Qualified Affiliate shall pay, when due and payable, all transfer,
filing and recording fees and taxes, and costs and expenses, if any, with
respect to the filing or recording of any documents or instruments relating to
the financing of any Parcel of Real Property and the cost of recording
corrective instruments, pursuant hereto or to the Sales Contract, except for
those related to any Interim Mortgage or deed to any Real Property, which
Seller shall pay.
Except as otherwise expressly provided herein, whether or not the
transactions contemplated hereunder are completed, Purchaser shall pay all of
its Closing and due diligence expenses and its expenses in negotiating and
carrying out its obligations under this Asset Sale Agreement, including the
costs of its counsel, all of the costs of title or other insurance which is not
presently in force or otherwise provided, or other due diligence Purchaser may
desire to undertakeand all of the expenses of Purchaser relating to this
Agreement.
Section 4.3 ESCROW ACCOUNTS. At Closing, all escrows held and
account records reflecting amounts held in escrow by or on behalf of Seller for
taxes, governmental assessments and insurance, deposits, security deposits,
replacement reserves or other funds relating to the Assets and then held by or
on behalf of Seller, including any accounts described in Section 8.1(d) hereof,
shall be assigned, transferred and paid over to the Purchaser. All such funds
transferred to and held by Purchaser shall be applied by Purchaser for their
designated purposes for the designated Mortgaged Property, in accordance with
the applicable Mortgage, or Real Property, as the case may be.
Section 4.4 LIMITATIONS ON LIABILITY. The parties hereto
acknowledge, confirm and agree that Purchaser shall have no claims and Seller
shall have no liability, whatever, as a result of or otherwise in connection
with any notice of default not being filed or being filed or any actions or
failure to act in connection with any default, bankruptcy, request for
modification or otherwise under any Mortgage Loan, except to the extent that
such may be deemed a violation of Seller's obligations under Section 8.1(f)
hereof; nor shall any of same be deemed a Defect or otherwise trigger any
requirement to repurchase any Mortgage Loan, unless any such action or inaction
shall constitute a breach by Seller of any representation or warranty set forth
in Article VII hereof.
ARTICLE V
DUE DILIGENCE PERIOD
Section 5.1 DUE DILIGENCE PERIOD.
Seller and Purchaser acknowledge that while Purchaser has had time to
conduct some due diligence, this Agreement is being executed and delivered
prior to the Closing Date and prior to Purchaser having as much time as
Purchaser might desire to conduct a due diligence review of the Assets,
including the underlying Mortgaged Properties. Seller and Purchaser agree,
therefore, that Purchaser may conduct additional due diligence in respect of
the Assets, including the Mortgaged
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Properties, until the termination of the Due Diligence Period, solely for the
purpose of confirming Seller's Due Diligence Representations and Warranties.
Prior to the Closing Date, however, Purchaser shall not contact the Mortgagors
or any guarantor of any Mortgage Loan or any junior or senior lienors or any
tenants of any Mortgaged Property or Real Property, as the case may be, or any
officer, employee or agent of any thereof except upon the prior consent of
Seller. Purchaser agrees that it will perform its due diligence review in good
faith during the Due Diligence Period.
Section 5.2 DUE DILIGENCE REVIEW OF ASSETS.
During the Pre-Offer Due Diligence Period through the Due Diligence
Cut-Off Date for each Asset listed on the Mortgage Loan and Real Property
Schedule, Seller or Seller's Due Diligence Contractor has provided Purchaser
with the related Investor Due Diligence Package and Seller has provided
Purchaser access, during normal business hours upon reasonable prior request,
to the related Investor File. Purchaser shall conduct, at its own expense,
such additional analysis and investigation of the Mortgage Loans, the Mortgaged
Properties and the Real Property as it deems necessary and appropriate. Under
no circumstances will any amounts expended by Purchaser for due diligence be
reimbursed or credited to or against the Initial Purchase Price.
Section 5.3 SELLER'S COOPERATION.
Seller agrees to cooperate with Purchaser during remainder of the Due
Diligence Period and shall provide Purchaser access to Seller's Asset Files and
any such non-privileged data or other materials that are reasonably related to
Purchaser's evaluation of the Asset it is reviewing and are obtainable by
Seller on a reasonable basis, provided that Seller shall not be obligated to
incur any material cost or expense (unless, with respect to any cost or
expense, a Person satisfactory to Seller in its sole discretion agrees to
promptly reimburse or indemnify Seller in a manner acceptable to Seller, in
Seller's sole discretion, for such cost or expense) or any liability as a
result of such cooperation; provided that the foregoing limitation shall not
reduce or limit Seller's representations and warranties under this Agreement.
Section 5.4 ACCEPTANCE OF ASSETS AND REMEDIES FOR DEFECTS.
Purchaser shall have the right either to accept an Asset as described
in subsection (a) below or, in the event of a Defect in an Asset, to notify
Seller in writing of such Defect as set forth in subsection (b) below.
(a) ASSET ACCEPTANCE. After completion of its due
diligence review of any Asset, Purchaser may finally accept such Asset for
purchase hereunder prior to the termination of the Due Diligence Period by
delivering to the Seller a certificate ("Acceptance Certificate") in the form
attached hereto as Exhibit B identifying each Asset being accepted.
Once an Asset is accepted hereunder, Purchaser's rights to
require Seller to repurchase such Asset or to cure a Defect in such Asset shall
terminate, except in the event of a breach of a Surviving Representation and
Warranty. Purchaser's failure to deliver a Certificate of Defective Asset with
respect to any Asset by the last day of the Due Diligence Period shall be
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deemed to be an acceptance of such Asset, subject to Purchaser's rights to
require Seller to make an election to cure the Defect in, reduce the Initial
Purchase Price of, or repurchase, such Asset on account of any Defect arising
from a Surviving Representation and Warranty in accordance with Section
5.4(b)(ii), Section 5.4(c) and Article X hereof.
(b) PURCHASER'S CLAIM OF BREACH OF REPRESENTATION AND
WARRANTY. In order to claim a Defect resulting from a breach of a
representation and warranty with respect to an Asset, Purchaser shall execute
and deliver to Seller a completed Certificate of Defective Asset no later than
(i) the last day of the Due Diligence Period with respect to all Due Diligence
Representations and Warranties under Section 7.2 hereof and with respect to a
Defect relating to any Surviving Representation and Warranty of which Purchaser
is then aware, or (ii) the earlier of (x) thirty (30) days following the
discovery by Purchaser or (y) the Surviving Representation Expiration Date with
respect to a Defect relating to a Surviving Representation and Warranty of
which Purchaser was not aware on or before the last day of the Due Diligence
Period. The completed Certificate of Defective Asset shall set forth (A) the
identity of the Asset, (B) the exact nature of the claimed Defect and the
manner in which the claimed Defect has a material adverse effect on the value
of the related Asset, (C) the section or subsection of this Agreement under
which such Defect is claimed, and (D) detailed evidence of the existence of the
Defect, including, but not limited to, the identity of, and any copy of any
materials provided by, any third party that performed any analysis or provided
any cure estimate or any other information with respect to such claimed Defect.
Within fifteen (15) days after delivery of any Certificate of Defective Asset,
Purchaser shall execute and deliver to Seller an additional Certificate of
Defective Asset (the "Supplemental Certificate of Defective Asset"), in
substantially the form as Exhibit E hereto, indicating (X) whether, in
Purchaser's reasonable judgment, the Defect is curable or is not susceptible to
cure, (Y) if Purchaser reasonably judges the Defect to be curable, Purchaser's
detailed description of the proposed cure and reasonable detailed estimate of
the cost to repair or otherwise cure such Defect ("Purchaser's Cure Estimate")
together with a copy of any supporting information prepared by any third party
expert, and (Z) the amount by which Purchaser would have reduced the Initial
Purchase Price with respect to such Asset had Purchaser been aware of such
Defect on the Offer Date (the "Reduction to the Initial Purchase Price").
(c) REMEDIES FOR BREACHES OF REPRESENTATIONS AND WARRANTIES.
In the event a Defective Asset exists and Purchaser has fulfilled the
conditions to the claim of Defect as set forth in Section 5.4(b) above, Seller
shall have the options specified in Section 5.4(d) below. Failure of Purchaser
to provide the proper Certificate of Defective Asset to Seller for each Asset
by no later than the time provided in Section 5.4(b) above for a Defective
Asset shall for all purposes terminate and extinguish any rights of Purchaser
to require Seller to make an election to cure the Defect in, reduce the Initial
Purchase Price of, or repurchase, such Asset; provided, however, that Purchaser
shall have a reasonable opportunity to supplement a Certificate of Defective
Asset if Seller reasonably determines that such certificate was not properly
completed.
If Purchaser, upon purchase of the related Asset, has title
insurance that provides coverage with respect to any condition that might
otherwise constitute a Defect, Purchaser shall seek recourse with respect to
such condition under such title insurance policy and such condition shall not
be considered a Defect. In order to preserve its rights under this Section 5.4
with respect
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to any such condition during the period in which Purchaser is pursuing its
obligations hereunder to seek recourse against such title policy, Purchaser may
submit a Certificate of Defective Asset in accordance with Section 5.4(b) with
respect to any such Asset for which Purchaser reasonably believes it had title
insurance at the time of purchase of such Asset, and, if coverage thereunder is
subsequently determined not to have existed through no fault of Purchaser,
whether by its action or inaction, the sixty (60) day time period under Section
5.4(d) for Seller to make its elections thereunder shall commence as of the
date of such determination.
(d) PROCEDURE FOR SELLER'S ELECTION OF REMEDY WITH RESPECT TO
A CERTIFICATE OF DEFECTIVE ASSET. In the event Purchaser delivers a
Certificate of Defective Asset as provided in Section 5.4(b) above, Seller
shall, no later than sixty (60) days after receipt of such Certificate, notify
Purchaser in writing that (i) Seller disputes (x) the existence of such Defect
or (y) the reasonableness of Purchaser's Cure Estimate or (z), if Purchaser has
stated that it believes such Defect is not curable, such statement, and in any
of such cases, the basis for any such position, including, if appropriate and
then available without undue delay or expense, evidence that no Defect exists
or that such Defect is susceptible to cure (which denial shall not be
dispositive as to the existence or absence of a Defect, whether with respect to
the susceptibility of such Defect to cure or the reasonableness of Purchaser's
Cure Estimate); or (ii) Seller intends to attempt to cure such Defect within
the Cure Period; or (iii) Seller has elected, at its option, to reduce the
Initial Purchase Price with respect to such Asset by either the amount
specified by Purchaser as Purchaser's Cure Estimate or the Reduction to the
Initial Purchase Price, respectively, as set forth in Section 5.4(b), which
amount shall be rebated to Purchaser not later than thirty (30) days after
delivery of Seller's notice to Purchaser of such election; or (iv) Seller has
elected to repurchase the Asset from Purchaser at the Repurchase Price; or (v)
with respect to Real Property to which Purchaser or a Qualified Affiliate, as
the case may be, has not yet taken title, Seller has elected to pay all sums
due under any Interim Mortgage Loan relating to such Real Property then
existing and terminate the Sales Contract with respect thereto. If Seller
fails to make the required election within said sixty (60) day period,
Purchaser shall send a second demand to Seller, which shall state that should
Seller fail to timely respond within five (5) Business Days as to its election,
Seller shall be deemed to have agreed to repurchase the Asset. In the event
Seller then shall fail to timely respond to such second demand, Seller shall be
required to repurchase the Asset at the Repurchase Price. Failure to so send
such second demand to Seller shall not diminish Purchaser's rights hereunder
except that the period within which Seller must make an election hereunder
shall be extended until five (5) days from the date such second demand is
actually delivered to Seller.
At least thirty (30) days, but no more than forty (40) days
prior to the end of the Cure Period, if Purchaser had previously received
notification from Seller (i) that Seller intended to attempt to cure the
Defective Asset and Purchaser has not received notification from Seller (or is
not otherwise aware) that the Defect has been cured or (ii) that Seller expects
that the Defect in the Asset will be cured by the end of the Cure Period,
Purchaser shall send a Deletion Certificate, in substantially the form attached
hereto as Exhibit F, to Seller stating that such Defective Asset will be
subject to repurchase at the Repurchase Price if such Defect has not been cured
within the Cure Period. Failure to so send such Deletion Certificate to Seller
shall not diminish Purchaser's rights hereunder except that the Cure Period
shall be extended until thirty (30) days from the date such Deletion
Certificate is actually delivered to Seller.
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Section 5.5 PROCEDURE IN RESPECT OF A STRUCTURAL DEFECT OR
NATURAL CONDITION. In response to a Certificate of Defective Asset with
respect to a Structural Defect (as such term is defined below) or Natural
Condition, all as provided in Section 5.5(a)(i) below, if Seller elects to
repair or otherwise cure such Structural Defect or incur additional engineering
or entitlement costs with respect to a Natural Condition, Seller shall be
obligated to pay for such repairs or other costs only to the extent that the
cost thereof exceeds (i) any amount to repair or cure identified in the Asset
Valuation Package or otherwise provided in writing to Purchaser on or before
the Due Diligence Cut-Off Date (the "Disclosed Remedial Cost Estimate") plus
(ii) the greater of two percent (2.0%) of the Initial Purchase Price of the
Asset, as shown on the Mortgage Loan and Real Property Schedule, or Fifty
Thousand Dollars ($50,000). A Structural Defect or Natural Condition shall not
give rise to any obligations of Seller hereunder without Purchaser's delivery
to Seller during the Due Diligence Period of sufficient specific information as
to the nature of the Structural Defect or Natural Condition, the estimated cost
to cure the Structural Defect or Natural Condition, the effect of the
Structural Defect or Natural Condition upon the use of the Mortgaged Property
and other information relevant under the circumstances for Seller to make its
election based upon the information submitted as part of the Certificate of
Defective Asset in respect of a Mortgage Loan.
(a)(i) Purchaser shall be entitled to deliver a Certificate
of Defective Asset with respect to a Structural Defect or Natural Condition in
the event that during the Due Diligence Period Purchaser discovers the
existence of either one or more defects in the improvements, fixtures (other
than carpet and floor coverings) or mechanical systems (including, but not
limited to, electrical, plumbing, elevator and heating, ventilation and air
conditioning) comprising a Mortgaged Property or Real Property ("Structural
Defect") or one or more Natural Conditions that, in either case, existed prior
to the Closing Date and either (A)(i) was not disclosed in the Due Diligence
Materials or otherwise provided in writing to Purchaser on or before the Due
Diligence Cut-Off Date, (ii) was not actually known to Purchaser prior to the
Offer Date (and Purchaser shall be deemed to have known about such Structural
Defect or Natural Condition if same is apparent from a physical inspection of
the Mortgaged Property or Real Property, as the case may be, by a person who is
not an expert on such Natural Conditions or Structural Defects), and (iii) (X)
with respect to a Structural Defect, would require the investment of not less
than the greater of two percent (2.0%) of the Initial Purchase Price of the
Asset, as shown on the Mortgage Loan and Real Property Schedule, or Fifty
Thousand Dollars ($50,000) to repair or otherwise cure, or (Y) with respect to
a Natural Condition, would be the sole cause of an increase in the cost to
develop the portion of the Mortgaged Property or Real Property, as the case may
be, intended to be developed (for the use indicated in the Due Diligence Report
or otherwise provided in writing to Purchaser on or before the Due Diligence
Cut-Off Date) of not less than the greater of two percent (2.0%) of the Initial
Purchase Price of the Asset, as shown on the Mortgage Loan and Real Property
Schedule, or Fifty Thousand Dollars ($50,000), or would require the investment
of not less than (a) the Disclosed Remedial Cost Estimate plus (b) the greater
of two percent (2.0%) of the Initial Purchase Price of the Asset, as shown on
the Mortgage Loan and Real Property Schedule, or Fifty Thousand Dollars
($50,000) to be expended to remove or negate the effects of same (in compliance
with all applicable laws, rules and regulations), as determined by a Seller-
Approved Contractor, or (B)(i) was disclosed in the Due Diligence Materials for
the related Asset, and (ii)(X) with respect to a Structural Defect, would
require the investment of not less than (a) the Disclosed Remedial
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Cost Estimate plus (b) the greater of two percent (2.0%) of the Initial
Purchase Price of the Asset, as shown on the Mortgage Loan and Real Property
Schedule, or Fifty Thousand Dollars ($50,000) net of any amount thereof
recoverable from third parties to be expended to repair or otherwise cure same,
as determined by a Seller-Approved Contractor, or (Y) with respect to a Natural
Condition, would be the sole cause of an increase in the cost to develop the
portion of the Mortgaged Property or Real Property, as the case may be,
intended to be developed (for the use indicated in the Due Diligence Materials,
or otherwise provided in writing to Purchaser on or before the Due Diligence
Cut-Off Date) of not less than (a) the Disclosed Remedial Cost Estimate plus
(b) the greater of two percent (2.0%) of the Initial Purchase Price of the
Asset, as shown on the Mortgage Loan and Real Property Schedule, or Fifty
Thousand Dollars ($50,000) or would require the investment of not less than (a)
the Disclosed Remedial Cost Estimate plus (b) the greater of two percent (2.0%)
of the Initial Purchase Price of the Asset, as shown on the Mortgage Loan and
Real Property Schedule, or Fifty Thousand Dollars ($50,000) to be expended to
remove or negate the effects of same (in compliance with all applicable laws,
rules and regulations), all as determined by a Seller-Approved Contractor.
Seller shall, in response to its receipt of a Certificate of Defective
Asset from Purchaser with respect to a Structural Defect or Natural Condition,
at Seller's sole option, elect within thirty (30) days after receipt of such
Certificate of Defective Asset either to (W) with respect to a Structural
Defect, repair or otherwise cure such Structural Defect, or, with respect to a
Natural Condition, remove or negate the effects of such Natural Condition;
provided, however, that even if Seller elects to repair or otherwise cure such
Structural Defect or remove or negate the effects of such Natural Condition,
Seller shall be obligated to pay for the cost thereof only to the extent that
same exceeds (i) the Disclosed Remedial Cost Estimate plus (ii) the greater of
two percent (2.0%) of the Initial Purchase Price of the Asset, as shown on the
Mortgage Loan and Real Property Schedule, or Fifty Thousand Dollars ($50,000),
or (X) repurchase the Asset at the Repurchase Price as provided in Section 10.2
hereof, or (Y) with respect to Real Property to which Purchaser, Affiliate
Purchaser or a Qualified Affiliate, as the case may be, has not yet taken
title, pay all sums due under any Interim Mortgage Loan relating to such Real
Property then existing and terminate the Sales Contract with respect thereto,
or (Z) permit Purchaser to revalue the Asset as described hereunder. Seller's
obligation to make such election shall be conditioned upon Purchaser's delivery
to Seller of sufficient specific information as to the nature of the Structural
Defect or Natural Condition, the estimated cost to cure the Structural Defect
or, with respect to a Natural Condition, the cost to remove or negate the
effects of same, the effect of the Structural Defect or Natural Condition upon
the use or development of the Mortgaged Property or Real Property, as the case
may be, and other information relevant under the circumstances for Seller to
determine whether there is a Structural Defect or Natural Condition and to make
the elections and other determinations required hereunder, along with the
aggregate of (i) the Disclosed Remedial Cost Estimate plus (ii) the greater of
two percent (2.0%) of the Initial Purchase Price of the Asset, as shown on the
Mortgage Loan and Real Property Schedule, or Fifty Thousand Dollars ($50,000),
with respect to such Structural Defect or Natural Condition, which amount may
be held in escrow, until such time as Seller has made its election whether to
cure, repurchase or revalue the Defective Asset, for use by Seller in its
efforts to cure or negate the effect of such Structural Defect or Natural
Condition.
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(ii) If Seller elects to permit Purchaser to revalue the
Asset in accordance with Section 5.5(a)(i) hereof, Purchaser shall retain a
Valuation Agent to revalue such Asset as of the Closing Date.
(iii) If Seller elects to permit Purchaser to revalue the
Asset in accordance with Section 5.5(a)(i) hereof, the Asset shall be revalued
in accordance with the valuation process described in Paragraph (b) below.
At least thirty (30) days, but no more than forty (40) days,
prior to the end of the Cure Period, if Purchaser had previously received
notification from Seller (i) that Seller intended to attempt to cure the
Defective Asset and Purchaser has not received notification from Seller (or is
not otherwise aware) that the Defect has been cured or (ii) that Seller expects
that the Defect in the Asset will be cured by the end of the Cure Period,
Purchaser shall send a deletion certificate, in substantially the form attached
hereto as Exhibit F ("Deletion Certificate"), to Seller stating that such
Defective Asset will be subject to repurchase at the Repurchase Price if such
Defect has not been cured within the Cure Period. Failure to so send such
Deletion Certificate to Seller shall not diminish Purchaser's rights hereunder
except that the Cure Period shall be extended until thirty (30) days from the
date such Deletion Certificate is actually delivered to Seller.
(b) Any revaluation of the Assets under this Section 5.5
shall be effected through a valuation process for each Asset as follows:
(i) Purchaser shall promptly appoint the
Valuation Agent to determine the Valuation of each Revalued Asset
("Valuation" herein) and shall notify Seller of its selection. The
Valuation Agent shall render a report (the "Valuation Report") as to
the Valuation of the Revalued Asset addressed to Seller and Purchaser
within ninety (90) days of appointment.
(ii) In the event that the designated Valuation
Agent is not eligible or capable of providing a Valuation in
accordance with this Section 5.5, Seller shall designate a new
Valuation Agent.
(iii) With regard to any Valuation Report rendered
under this Section 5.5(b), except as provided in Section 5.5(c) below,
the fees and other costs of the Valuation Agent shall be borne
one-half by Purchaser and one-half by Seller.
(iv) Purchaser shall instruct the Valuation Agent
appointed hereunder that in making its determination of the Valuation
of any Asset as of the Closing Date, the Valuation Agent shall follow
the instructions specified on Exhibit G attached hereto, taking into
account the assumptions (and only such assumptions, except to the
extent that the Valuation Agent finds it reasonably necessary to
modify one or more assumptions and then only upon the prior written
consent of Purchaser and Seller) set forth in this Section 5.5(b)
hereof.
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(v) Upon determination of the Valuation in
accordance with the foregoing, the Valuation Agent shall execute a
valuation certificate in substantially the form attached hereto as
Exhibit H (the "Valuation Certificate") indicating the Valuation. The
product of the Valuation multiplied by the Offer Percentage shall be
inserted as the Adjusted Purchase Price for each Revalued Asset on the
Mortgage Loan and Real Property Schedule in accordance with Section
2.3 hereof and shall be used to calculate the Adjusted Purchase Price.
For all Assets which are not Revalued Assets, the Adjusted Purchase
Price shall be the Initial Purchase Price.
(vi) With respect to any Interim Mortgage Loan,
the Valuation Agent, pursuant to the valuation process outlined in
this Section 5.5, will be instructed to value the underlying Mortgaged
Property. The value determined to be the value of the underlying
Mortgaged Property shall be deemed the Valuation for purposes of
calculating the Adjusted Purchase Price.
(vii) In the event of the adjustment between the
Initial Purchase Price and the Adjusted Purchase Price (the amount of
such adjustment herein, a "Shortfall"), Seller and Purchaser shall
take all necessary action to amend the Asset Documents, Loan and
Security Agreement and related documents to reflect the Shortfall; and
an amount equal to twenty-five percent (25.0%) of the aggregate amount
of any such Shortfall plus interest on the Shortfall from the Cut-Off
Date to the Revaluation Adjustment Date, as such term is defined in
the Loan and Security Agreement, at the Applicable Rate shall be
refunded to Purchaser within ten (10) Business Days after the
determination of same has been made and the balance of the aggregate
amount of the Shortfall shall be held by Seller to be applied toward
the next principal payment to be made by Purchaser in connection with
Seller's financing of the sale transaction contemplated hereby.
(viii) The Valuation Agent shall be instructed to
use all assumptions used in determining the Valuation of the Asset, as
reflected in the Due Diligence Materials, or with respect to any Asset
or parcel of Mortgaged Property for which Seller's Valuation was not
contained in the Due Diligence Materials, which assumptions are (i)
reasonable as of July 1, 1993 and (ii) consistent with the assumptions
used in those Valuations performed by Seller which were contained in
the Due Diligence Materials, and shall be applied in following the
instructions described in Exhibit G, unless the calculations pursuant
to a particular instruction would have yielded a different result if
the Valuation Agent that determined the value as reflected in the Due
Diligence Materials had considered the Structural Defect or Natural
Condition in performing such calculations.
(ix) If a calculation pursuant to a particular
instruction in Exhibit G would yield a different result if the
Valuation Agent modified the assumptions used in performing the
required calculation (1) to reflect the cost to (X) repair or
otherwise cure the Structural Defect or (Y) remove or otherwise negate
the effect of a Natural Condition (but only to the extent (with
respect to both (X) and (Y) above) that the cost thereof exceeds (i)
the Disclosed Remedial Cost Estimate plus (ii) the greater of two
percent (2.0%) of the Initial Purchase Price of the Asset, as shown on
the Mortgage Loan and Real Property Schedule,
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or Fifty Thousand Dollars ($50,000), net of any amount thereof
recoverable from third parties), that would cause the value of the
Asset to be reduced by more than (i) the Disclosed Remedial Cost
Estimate plus (ii) the greater of two percent (2.0%) of the Initial
Purchase Price of the Asset, as shown on the Mortgage Loan and Real
Property Schedule, or Fifty Thousand Dollars ($50,000), for, with
respect to a Structural Defect, the repair or cure of such Structural
Defect or, with respect to a Natural Condition, the removal or
negation of the effects of such Natural Condition and, in both cases,
net of any amount thereof recoverable from third parties (such as
tenants, insurers, contractors or bondsmen) or other participants, or
(2) in the alternative, to reflect the permanent reduction (X) with
respect to a Structural Defect, in net rental income that would cause
the value of the Asset to be reduced by more than (i) the Disclosed
Remedial Cost Estimate plus (ii) the greater of two percent (2.0%) of
the Initial Purchase Price of the Asset, as shown on the Mortgage Loan
and Real Property Schedule, or Fifty Thousand Dollars ($50,000), for
the repair or cure of such Defect that would result if such repair or
other cure were not performed, or (Y) with respect to a Natural
Condition, in the value of the Asset to be reduced by more than (i)
the Disclosed Remedial Cost Estimate plus (ii) the greater of two
percent (2.0%) of the Initial Purchase Price of the Asset, as shown on
the Mortgage Loan and Real Property Schedule, or Fifty Thousand
Dollars ($50,000), for the cost to remove or negate the effects of the
Natural Condition, if the Natural Condition was not removed or its
effects not negated, then in both the situation of a Structural Defect
or a Natural Condition, the Valuation Agent shall be instructed to
modify the assumptions or calculations at issue as described in clause
(1) or (2) using the modification method that would yield the lesser
adjustment in the Valuation of the Asset. No other assumption or
calculation shall be modified by the Valuation Agent unless Seller and
Purchaser grant their prior written consent.
(x) The assumed cost to repair or otherwise cure
the Structural Defect or to remove or negate the effect of the Natural
Condition applied under the method described in clause (1) of Section
5.5(a)(iii)(B) above, shall be provided by an engineering firm
reasonably acceptable to Seller and qualified to make such a
determination and shall be based upon reasonable estimates as to cost
for goods and services necessary to (X) with respect to a Structural
Defect, cure the Structural Defect so as to render the defective
structure serviceable for the uses for which the improvements or
fixtures were designed or (Y) with respect to a Natural Condition,
render the Mortgaged Property or Real Property, as the case may be (or
portion thereof), in a condition suitable for development (for the use
indicated in the Due Diligence Materials or otherwise provided in
writing to Purchaser on or before the Due Diligence Cut-Off Date).
(xi) Improvements, fixtures or mechanical systems
shall not be deemed to have a Structural Defect (1) solely by reason
of the failure of the improvements, fixtures or mechanical systems to
have a design or function satisfactory for a new or unintended use or
purpose, (2) solely by reason of the wear and tear associated with the
operation of such improvements, fixture or mechanical system, unless
the wear and tear is in excess of that which could reasonably be
expected based on a limited sight inspection and the inspection report
contained in the Investor Due Diligence Package, (3) solely by reason
of deferred
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maintenance, (4) solely by reason of having outlived its useful life
or its functional utility, (5) solely by reason of the requirements of
any law, rule, regulation or code relating to such improvements,
fixtures or mechanical systems which were promulgated, amended,
supplemented or otherwise passed or modified after the earlier of the
date of (i) construction of the improvements on the Mortgaged Property
or Real Property, (ii) the issuance of the certificate of occupancy
with respect to such Mortgaged Property or Real Property or (iii) the
origination of the related Mortgage Loan, including, but not limited
to, the Americans With Disabilities Act of 1990 (as set forth in
Chapter 126 of Title 42 of the United States Code), or (6) solely by
reason of any combination of the foregoing.
(xii) A Natural Condition shall not be deemed to be
the sole cause of an increase in the cost to develop Mortgaged
Property or Real Property, as the case may be, to the extent any other
reason exists independent of such Natural Condition which prohibits,
restricts or increases the cost to develop the Mortgaged Property or
Real Property, as the case may be (other than the existence of laws,
rules or regulations which prohibit or impose obligations in
connection with the development of land on which a Natural Condition
exists).
(c) Seller shall have the right to elect, within sixty
(60) days of receipt of the Valuation Certificate, at its sole option, to
repurchase the Asset for the Repurchase Price within ninety (90) days after
receipt of the Valuation Certificate in lieu of making an adjustment in the
Initial Purchase Price of any Asset under this Section 5.5. In the event
Seller repurchases any such Asset, Seller shall reimburse Purchaser for its
reasonable out-of-pocket costs incurred in employing the Valuation Agent to
render the Valuation Certificate. If Seller elects to repurchase an Asset
pursuant to this Section 5.5(c), such Asset shall be treated as a Deleted Asset
and shall not be deemed to be or be treated as a Revalued Asset.
(d) Notwithstanding anything contained herein to the
contrary, Purchaser shall only be entitled to deliver a Certificate of
Defective Asset (i) with respect to an Asset having a Structural Defect if the
cost to repair such Structural Defect would require the investment of more than
(a) the Disclosed Remedial Cost Estimate plus (b) the greater of (x) Fifty
Thousand Dollars ($50,000), or (y) two percent (2.0%) of the Initial Purchase
Price for the applicable Asset (net of any amounts recoverable from third
parties), or (ii) with respect to an Asset on which a Natural Condition exists,
such Natural Condition would be the sole cause of an increase in the cost to
develop the portion of the Mortgaged Property or Real Property, as the case may
be, intended to be developed (for the use indicated in the Due Diligence
Materials or otherwise provided in writing to Purchaser on or before the Due
Diligence Cut-Off Date) of more than (a) the Disclosed Remedial Cost Estimate
plus (b) the greater of (x) Fifty Thousand Dollars ($50,000) or (y) two percent
(2.0%) of the Initial Purchase Price for the applicable Asset (net of any
amounts recoverable from third parties) to be expended to remove or negate the
effects of such Natural Condition, in both the case of a Structural Defect and
a Natural Condition, as determined by a Seller-Approved Contractor (and such
Asset shall not be deemed a Defective Asset or to have a Defect unless the
conditions for delivering a Certificate of Defective Asset are satisfied with
respect thereto.)
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 6.1 PURCHASER'S REPRESENTATIONS.
Each of the following representations and warranties by Purchaser is
true and correct as of the date of delivery of this Agreement and shall be true
and correct on the Closing Date:
(a) AUTHORITY; BINDING ON PURCHASER; ENFORCEABILITY.
Purchaser is a limited partnership and is duly formed, validly existing and in
good standing under the laws of Delaware. Purchaser has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
has the power and authority to execute, deliver and perform this Agreement, and
all related documents and all the transactions contemplated hereby, including,
but not limited to the authority to purchase and acquire the Assets and
servicing thereof in accordance with this Agreement, has duly authorized,
executed and delivered this Agreement and, assuming due authorization,
execution and delivery by each other party hereto, this Agreement and all the
obligations of Purchaser hereunder are the legal, valid and binding obligations
of Purchaser, enforceable in accordance with the terms of this Agreement,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(b) CONFLICT WITH EXISTING LAWS OR CONTRACTS. The
execution and delivery of this Agreement and the performance of its obligations
hereunder by Purchaser will not conflict with any provision of any law or
regulation to which Purchaser is subject; or conflict with or result in a
breach of or constitute a default under any of the terms, conditions or
provisions of any organizational document of Purchaser or any agreement or
instrument to which Purchaser is a party or by which it is bound, or any order
or decree applicable to Purchaser; or result in the creation or imposition of
any lien on any of its assets or property which would materially and adversely
affect the ability of Purchaser to carry out the terms of this Agreement.
Purchaser will obtain any consent, approval, authorization or order of any
court or governmental agency or body required for the execution, delivery and
performance by Purchaser of this Agreement.
(c) DECISION TO PURCHASE. Purchaser is a sophisticated
investor and its offer and decision to purchase the Assets are based upon its
own independent expert evaluations of the Offering Memorandum, the Due
Diligence Materials, the Asset Documents and other materials deemed relevant by
Purchaser and its agents. Purchaser has not relied in entering into this
Agreement upon any oral or written information from Seller or any of its
employees, Affiliates, agents or representatives, other than the Offering
Memorandum, the Due Diligence Materials, the Asset Documents and the
representations and warranties of Seller contained herein. Purchaser further
acknowledges that no employee or representative of Seller has been authorized
to make, and that Purchaser has not relied upon, any statements or
representations other than those specifically contained in this Agreement.
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(d) COMPLIANCE WITH REQUIREMENTS OF OFFERING MEMORANDUM.
Purchaser (i) complied fully and on a timely basis with all requirements set
forth in the Offering Memorandum with respect to its successful offer to
purchase Assets described in such Offering Memorandum, which compliance
included, but was not limited to, the taking of all actions required to be
taken pursuant to the Offering Memorandum on a timely basis and the refraining
from taking any actions prohibited pursuant to the Offering Memorandum and (ii)
complied fully and on a timely basis with all terms and conditions of the
Confidentiality Agreement executed by Purchaser in order to qualify as a
prospective purchaser under the Offering Memorandum, which compliance included,
but was not limited to, the taking of all actions required to be taken pursuant
to the Confidentiality Agreement on a timely basis and the refraining from
taking any actions prohibited pursuant to the Confidentiality Agreement.
Without limiting the foregoing, neither Purchaser nor any of its Affiliates or
agents has communicated with any Mortgagor or guarantor with respect to any
Asset, or any other party to the transaction contemplated herein, including any
junior or senior lienors on or tenants of the Mortgaged Property or the Real
Property, other than a property manager of the Real Property, if any, or any of
their respective officers, employees or agents, without the prior written
consent of Seller.
(e) INCUMBENCY CERTIFICATE. Purchaser has delivered to
Seller an incumbency certificate identifying the officers of Purchaser
authorized to execute this Agreement and all certificates or other
communications which have been or may be delivered hereunder, together with a
specimen signature of each such officer.
(f) INSOLVENCY OF PURCHASER. Purchaser is not insolvent
or bankrupt and there is no pending or threatened insolvency or bankruptcy
proceeding of any kind affecting Purchaser or any of its assets, properties or
business.
(g) VALUATION ASSUMPTIONS. Purchaser acknowledges that
the Valuations set forth in the Mortgage Loan and Real Property Schedule were
developed within the context of a portfolio sale by Seller's Valuation Agent
for the sole purpose of allocating the Initial Purchase Price among the
individual Assets in order to provide a method of determining the Repurchase
Price or Adjusted Purchase Price in the event any Asset is repurchased or
revalued. There are certain standard assumptions as to the timing and amounts
of future cash flows, applicable capitalization and discount rates, timing of
foreclosures and bankruptcies and other factors that might be different if the
Assets had not been valued in the context of this portfolio sale. Purchaser
agrees that the use of the Valuations for any purpose other than their intended
use as described herein and the disclosure of such Valuations to third parties
without Seller's prior consent is strictly prohibited.
(h) OBLIGATIONS ASSUMED. At the Closing, Purchaser shall
purchase and assume, without recourse or warranty, except as specifically set
forth herein, all of Seller's right, title and interest in and to, and
obligations in respect of, the Mortgage Loans, and Purchaser covenants and
agrees that, with respect to such purchase and assumption, it will perform each
and every obligation of Seller to be performed from and after the Closing Date,
as set forth in such documents, including, but not limited to, those
obligations under outstanding letters of credit and in respect of undisbursed
funds, if any, under Mortgage Notes, to the extent and only to the extent that
such
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letters of credit, undisbursed funds and other obligations were fully disclosed
to Purchaser in writing prior to the Closing.
(i) OPINION OF PURCHASER'S COUNSEL. Purchaser shall
deliver on the Closing Date an opinion of counsel for Purchaser (who may be an
employee of Purchaser) opining as to the power, authority and legal right of
Purchaser to execute and deliver the Loan and Security Agreement and all
associated documents entered into by and between Purchaser and Seller or any of
their respective Affiliates, and to perform and observe the terms and
conditions of such instruments, and as to all other things that Seller
reasonably may request in connection therewith, all in form and substance
satisfactory to Seller.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 7.1 SURVIVING REPRESENTATIONS AND WARRANTIES OF SELLER.
Each of the following representations and warranties of Seller is true
and correct as of the date of delivery of this Agreement and shall be true and
correct in all material respects on the Closing Date:
(a) AUTHORITY; BINDING ON SELLER; ENFORCEABILITY. Seller
has taken all necessary action to authorize its execution, delivery and
performance of this Agreement, has the power and authority to execute, deliver
and perform this Agreement and all the transactions contemplated hereby,
including but not limited to the authority to sell, assign and transfer the
Assets in accordance with this Agreement, has duly authorized, executed and
delivered this Agreement and, assuming due authorization, execution and
delivery by each other party hereto, this Agreement and all the obligations of
Seller hereunder are the legal, valid and binding obligations of Seller,
enforceable in accordance with the terms of this Agreement, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) CONFLICT WITH EXISTING LAWS OR CONTRACTS. The
execution and delivery of this Agreement and the performance of its obligations
hereunder by Seller will not conflict with any provision of any law or
regulation to which Seller is subject or conflict with or result in a breach of
or constitute a default under any of the terms, conditions or provisions of any
agreement or instrument to which Seller is a party or by which it is bound or
any order or decree applicable to Seller or result in the creation or
imposition of any lien on any of its assets or property, in each case in any
manner which would adversely affect the ability of Seller to carry out the
terms of this Agreement; and Seller has obtained any consent, approval,
authorization or order of any court or governmental agency or body required for
the execution, delivery and performance by Seller of this Agreement.
(c) LEGAL ACTION AGAINST SELLER. There is no action,
suit or proceeding pending against Seller in any court or by or before any
other governmental agency or instrumentality which
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would adversely affect the ability of Seller to carry out the transactions
contemplated by this Agreement, except as disclosed with respect to any
particular Asset in the Due Diligence Materials or otherwise disclosed to
Purchaser in writing on or before the Due Diligence Cut-Off Date.
(d) REPRESENTATIONS AND WARRANTIES REGARDING THE ASSETS.
Subject to the provisions of Section 7.4 hereof, Seller hereby represents and
warrants that, as to each Mortgage Loan, and the Real Property where indicated,
the following representations and warranties are true and correct in all
respects as of the date of delivery of this Agreement, or as otherwise
specified, and shall be true and correct in all respects as of the Closing
Date:
(i) NO DEFENSE BY MAKER. Except as set forth in
the Due Diligence Materials or otherwise disclosed to Purchaser in writing on
or before the Due Diligence Cut-Off Date, Seller has neither taken an action
nor failed to take an action which would give the Mortgagor a valid defense to
the payment in full of the Mortgage Loan that arises from applicable local,
state or federal laws, regulations and other requirements pertaining to usury
or any other requirements of any federal, state or local law relating to the
origination of such Mortgage Loan, including, but not limited to,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws.
(ii) NO COUNTERCLAIMS. Except as set forth in the
Due Diligence Materials or otherwise disclosed to Purchaser in writing on or
before the Due Diligence Cut-Off Date, such Mortgage Loan is not subject to any
right of rescission, set-off, abatement, diminution, counterclaim or defense
that adversely affects the ability of Seller or its assigns to enforce the
provisions of the Mortgage Note or the Mortgage or realize against the
Mortgaged Property subject to such Mortgage, and no such claims have been
asserted as of the date hereof with respect to the Mortgage Loan, and if so
asserted, have either been withdrawn or released.
(iii) AMOUNT OF LOAN. The outstanding principal
amount of the Mortgage Loan as of the Due Diligence Cut-Off Date was not less
than such amount as set forth in the Mortgage Loan and Real Property Schedule
and the current interest rate, current required monthly payment, and the
Current Fully Extended Maturity Date of the Mortgage Loan are as set forth in
the Mortgage Loan and Real Property Schedule.
(iv) ENFORCEABILITY. The Mortgage Note and the
related Mortgage are each the legal, valid and binding obligation of the maker
or obligor thereof, and contain customary and enforceable provisions that, in
the event of a breach of a provision thereof, will enable the holder to bring
an action or proceeding to foreclose the lien of the Mortgage in accordance
with California law, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or law).
(v) SELLER'S OWNERSHIP AND RIGHT TO SELL. Seller
is the sole owner and holder of the Mortgage Loan and the Real Property and has
the right to sell the Mortgage Loan and the Real Property free and clear of any
valid claims of third parties.
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(vi) NO MODIFICATION. Seller has not modified the
related Mortgage or Mortgage Note (in the form contained in the Investor File),
or satisfied, cancelled or subordinated such Mortgage or Mortgage Note in whole
or in part or released all or any portion of the Mortgaged Property from the
lien of the Mortgage, or executed any instrument of release, cancellation or
satisfaction, except by written instrument as disclosed in the Due Diligence
Materials or otherwise disclosed to Purchaser in writing on or before the Due
Diligence Cut-Off Date.
(vii) DISBURSEMENT OF LOAN PROCEEDS. The Mortgagor
does not have the right to disbursement of additional loan proceeds or future
advances with respect to the Mortgage Loan except as such right is disclosed in
the Portfolio Summary Spreadsheet contained in the Due Diligence Materials or
otherwise disclosed to Purchaser in writing on or before the Due Diligence
Cut-Off Date.
(viii) CROSS-COLLATERALIZATION. The Mortgage Loan
is not cross collateralized with any other mortgage loan except as such cross
collateralization is disclosed in the Portfolio Summary Spreadsheet contained
in the Due Diligence Materials or otherwise disclosed to Purchaser in writing
on or before the Due Diligence Cut-Off Date.
(ix) TRUSTEE'S SALE SET-ASIDE. Seller has taken
no action that would give the Mortgagor a valid claim to set aside a
non-judicial foreclosure of the related Mortgage.
(e) INCUMBENCY CERTIFICATE. Seller has delivered to
Purchaser an incumbency certificate identifying the officers of Seller
authorized to execute this Agreement and all certificates or other
communications which have been or may be delivered hereunder, together with a
specimen signature of each such officer.
Section 7.2 DUE DILIGENCE REPRESENTATIONS AND WARRANTIES OF
SELLER.
Subject to the provisions of Section 7.4 hereof, Seller hereby
represents and warrants that, as to each Mortgage Loan or Real Property, as
indicated below, the following representations and warranties are true and
correct in all material respects as of the date of delivery of this Agreement,
or as otherwise specified, and shall be true and correct in all material
respects as of the Closing Date:
(a) DUE DILIGENCE MATERIALS. As of the Due Diligence
Cut-Off Date, the Asset Data Sheet, Portfolio Summary Spreadsheet and document
inventory, all of which are contained in the Investor Due Diligence Package,
reflect accurately in all respects the information set forth in the Asset File
with respect to such Asset, provided that such Due Diligence Materials purport
only to reflect information as it appears on the face of the documents and
other papers in such Asset File and does not purport to verify the accuracy of
the facts recited in such documents and other papers.
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(b) VALIDITY OF COLLATERAL DOCUMENTS. Each Security
Agreement related to each Mortgage Loan and referenced in the Due Diligence
Materials creates a valid security interest in the property described therein.
(c) ASSET DOCUMENTS. The copies of the grant deed in
respect of the Real Property, and the Mortgage Note and Mortgage and any
documents modifying the terms of the Mortgage Note and Mortgage included in the
Due Diligence Materials are true and correct copies of the documents they
purport to be and have not been superseded, amended, modified, cancelled or
otherwise changed in any respect except as set forth in the Due Diligence
Materials or otherwise disclosed to Purchaser in writing on or before the Due
Diligence Cut-Off Date.
(d) CONDEMNATION. To the Best of Seller's Knowledge (as
hereafter defined), there is no pending or threatened condemnation proceeding
or similar proceeding affecting the Mortgaged Property or the Real Property, as
the case may be, or any part thereof which could have an adverse effect upon
the use of that Mortgaged Property or the Real Property for its intended
purposes, except as set forth in the Due Diligence Materials or otherwise
disclosed to Purchaser in writing on or before the Due Diligence Cut-Off Date.
As used herein, "to the Best of Seller's Knowledge" means, as to any Asset,
knowledge as to which Seller has received written notice or which is the actual
present knowledge of the current officers of Seller who are primarily
responsible for such Asset, as the case may be, without any independent
investigation or inquiry whatsoever, and expressly excluding any knowledge of
any other former officer of Seller.
(e) LITIGATION. To the Best of Seller's Knowledge as of
the Due Diligence Cut-Off Date, there is no litigation, proceeding or
governmental investigation pending, or any order, injunction or decree
outstanding, existing or relating to any Asset or the related Mortgaged
Property which could have an adverse effect upon such Asset, except as set
forth in the Due Diligence Materials or otherwise disclosed to Purchaser in
writing on or before the Due Diligence Cut-Off Date.
(f) COMPLIANCE WITH LAWS. To the Best of Seller's
Knowledge and except as disclosed in the Due Diligence Materials or otherwise
disclosed to Purchaser in writing on or before the Due Diligence Cut-Off Date,
(i) no currently applicable zoning, building, or other federal, state or
municipal law, ordinance, regulation, or any restrictive covenant is currently
violated by the current maintenance, operation, occupancy, or use of any of the
Mortgaged Property or the Real Property, as the case may be, in its present
manner such that the violation would adversely affect the current operation,
occupancy or other use of the Mortgaged Property or the Real Property and (ii)
all licenses, permits, inspections, authorizations, certifications and
approvals required by all governmental authorities having jurisdiction over the
current operation of the Mortgaged Property and the Real Property have been
performed or issued and paid for and are in full force and effect.
(g) TITLE INSURANCE. A valid and enforceable ALTA or
CLTA policy of title insurance or CLTA owner's binder, as the case may be, or
any other form customarily approved by institutional investors in the
jurisdiction in which the Mortgaged Property or Real Property is located has
been issued by and is the binding obligation of a title insurer qualified to do
business
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in the jurisdiction where the Mortgaged Property or Real Property is located
and, with respect to the Mortgaged Property, in an amount not less than the
principal amount of the Mortgage Note secured by such Mortgaged Property at
origination and, with respect to the Real Property, in an amount not less than
the current appraised value of such Real Property or the amount of the original
Mortgage Note that had been secured by such Real Property, whichever is less,
and such policy is presently in full force and effect and all premiums with
respect thereto have been paid in full. With respect to each Mortgage Loan,
each such title insurance policy insures Seller and its successors and assigns
that the Mortgage securing such Mortgage Loan is a valid first lien on the
Mortgaged Property (or that such Mortgage has the lien priority noted on the
Mortgage Loan and Real Property Schedule) and is otherwise free and clear of
encumbrances, liens and exceptions having priority over the lien of the
Mortgage, subject only to those exceptions set forth in the Due Diligence
Materials, and such exceptions are customarily acceptable to institutional
lenders in the jurisdiction in which the Mortgaged Property is located. Seller
has not, by its action or inaction, adversely affected any of its rights under
any such title insurance policy or the priority of any such Mortgage as insured
by such title insurance policy. With respect to each Interim Mortgage Loan,
Purchaser can obtain during the Due Diligence Period, upon the payment of the
applicable premium, a valid and enforceable policy of title insurance, from a
title insurer qualified to do busines in the jurisdiction where the Real
Property is located, in an amount not less than the Initial Purchase Price for
such Asset. Such policy of title insurance shall insure Purchaser and its
assigns that such Interim Mortgage is a valid and enforceable first or, with
respect to those Assets specifically identified in the Due Diligence Materials
as being subject to an existing first lien, second lien on the Real Property
described therein and such Real Property is otherwise free and clear of
encumbrances, liens, and exceptions having priority over the lien of such
Interim Mortgage, subject only to those exceptions set forth in the Due
Diligence Materials. No title exceptions contained in any such policy of title
insurance adversely interfere with the current use of the related Mortgaged
Property or Real Property, except as otherwise disclosed in the Due Diligence
Materials or to Purchaser in writing on or before the Due Diligence Cut-Off
Date.
(h) REAL ESTATE TAXES. As of the Due Diligence Cut-Off
Date, there were no unpaid real property taxes due and payable against the
related Mortgaged Property or Real Property except as disclosed in the Due
Diligence Materials or otherwise disclosed to Purchaser in writing on or before
the Due Diligence Cut-Off Date. For the purpose of this representation and
warranty (and otherwise as used in this Agreement with respect to whether real
property taxes are "due and payable"), real estate taxes shall not be deemed to
be due and payable until the Business Day immediately preceding the date on
which such taxes would become delinquent.
(i) FLOOD INSURANCE. If, upon origination of the
Mortgage Loan or the original obligation secured by the Real Property, the
Mortgaged Property or the Real Property was in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and the flood insurance described below has been made
available), a flood insurance policy covering improved Mortgaged Property and
Real Property only and meeting the requirements of the current guidelines of
the Federal Insurance Administrator is in effect with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least
of (A) the unpaid principal balance of the Mortgage Loan, (B) the full
insurable value of the
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Mortgaged Property or the Real Property, as the case may be, or (C) the maximum
amount of insurance which was available under the Flood Disaster Protection Act
of 1973.
(j) HAZARD INSURANCE. The Mortgage Loan obligates the
Mortgagor thereunder to maintain a hazard insurance policy with a standard
mortgagee clause at the Mortgagor's cost and expense and there is maintained
such a policy, in an amount not less than the lesser of (x) ninety percent
(90%) of the full replacement cost of the Mortgaged Property or (y) the current
balance of such Mortgage Loan, irrespective of whether evidence of such policy
is available for review in the Investor Due Diligence Package. No notice of
claims therefor or lapse in coverage has been received by Seller with respect
to any Mortgaged Property, except as set forth in the Due Diligence Materials
or otherwise disclosed to Purchaser in writing on or before the Due Diligence
Cut-Off Date.
(k) ENVIRONMENTAL MATTERS. Either a Phase I or a Phase
II environmental inspection report was, to the extent such is available,
provided to Purchaser with regard to the Mortgaged Property or the Real
Property, as the case may be, prior to the Due Diligence Cut-Off Date. No
material amount of Hazardous Substances affects any Asset in excess of the
quantities disclosed in the environmental inspection report for such Asset
delivered to Purchaser, if any. For purposes of this Section 7.2(k) only,
"material" shall mean any amount of Hazardous Substances in violation of law or
equal to or in excess of actionable amounts set forth in any applicable or
relevant environmental regulation, requirement, guideline, policy or standard
promulgated by any local, state or federal governmental entity, or the presence
of friable asbestos with respect to any Asset, in excess of the amounts
commonly used by like property owners in compliance with such environmental
laws to maintain, landscape and operate their properties, and that cannot be
remediated for a cost equal to or less than the greater of (i) two percent
(2.0%) of the Initial Purchase Price of the Asset, as shown on the Mortgage
Loan and Real Property Schedule, or (ii) Twenty-Five Thousand Dollars ($25,000)
plus any remediation amount identified in such environmental inspection report.
Without limiting any other provision of this Agreement, Seller is not and shall
not be responsible or liable in any manner whatsoever for any information or
condition disclosed or failed to be disclosed by any environmental inspection
report delivered hereunder. For purposes hereof, the Summary of Site
Assessment and Site Remediation Activities dated December 1992 delivered to
Purchaser in respect of Asset No. 30 shall be deemed to be a Phase II
environmental inspection report hereunder.
(l) OUTSTANDING CONTRACTS. In respect of all Real
Property to be conveyed to Purchaser or a Qualified Affiliate, as the case may
be, at the end of the Due Diligence Period, there will be no leases or
management, service, supply, security, maintenance or similar contracts with
respect to such Real Property other than (i) leases that were in place as of
the Due Diligence Cut-Off Date and are reflected in the Due Diligence Materials
or, if executed after the Due Diligence Cut-Off Date, were made with the
express consent of Purchaser or pursuant to Purchaser's written guidelines
delivered to Seller, and (ii) those contracts that may be terminated upon no
more than thirty (30) days' notice or that have been approved by Purchaser or
Affiliate Purchaser in writing.
(m) OBLIGATIONS RESPECTING LEASES. To the Best of
Seller's Knowledge in respect of Real Property only and to the extent not
previously disclosed to Purchaser in writing, Seller has received no notice of
any breach of any lease; there are no brokerage commissions payable with
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respect to any lease; and there are no contracts running with the land that are
not terminable upon thirty (30) days' notice.
(n) LEASEHOLD LOANS. Except as disclosed on the Mortgage
Loan and Real Property Schedule, there are no ground leases affecting the
Mortgaged Property or any part thereof. To the Best of Seller's Knowledge with
respect to each leasehold loan described on the Mortgage Loan and Real Property
Schedule, except as otherwise disclosed in the Due Diligence Materials:
(i) the ground lease described in the related
Mortgage is valid and enforceable, is in full force and effect, and is binding
upon the parties thereto and their respective successors and assigns, in
accordance with the terms of such ground lease; provided, however, with respect
to Asset No. 21, in the event that Purchaser fails to obtain a waiver or
consent from the ground lessor with regard to the assignment of the Mortgage to
Purchaser (notwithstanding the diligent efforts of Purchaser to obtain such
waiver or consent), such failure shall be deemed a Defect.
(ii) each such ground lease has not been modified,
amended or extended;
(iii) the Mortgagor, as the lessee under each such
ground lease, has performed all obligations under the ground lease to be
performed by the ground tenant;
(iv) neither the ground lessor nor Mortgagor, as
lessee under any such ground lease, is in default under such ground lease;
(v) each such ground lease (or memorandum
thereof) has been recorded in the land records in the jurisdiction in which the
Mortgaged Property is located purporting to create the leasehold estate prior
the recordation of the Mortgage related to such Mortgaged Property; and
(vi) each such ground lease contains leasehold
mortgage loan provisions customarily required by institutional lenders in the
jurisdiction in which the Mortgaged Property is located.
Section 7.3 TERMINATION OF REPRESENTATIONS AND WARRANTIES.
Each of the Surviving Representations and Warranties in Section 7.1
hereof shall survive the Closing and shall terminate on the Surviving
Representation Expiration Date. Each of the Due Diligence Representations and
Warranties in Section 7.2 hereof shall terminate upon the termination of the
Due Diligence Period, as such may terminate by the earlier to occur of the
expiration of time (without prior delivery of a Certificate of Defective Asset)
or the delivery to Seller of an Acceptance Certificate with respect to any
Asset as provided in Section 5.4(a) hereof; except, however, in the event
Purchaser is unable to gain access to any Mortgaged Property in order to
perform its environmental due diligence, the Due Diligence Period for the
representation and warranty made by Seller in Section 7.2(k) shall survive for
a period of ninety (90) days beyond
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the date on which Purchaser first becomes able to gain such access. The
Surviving Representations and Warranties shall survive termination of any Due
Diligence Period and the Closing, except as described above, subject to
Purchaser's obligation to deliver a Certificate of Defective Asset with respect
to a Defect arising from a Surviving Representation and Warranty within the
period provided in Section 5.4(b) hereof.
Section 7.4 SCOPE OF INVESTIGATION AND OTHER DUE DILIGENCE.
Seller has made certain representations and warranties with respect to
the Assets in Sections 7.1 and 7.2. Seller's investigation and other due
diligence with respect to the Assets has been limited. Seller has not verified
whether the representations and warranties are true and correct. Seller and
Purchaser understand that if Seller's representations and warranties are
breached, that the Purchaser is limited to the exercise of its rights and the
remedies expressly set forth herein. In no event shall a breach of a
representation and warranty in this Article VII be used as evidence of or
deemed to constitute bad faith, misconduct or fraud even in the event that it
is shown that Seller, any Affiliate thereof or any of their respective
directors, employees, officers or agents knew or should have known of the
existence of information which was inconsistent with any of the representations
and warranties provided in this Article VII.
Section 7.5 ASSERTION OF CLAIMS.
In the event and at such time as a Claim is brought by a Mortgagor in
respect of any of the Assets, the adverse resolution of which would constitute
a breach of any representation or warranty made by Seller in this Article VII,
Seller, at its option, may (i) participate (at its sole cost and expense) with
Purchaser in the defense of such Claim and in the negotiation of any reasonable
settlement or compromise thereof, or (ii) repurchase, at the Repurchase Price,
the Asset subject to such Claim, or (iii) both.Notwithstanding the foregoing,
Seller's right to elect to repurchase an Asset under this Section 7.5 shall be
terminated and any such election so made shall be null and void, in the event
that Purchaser delivers to Seller in writing an absolute waiver of such breach
and of any right Purchaser may have under this Agreement to deliver a
Certificate of Defective Asset with respect to such Asset (each, a "Release
Notice") and upon Seller's receipt of such Release Notice, Seller shall be
relieved of all obligation to repurchase or provide any of the other remedies
for a Defective Asset provided under this Agreement with respect to such Asset.
If a Release Notice has not been delivered and Seller and Purchaser disagree
over the terms of one or more settlement proposals with respect to such Claim,
Seller may notify Purchaser that Seller intends to repurchase the Asset subject
to such Claim, in which event, if Seller reasonably determines and so notifies
Purchaser that such settlement or compromise must be entered into prior to the
repurchase of such Asset (e.g., if such settlement or compromise offer would
expire and Purchaser and Seller could not effect a repurchase prior to such
expiration), and Purchaser immediately thereafter fails to send a Release
Notice, Purchaser shall enter into such settlement or compromise for the
benefit of Seller (provided Seller advances any funds required in connection
with such settlement) as Seller shall direct.The Repurchase Price shall not be
affected by such settlement or compromise and Seller shall indemnify, defend,
and hold Purchaser harmless from and against any liability or losses relating
to such settlement or compromise. In the event Purchaser delivers a Release
Notice with respect to such Asset, and Purchaser obtains a release of any and
all claims against Seller arising
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out of such Claim, Purchaser shall have the right to settle such Claim and
Seller's right to participate in such setttlement shall terminate. Nothing in
this Section 7.5 shall affect Seller's right to defend itself in respect of any
Claim that may be brought against Seller.
ARTICLE VIII
CERTAIN COVENANTS OF SELLER
Section 8.1 SELLER COVENANTS.
Seller covenants and agrees with Purchaser as follows, it being
understood and agreed that each of the following covenants and agreements, with
the exception of the covenants set forth in Sections 8.1(a), (b), (c), (d), (e)
and (g) which shall survive the Closing, shall terminate upon the Closing Date:
(a) ACCESS TO RECORDS. From and after the date of its
execution of this Agreement, Seller shall make available to Purchaser or cause
to be made available to Purchaser for its inspection, copying and reproduction,
all non-confidential books and records of the type included in the Asset File
that are maintained by, through or for Seller and are related to the Assets.
(b) NOTICE TO MORTGAGORS. At the request of Purchaser,
Seller shall cooperate with Purchaser in notifying on and after the Closing
Date each maker or obligor, or its successors or assigns, under a Mortgage Loan
of the assignment thereof from Seller to Purchaser. Such notification shall be
made by letter prepared by Purchaser in substantially the form attached hereto
as Exhibit I or as mutually agreed by Seller and Purchaser.
(c) NOTICE TO TENANTS. With respect to any tenant then
sending its rent directly to Seller, at the request of Purchaser, Seller shall
cooperate with Purchaser, after the Closing Date as to the Mortgage Loans and
any Real Property conveyed on the Closing Date, and on and after each Real
Property Closing Date, as such term is defined in the Sales Contract as to any
Real Property not conveyed on the Closing Date, in notifying each tenant with
respect to any Mortgaged Property, or any Real Property, of the assignment of
the Real Property or the Mortgage Loan secured by such Mortgaged Property, as
the case may be, from Seller to Purchaser. Such notification shall be by
letter prepared by Purchaser in a form mutually agreed by Seller and Purchaser.
(d) CERTAIN PAYMENTS.
(i) At the Closing, Purchaser shall receive credit (the
"Section 8.1(d) Credit"), in the amount, and applied in the manner, determined
by this subsection 8.1(d). The amount of the Section 8.1(d) Credit shall be
equal to the sum of the following three amounts (the "Creditable Amounts"):
(A) Any of the following amounts which are
actually received by Seller after the Due Diligence Cut-Off Date and on or
before the Closing Date -- any principal payments or prepayments, including
Payment in Full, on a Mortgage Loan of any kind or character, including
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proceeds from any compromises and settlements.
(B) Any of the following amounts which are
actually received by Seller after the Due Diligence Cut-Off Date and on or
before the Closing Date -- any net proceeds of the sale of any Mortgage Loan or
the sale or condemnation of any Mortgaged Property or Real Property, or hazard
insurance proceeds not applied to restore the Mortgaged Property or Real
Property or payable to a prior lienor.
(C) Any of the following amounts which are
actually received by Seller on or before the Closing Date, regardless of when
they are or have been received by Seller -- the interest component of regular
scheduled payments, and prepayments of interest, on the Mortgage Loans, to the
extent such payments and prepayments are attributable to periods commencing on
or after the Cut-Off Date.
(ii) The amount of the Section 8.1(d) Credit shall be
applied as follows:
(A) If the Loan and Security Agreement has not
been executed, the entire Section 8.1(d) Credit shall be applied against the
cash due from Purchaser at the Closing.
(B) If the Loan and Security Agreement has been
executed, the following two adjustments shall be made:
(1) Purchaser shall be deemed to have
made a prepayment on account of the Promissory Note in an amount equal to the
amount that would be required to be paid under the Loan and Security Agreement
if Purchaser, rather than Seller, had received the Creditable Amounts on the
day after the Closing (the "Section 8.1 Deemed Prepayment").
(2) Purchaser shall receive a credit
against the Cash Portion of the Purchase Price equal to the excess, if any, of
the amount of the Section 8.1(d) Credit over the amount of the Section 8.1
Deemed Prepayment.
(iii) With respect to amounts held by a bankruptcy court,
bankruptcy trustee, bankruptcy debtor-in-possession, receiver in foreclosure or
similar third party, or similar account or pursuant to a cash collateral order
or any other account maintained for the benefit of any Asset, and any amounts
actually or constructively received by Seller or Purchaser: (i) if the
existence of same was disclosed in the Due Diligence Materials, Seller's
interest in same shall be assigned to Purchaser along with all of the other
Assets and Asset Documents to be assigned hereunder or, if received by Seller
it shall be paid or credited to Purchaser promptly after receipt thereof, or
(ii) if the existence of same was not disclosed in the Due Diligence Materials,
Seller's interest in same shall be assigned to Purchaser along with all of the
other Assets and Asset Documents to be assigned hereunder and Purchaser shall
pay to Seller at the Closing or as soon thereafter as the amount held as of the
Cut-Off Date is known, the value of said amount determined by Seller in the
manner provided in Exhibit G hereto, utilizing the same assumptions utilized in
the Due Diligence Materials (i.e., assuming said amount is received on the
projected recovery date and is discounted from that date to the Cut-Off Date).
The amount payable to Seller pursuant to (ii)
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above shall not exceed the sum Seller could retain if said sum was received
immediately prior to the Closing Date.
(iv) [Text deleted in original]
(v) Any and all payments received by Seller after the
Closing Date that would have been included in the Creditable Amounts if
received by Seller on or before the Closing Date shall be applied in accordance
with the terms of the Loan and Security Agreement.
(e) INSURANCE. At the request of Purchaser, Seller shall
cooperate with Purchaser in the preparation and mailing by Purchaser to each
hazard and casualty insurer, and to the writing agent for each flood hazard
insurer, for the Assets a request for an endorsement of its policy of insurance
effective on the Closing Date showing Purchaser as the mortgagee or insured
named therein, as the case may be, together with instructions that such
endorsement be forwarded directly to Purchaser, at the address herein specified
for notices.
(f) SERVICING. With respect to the Mortgage Loans from
the date hereof until the Closing Date, Seller shall service and administer the
Mortgage Loans in the manner in which it was servicing such Mortgage Loans
immediately prior to the date hereof. Without the prior written consent of the
Purchaser, Seller shall not, except as required by law or as a prudent lender,
or by the terms of the Asset Documents relating to such Mortgage Loans, or
pursuant to previously negotiated settlement or similar contracts entered into
or pending as of the Offer Date and disclosed to Purchaser in writing on or
before the Offer Date, (i) release any collateral or any party from any
liability on or with respect to the Mortgage Loans, (ii) compromise or settle
any claims of any kind or character with respect to the Mortgage Loans, (iii)
initiate, complete or otherwise take any action with respect to a foreclosure
on any of the Mortgaged Property, except to the extent in Seller's reasonable
judgment such actions are required pursuant to actions taken prior to the Offer
Date, (iv) sell or encumber, or contract to sell or encumber, the Mortgage
Loans, or any portion thereof or any interest therein, or (v) agree to any
amendments or modifications to any such Mortgage Loan. Seller as servicer,
however, may notify Purchaser in the event that an action under (i), (ii),
(iii), (iv), or (v) above should be taken in order to enhance or protect the
value of the Mortgage Loans. In such event, Seller shall be absolved of any
responsibility it may have to take such action unless written consent to such
action has been promptly received by Seller. Upon request of Purchaser, Seller
shall disclose to Purchaser the status of any Mortgage Loan foreclosure in
progress and any actions taken in connection therewith as of the Offer Date.
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[SECTION 8.1(d)(iv)]
(iv) All amounts of delinquent or current interest
received by Purchaser after the Closing Date on account of a Mortgage Loan with
respect to which a payment default exists as of the Cut-Off Date (that is,
there are delinquent amounts due under the Mortgage Loan) shall be applied by
Purchaser first against delinquent or current interest due on account of such
Mortgage Loan after the Cut-Off Date (in any order determined by Purchaser),
and then on account of any delinquent interest due under such Mortgage Loan as
of the Cut-Off Date. Amounts received by Purchaser and applied on account of
delinquent interest due under a Mortgage Loan as of the Cut-Off Date shall be
remitted by Purchaser to Seller promptly after receipt by Purchaser. Seller
agrees that Purchaser shall have no obligation to treat any payments received
by Purchaser as pre-Cut-Off Date interest, except to the extent agreed to by
Purchaser and Mortgagor or as required by applicable law.
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(g) COOPERATION. From and after the Closing Date, Seller
shall in general cooperate with Purchaser, and Purchaser shall cooperate with
Seller, in connection with any litigation or other matter involving the Assets,
but Seller shall not be required to institute any lawsuit or (unless a Person
satisfactory to Seller in Seller's sole discretion agrees to promptly reimburse
Seller or shall indemnify Seller in a manner satisfactory to Seller in Seller's
sole discretion with respect to any such expense) to expend any material sums
of money in connection with such cooperation. On and after the Closing Date,
Seller shall promptly deliver, forward and remit to Purchaser any and all
bills, invoices, insurance policies, letters, documents and other
correspondence or communications of a non-confidential nature relating to the
Assets which are received by Seller.
(h) ENDORSEMENT OF MORTGAGE NOTE. It is hereby
understood and agreed that an endorsement by Seller of a Mortgage Note "without
recourse" and "without any representation or warranty, express or implied,"
whether such endorsement is made on or after the Closing Date, is not intended
to diminish, alter or negate in any way Seller's representations, warranties or
obligations set forth in this Agreement, including but not limited to, the
representations and warranties set forth in Article VII of this Agreement, or
constitute a waiver by Purchaser of, or a limitation or modification on, any of
the rights or remedies under this Agreement. To the extent Purchaser,
following the earlier to occur of the date on which an Asset is accepted by
Purchaser or the expiration of the Due Diligence Period with respect to a
Mortgage Loan, provides evidence reasonably satisfactory to Seller that the use
of an allonge to assign such Mortgage Note, and not an endorsement directly on
the Mortgage Note, has adversely affected the marketability of such Mortgage
Note or that an endorsement is required under applicable law, Purchaser may
request in writing that Seller endorse the Mortgage Note and in connection
therewith, Purchaser shall prepare such endorsement (which shall be identical
in all respects to the allonge delivered at Closing), deliver the original
Morgage Note to Seller and pay all reasonable costs and expenses of Seller in
connection therewith (including, without limitation, reasonable attorneys' fees
and disbursements). Upon satisfaction of the foregoing conditions, Seller
shall sign an endorsement of the Mortgage Note as aforementioned.
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING
The respective obligations of Purchaser and Seller to complete the
purchase and sale of the Assets pursuant to this Agreement are subject to the
fulfillment on or prior to the Closing Date of each of the following additional
conditions to be fulfilled by the other, unless the same is specifically waived
in writing by the party for whose benefit the same is to be fulfilled.
Provided that all conditions to Closing have been satisfied, Purchaser shall be
obligated to purchase the Assets at the Closing for the Initial Purchase Price
irrespective of the fact that Seller or Purchaser may have knowledge that one
or more breaches of Seller's representations and warranties hereunder may
exist. Purchaser's purchase of the Assets as to which such breaches or
conditions are discovered prior to the Closing shall not operate as a waiver of
Purchaser's rights under Section 5.4 or 5.5 hereof.
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Section 9.1 MUTUAL OBLIGATIONS.
(a) PERFORMANCE OF COVENANTS. Seller and Purchaser each
shall have performed all of its covenants and agreements contained herein which
are required to be performed by it on or prior to the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. All of the
respective representations and warranties of Seller in Sections 7.1(a), (b),
and (c) hereof and of Purchaser in Section 6.1 hereof shall be true in all
material respects at and as if made on the Closing Date.
(c) GOVERNMENTAL APPROVALS. All requisite federal, state
and local governmental and regulatory approvals relating to the transactions
contemplated hereby, if any, shall have been obtained.
(d) CORPORATE APPROVALS. Seller and Purchaser shall each
provide the other with certified copies of corporate resolutions approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, together with customary certificates of
incumbency and certificates of good standing, as the others or its counsel may
reasonably require.
Section 9.2 SELLER'S DOCUMENTS.
Seller agrees to execute, deliver and/or provide to Purchaser the
following items, to be delivered at the Closing at the office of Seller or at
such other location as Seller may designate:
(a) For each Mortgage Loan, to be delivered at Closing at
the offices of Seller or such other location(s) as Seller determines, the
original Mortgage Note duly endorsed by means of an allonge by Seller to
Purchaser, without recourse (except as otherwise provided in this Agreement);
the Mortgage; and an assignment of such Mortgage in the form attached hereto as
Exhibit C with such modifications as shall be customary and appropriate under
local laws for recording in the land records in the jurisdiction in which the
related Mortgage Property is located (the "Mortgage Assignment"), transferring
and conveying Seller's rights thereunder, as well as its rights, title and
interest in the Asset Documents of which such Mortgage Note and Mortgage are a
part;
(b) For each Asset, to be delivered at the Closing at the
offices of Seller or such other locations(s) as Seller determines, the
additional Asset Documents and all account histories, payment records and other
documents comprising the Asset File for each Asset, including, but not limited
to, assignments in blank of Seller's rights under any letter of credit,
certificates of deposit or other escrows or deposits and instructions to
insurers, financial institutions or others to the extent necessary to provide
Purchaser with the right to enforce such Asset Documents. Any fees or charges
incurred by Seller in transporting the additional Asset Documents from the
location designated by Seller or in taking other steps at Purchaser's request
under this Section 9.2(b) shall be paid by Purchaser;
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(c) Such other assignments, instruments of transfer, and
other documents held by Seller as Purchaser may reasonably require and prepare
in order to complete the transactions specifically contemplated hereunder
including, but not limited to, the assignment of any UCC-1 financing statement
for the Mortgage Loans which currently exists for the benefit of Seller;
(d) A certificate of Seller reaffirming, subject to the
provisions and limitations of Section 7.4, all representations and warranties
of Seller under Section 7.1, as of the Closing Date; provided, however, that
recourse thereunder shall be limited as set forth in this Agreement;
(e) Corporate resolutions, certificates of incumbency and
certificates of good standing with respect to Seller as may be required by
Purchaser or its counsel pursuant to Section 9.1(d);
(f) For each Mortgage Loan, to be delivered at Closing at
the offices of Seller or such other location(s) as Seller determines, an
assignment of additional collateral for each Mortgage Loan, prepared by
Purchaser, in the form of Exhibit C-1 (the "Additional Collateral Assignment"),
transferring and conveying to Purchaser Seller's rights thereunder and a Notice
to Mortgagor in the form of Exhibit I, prepared by Purchaser;
(g) For each Interim Mortgage Loan, an executed Interim
Mortgage Note and Interim Mortgage in substantially the forms attached hereto
as Exhibit L and Exhibit M (each dated as of the Cut-Off Date); and
(h) The Loan and Security Agreement substantially in the
form attached hereto as Exhibit K.
Section 9.3 PURCHASER'S CLOSING ITEMS.
Purchaser agrees to execute, deliver and/or provide to Seller the
following at Closing:
(a) The portion of the Initial Purchase Price, and other
amounts required under Sections 2.2(b) and (c) hereof, due to be paid by
Purchaser to Seller on the Closing Date;
(b) A certificate of Purchaser reaffirming all
representations and warranties of Purchaser under Section 6.1 as of the Closing
Date; and
(c) Corporate resolutions, certificates of incumbency and
certificates of good standing with respect to Purchaser as may be required by
Seller or its counsel pursuant to Section 9.1(d)[; and].
(d) The Loan and Security Agreement substantially in the
form attached hereto as Exhibit K and a promissory note in an amount equal to
the Financed Portion and all other instruments required under the Loan and
Security Agreement; and
(e) An opinion of Purchaser's counsel as described in
Section 6.1(i) hereof.
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ARTICLE X
REPURCHASE BY SELLER
Section 10.1 MANDATORY REPURCHASE.
Seller shall be required to repurchase, for the Repurchase Price with
respect thereto, any Defective Asset that Seller either (i) has elected to
repurchase under Section 5.4 or 5.5 hereof, or (ii) is required to repurchase
as a result of its failure to cure the Defect under Section 5.4 or 5.5 hereof
within the time periods prescribed therefor, and subject to the following terms
and conditions:
(a) If Seller has elected to repurchase any Asset, the
Repurchase Date for a Defective Asset shall be specified in such election and
shall be a date occurring on or before the date thirty (30) days following the
date of Seller's election to repurchase such Asset. If Seller is deemed to
have elected to repurchase any Asset, the Repurchase Date thereof shall be
ninety (90) days after Seller's receipt of a timely Certificate of Defective
Asset for any Defective Asset If Seller has elected to cure a Defect and such
cure has not been effected, the Repurchase Date for such Defective Asset shall
be thirty (30) days after the expiration of the Cure Period for such Defective
Asset. In any of the above cases, if such ninetieth (90th) day or thirtieth
(30th) is not a Business Day, the Repurchase Date shall be the first Business
Day thereafter.
(b) On the Repurchase Date, Purchaser shall convey, or
cause Affiliate Purchaser or a Qualified Affiliate, as the case may be, to
convey to Seller all right, title and interest in and to the Defective Asset
pursuant to a note endorsement by allonge and a mortgage assignment with
respect to a Mortgage Loan, or grant deed (or other appropriate form of deed)
with respect to Real Property, as the case may be, and other appropriate
documents, and shall make all deliveries and take any other actions on
substantially the same terms and conditions under which Seller had conveyed
such Asset to Purchaser at the Closing, except to the extent of the Defect
giving rise to the subject repurchase and except as otherwise provided in
Section 10.2 hereof. If Purchaser or any Affiliate of Purchaser owns the
Mortgaged Property at the Repurchase Date, whether through foreclosure, deed in
lieu of foreclosure or otherwise, Purchaser shall convey or cause its Affiliate
to convey to Seller all right, title and interest in and to such Mortgaged
Property, pursuant to a grant deed (or other appropriate form of deed), and
other appropriate documents, and shall make all deliveries and take all other
actions on substantially the same terms and conditions under which Seller had
conveyed the related Mortgage Loan to Purchaser under the Mortgage Assignment,
modified in a manner reasonably acceptable to Seller to reflect the fact that
Mortgaged Property is being conveyed instead of a Mortgage Loan, and provided
that the Mortgaged Property shall be so reconveyed in substantially the same
condition it was in when Seller conveyed the related Mortgage Loan to Purchaser
pursuant thereto; provided, however, that if the Defective Asset is required to
be repurchased and Seller has conveyed to a Qualified Affiliate Real Property,
Qualified Affiliate shall be obligated to reconvey or cause to be reconveyed,
such Defective Real Property to Seller substantially in the same condition
under which Seller had conveyed such Real Property to Qualified Affiliate
pursuant hereto.
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(c) For purposes of this Agreement, conveying such
Mortgaged Property or Real Property, as the case may be, in substantially the
same condition shall mean that (i) the physical condition of such property
shall be the same (normal wear and tear excepted), other than in respect of a
fully insured casualty loss, in which event the insurance proceeds shall be
assigned to Seller, (ii) the condition of title to any such Asset and all
related collateral shall be the same as conveyed, except for any changes
thereto such as ownership, which customarily can be expected to occur as a
result of exercising remedies under the related Mortgage Loan, (iii) the
collateral for such Asset is the same, except to the extent that any of such
collateral (including escrows and deposits) was expended for its intended
purposes or otherwise in a prudent manner for the related property, in
accordance with customary servicing standards of prudent institutional
servicers of similar types of Mortgage Loans or Mortgaged Properties, and (iv)
there are no Claims of any parties against Seller that were the result of
actions of Purchaser or any agents, successors or assigns thereof, other than
those as to which Seller shall have received a written indemnification in form
and substance acceptable to Seller from a party whose financial condition is
satisfactory to Seller for purposes of the indemnification. Purchaser
acknowledges and agrees that Purchaser shall indemnify and hold harmless Seller
and its Affiliates from and against any Claim directly or indirectly arising
out of or attributable to the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal, or presence of a
Hazardous Substance on, under, or about any Mortgaged Property or Real Property
that is to be repurchased hereunder while Purchaser owned, operated, managed or
controlled such Mortgaged Property or Real Property, except to the extent that
such Claim arises from Seller's breach of the representation made in Section
7.2(k) hereof.
Section 10.2 REPURCHASE PRICE.
The repurchase of any Asset by Seller pursuant to Sections 5.4, 5.5
and 10.1 hereof shall be at the Repurchase Price for such Asset.
If a Defective Asset has any defect that did not exist when such Asset
was conveyed to Purchaser, Seller may offset against the Repurchase Price the
amount, determined in Seller's reasonable judgment, necessary to accurately and
reasonably compensate Seller for the loss of value resulting from the defect.
In particular, Seller may reduce the amount of the Repurchase Price by the
reduction in the value of a Defective Asset attributable to any (i) failure of
Purchaser to service a Mortgage Loan in accordance with applicable law and
prudent mortgage loan servicing standards for similar commercial Mortgage Loans
or Mortgaged Property, as the case may be, or (ii) failure to reconvey the
Mortgaged Property or Real Property, as the case may be, to Seller in a
condition that is in substantially the same condition on the date of conveyance
determined as provided in Section 10.1(b) hereof (except as may have been
approved by Seller in writing), (iii) failure of Purchaser to reconvey the
Defective Asset to Seller without any encumbrances other than those
encumbrances in existence on the Closing Date, or (iv) any other defect that
did not exist when such Asset was conveyed to Purchaser, whether or not
attributable to the action or inaction or fault of Purchaser. Notwithstanding
the foregoing, the reduction in the Repurchase Price shall not be subject to
any such offset if the reduction in the value of the Defective Asset was (x)
the direct result of actions taken by Purchaser in good faith as the result of
non-negligent judgments made by it in the servicing and enforcement of a
Mortgage Loan, and the disposition of the Mortgage Loan and the underlying
Mortgaged Property, if any, or the disposition of the Real Property, as the
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case may be, provided that Purchaser observes prudent commercial mortgage loan
servicing standards for similar Mortgage Loans or Mortgaged Property, as the
case may be, or (y) with respect to subparagraphs (ii), (iii) and (iv) hereof,
such reduction in value did not result from any action or inaction of
Purchaser, whether direct or indirect, during any period in which such Asset
was held by Purchaser, except that nothing in this paragraph shall limit the
rights of Seller under Section 10.1 hereof.
ARTICLE XI
DEFAULT
Section 11.1 PURCHASER'S DEFAULT.
In the event Purchaser shall default in its obligations to purchase
any Asset or breach a representation or warranty or covenant hereunder, or
otherwise fail to perform its obligations under this Agreement prior to the
Closing hereunder, the Deposit shall be retained by Seller (after notice and
lapse of time as described below), and Seller may avail itself of any rights
and remedies it may have at law or in equity, or under this Agreement with
respect to any such Purchaser default or breach of representations or
warranties. Upon written notification to Purchaser that Seller has declared a
default hereunder, and specifying the grounds for such declaration (the
"Default Notice"), Purchaser shall have five (5) calendar days after receipt of
the Default Notice to notify Seller, in writing, that Purchaser disputes that a
default exists, and state the grounds for such dispute by Purchaser. If
Purchaser does not notify Seller that a dispute exists within such five (5)
calendar day period, Seller shall be unconditionally entitled to retain the
Deposit. If Purchaser sends notice of a dispute to Seller within the
appropriate time period, Seller shall continue to hold such funds as the
Deposit in accordance with the resolution of the dispute. The successful party
or parties shall be reimbursed for all expenses, including reasonable
attorneys' fees incurred in connection with any successful action brought under
this Section 11.1.
Section 11.2 SELLER'S DEFAULT.
In the event Seller shall default in its obligations hereunder, then,
if prior to Closing, the Deposit shall be returned to Purchaser by Seller
(after notice and lapse of time as described below) and Purchaser shall not be
entitled to monetary damages, except for direct out- of-pocket expenses proved
by Purchaser to have been expended by delivering to Seller documentary evidence
thereof satisfactory to Seller, but may avail itself of its equitable rights.
Upon written notification to Seller that Purchaser has declared a default of
Seller hereunder and specifying the grounds for such declaration (the
"Purchaser Default Notice"), Seller shall have five (5) calendar days after
receipt of the Purchaser Default Notice to notify Purchaser in writing that
Seller disputes that a default exists and state the grounds for such dispute by
Seller. If Seller does not notify Purchaser that a dispute exists within such
five (5) calendar day period, Seller shall turn over all amounts held by it
hereunder to Purchaser. If Seller sends notice of a dispute to Purchaser
within the appropriate time period, Seller shall continue to hold such funds as
the Deposit in accordance with this Agreement until such time as the dispute
has been resolved. The Deposit shall then be disbursed in accordance with the
resolution of the dispute. The successful party or parties shall be
49
<PAGE> 56
reimbursed for all expenses, including reasonable attorneys' fees, incurred in
connection with any successful action brought under this Section 11.2.
If such Seller default occurs subsequent to Closing, Purchaser may
avail itself of any rights that Purchaser may have at law or in equity or under
this Agreement, provided, however, that Purchaser's sole remedy for any Defect
in the Assets is to require Seller to elect a remedy for the Assets in
accordance with Section 5.4 or 5.5 hereof. Purchaser shall be reimbursed for
all expenses, including reasonable attorneys' fees, incurred in connection with
any successful action brought under this Section 11.2. Purchaser shall have no
right to consequential damages from Seller.
With respect to a default by Seller which, with regard to this
Agreement, does not have a material adverse impact on Purchaser, Purchaser
shall have no remedy. In no event shall Purchaser have the right to offset
amounts due to Seller under any contract or agreement with Purchaser or any
Affiliate of Purchaser or to offset amounts due to Seller against any damages
on account of default by Seller hereunder.
ARTICLE XII
SUBSEQUENT DOCUMENTATION
At any time, and from time to time hereafter, upon the reasonable
request of Purchaser, and without payment of further consideration to Seller,
other than reimbursement for Seller's out-of-pocket expenses, Seller will do,
execute, acknowledge and deliver, and will cause to be done, executed,
acknowledged and delivered, all such further assignments, transfers,
conveyances, confirmations of powers of attorney issued at Closing and
assurances as may be required in order to better assign, transfer, grant,
convey, assure and confirm to Purchaser, or to collect and reduce to
possession, the Assets as provided for herein.
ARTICLE XIII
NOTICE OF MORTGAGOR CLAIMS OR LITIGATION
Purchaser shall promptly notify Seller of any Claim, threatened Claim,
or litigation filed by a Mortgagor against Seller which arises from or relates
to the Mortgage Loans purchased hereunder.
ARTICLE XIV
FILES AND RECORDS
After the transfer of documents or files to Purchaser pursuant to the
terms of this Agreement, Purchaser agrees that Seller at its expense, shall
have the continuing right to use, inspect, and make extracts from or copies of
any such documents or records, upon reasonable prior notice to Purchaser.
Purchaser further agrees to allow Seller at its expense, the temporary
possession, custody and use of original documents for any lawful purpose and
upon reasonable terms and conditions and upon reasonable prior notice to
Purchaser, and Seller shall indemnify Purchaser for any material costs
resulting from the loss or misuse of any such documents while in Seller's
possession. Before destruction or disposition of any documents or files
transferred
50
<PAGE> 57
hereunder, Purchaser shall attempt to give reasonable notice to Seller and to
allow Seller, at its expense, to recover the same from Purchaser.
ARTICLE XV
SALE OF REAL PROPERTY
In the event that prior to the Closing Date hereunder Seller
forecloses upon a Mortgage Loan or otherwise acquires title to the Mortgaged
Property, subject, however, to Section 8.1(f) hereof, Seller and Purchaser
agree to amend this Agreement and the Mortgage Loan and Real Property Schedule
as appropriate to provide for the sale and transfer of such Mortgaged Property
by Seller to Purchaser[ or, if Seller financing is utilized to effect the sale
hereunder or otherwise at Purchaser's option, an Affiliate Purchaser or a
Qualified Affiliate] in lieu of the related Mortgage Loan.
ARTICLE XVI
NOTICES
Unless otherwise provided for herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered, if sent by registered or
certified mail (return receipt requested), (b) when delivered, if delivered
personally, (c) when transmitted, if sent by facsimile if a confirmation of
transmission is produced by the sending machine (and a copy of each facsimile
promptly shall be sent by ordinary mail) or (d) on the following Business Day,
if sent by overnight mail or overnight courier, in each case to the parties at
the following addresses or facsimile numbers (or at such other addresses or
facsimile numbers as shall be specified by like notice):
(a) If to Seller, at:
City National Bank
Risk Management
606 S. Olive Street, 9th Floor
Los Angeles, CA 90014
Attention: Jeffery Puchalski, Executive Vice President
Fax: (213) 629-3677
with a copy to:
City National Bank
Legal Department
9701 Wilshire Blvd., Ninth Floor
Beverly Hills, CA 90212-2050
Attention: Office of the General Counsel
Fax: (310) 273-5859
51
<PAGE> 58
(b) If to Purchaser, at:
WHC-THREE Investors, L.P.
c/o WHC-THREE Investors, Inc.
85 Broad Street, 19th Floor
New York, NY 10004
Attention: Neil Hasson
Richard Georgi
Fax: (212) 902-3000
with a copy to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: Mark M. Katz, Esq.
Fax: (202) 857-6395
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication within any corporation or firm to the persons designated to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 SEVERABILITY.
Each part of this Agreement is intended to be severable. If any term,
covenant, condition or provision hereof is unlawful, invalid, or unenforceable
for any reason whatsoever, and such illegality, invalidity, or unenforceability
does not affect the remaining parts of this Agreement, then all such remaining
parts hereof shall be valid and enforceable and have full force and effect as
if the invalid or unenforceable part had not been included.
Section 17.2 RIGHTS CUMULATIVE; WAIVERS.
Except as otherwise expressly provided herein, the rights of each of
the parties under this Agreement are cumulative and may be exercised as often
as any party considers appropriate. The rights of each of the parties
hereunder shall not be capable of being waived or varied otherwise than by an
express waiver or variation in writing. Failure to exercise or any delay in
exercising any of such rights also shall not operate as a waiver or variation
of that or any other such right. Defective or partial exercise of any of such
rights shall not preclude any other or further exercise of that or any other
such right. No act or course of conduct or negotiation on the part of any
party
52
<PAGE> 59
shall in any way preclude such party from exercising any such right or
constitute a suspension or any variation of any such right.
Section 17.3 HEADINGS.
The headings contained in this Agreement are inserted for convenience
only and shall not affect the meaning or interpretations of this Agreement or
any provision hereof.
Section 17.4 CONSTRUCTION.
Unless the context otherwise requires, singular nouns and pronouns,
when used herein, shall be deemed to include the plural of such noun or pronoun
and pronouns of one gender shall be deemed to include the equivalent pronoun of
the other gender.
Section 17.5 ASSIGNMENT.
This Agreement and the terms, covenants, conditions, provisions,
obligations, undertakings, rights and benefits hereof, including the Addenda,
Exhibits and Schedules hereof, shall be binding upon, and shall inure to the
benefit of, the undersigned parties and their respective heirs, executors,
administrators, representatives, successors, and assigns. In no event may
Purchaser assign its rights or obligations hereunder without the prior written
consent of Seller, except to a lender as collateral for the financing or
refinancing of the acquisition of the Assets as provided herein, an Affiliate
of Purchaser or a Qualified Affiliate, or as otherwise may be contemplated
herein.
[INSERT 17.5]
Section 17.6 PRIOR UNDERSTANDINGS; INTEGRATED AGREEMENTS.
This Agreement supersedes any and all prior discussions and agreements
between Seller and Purchaser with respect to the purchase of the Assets and
other matters continued herein, and this Agreement contains the sole, final and
complete expression and understanding between Seller and Purchaser with respect
to the transactions contemplated herein, except for those documents executed
and delivered by Purchaser prior to the execution hereof titled Due Diligence
Deposit and Review Agreement and the Confidentiality Agreement. This Agreement
shall not be altered or modified except by a subsequent writing, signed by
Purchaser and Seller.
Section 17.7 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall constitute one and the same instrument, and either party hereto may
execute this Agreement by signing any such counterpart.
Section 17.8 SURVIVAL.
Each and every Surviving Representation and Warranty made by Seller,
each representation and warranty made herein by Purchaser and each covenant
made herein by Purchaser or Seller
53
<PAGE> 60
[INSERT TO SECTION 17.5]
In the event Purchaser assigns those certain Asset Sale Agreement and
Sales Contract executed concurrently herewith in respect of the Pool 1 sale
(herein, the "Pool 1 Agreement" and the "Pool 1 Sales Contract," respectively)
to the Permitted Assignee, as such term is defined in Section 17.5 of the Pool
1 Agreement, any default by the Permitted Assignee under the Pool 1 Agreement
or Pool 1 Sales Contract prior to and on the Closing that remains uncured shall
be deemed a default by Purchaser hereunder and under the Sales Contract.
53A
<PAGE> 61
shall survive the Closing and shall not merge into any document executed as
part of Closing, but instead shall be independently enforceable except to the
extent expressly limited in this Agreement.
Section 17.9 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
Section 17.10 NO THIRD PARTY BENEFICIARIES.
No person, firm or other entity other than the parties hereto (and
their successors and assigns) shall have any rights or claims under this
Agreement. No brokerage commission shall be payable to any party in connection
with the sale of the Assets except such sales commissions as Seller may
previously have agreed in writing to pay certain third parties, which will be
payable by Seller.
Section 17.11 ARBITRATION.
Any controversy or claim between Purchaser and Seller arising out of
or relating to this Agreement or any actions or conduct of either in connection
therewith (including, but not limited to, any claim based on or arising from an
alleged tort) shall at the request of Purchaser or Seller be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall resolve all claims
and defenses or other matters in dispute in accordance with applicable law,
including, but not limited to, all statutes of limitation. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be entered in any court
having jurisdiction. No provision of this Agreement shall limit the right of
either Purchaser or Seller to exercise self-help remedies such as setoff, or
obtaining provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The institution and maintenance of any action for judicial relief
or pursuit of provisional or ancillary remedies shall not constitute a waiver
of the right of either Purchaser or Seller to submit the controversy or claim
to arbitration if the other party contests such action for judicial relief.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION"
PROVISION OF THIS AGREEMENT DECIDED BY NEUTRAL ARBITRATION AS PROVIDED
BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS
TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING
IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHT TO DISCOVERY
AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION" PROVISIONS. IF YOU REFUSE TO
54
<PAGE> 62
SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY. THE UNDERSIGNED HAVE READ AND UNDERSTAND THE FOREGOING AND
AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION" PROVISION TO NEUTRAL ARBITRATION.
/s/ DTH /s/ JP
-------------------- ---------------------
PURCHASER'S INITIALS SELLER'S INITIALS
Section 17.12 SELLER FINANCING.
Seller and Purchaser have not reached final agreement over the terms
and conditions of the Seller financing which Seller has offered to Purchaser in
connection with this transaction. Accordingly, Seller and Purchaser
acknowledge that the Loan and Security Agreement attached as Exhibit K does not
represent the final agreement of the parties. In the event Seller and
Purchaser do not reach agreement over the terms of such financing (for any
reason) on or before November 8, 1993, (i) this Agreement and the Sales
Contract shall remain in full force and effect on the basis of an "all cash"
transaction, (ii) neither party shall be deemed to be in default as a result of
the failure to reach agreement over the terms of the Loan and Security
Agreement and the Seller financing, (iii) all references in this Agreement and
the Sales Contract to the Loan and Security Agreement and all provisions
relating to a Seller financed sale shall be deemed deleted, (iv) the Initial
Purchase Price shall automatically reduce to the amount Purchaser submitted on
the Offer Date as its "all cash" Initial Purchase Price, and (v) Seller and
Purchaser shall promptly enter into an amendment to this Agreement, the Sales
Contract, and all supporting documents as necessary, including a revised
Mortgage Loan and Real Property Schedule, to reflect such modifications and
conforming changes to reflect the terms and conditions of an all cash
transaction.
* * * * * *
55
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first day of November, 1993.
"Purchaser" WHC-THREE INVESTORS, L.P.,
a Delaware limited partnership
By: WHC-THREE INVESTORS, INC.,
a Delaware corporation,
general partner
By: /s/ David T. Hamamoto
-------------------------
Its: Vice President
-------------------------
"Seller" CITY NATIONAL BANK, a national
banking association
By: /s/ Jeffery Puchalski
---------------------------
Its: Executive Vice President
---------------------------
56
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT "A"
ALL ASSETS, POOLS 2-6
mlrp2-6.wk3
Page 1
11/05/93
CITY NATIONAL BANK
MORTGAGE LOAN AND REAL PROPERTY SCHEDULE
Asset Pool Loan
# No. Asset Name No. Borrowers Name Street Address City
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
14.00 2 Brookside Apt. 25341 Emil and Jenny Fish 9151 Topanga Canyon Blvd. Chatsworth
33.00 2 Villa Del Sol Apts 35542 NAP 10025 De Soto Ave Chatsworth
48.00 2 Landes & Lancaster 23390, Landes & Lancaster 45465 25th Street East Lancaster
40390 Estate, Ltd.
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
4.00 3 Bernstein/Michrowski 64641 Bernstein/Michrowski 7405 E. Slauson Avenue City of Commerce
4.01 3 Bernstein/Michrowski 64392 Bernstein/Michrowski 7355 E. Slauson Avenue City of Commerce
8.00 3 Centinela Studios 64838 Centinela Studios, L.P. 3401 Exposition Blvd. Santa Monica
18.00 3 West Bernardo 25207, Frankris Corporation 16160 West Benardo Drive Rancho Bernardo
Corporate Center 40207,
40208
22.00 3 Santa Fe Industrial 105 NAP 2209 So. Santa Fe Avenue Los Angeles
24.00 3 Ohai 64293, Ohai, Reynolds and 13404 Monta Vista Chino
40293 Dorothy
30.00 3 San Fernando Industrial 36260 NAP 1501 1st Street San Fernando
40.00 3 Sorrento Creek 64944 Ed and Ellen Wong 10350 & 10360 Sorrento San Diego
Business Center Valley Road
40.01 3 Roselle Property 64944 Ed and Ellen Wong 10635 - 37 - 39 Roselle Street San Diego
40.02 3 Sorrento Creek Land 64944 Ed and Ellen Wong 10353 Sorrento Valley Road San Diego
40.03 3 Scientific Land on 64944 Ed and Ellen Wong North side of Towne San Diego
Towne Center Dr. Centre Drive
42.00 3 12565 Strathern Street 64877 NAP 12565 Strathern Street North Hollywood
46.00 3 Anderson Trust 64768 Anderson Family Trust 2800 Anderson Avenue Palmdale
47.00 3 Anderson Trust 64769 Anderson Family Trust Westline of 30th East, Palmdale
North of Avenue Q
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
1.00 4 Jefferson Industrial 64684 NAP SEC Jefferson Ave and Murrieta
Fig Street
9.00 4 Malibu Highlands 120 NAP Thrift Road, Birdella Road Malibu
and Latigo Canyon Road
11.00 4 Lakewood and 114 NAP 13526 Lakewood Blvd. and Bellflower
Rosecrans 9026 Rosecrans Ave.
12.00 4 Palmdale Industrial 64909 NAP SWC Avenue P & Palmdale
Development 12th Street East
15.00 4 Foley Family Trust 25252 Foley Family Trust Palomar Street and Wildomar
Harwood Lane
15.01 4 Foley and Foley 25253 Foley Family Trust Palomar Street and Wildomar
Harwood Lane
31.00 4 Sepulveda Center 64760 Sepulveda Center 1856, 1864, 1872 West Los Angeles
Partners, Ltd. Partners, Ltd. S. Sepulveda Blvd.
32.00 4 The Plaza 64561 NAP S/S of Via Princessa btwn Santa Clarita
Sierra Hwy. &
Antelope Valley Fwy.
32.01 4 The Arbors 64561 NAP S/S of Via Princessa btwn Santa Clarita
Sierra Hwy. &
Antelope Valley Fwy.
32.02 4 The Courtyard 64561 NAP North line of Via Princessa, Santa Clarita
West of Jason Road
34.00 4 40th St. & Ave. "R" 31058 NAP Avenue R & 40th St. East Palmdale
34.01 4 The Crossroads 35543 NAP Via Princessa and Santa Clarita
Sierra Highway
35.00 4 The Marketplace 64600 NAP SW corner of Sierra Highway Santa Clarita
and Via Princessa
36.00 4 Shir Chadash 35977 Shir Chadash - Victory Blvd. East of Woodland Hills
Congregation Winnetka Avenue
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
20.00 5 Lamb, Ray and Dianne 25188 Ray and Dianne Lamb 947 East Thousand Oaks Blvd. Thousand Oaks
25.00 5 Ortega 25312 Carlos and Eva Ortega 501 S. Atlantic Blvd. East Los Angeles
33.01 5 Casa Balboa Center 35542 NAP 16810 Ventura Blvd. Encino
37.00 5 Fairfax Plaza 23630 NAP 301 South Fairfax Los Angeles
44.00 5 Robertson Office Plaza 64866 Jack Slomovic 1030 S. Robertson Blvd. Beverly Hills
45.00 5 Robertson Office Plaza 64867 Jack Slomovic 1030 S. Robertson Blvd. Beverly Hills
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
5.00 6 Bolsa-Magnolia, Ltd. 25200 Bolsa-Magnolia, Ltd. 9039 Bolsa Avenue Westminster
7.00 6 California Oaks, Center 25269 California Oaks 40515-40605 California Murrieta
Center, J.V. Oaks Road
21.00 6 Liberty Square, Ltd. 25383 Liberty Square, Ltd. 9852-9938 Bolsa Ave. Westminster
28.00 6 Plaza Las Glorias 25409 Plaza Las Glorias, L.P. SWC Mount Vernon Ave and Colton
Olive Street
38.00 6 Village Faire Shopping 64803 TIO, Ltd./TIL Ltd. 2978 Carlsbad Blvd. Carlsbad
Center
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
Total
- ---- -- --------------------- ----- ------------------- -------------------------- --------------
</TABLE>
<PAGE> 65
EXHIBIT "A"
CITY NATIONAL BANK PAGE 2
Mortgage Loan and Real Property Schedule 11/05/93
<TABLE>
<CAPTION>
Original Loan
Asset Pool Property Loan Balance
# No. Asset Name County State Zip Code Type Balance (as of 9/30/93)
- ----- ---- ---------- ------ ----- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
14.00 2 Brookside Apt. Los Angeles CA 91311 Multi-Family 5,600,000 5,592,923
33.00 2 Villa Del Sol Apts. Los Angeles CA 91311 Multi-Family NAP 4,608,419
48.00 2 Landes & Lancaster Los Angeles CA NAV Mobile Home Pk 5,000,000 4,910,617
- ----- - ----------------------------- ----------- -- ----- -------------- ------------ ------------
4.00 3 Bernstein/Michrowski Los Angeles CA 90040 Industrial $626,500 639,702
4.01 3 Bernstein/Michrowski Los Angeles CA 90040 Industrial 2,000,000 1,781,474
8.00 3 Centinela Studios Los Angeles CA 90404 Industrial 3,200,000 3,200,000
18.00 3 West Bernardo Corporate Center San Diego CA 92128 Industrial/R&D 4,071,000 4,062,905
22.00 3 Santa Fe Industrial Los Angeles CA 90058 Industrial NAP 2,390,258
24.00 3 Ohai San Bern. CA 91710 Industrial 3,400,000 3,412,783
30.00 3 San Fernando Industrial Los Angeles CA 91341 Industrial NAP 8,868,901
40.00 3 Sorrento Creek Business Center San Diego CA 92121 Industrial/R&D 4,227,900 4,202,687
40.01 3 Roselle Property San Diego CA 92121 Industrial/R&D NAP NAP
40.02 3 Sorrento Creek Land San Diego CA 92121 Land NAP NAP
40.03 3 Scientific Land on Towne Center Dr. San Diego CA 92121 Land NAP NAP
42.00 3 12565 Strathern Street Los Angeles CA 90021 Industrial NAP 2,109,227
46.00 3 Anderson Trust Los Angeles CA 93550 Industrial 1,900,000 1,860,556
47.00 3 Anderson Trust Los Angeles CA 93550 Land 500,000 271,565
- ----- - ----------------------------- ----------- -- ----- -------------- ------------ ------------
1.00 4 Jefferson Industrial Riverside CA 92562 Land NAP $1,700,000
9.00 4 Malibu Highlands Los Angeles CA 90265 Land NAP 2,280,692
11.00 4 Lakewood and Rosecrans Los Angeles CA 90706 Land NAP 540,000
12.00 4 Palmdale Industrial Development Los Angeles CA NAV Land NAP 869,278
15.00 4 Foley Family Trust Riverside CA 92362 Land/SFD Homes 7,811,250 3,173,428
15.01 4 Foley and Foley Riverside CA 92362 Developed Lots 2,492,750 2,476,861
31.00 4 Sepulveda Center Partners, Ltd. Los Angeles CA 90025 Land 1,250,000 1,250,000
32.00 4 The Plaza Los Angeles CA NAV Land NAP 1,201,189
32.01 4 The Arbors Los Angeles CA NAV Land NAP 642,636
32.02 4 The Courtyard Los Angeles CA NAV Land NAP 372,369
34.00 4 40th St. & Ave. "R" Los Angeles CA 93550 Land NAP 2,215,167
34.01 4 The Crossroads Los Angeles CA 93550 Land NAP 2,810,018
35.00 4 The Marketplace Los Angeles CA NAV Land NAP 4,839,113
36.00 4 Shir Chadash Los Angeles CA 91364 Land 3,075,000 3,117,922
- ----- - ----------------------------- ----------- -- ----- -------------- ------------ ------------
20.00 5 Lamb, Ray and Dianne Ventura CA 91360 Office 1,150,000 938,196
25.00 5 Ortega Los Angeles CA 90022 Office 1,120,000 1,023,368
33.01 5 Casa Balboa Center Los Angeles CA NAV Office NAP 1,914,657
37.00 5 Fairfax Plaza Los Angeles CA 90036 Office 9,400,000 7,717,084
44.00 5 Robertson Office Plaza Los Angeles CA 90035 Office 1,450,000 1,434,113
45.00 5 Robertson Office Plaza Los Angeles CA 90035 Office 1,450,000 1,426,968
- ----- - ----------------------------- ----------- -- ----- -------------- ------------ ------------
5.00 6 Bolsa - Magnolia, Ltd. Orange CA 92683 Retail 4,200,000 4,200,000
7.00 6 California Oaks Centers Riverside CA 92562 Retail 14,800,000 13,322,993
21.00 6 Liberty Square, Ltd. Orange CA 92683 Retail 4,550,000 4,545,002
28.00 6 Plaza Las Glorias San Bernard CA 92324 Retail 8,250,000 8,305,000
38.00 6 Village Faire Shopping Center San Diego CA 92008 Retail 12,316,405 12,445,982
- ----- - ----------------------------- ----------- -- ----- -------------- ------------ ------------
TOTAL $103,840,805 $132,674,053
- ----- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Accrued and Uncollected Amount
Deferred Late Owed Lien
Interest Charges (as of 9/30/93) Position
----------- ----------- --------------- --------
<S> <C> <C> <C>
748,691 0 6,341,614 1st
NAP NAP 4,608,419 REO
30,691 0 4,941,308 1st
--------------------------------------------------------------
$8,268 $4,831 652,801 1st
36,995 15,294 1,833,763 1st
20,000 0 3,220,000 1st
381,910 0 4,444,815 1st
NAP NAP 2,390,258 REO
846,329 0 4,259,142 1st
NAP NAP 8,868,901 REO
25,922 1,607 4,230,216 1st
NAP NAP See 40.00 2nd
NAP NAP See 40.00 1st
NAP NAP See 40.00 1st
NAP NAP 2,109,227 REO
11,631 0 1,872,187 1st
1,813 0 273,378 1st
--------------------------------------------------------------
NAP NAP $1,700,000 REO
NAP NAP 2,280,692 REO
NAP NAP 540,000 REO
NAP NAP 869,278 REO
813,744 11,215 3,998,387 1st
581,377 7,880 3,066,118 1st
161,453 1,581 1,413,034 1st
NAP NAP 1,201,189 REO
NAP NAP 642,636 REO
NAP NAP 372,369 REO
NAP NAP 2,215,167 REO
NAP NAP 2,810,018 REO
NAP NAP 4,839,113 REO
485,523 0 3,603,445 1st
--------------------------------------------------------------
304,365 5,081 1,247,642 1st
6,778 971 1,031,117 1st
NAP NAP 1,914,657 REO
1,197,563 69,318 8,983,965 REO
107,142 6,443 1,547,698 1st
13,975 890 1,441,833 1st
--------------------------------------------------------------
240,109 32,908 4,473,017 1st
3,327,532 6,578 16,657,103 1st
92,675 7,624 4,645,301 1st
443,014 2,984 8,750,998 REO
427,904 0 12,873,886 1st
----------- -------- ------------ --------
$10,315,404 $175,205 $143,164,692
----------- -------- ------------
</TABLE>
<PAGE> 66
EXHIBIT "A" Page 3
11/05/93
CITY NATIONAL BANK
Mortgage Loan and Real Property Schedule
<TABLE>
<CAPTION> Last Approx. Approx.
Superior Original Interest Trans- Current Saleable/ Land
Asset Pool Lien Note Maturity Paid to action Accrual Rentable Acre- No. of Seller's
# No. Asset Name Balance Date Date Date Date Rate SF age Units DIV
- ----- ---- ------------------- ---------- --------- ---------- --------- --------- --------- ---------- ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14.00 2 Brookside Apt. 0 5/10/90 12/31/94 12/24/91 09/15/93 7.25% 81,984 0.00 80 $3,665,441
33.00 2 Villa Del Sol Apts. 2,415,000 REO REO NAP NAP REO 71,112 0.00 104 $1,896,057
48.00 2 Landes & Lancaster 0 2/14/86 11/01/95 09/01/93 09/01/93 7.50% 1,256,320 0.00 302 $4,506,114
- ------------------------------------------------------------------------------------------------------------------------------------
4.00 3 Bernstein/Michrowski 0 8/16/89 09/01/94 07/30/93 09/16/93 7.50% 18,320 0.00 NAP $319,728
4.01 3 Bernstein/Michrowski 0 3/21/88 09/01/94 07/22/93 09/16/93 7.50% 96,800 0.00 NAP $1,081,557
8.00 3 Centinela Studios 0 9/27/90 10/01/91 09/01/93 09/14/93 7.50% 50,570 0.00 NAP $2,152,089
18.00 3 West Bernardo
Corporate Center 0 4/19/89 01/04/94 09/01/93 09/14/93 7.50% 62,707 0.00 NAP $2,304,448
22.00 3 Santa Fe Industrial 0 REO REO NAP NAP REO 57,500 0.00 NAP $1,247,017
24.00 3 Ohai 0 10/5/87 08/01/90 03/14/91 09/22/93 9.50% 152,625 0.00 NAP $3,424,783
30.00 3 San Fernando
Industrial 0 REO REO NAP NAP REO 50,760 0.00 NAP $1,492,572
40.00 3 Sorrento Creek
Business Center 0 4/1/93 04/01/96 09/01/93 09/15/93 7.50% 49,058 0.00 NAP $2,499,877
40.01 3 Roselle Property 1,000,000 See 40.00 See 40.00 See 40.00 See 40.00 See 40.00 51,537 0.00 NAP N/A
40.02 3 Sorrento Creek
Land 0 See 40.00 See 40.00 See 40.00 See 40.00 See 40.00 85,813 2.28 NAP N/A
40.03 3 Scientific Land on
Towne Center Dr. 0 See 40.00 See 40.00 See 40.00 See 40.00 See 40.00 1,469,714 33.74 NAP N/A
42.00 3 12565 Strathern
Street 0 REO REO NAP NAP REO 31,610 0.00 NAP $1,180,247
46.00 3 Anderson Trust 0 8/22/90 09/01/95 09/01/93 09/10/93 7.50% 55,290 0.00 NAP $1,436,108
47.00 3 Anderson Trust 0 8/22/90 12/31/93 09/01/93 09/14/93 8.00% 148,104 1.70 NAP $117,273
- ------------------------------------------------------------------------------------------------------------------------------------
1.00 4 Jefferson
Industrial 0 REO REO NAP NAP REO 1,125,590 25.84 NAP $619,435
9.00 4 Malibu Highlands REO REO NAP NAP REO 650,786 14.94 NAP $907,664
11.00 4 Lakewood and
Rosecrans 0 REO REO NAP NAP REO 43,410 1.00 NAP $305,189
12.00 4 Palmdale Industrial
Development 0 REO REO NAP NAP REO 412,078 9.61 NAP $107,507
15.00 4 Foley Family Trust 0 8/16/89 01/31/93 05/07/91 12/02/92 7.50% 172,062 3.95 NAP $2,064,103
15.01 4 Foley and Foley 8/16/89 01/31/93 01/01/91 07/01/92 7.50% 424,710 9.75 NAP $1,312,790
31.00 4 Sepulveda Center
Partners, Ltd. 0 5/10/90 07/01/92 06/17/92 09/10/93 10.00% 16,356 0.38 NAP $353,815
32.00 4 The Plaza 0 REO REO NAP NAP REO 222,592 12.70 NAP $1,133,049
32.01 4 The Arbors 0 REO REO NAP NAP REO 106,722 6.70 NAP $589,975
32.02 4 The Courtyard 0 REO REO NAP NAP REO 48,351 1.10 NAP $286,940
34.00 4 40th St. & Ave "R" 0 REO REO NAP NAP REO 1,131,689 27.20 NAP $638,774
34.01 4 The Crossroads 0 REO REO NAP NAP REO 125,888 3.84 NAP $671,325
35.00 4 The Marketplace 0 REO REO NAP NAP REO 439,956 10.10 NAP $2,030,063
36.00 4 Shir Chadash 0 10/31/89 04/01/91 09/01/91 08/21/92 7.00% 741,826 17.57 NAP $823,767
- ------------------------------------------------------------------------------------------------------------------------------------
20.00 5 Lamb, Ray and Dianne 0 2/27/89 06/01/92 12/14/90 10/14/92 9.50% 8,556 0.00 NAP $585,729
25.00 5 Ortega 10/16/89 10/15/93 09/01/93 09/03/93 8.00% 10,763 0.00 NAP $597,438
33.01 5 Casa Balboa Center 0 REO REO NAP NAP REO 8,571 0.00 NAP $1,768,274
37.00 5 Fairfax Plaza 0 REO REO NAP NAP REO 64,665 0.00 NAP $4,033,933
44.00 5 Robertson Office
Plaza 0 1/25/91 03/01/96 10/07/92 11/05/92 7.50% 11,983 0.00 NAP $422,773
45.00 5 Robertson Office
Plaza 0 1/25/91 03/01/96 09/01/93 09/23/93 11.75% 11,983 0.00 NAP $673,540
- ------------------------------------------------------------------------------------------------------------------------------------
5.00 6 Bolsa-Magnolia, Ltd. 0 3/10/89 10/01/92 01/17/93 09/14/93 8.00% 34,911 0.00 NAP $2,416,017
7.00 6 California Oaks
Center 0 11/20/89 03/01/91 03/22/91 09/24/91 8.00% 126,136 0.00 NAP $7,610,425
21.00 6 Liberty Square, Ltd. 0 6/22/90 08/01/92 09/23/93 06/28/93 7.75% 48,860 0.00 NAP $1,472,515
28.00 6 Plaza Las Glorias 0 REO REO NAP NAP REO 142,347 0.00 NAP $5,178,142
38.00 6 Village Faire
Shopping Center 0 7/10/90 05/01/95 04/07/93 09/14/93 7.00% 81,121 0.00 NAP $5,262,033
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $3,415,000 10,001,737 182.39 486 $69,188,526
- ----- ---------- ---------- ------ --- -----------
</TABLE>
<PAGE> 67
<TABLE>
EXHIBIT "A"
CITY NATIONAL BANK Page 4
Mortgage Loan and Real Property Schedule 11/05/93
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Initial Adjusted
Asset Pool Purchase Offer Purchase COMMENTS
# No. Asset Name Price (IPP) Percentage Price (APP)
- ------------------------------------------------------------------------------------------------------------------------------------
14.00 2 Brookside Apt. 4,040,896.08 110.2431% 4,040,896.08
33.00 2 Villa Del Sol Apts. 2,175,824.56 114.7552% 2,175,824.56
48.00 2 Landes & Lancaster 4,474,526.16 99.2990% 4,474,526.16
- ------------------------------------------------------------------------------------------------------------------------------------
4.00 3 Bernstein/Michrowski 328,806.40 102.8394% 328,806.40 CNB is currently in negotiations with the
borrower to extend the maturity date to
9/1/96.
4.01 3 Bernstein/Michrowski 1,174,216.16 108.5672% 1,174,216.16 CNB is currently in negotiations with the
borrower to extend the maturity date to
9/1/96.
8.00 3 Centinela Studios 2,376,476.96 110.4265% 2,376,476.96
18.00 3 West Bernardo Corporate Center 3,396,537.04 147.3905% 3,396,537.04 The Paid to and Last Transaction Dates are
for Loan #25207.
22.00 3 Santa Fe Industrial 975,451.36 78.2228% 975,451.36
24.00 3 Ohai 2,920,383.44 85.2721% 2,920,383.44 The Paid to and Last Transaction Dates are
for Loan #64293.
30.00 3 San Fernando Industrial 1,699,631.44 113.8727% 1,699,631.44
40.00 3 Sorrento Creek Business Center 3,301,979.20 132.0857% 3,301,979.20
40.01 3 Roselle Property NAP NAP NAP
40.02 3 Sorrento Creek Land NAP NAP NAP
40.03 3 Scientific Land on Towne Center Dr. NAP NAP NAP
42.00 3 12565 Strathern Street 896,858.56 75.9891% 896,858.56
46.00 3 Anderson Trust 1,515,665.84 105.5398% 1,515,665.84
47.00 3 Anderson Trust 96,223.92 82.0512% 96,223.92
- ------------------------------------------------------------------------------------------------------------------------------------
1.00 4 Jefferson Industrial 292,653.92 47.2453% 292,653.92
9.00 4 Malibu Highlands 455,520.00 50.1860% 455,520.00
11.00 4 Lakewood and Rosecrans 146,411.20 47.9739% 146,411.20
12.00 4 Palmdale Industrial Development 88,210.72 82.0511% 88,210.72
15.00 4 Foley Family Trust 1,925,310.40 93.2759% 1,925,310.40
15.01 4 Foley and Foley 584,480.00 44.5220% 584,480.00
31.00 4 Sepulveda Center Partners, Ltd. 362,892.40 102.5656% 362,892.40
32.00 4 The Plaza 1,157,478.40 102.1561% 1,157,478.40
32.01 4 The Arbors 554,954.40 94.0641% 554,954.40
32.02 4 The Courtyard 251,425.20 87.6229% 251,425.20
34.00 4 40th St. & Ave "R" 120,640.00 18.8862% 120,640.00
34.01 4 The Crossroads 785,200.00 116.9627% 785,200.00
35.00 4 The Marketplace 2,245,360.00 110.6054% 2,245,360.00
36.00 4 Shir Chadash 308,880.00 37.4960% 308,880.00
- ------------------------------------------------------------------------------------------------------------------------------------
20.00 5 Lamb, Ray and Dianne 632,385.52 107.9655% 632,385.52
25.00 5 Ortega 620,933.04 103.9326% 620,933.04
33.01 5 Casa Balboa Center 1,865,758.96 105.5130% 1,865,758.96
37.00 5 Fairfax Plaza 3,853,583.76 95.5292% 3,853,583.76
44.00 5 Robertson Office Plaza 530,223.20 125.4156% 530,223.20
45.00 5 Robertson Office Plaza 950,485.12 141.1178% 950,485.12
- ------------------------------------------------------------------------------------------------------------------------------------
5.00 6 Bolsa - Magnolia, Ltd. 3,269,359.60 135.3202% 3,269,359.60
7.00 6 California Oaks Center 8,116,444.96 106.6490% 8,116,444.96 CNB is currently in negotiations with the
borrower to extend the maturity date to
5/1/96.
21.00 6 Liberty Square, Ltd. 2,214,447.04 150.3854% 2,214,447.04
28.00 6 Plaza Las Glorias 4,719,116.48 91.1353% 4,719,116.48
38.00 6 Village Faire Shopping Center 7,583,606.16 144.1193% 7,583,606.16
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 73,009,237.60 105.5222% 73,009,237.60
============= ======== =============
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 68
Exhibit B to
Asset Sale Agreement
FORM OF
ASSET ACCEPTANCE CERTIFICATE
____________________________________________________, the Purchaser
under that certain Asset Sale Agreement (the "Agreement"), by and among CITY
NATIONAL BANK, a national banking association, as Seller,
______________________________________________________
____________________________________________________________, as Escrow Agent,
and ___________________________________________________________________ as
Purchaser, dated as of ___________________, 1993, hereby certifies that it
finally, irrevocably and unconditionally accepts the Asset, identified as
[specify pool number and name of Asset], in accordance with Section 5.4(a) of
the Agreement.
Dated the _______ day of _______________________, 1993.
PURCHASER:
____________________________________
[Corporation/Partnership]
By: _______________________________
Its:
_______________________________
<PAGE> 69
Recording Requested By And When |
Recorded Mail To: |
_______________________________ |
_______________________________ |
__________________, CA ________ |
Attn: _________________________ |
_________________________ |
|
- -------------------------------------------------------------------------------
Space Above This Line for Recorder's Use
FORM OF
MORTGAGE ASSIGNMENT
ASSIGNMENT OF MORTGAGE
LOAN FROM SELLER TO PURCHASER
CITY NATIONAL BANK, a national banking association ("Assignor"), for
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby absolutely sells, transfers, assigns, delivers,
sets-over and conveys to _________________________________________________, a
[corporation/partnership] ("Assignee"), without recourse:
The mortgage or deed of trust loan or loans identified onAttachment A
hereto (the "Mortgage Loan"), including the promissory note(s)
evidencing any and all liens and security interests securing the
payment of the Mortgage Loan and all documents and instruments
evidencing, securing or relating to the Mortgage Loan, including, but
not limited to, the beneficial interest or mortgagee's interest under
the mortgage(s) or deed(s) of trust, and any other documents recorded
in the real property or chattel records of the jurisdiction in which
the real property or personal property securing such Mortgage Loan is
located (to which records reference is made for all purposes) as such
documents are more particularly described and referenced onAttachment
B hereto.
This Assignment of Mortgage shall be governed by the laws of the State
of California.
TO HAVE AND TO HOLD the Mortgage Loan, together with all and singular
the rights and privileges thereunto in any wise belonging unto Assignee, its
successors and assigns, forever.
Dated: __________________, 1993 CITY NATIONAL BANK, a national
banking association
By: ___________________________
Its: ___________________________
Exhibit C to
Asset Sale Agreement
<PAGE> 70
Exhibit C to
Asset Sale Agreement
STATE OF )
) SS.
COUNTY OF )
On ___________________________, 19___ before me _______________________________
Date Name, Title of Officer,
e.g., "Jane Doe, Notary Public"
personally appeared __________________________________________________________
Name(s) of Signer(s)
// personally known to me -OR- // proved to me on the basis of
satisfactory evidence to be the
person(s) whose name(s) is/are
subscribed to the within instrument
and acknowledged to me that he/she/
they executed the same in
his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
[SEAL]
_____________________________________
NOTARY PUBLIC
<PAGE> 71
Exhibit C to
Asset Sale Agreement
ATTACHMENT A TO
MORTGAGE ASSIGNMENT
DESCRIPTION OF MORTGAGE LOAN
Name of Borrower:
Principal Amount of Note:
Current Fully Extended Maturity Date:
Control No.:
Type of Collateral:
<PAGE> 72
Exhibit C to
Asset Sale Agreement
ATTACHMENT B TO
MORTGAGE ASSIGNMENT
DESCRIPTION OF SECURITY DOCUMENTS
<PAGE> 73
EXHIBIT C-1 TO THE
ASSET SALE AGREEMENT
Asset No.__________
ASSIGNMENT OF ADDITIONAL COLLATERAL
CITY NATIONAL BANK, a national banking association ("Assignor"), for
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, hereby absolutely sells, transfers, assigns, endorses, delivers,
sets-over and conveys to WHC-THREE INVESTORS, L.P., a Delaware limited
partnership ("Assignee"), without representation, warranty or recourse, the
following:
(a) the mortgage note (the "Mortgage Note") identified
on Exhibit A attached hereto, together with any and all
amendments, supplements, restatements, and modifications
thereto (collectively, the "Mortgage Loan");
(b) all documents, agreements and instruments evidencing,
securing or relating to the Mortgage Loan, including, without
limitation, pledge agreements, guarantees, security
agreements, financing statements, indemnity agreements,
loan agreements, assignments of management agreements and
assignment of stock or partnership units ("Collateral Loan
Documents"), which includes, but is not limited to, the
Collateral Loan Documents identified on Exhibit B attached
hereto;
(c) all property and other interests securing or relating
to the Mortgage Loan, and all proceeds thereof, including
without limitation, all rights, titles, interests, claims,
escrows, accounts, letters of credit, title insurance
policies (except to the extent of any blanket policies carried
by Assignor), flood hazard insurance policies, performance
bonds, demands, certificates of deposit, causes of action,
proofs of claim and judgments, claims and actions against
guarantors
<PAGE> 74
and any other collateral arising out of and/or executed
and/or delivered in or to or with respect to the Mortgage Loan
(the "Additional Collateral"), which includes, but is not
limited to, the Additional Collateral identified on Exhibit B
attached hereto; and
(d) any other documents, agreements, instruments or
property and all proceeds thereof, relating to the Mortgage
Loan or any other agreements or instruments evidencing or
securing such Mortgage Loan and held by Assignor or a third
party on behalf of Assignor (the "Other Collateral Loan
Documents").
This assignment shall not be recorded.
TO HAVE AND TO HOLD the Mortgage Loan, the Mortgage Note, the
Collateral Loan Documents, the Additional Collateral and the Other Collateral
Loan Documents, together with all and singular the rights and privileges
thereunto in any way belonging unto Assignee, its successors and assigns,
forever.
Assignor does hereby confirm and ratify the sale, transfer, assignment,
delivery, setting over and conveyance of the Mortgage Loan, the Mortgage Note,
the Collateral Loan Documents, the Additional Collateral and the Other
Collateral Loan Documents to Assignee.
Dated as of November 17, 1993.
ASSIGNOR:
CITY NATIONAL BANK,
a national banking association
By: ________________________________
Name: __________________________
Title: _________________________
2
<PAGE> 75
EXHIBIT A TO
ASSIGNMENT OF ADDITIONAL COLLATERAL
3
<PAGE> 76
EXHIBIT B
[IDENTIFIES UNRECORDED ADDITIONAL COLLATERAL]
4
<PAGE> 77
Exhibit D to
Asset Sale Agreement
FORM OF
CERTIFICATE OF DEFECTIVE ASSETS
Pursuant to Section 5.4(b) of that certain Asset Sale Agreement (the
"Agreement") by and among CITY NATIONAL BANK, a national banking association as
Seller, ____________________________________________________, as Escrow Agent
and _____________________________________________________________, as
Purchaser, the undersigned hereby certifies to Seller that the Mortgage Loan
identified below is a Defective Mortgage Loan, as that term is defined in the
Agreement. The Mortgage Loan has a Defect since it breaches the representation
and warranty more particularly described as follows, or has a Structural Defect
more particularly described as follows and the effect of the claimed Defect(s)
on the value of the Mortgage Loan is materially adverse as indicated below
[attach additional pages as necessary]:
A. Identity of Mortgage Loan ________________________________
[Specify pool number and name of Mortgage Loan.]
B. Detailed description of condition giving rise to, or
nature of, the claimed Defect or Structural Defect and
state why any claimed Defect has a material adverse effect
on the value of the related Mortgage Loan.
C. Identify section and subsections of the Agreement under
which the Defect or Structural Defect is claimed.
D. Provided detailed evidence of the existence of the Defect
including, but not limited to, the identity of, and a copy
of any materials provided by, any third party which
performed any analysis or provided any cure estimate or
any other information with respect to such claimed
Defect.
Dated: _______________________, 1993.
PURCHASER:
_______________________________
By: ___________________________
Its: __________________________
<PAGE> 78
Exhibit E to
Asset Sale Agreement
FORM OF
SUPPLEMENTAL CERTIFICATE OF DEFECTIVE ASSETS
Pursuant to Section 5.4(b) of that certain Asset Sale Agreement (the
"Agreement") by and among CITY NATIONAL BANK, a national banking association as
Seller, ____________________ ____________________________________, as Escrow
Agent and ____________________________ ____________________________________, as
Purchaser, the undersigned hereby certifies to Seller that the Mortgage Loan
identified below is a Defective Mortgage Loan, as that term is defined in the
Agreement. The Mortgage Loan has a Defect since it breaches the representation
and warranty more particularly described as follows, or has a Structural Defect
more particularly described as follows and the effect of the claimed Defect(s)
on the value of the Mortgage Loan is materially adverse as indicated below
[attach additional pages as necessary]:
A. State whether in Purchaser's reasonable judgment the
Defect is curable or non-curable.
B. If, in Purchaser's reasonable judgment, the Defect is
curable, provide a detailed description of the proposed
cure and reasonable detailed estimated itemized cost of
repair or other cure ("Purchaser's Cure Estimate") and
attach supporting information prepared by third party
expert.
C. If this certificate is delivered no later than the last
day of the Due Diligence Period, state the dollar amount,
or percentage of Initial Purchase Price, by which
Purchaser would have reduced the Initial Purchase Price
with respect to such Mortgage Loan, had Purchaser been
aware of such Defect on the Offer Date.
Dated: ___________________, 199__
PURCHASER:
_____________________________
By:__________________________
Its:__________________________
<PAGE> 79
Exhibit F to
Asset Sale Agreement
FORM OF
DELETION CERTIFICATE
Pursuant to Section 5.4(d) of that certain Asset Sale Agreement (the
"Asset Sale Agreement") by and between ______________________________________,
as Purchaser, and CITY NATIONAL BANK, a national banking association, as
Seller, the undersigned hereby certifies to Seller as follows:
1. On ____________________________, 199___, Purchaser delivered
to Seller a Certificate of Defective Mortgage Loan with regard to the Mortgage
Loan identified as Control No. ____________ on the Mortgage Loan and Real
Property Schedule attached as Exhibit D to the Asset Sale Agreement.
2. Seller has not cured the Defect in such Mortgage Loan.
3. Such Mortgage Loan will be subject to repurchase at the
Repurchase Price as provided in Section 10.2 of the Asset Sale Agreement if
such Defect has not been cured within the Cure Period.
4. All capitalized terms used herein and not defined shall have
the meaning assigned to them in the Asset Sale Agreement.
Dated the _________________ day of ___________________________, 199___.
PURCHASER:
__________________________________
[Corporation/Partnership]
By:_______________________________
Its:_______________________________
<PAGE> 80
Exhibit G to
Asset Sale Agreement
CITY NATIONAL BANK
COMMERCIAL MORTGAGE LOAN AND REAL PROPERTY SALE
VALUATION METHODOLOGY
I. DUE DILIGENCE PROCESS
Asset information was extracted from loan files. The asset
information was recorded on Data Sheets which provided a history of the loan
transaction and the current status of the loan or real estate owned (REO).
Utilizing the information recorded on the data sheets, the property inspections
and the market analyses, underwriting and valuation took place. The
methodology and procedures presented are not intended to and do not comply with
generally accepted accounting and auditing procedures and, therefore, no
opinion was expressed in that regard. Likewise, the methodology and procedures
do not meet the Uniform Standards of Professional Appraisal Practice for
preparation of a market value appraisal as defined by the Appraisal Standards
Board of the Appraisal Foundation and should not be relied on to replace or
augment appraisal information.
II. VALUATION METHODOLOGY
The RTC Valuation Methodology for Portfolio Sales of Commercial
Mortgages and Real Estate Owned, otherwise known as "Appendix H," was utilized
as the primary standard for arriving at the various factors applied to each
asset in underwriting and valuation. These standards were modified where the
Financial Advisor, market conditions or the Due Diligence Contractor determined
that reasons existed for changing any one or more of the following factors.
Otherwise the following standards were utilized in arriving at the stated
Derived Investment Value (DIV) also known as "Valuation" in the Offering
Memorandum.
III. UNDERWRITING AND VALUATION ASSUMPTIONS FOR ALL ASSETS
Discount rates were established for each type of property and the
methodology used in valuation of the asset. The discount rates assumed for
each property type and valuation methodology are as follows:
VALUATION METHODOLOGY
<TABLE>
<CAPTION>
PROPERTY TYPE IMMEDIATE FUTURE DEFAULT REO PERFORMING
DEFAULT LOANS
<S> <C> <C> <C> <C>
Multifamily 14% 13.5% 12% 500(1)
</TABLE>
___________________
(1) Basis points over Treasuries of comparable maturities.
<PAGE> 81
Exhibit G to
Asset Sale Agreement
<TABLE>
<CAPTION>
PROPERTY TYPE IMMEDIATE FUTURE DEFAULT REO PERFORMING
DEFAULT LOANS
<S> <C> <C> <C> <C>
Commercial 16% 15.5% 14% 600
Entitled Land 20% 19% 17% NAP
Raw Land 22% 21% 18% NAP
</TABLE>
The above discount rates were adjusted up or down 200 basis points
based on whether there were 2nd Lien or Wrap Notes. Adjustments were made as
available information justified making such adjustments. In the cases where a
different discount rate was used, the justification was documented in the
underwriting and valuation summaries.
IV. PERFORMING LOANS VALUATION METHODOLOGY
4.1 Loans were valued in accordance with Seller guidelines as the
lesser of the following:
4.1.1 Face amount of the loan balance as of 08/03/93; or
4.1.2 Present value of the cash flows of the loan assuming
the discount rates noted in Section III.
4.2 To calculate expected cash flows for the loans, the following
assumptions were used:
4.2.1 interest rates at current stated interest rate, or at
stated interest rates at time of maturity;
4.2.2 principal payments assumed to be made as scheduled,
including balloon payments;
4.2.3 adjustable rate loans assumed a constant interest
rate environment; and
4.2.4 extension options assumed loan was extended at
contractual terms.
V. CASH FLOW METHODOLOGY
For all property types, the methodology for valuing real estate owned
(REO) and for real estate collateralizing permanent mortgage loans was a
discounted cash flow concept. DIVs were calculated based upon the discounted
value of the estimated future net cash flows. The valuation period was assumed
to begin July 1, 1993. Estimated revenue and expenses were projected based
2
<PAGE> 82
Exhibit G to
Asset Sale Agreement
upon analysis of existing property operations as well as limited research into
the competitive market.
DIVs on land were generated by utilizing comparable land sales within
the market area and to the extent practical a land residual analysis was
prepared.
5.1 Revenue
5.1.1 Rental rates were based on a comparison of historical
actual, street rents at the subject property and street rents at comparable
properties. Street rents were obtained from the inspections of each property.
Office and retail rents for occupied space were based on actual rents so long
as actuals were in line with market rents. Rents for vacant space were based
on current market rents. Rental rates were effective rents adjusted for free
rent and other concessions that may be amortized over the term of the lease.
Rental rates were assumed to increase no more than four percent (4.0%) per
year. Lease renewals were projected at fifty percent (50%) on commercial and
retail properties unless otherwise justified.
5.1.2 Stabilization was defined as occupancy at which
similar properties within the subject market were able to maintain.
Non-stabilized property occupancy was projected at market levels within the
submarket. Any vacancies existing after the date of stabilization were assumed
to be permanent.
5.1.3 Other income was based upon historical revenues where
available. When not available, industry standards were used.
5.2 Operating Expenses
5.2.1 In all cases, the following expenses were utilized in
estimating operating expenses for each property. They were:
a. property taxes;
b. insurance;
c. general and administrative;
d. utilities;
e. repairs and maintenance;
f. property management;
g. ground rents, if applicable;
3
<PAGE> 83
Exhibit G to
Asset Sale Agreement
h. miscellaneous/all other; and
i. reserves.
Where available, actual property data were used in estimating
operating expenses. When actual data were not available, IREM, and/or area
surveys and other reliable sources were used. Operating expenses were assumed
to increase at four percent (4.0%) per annum.
5.2.2 Property tax information was based on current
assessed value, however minimum annual increases were projected at two percent
(2.0%).
5.2.3 Property management fees were projected as five
percent (5.0%) of effective gross income with a minimum acceptable of three
percent (3.0%) of gross potential income.
There were other factors that influenced the
valuation process depending on type of property. In general the condition of
the property had an impact on valuation. Deferred maintenance and required
capital expenditures had an impact on total operating expenses and net cash
flow.
5.3 Upon recovery of the property, a 12-month marketing period was
assumed in order to sell the property:
5.4 Terminal capitalization rates varied by property type,
location and special market circumstances. The assumed capitalization rates
used for each property type within the portfolio were as follows:
<TABLE>
<S> <C>
Multifamily . . . . . . . . . . . . . . . 9.0%
Retail . . . . . . . . . . . . . . . . . . 10.5%
Office . . . . . . . . . . . . . . . . . . 11.0%
Industrial . . . . . . . . . . . . . . . . 11.0%
</TABLE>
The capitalization rates above were adjusted upwards or
downwards if market conditions warranted.
Selling and closing costs were projected at six percent
(6.0)% for all properties.
5.5 Land
The DIV for Land was valued utilizing primarily sales
comparable information and, to the extent practical, a land residual analysis
was prepared. Where specific information was available to support lot sales,
that information was utilized in the overall value.
4
<PAGE> 84
Exhibit G to
Asset Sale Agreement
5.5.1 Revenue
No revenue other than sales proceeds was assumed. No land
within the portfolio had significant income streams from which to compute cash
flow information.
5.5.2 Expenses
Annual operating expenses were estimated based upon historical
information when available. Operating expenses considered in the valuation
were:
a. property taxes;
b. insurance (an estimate of $25 per acre was
used with a minimum of $250 per year and
maximum of $3,000 per year unless more
accurate information was available); and
c. ground maintenance and security (a minimum
amount of $10,000 per year was used unless
more accurate information was available).
All operating expenses were assumed to increase a minimum of
[four] percent (4.0%) per year. In no event were property taxes increased less
than [two] percent (2.0%).
5.6 Estimated Net Sales Proceeds
Capitalized NOI and appraisal information, comparable sales,
and to the extent practical, a land residual analysis, to establish the current
value of the property. Where appraisal information was considered inadequate,
recent sales comparables were used.
VI. NON-PERFORMING LOAN VALUATION METHODOLOGY
Mortgage loans that have matured and are currently not paying or are
anticipated to default during the term of the loan or at maturity were valued
at the lesser of:
6.1 Face amount of the loan; or
6.2 Present Value of the Estimated Future Cash Flows of the loan
(Future Default), assuming the discount rates in Section III; or
6.3 Present Value of the Cash Flows from the underlying collateral
adjusted for timing and cost of foreclosure (Immediate Default). /// /// ///
5
<PAGE> 85
Exhibit G to
Asset Sale Agreement
Loan cash flows under item 6.2 were equal to contractual loan payments
through default, payments received during bankruptcy/foreclosure proceedings,
and property cash flows through sale.
VII. DEFAULT ASSUMPTIONS
7.1 Default Date
It was assumed that default would occur when the property
could no longer support the required payment or the loan matured and the
terminal value did not support the payoff of the loan. This could be caused by
economic changes, changes in payment requirements, interest rates or
maturities.
7.2 Timing of Foreclosure and Bankruptcy
On the Default Date, the holder of the note was assumed to
initiate foreclosure proceedings and exercise all rights and remedies
available. The borrower is likely to exercise certain defense tactics,
including bankruptcy, designed to delay the lender's ability to recover the
collateral. Even though most of the assets are owned by single purpose,
limited debt entities, borrowers have had increasing success in stalling the
resolution of these cases through several techniques. The most common
technique is the filing of an inadequate plan of reorganization. It was
assumed that bankruptcy is filed in all foreclosure cases and that the holder
of the note is successful in recovering the property.
Foreclosure timing varies based on state laws and whether
legal action may be pursued through judicial or non-judicial proceedings. It
has been assumed that foreclosure and bankruptcy proceedings will take, on
average, 15 months as California is a non-judicial foreclosure state. This
period is adjusted to reflect those cases where the recovery period may be less
than the average, such as the case of negotiated Deed in Liens and lengthen the
case of multiple assets.
7.3 Cash Flow During Foreclosure/Bankruptcy
During the default period and the bankruptcy proceedings, the
borrower may have the ability to retain the cash flow from the property rather
than remit it to the holder of the note.
The note holder can defend rights to the property cash flow by
either appointing a receiver or obtaining a Cash Collateral Order (CCO). It
has been assumed that, in either case, this defense will take, on average,
ninety (90) days from the bankruptcy filing date.
The level of Property Cash Flow during the receiver/CCO period
will be reduced by one of two things. First, if a receiver has been appointed,
the receiver will collect all of the cash flow, but will charge a fee for his
services. Second, if a receiver is not appointed it will be assumed that the
borrower will have adequate control to reduce cash flow by overstating
6
<PAGE> 86
Exhibit G to
Asset Sale Agreement
expenses or understating rents. In either case it was assumed that only
eighty-five percent (85%) of cash flow was turned over to the court. It is
further assumed that the court collects the cash flow during
foreclosure/bankruptcy and the lender receives the cash flow at termination of
the proceedings.
7.4 Legal Expenses
Legal expenses incurred in bankruptcy and foreclosure were
assumed to be the greater of [five] percent (5.0%) of collateral value with a
minimum of or [$50,000.00] with a cap of [$300,000.00]. Legal expenses were
adjusted for multiple entity borrowers and some very large balance loans.
7.5 Guarantees
It was assumed that no collections would be made or guaranteed.
7.6 Recovery
On the Recovery Date, the holder of the note was assumed to
have received all funds accumulated in accordance with CCO. Legal fees,
delinquent real estate taxes, senior debts and deferred maintenance had the
effect of reducing the amount of recovery.
7
<PAGE> 87
Exhibit H to
Asset Sale Agreement
Form of
VALUATION CERTIFICATE
Pursuant to Section 5.4 of that certain Asset Sale Agreement (the
"Agreement"), by and between _________________________________________________
("Purchaser"), _______________________________ ("Purchaser"), and City National
Bank, a national banking association ("Seller"), the undersigned firm, appointed
pursuant to Section 5.5(b)(i) of the Purchase Agreement ("Valuation Agent"),
hereby represents that (i) it prepared estimated cash flows and present value
calculations regarding the [Mortgage Loan/Real Property] listed as Control
Number ______ on the Mortgage Loan and Real Property Schedule attached to the
Agreement as Exhibit A thereto (the ""Valuation"); (ii) the Valuation Reports
thereon are attached hereto and reference is made to them for their content;
and (iii) the procedures by which the Valuation was prepared, the estimates and
the assumptions, including any provided or prescribed by Seller, upon which the
Valuation was prepared, and the limitations attending any use of the Valuation,
are described in the Valuation Report, and in Exhibit G to the Agreement,
copies of which are attached to this Valuation Certificate, and reference is
made to the Valuation Report and Exhibit G for their content.
The undersigned firm hereby represents that copies of this Valuation
Certificate and attachments hereto have been delivered to Purchaser as of the
date hereof. The undersigned Purchaser hereby represents that it has received
such copies of this Valuation Certificate and attachments hereto as of the date
hereof and that Purchaser is familiar with their contents.
Dated the ________ day of ____________________, 1993.
PURCHASER VALUATION AGENT
By: __________________________ By: __________________________
Its: __________________________ Its: __________________________
<PAGE> 88
Exhibit I to
Asset Sale Agreement
FORM OF
NOTICE TO MORTGAGORS
_________________________, 199___
[Name and Address of Mortgagor]
Subject: City National Bank
Property Name:
Loan No.:
Original Loan Amount: $________________
Note Dated:
Gentlemen:
The above mortgage loan ("Loan") has been sold and conveyed to
______________________________________________________________________________
("Purchaser") by CITY NATIONAL BANK, a national banking association. Purchaser
has designated [A LOCKBOX] [A DEPOSITORY ACCOUNT] for the collection of
interest, principal, escrows and other charges under the Loan. In order to
receive credit for payments under the Loan, all payments should be made in
accordance with the directions set forth in this letter.
You are hereby irrevocably and unconditionally authorized and directed
that each payment of interest, principal, escrows or any other charge by you
under the Loan is to be made in the form of a check made payable to the order
of:
_____________________________________________________________________
and delivered to the following address:
_____________________________________________________________________
Payments that are not made in accordance with this authorization and
direction will not be credited to payment of such interest, principal, escrows
or other charges under the Loan until otherwise properly directed. Please
contact Purchaser at the address and phone number given below if you have any
questions or comments on this matter:
[Corporation/Partnership]:
_____________________________________________________________________
<PAGE> 89
Exhibit I to
Asset Sale Agreement
Telephone: _________________________
Attention: _________________________
Thank you for your cooperation.
CITY NATIONAL BANK, a national banking
association
By: ________________________________
Its: ________________________________
2
<PAGE> 90
Exhibit J to
Asset Sale Agreement
REAL PROPERTY SALES CONTRACT
THIS REAL PROPERTY SALES CONTRACT (the "Contract") is made and entered
into as of the first day of November, 1993, by and between (i) WHC-THREE
Investors, L.P., a Delaware limited partnership having an office at c/o
WHC-THREE Investors, Inc., 85 Broad Street, 19th Floor, New York, New York
10004 ("Affiliate Purchaser"); and (ii) CITY NATIONAL BANK, a national banking
association, including any subsidiary thereof holding title to any Real
Property under this Contract ("Seller"). Capitalized terms not otherwise
defined herein shall have as their meaning the definition ascribed to such
terms in the Asset Sale Agreement of even date herewith (the "Asset Sale
Agreement").
W I T N E S S E T H:
WHEREAS, Seller is the owner (i) in fee simple of certain parcels of
commercial land, including all improvements, fixtures, easements and other
appurtenances and (ii) leasehold estates, if any, each of which will, as of the
Closing Date, be encumbered by Interim Mortgage Loans (each a "Parcel of Real
Property" and collectively, the "Real Property"), as further described in
Exhibits A-1 through A-17 attached hereto and incorporated herein by reference;
and
WHEREAS, Seller, and Affiliate Purchaser (the "Purchaser"), have on
the date hereof entered into the Asset Sale Agreement, whereby Purchaser agreed
to purchase certain Mortgage Loans and to cause Affiliate Purchaser to purchase
certain Real Property from Seller pursuant to the terms and conditions set
forth in the Asset Sale Agreement and Purchaser and Seller have agreed to enter
into a Loan and Security Agreement (the "Loan and Security Agreement") for the
financing of the sale of the aforementioned Mortgage Loans and Real Property;
and
WHEREAS, Seller has agreed to sell the Real Property to Affiliate
Purchaser and Affiliate Purchaser has agreed to purchase said Real Property
from Seller, at the price and upon the terms and conditions hereinafter set
forth; and
WHEREAS, Affiliate Purchaser has agreed that Seller will continue to
own and manage the Real Property prior to the Real Property Closing Date, but
shall amend the existing management contracts with the managing agents for the
Real Property to reflect Seller's and Affiliate Purchaser's agreement regarding
the management of the Real Property from said date until the dates Affiliate
Purchaser or its assignee takes title to each Parcel of Real Property as more
particularly described herein;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1
<PAGE> 91
Exhibit J to
Asset Sale Agreement
1. PURCHASE AND SALE OF REAL PROPERTY.
1.1 On the Real Property Closing Date (as defined in
Section 3 hereof) for each Parcel of Real Property, and subject to the terms
and conditions set forth in this Contract and the Asset Sale Agreement, Seller
agrees to sell, assign, transfer and deliver to Affiliate Purchaser or a
Qualified Affiliate, and Affiliate Purchaser, on behalf of itself and the
Qualified Affiliate, agrees to purchase, acquire and accept such Parcel or
Parcels of the Real Property from Seller.
1.2 In addition to the Real Property, this sale includes
all of Seller's (herein, "Owner") right, title and interest in and to the
following:
1.2.1 All easements, covenants and other rights
appurtenant to said Real Property, and all right, title and interest, if any,
in and to any land lying in the bed of any street, road, avenue or alley, open
or closed, in front of or adjoining said Real Property and to the center line
thereof;
1.2.2 All furniture, fixtures, equipment and other
personal property (except items owned by tenants) which are now, or may
hereafter prior to the Real Property Closing Date be placed in or attached to
the Real Property;
1.2.3 To the extent same may be transferred under
applicable law without consent (unless obtained by Purchaser), all licenses,
permits and authorizations presently issued in connection with the operation of
all or any part of the Real Property or necessary to operate the Real Property
as it is presently being operated;
1.2.4 To the extent same may be assigned without
consent (unless obtained by Purchaser), all warranties, if any, issued to the
Owner by any manufacturers and contractors in connection with construction or
installation of equipment included as part of the Real Property;
1.2.5 To the extent assignable and same are to be
assigned hereunder (at the election of Affiliate Purchaser) to Affiliate
Purchaser or a Qualified Affiliate at the Real Property Closing Date for each
Parcel of Real Property, all service, supply and maintenance contracts (if any)
held by the Owner with respect to the Real Property and its mechanical
equipment, elevators and other elements;
1.2.6 To the extent assignable without consent
(unless obtained by Purchaser) all trade names and general intangibles relating
solely to the Real Property;
1.2.7 To the extent assignable, all leases of all
or any part of the Real Property; and
1.2.8 All other rights, privileges and
appurtenances to which Affiliate Purchaser may be entitled under the Contract
or the Asset Sale Agreement, including but
2
<PAGE> 92
Exhibit J to
Asset Sale Agreement
not limited to tenant security deposits to the extent held by Owner, utility
capacity, utility reservation deposits and refunds in connection therewith; and
1.2.9 Hazard insurance and condemnation proceeds
received by Owner and payable to Purchaser pursuant to Section 8.1(d) of the
Asset Sale Agreement with respect to the Real Property and not applied to
amounts due on the Mortgage Loan or to the repair of the Real Property.
2. PURCHASE PRICE.
The purchase price of each Parcel of Real Property shall be the
Initial Purchase Price consisting of the sum of One Hundred Dollars U.S.
($100.00) cash plus taking title thereto in satisfaction of the debt owing on
the respective Interim Mortgage (as hereinafter defined) (collectively, the
"Purchase Price"), subject to adjustment as set forth below, and shall be paid
as follows:
2.1 The Initial Purchase Price, One Hundred Dollars
($100.00), shall be paid, in cash or by bank wire transfer for each Parcel of
Real Property, payable on the Real Property Closing Date as such term is
defined below.
2.2 One or more Qualified Affiliates shall take title to
the Real Property designated "industrial" on the Mortgage Loan and Real
Property Schedule, as such term is defined in the Asset Sale Agreement, which,
as of the date hereof, shall be subject to one or more Interim Mortgage Notes,
as such term is defined in the Asset Sale Agreement, and Interim Mortgages, as
such term is defined in the Asset Sale Agreement, in favor of Purchaser, and
another Qualified Affiliate or Qualified Affiliates shall take title to the
remaining Real Property not designated "industrial" on the Mortgage Loan and
Real Property Schedule, which, as of the date hereof, shall be subject to one
or more Interim Mortgage Notes and Interim Mortgages, each of which Interim
Mortgage Loans is in the principal amount shown on Exhibit C hereto, with
interest thereon payable at the Applicable Rate, as such principal may be
adjusted to reflect the Adjusted Purchase Price of each Parcel of Real
Property, and payable monthly. Concurrently with the transfer of title to a
Qualified Affiliate with respect to each Parcel of Real Property, the Interim
Mortgage Note shall be marked Paid in Full and, along with the Interim
Mortgage, reconveyed to Seller.
3. REAL PROPERTY CLOSING DATE.
3.1 The closing of the purchase and sale for each Parcel
of Real Property (each, a "Real Property Closing Date") shall occur no later
than the last day of the month in which the following date occurs: the earlier
of (i) ten (10) calendar days after the termination of the Due Diligence Period
for the related Interim Mortgage Loan unless a Certificate of Defective Asset
under the Asset Sale Agreement has been delivered to Seller prior to the
expiration of the Due Diligence Period, in which event the Real Property
Closing Date for such Parcel of Real Property shall be extended until the
Defect listed in such Certificate of Defective
3
<PAGE> 93
Exhibit J to
Asset Sale Agreement
Asset is cured; or (ii) thirty (30) days after the date Seller receives an
Acceptance Certificate for the Interim Mortgage Loan secured by or related to
the Real Property. On each Real Property Closing Date, Seller shall deliver to
the Qualified Affiliate a deed in substantially the form attached to the Asset
Sale Agreement as Exhibit N. The conveyance under such deed shall be made
subject to a lien in favor of Seller in an amount equal to seventy-five percent
(75%) of the Adjusted Purchase Price of the related Real Property, evidenced by
a mortgage in the form of Exhibit M to the Loan and Security Agreement.
Affiliate Purchaser or its assignee Qualified Affiliate shall have the
option to purchase any Parcel of Real Property prior to the aforementioned date
upon ten (10) days' prior written notice, provided however, that Seller shall
not be required to close the sale of Real Properties more than once per month.
Each such closing (collectively, the "Real Property Closing") shall be held at
the offices of Seller's counsel, or at such other place that Seller and
Affiliate Purchaser or any Qualified Affiliate that will take title to the Real
Property, as the case may be, may agree.
3.2 The following items of expense shall be adjusted as
of midnight of the day immediately preceding the Real Property Closing Date for
each Parcel of Real Property:
3.2.1 Real estate taxes with respect to each Parcel
of Real Property. If the rate or amount of such taxes shall not be fixed prior
to the Real Property Closing Date, the adjustment thereof at each Real Property
Closing Date shall be upon the basis of the rate for the preceding fiscal year
applied to the latest assessed valuation (or other basis of valuation) and the
same shall be further adjusted when the rate and valuation for the current
fiscal year is fixed. Affiliate Purchaser or any Qualified Affiliate that will
take title to the Real Property shall receive a credit for the amount of all
unpaid assessments (whether special or general) that have been levied or are
payable with respect to any Parcel of Real Property prior to the Real Property
Closing Date with respect to such Parcel of Real Property and that have not
been deposited into the Estimated Accrual Account under Section 3.3 below;
3.2.2 Water and sewer service charges, and charges
for all other public utilities (if any);
3.2.3 Rents, provided, however, that (A) Purchaser,
Affiliate Purchaser or any Qualified Affiliate that will take title to the Real
Property shall receive a credit for any rents paid to Seller by tenants of each
Parcel of Real Property for rent applicable to the period from each Real
Property Closing Date and thereafter, and (B) in the event that prior to each
Real Property Closing Date, Seller is unable to collect all rents due and owing
for any period after the Due Diligence Cut-Off Date and prior to the Closing
Date, Purchaser, Affiliate Purchaser or the Qualified Affiliate shall use its
best efforts (but shall not be obligated to institute or prosecute any
litigation) to collect such amounts from tenants and pay the same to Seller.
Any such payments relating to any period after the Closing Date and prior to
such Real Property Closing Date shall be paid to Seller for the benefit of
Purchaser as amounts due under the related Interim Mortgage. Any rent
collected by Purchaser, Affiliate Purchaser or the Qualified Affiliate from a
tenant who owes delinquent rent as of each Real Property Closing Date will
first be
4
<PAGE> 94
Exhibit J to
Asset Sale Agreement
credited to rent accruing on and after each Real Property Closing Date and due
as of the date of its collection until such rents are fully current and further
provided that nothing contained herein shall preclude Seller from using efforts
to collect such delinquent amounts from tenants. Purchaser, Affiliate
Purchaser or the Qualified Affiliate shall also receive a credit for the amount
of all tenant security, pet and/or other deposits actually held by Seller with
respect to each Parcel of Real Property (or same shall actually be
transferred);
3.2.4 Hazard insurance premiums on any insurance
policies that are transferred to Purchaser, Affiliate Purchaser or the
Qualified Affiliate; and
3.2.5 Gas, oil and all other private utilities.
The adjustments described in this subparagraph shall be paid on each
Real Property Closing Date in cash or by certified or cashier's check. If the
amount of any of the adjustments described in this subparagraph cannot be
determined on each Real Property Closing Date, the adjustment therefor shall be
made within thirty (30) days after each such Real Property Closing Date by
certified or cashier's check. In making the adjustments required by this
subparagraph, Seller shall be entitled to a credit for all amounts prepaid as
of each Real Property Closing Date and any period after each Real Property
Closing Date, and Seller shall be charged with any unpaid charges for the
period prior to each Real Property Closing Date.
3.3 In the event an Interim Mortgage is utilized, the Seller
covenants and agrees (i) to pay, for the purpose of establishing an escrow
account to be held by Seller for the benefit of Purchaser, Affiliate Purchaser
or a Qualified Affiliate (the "Estimated Accrual Account") (which account shall
not bear interest), an initial amount equal to the Proration Amount, as such
term is hereafter defined; and (ii) thereafter to continue to pay into the
Estimated Accrual Account monthly to the extent available from Cash Flow, on
each and every monthly payment date, one-twelfth (1/12th) of the estimated
annual real estate taxes, assessments and hazard insurance premiums on the Real
Property, as Permitted Expenses. The amount of such real estate taxes,
assessments and hazard insurance premiums, when unknown, shall be reasonably
estimated by Seller. Such deposits shall be used by Seller or, if such real
estate taxes, assessments and hazard insurance premiums are payable after the
Real Property Closing Date,such Estimated Accrual Account shall be assigned to
Purchaser and used by Purchaser, Affiliate Purchaser or Qualified Affiliate to
pay such real estate taxes, assessments, and hazard insurance premiums when
due. The enforceability of the covenants relating to the Seller's payment of
real estate taxes, assessments and hazard insurance premiums herein otherwise
provided shall not be affected except insofar as those obligations have been
met by compliance with this Section 3.3. As used herein, "Proration Amount"
means that amount of real estate taxes, assessments and hazard insurance
premiums which would be payable by Seller if the Real Property were transferred
to Purchaser, Affiliate Purchaser or a Qualified Affiliate on the Closing Date.
3.4 Affiliate Purchaser or Qualified Affiliate shall pay,
when due and payable, all transfer, filing and recording fees and taxes, and
costs and expenses, if any, with respect to the filing or recording of any
documents or instruments relating to the financing of any Parcel
5
<PAGE> 95
Exhibit J to
Asset Sale Agreement
of Real Property and the cost of recording corrective instruments, pursuant
hereto or to the Asset Sale Agreement, except for those related to any Interim
Mortgage or deed to any Real Property, which Seller shall pay.
Except as otherwise expressly provided herein, whether or not the
transactions contemplated hereunder are completed, Affiliate Purchaser or
Qualified Affiliate shall pay all of its closing and due diligence expenses and
its expenses in negotiating and carrying out its obligations under this Sales
Contract, including the costs of its counsel, all of the costs of title or
other insurance which is not presently in force or otherwise provided by Seller
or other due diligence Affiliate Purchaser or Qualified Affiliate may desire to
undertake and all of the expenses of Affiliate Purchaser or Qualified Affiliate
relating to this Contract.
3.5 To the extent set forth in Paragraph 1 (and in the
case of 3.5.1, 3.5.4 and 3.5.5, in a form reasonably acceptable to the parties
to this Contract)the following documents shall be delivered to each Affiliate
Purchaser or Qualified Affiliate on each Real Property Closing Date for the
Parcel of Real Property being purchased:
3.5.1 A duly executed and acknowledged assignment
of all landlord's interest in tenant leases affecting the Parcel of Real
Property;
3.5.2 A current rent roll for the Parcel of Real
Property (to be used for proration purposes only and to the extent available);
3.5.3 Such utility bills, tax statements, water,
sewer and other service bills, and insurance bills as are available for
purposes of determining amounts set forth in Section 3.2 hereof and to the
extent available;
3.5.4 A general assignment of all assignable (w)
existing warranties of the Real Property, (x) contracts and agreements
affecting the Real Property, (y) trade names relating solely to the Parcel of
Real Property and (z) any and all other intangible property included in this
sale pursuant to Paragraph 1; and
3.5.5 A bill of sale covering all personal property
for the Parcel of Real Property, together with such other documents as are
appropriate to convey, transfer or assign any interest that the Seller may have
to the other items described in Section 1.2 hereof.
3.6 Affiliate Purchaser or any Qualified Affiliate shall
have its counsel deliver to Seller the following legal opinions as of the Real
Property Closing Date for each Parcel of Real Property:
3.6.1 Affiliate Purchaser or, if Affiliate
Purchaser has assigned its rights hereunder to a Qualified Affiliate, such
Qualified Affiliate, is duly formed and validly existing and in good standing
under the laws of the State of its incorporation or formation;
6
<PAGE> 96
Exhibit J to
Asset Sale Agreement
3.6.2 (A) Affiliate Purchaser or, if Affiliate
Purchaser has assigned its rights hereunder to a Qualified Affiliate, such
Qualified Affiliate, as the assignee of the Affiliate Purchaser, has full and
absolute power and authority to assume, as the case may be, this Contract and
Affiliate Purchaser's obligations hereunder and to enter into the Assignment
and Assumption of Sales Contract substantially in the form attached hereto as
Exhibit B and to perform its obligations thereunder, and (B) the Asset Sale
Agreement, the Assignment and Assumption of Sales Contract, if applicable, the
above referenced documents and any other ancillary documents delivered pursuant
hereto will constitute binding and enforceable obligations of the Qualified
Affiliate or Affiliate Purchaser, as the case may be, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
enforcement of creditor's rights generally and by general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity);
3.6.3 If Affiliate Purchaser has assigned its
rights hereunder to a Qualified Affiliate, the Qualified Affiliate has been
duly authorized by all requisite action to assume the Sales Contract, and
Affiliate Purchaser's obligations hereunder, and to execute the Assignment and
Assumption of Sales Contract and any other documents that such Qualified
Affiliate is required to execute pursuant to the Asset Sale Agreement and the
Loan and Security Agreement;
3.6.4 Affiliate Purchaser and, if Affiliate
Purchaser has assigned its rights hereunder to a Qualified Affiliate, such
Qualified Affiliate, have all the requisite governmental approvals of any kind,
including without limitation, licenses, permits and authorizations, if any,
required to manage the Real Property and perform the obligations under this
Contract, the Interim Mortgage and any amendments thereto; and
3.6.5 The Qualified Affiliate is qualified to
transact business in the State of California and all jurisdictions in which its
ownership of real property or its conduct of business requires such
authorization.
3.6.6 The Qualified Affiliate is a "Qualified
Affiliate" as that term is defined herein and in the Asset Sale Agreement and
has satisfied all conditions in the Asset Sale Agreement to its qualification
as a Qualified Affiliate. Such legal opinion may rely on certificates of
executive officers or other officers in possession of the official records of
the entities in question. Instead of delivering a legal opinion as to the
foregoing, Affiliate Purchaser or the Qualified Affiliate may deliver other
evidence reasonably satisfactory to Seller.
4. ADDITIONAL OBLIGATIONS OF SELLER.
4.1 Since Section 6 hereof conditions the obligations of
Affiliate Purchaser to acquire the Real Property hereunder only upon
satisfaction by Seller of its representations and warranties under Sections 7.1
and 7.2 of the Asset Sale Agreement (or acceptance of the related Mortgage Loan
by an affiliate of Affiliate Purchaser thereunder), which representations and
warranties include items related to the condition of title to each Parcel of
Real
7
<PAGE> 97
Exhibit J to
Asset Sale Agreement
Property, other than as specifically provided herein, there are no further
obligations of Seller or conditions precedent to each Real Property Closing
under this Agreement.
4.2 At each Real Property Closing, Seller shall execute
and deliver to Affiliate Purchaser or Qualified Affiliate a deed, in the form
attached as Exhibit N to the Asset Sale Agreement (and with respect to any
leasehold estate, the appropriate transfer documentation, without
representation or warranty), in recordable form, which conveys indefeasible
title to the Parcel of Real Property in fee simple, good and marketable, of
record and in fact (but subject to those exceptions, conditions and facts
permitted by the Asset Sale Agreement or agreed to by Qualified Affiliate or
Affiliate Purchaser) and insurable by a nationally recognized title insurance
company. With respect to any such leasehold estate, Affiliate Purchaser or
Qualified Affiliate shall assume, in writing, all of the obligations of Seller
under the lease arising and incurred on and after such Real Property Closing
Date.
4.3 For each Parcel of Real Property, from the date of
execution of this Contract until the earlier to occur of either the Real
Property Closing Date or the date, if any, on which Seller is no longer
obligated to sell such Parcel of the Real Property hereunder, Seller covenants
and agrees as follows:
4.3.1 Seller shall not cause or permit, without the
prior written consent of Affiliate Purchaser or Qualified Affiliate or as
expressly permitted by the management agreement relating to the management of
the specified Parcel of Real Property, as such may have been amended to reflect
Seller's and Affiliate Purchaser's agreement regarding the management of such
Real Property, any of the following (except with respect to default by tenants,
casualty or condemnation or restoration associated therewith or required to
protect or preserve the Parcel of Real Property and improvements thereon):
(a) Any changes, amendments or waivers
of any lease that would result in a material adverse effect to Affiliate
Purchaser or a Qualified Affiliate including (x) a material reduction in
payments under a lease covering all or any portion of any Parcel of Real
Property, (y) any additional material obligation to be imposed on the landlord
thereunder (other than in the ordinary course of business), or (z) an extension
of (or option to extend) the term of such lease beyond six months from the
Closing Date under the Asset Sale Agreement;
(b) the execution of any new lease of
any portion of the Parcel of Real Property that is not, in the reasonable
judgment of the Seller, commercially reasonable or would have a term (including
any options to extend) extending such lease beyond six months from the Closing
Date under the Asset Sale Agreement; and
(c) the conveyance, contracting to
convey, assigning, pledging or other encumbering of the Parcel of Real Property
or any of the future rents or other charges payable under any leases covering
all or any portion of the Parcel of the Real Property.
8
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Exhibit J to
Asset Sale Agreement
4.3.2 Seller hereby authorizes Affiliate Purchaser, its assignee
Qualified Affiliate and their respective representatives to appear and contest
any ad valorem tax valuations or assessments with respect to the Parcel of Real
Property so long as such is done at the sole cost and expense of Affiliate
Purchaser or its assignee Qualified Affiliate.
4.4 For each Parcel of the Real Property from the date of
execution of this Contract until the Real Property Closing Date, Seller
covenants and agrees to operate, manage and maintain such Real Property in
conformity with customary prudent industry management standards of owners of
similar real properties who act in a prudent manner.
5. ASSIGNMENT TO QUALIFIED AFFILIATE.
5.1 Affiliate Purchaser shall, except as otherwise agreed
by Seller, in writing, prior to any Real Property Closing Date, assign its
rights, interests, duties and obligations under this Contract with respect to
the Real Property to not less than two Qualified Affiliates (one or more
Qualified Affiliates shall take title to all of the Real Property designated
"industrial" on the Mortgage Loan and Real Property Schedule, and one or more
other Qualified Affiliates shall take title to the remaining Real Property not
designated "industrial" on the Mortgage Loan and Real Property Schedule), which
shall assume, in writing, such duties and obligations. The assignment and
assumption of the rights, interests, duties and obligations under this Contract
with respect to each Parcel or Parcels of Real Property to a Qualified
Affiliate shall be substantially in the form attached hereto as Exhibit B.
5.2 In the event that Seller is providing financing under
the Loan and Security Agreement, Seller shall require that one or more
Qualified Affiliates will acquire one or more Parcels of Real Property
designated "industrial" on the Mortgage Loan and Real Property Schedule, and
one or more other Qualified Affiliates that do not hold any Real Property
designated "industrial" on such schedule acquire one or more of the remaining
parcels of Real Property.
6. CONDITION TO OBLIGATION TO PURCHASE OR SELL.
6.1 Condition to Purchaser's Obligation to Purchase.
Seller and Purchaser each shall have performed all of its covenants and
agreements required to be performed by it under the Asset Sale Agreement prior
to the Closing Date. Neither Purchaser, Affiliate Purchaser nor any Qualified
Affiliate shall be obligated to acquire any Parcel of Real Property hereunder
in the event that Purchaser has properly and timely delivered to Seller a
Certificate of Defective Asset prior to the expiration of the Due Diligence
Period for the related Asset declaring that the related Asset is a Defective
Asset under the Asset Sale Agreement and Seller has not (i) cured such Defect
within the period provided under the Asset Sale Agreement, or (ii) established
that no Defect exists, or (iii) repurchased the related Asset pursuant to
Section 10.1 of the Asset Sale Agreement, or (iv) reduced the Initial Purchase
Price with respect to such Asset by either the amount specified by Purchaser as
Purchaser's Cure Estimate or the Reduction to the Initial Purchase Price, or
(v) deleted the Interim Mortgage securing such Parcel of Real Property pursuant
to the Asset Sale Agreement.
9
<PAGE> 99
Exhibit J to
Asset Sale Agreement
6.2 Condition to Seller's Obligation to Sell. Seller's
obligation to sell any Parcel of Real Property under this Contract shall
terminate if the related Asset has been deleted from the Mortgage Loan and Real
Property Schedule in accordance with Section 10.1 of the Asset Sale Agreement
and, upon such deletion, neither Seller nor Affiliate Purchaser or any
Qualified Affiliate shall have any further obligations under this Contract with
respect to such Parcel of Real Property. Seller's obligation to sell any
Parcel of Real Property shall be suspended during any period in which Purchaser
shall be in default under the Asset Sale Agreement. Seller's liability with
regard to such termination of Seller's obligations to sell a particular Parcel
of Real Property under this Contract shall be limited to its repurchase
obligations and the remedies for breach of that obligation under the Asset Sale
Agreement.
7. REPRESENTATIONS AND WARRANTIES OF AFFILIATE PURCHASER.
Affiliate Purchaser represents and warrants to Seller that the
representations and warranties stated in Section 6.1 of the Asset Sale
Agreement are true and correct as of the date of this Contract and shall be
true and correct on each Real Property Closing Date, each as though made by
Affiliate Purchaser.
8. DISCLAIMER OF WARRANTIES.
Affiliate Purchaser acknowledges on its own behalf and on behalf of
any assignee Qualified Affiliate that, except for the representations and
warranties included in the Asset Sale Agreement, neither Seller nor any
attorney, agent, employee or representative of Seller has made any
representation or warranty whatsoever, express or implied, regarding the
subject matter of this sale, or any part thereof, including, without limiting
the generality of the foregoing, representations or warranties as to the
physical nature or condition of the premises or the personal property for each
Parcel of Real Property transferred hereunder, or their fitness or suitability
for any use, except as expressly set forth in the Asset Sale Agreement or this
Contract, and that Affiliate Purchaser, in executing, delivering and performing
this Contract, does not rely upon any statement made or information given,
directly or indirectly, verbally or in writing, to any individual, firm or
corporation other than as provided in the representations and warranties in
Sections 7.1 and 7.2 of the Asset Sale Agreement. Possession of the Real
Property shall be delivered in "as is" condition as of each Real Property
Closing Date, subject only to the provisions of Sections 9 and 10 hereof.
9. RISK OF LOSS.
Seller shall bear the risk of loss of each Parcel of Real Property
during the period from the date hereof until the Closing Date under the Asset
Sale Agreement (also referred to in this Section 9 as the "Closing"). In the
event of damage to any Parcel of Real Property by fire or other casualty, act
of God or any other event prior to the Closing, Seller shall be deemed to have
satisfied its obligations to convey the Real Property hereunder in accordance
herewith if (a) Seller shall repair or pay for the cost of repair or
restoration of the Real Property caused by such casualty damage, (b) if the
insurance proceeds in respect of such damage are received prior to the Closing
Date under the Asset Sale Agreement, Seller shall pay or credit the amount of
the insurance
10
<PAGE> 100
Exhibit J to
Asset Sale Agreement
proceeds, as well as any unpaid claims or rights in connection with such
casualty, together with any uninsured amount, against the Adjusted Purchase
Price of the Assets under the Asset Sale Agreement as provided therein, (c) if
the insurance proceeds described in subparagraph (b) above are received after
the Closing Date under the Asset Sale Agreement and on or before the applicable
Real Property Closing Date, Seller shall assign such insurance proceeds to
Affiliate Purchaser or its assignee Qualified Affiliate at the Real Property
Closing and pay or credit to Purchaser any uninsured amount, or (d) if such
insurance proceeds are not received by Seller on or before the applicable Real
Property Closing Date, Seller shall assign its right to receive such insurance
proceeds to Affiliate Purchaser or its assignee Qualified Affiliate at such
Real Property Closing and pay or credit to Purchaser any uninsured amount. The
insurance proceeds described in the preceding sentence shall include, but not
be limited to, any proceeds (a) payable as of the date hereof or (b) paid prior
to the date hereof and shall be limited to the proceeds not expended for the
repair of such damage or to protect and preserve the damaged property. Prior
to the Real Property Closing Date, Affiliate Purchaser or its assignee
Qualified Affiliate shall have the right to participate in the negotiations and
settlement of any casualty-related claim and any decision regarding the
reconstruction or renovation of any improvement on the Real Property.
Seller shall have the option to terminate this Contract with respect
to any Real Property and to delete the related Mortgage Loan under the Asset
Sale Agreement in the event of an uninsured loss or a loss valued at more than
thirty percent (30%) of the Adjusted Purchase Price of the related Interim
Mortgage Loan under the Asset Sale Agreement. Notwithstanding the foregoing,
however, Affiliate Purchaser shall have the right, at its option, to rescind
and revoke any such termination by Seller by delivering written notice to
Seller, within thirty (30) days after Affiliate Purchaser's receipt of such
termination notice, provided that Affiliate Purchaser agrees to take the Real
Property in "as is" condition and to relieve Seller of any obligation to pay
for the costs of any repair or restoration of the Real Property or any other
damages related to or arising as the result of or with respect to such loss or
to assign any insurance proceeds received by Seller with respect to such Real
Property.
Purchaser shall bear the risk of loss of the Real Property after the
Closing.
10. CONDEMNATION.
Seller agrees to give Affiliate Purchaser written notice of any action
or proceeding instituted or pending, in eminent domain or for condemnation
affecting any material part of any Parcel of Real Property, promptly after
Seller's receipt thereof. If, prior to the Real Property Closing Date for such
Parcel of Real Property, all or any part of such Parcel of Real Property is
taken by condemnation or eminent domain proceeding or other transfer in lieu
thereof, this Contract shall remain in full force and effect, and Seller will
pay to Affiliate Purchaser or its assignee Qualified Affiliate at the Real
Property Closing for such Parcel of Real Property an amount equal to the net
proceeds received by Seller from such condemnation. However, if by the Real
Property Closing Date for any such Parcel of Real Property, Seller has not
received the condemnation proceeds, then the parties shall consummate this
transaction on the Real Property Closing Date for such Parcel of Real Property
and Seller will at such Real Property Closing assign
11
<PAGE> 101
Exhibit J to
Asset Sale Agreement
to Affiliate Purchaser or its assignee Qualified Affiliate all rights of Seller
to the condemnation award and to all other rights or claims arising out of or
in connection with any such eminent domain or condemnation action or
proceeding. Notwithstanding the foregoing, nothing contained in this Section
10 shall impair Purchaser's and/or Affiliate Purchaser's exercise of their
rights in the event of a breach of Section 7.2(d) of the Asset Sale Agreement.
11. DEFAULT BY AFFILIATE PURCHASER.
In the event Affiliate Purchaser or its assignee Qualified Affiliate
shall default in its obligations to purchase any Parcel of Real Property
hereunder or otherwise breaches this Contract, then: (i) such default or
breach shall constitute an Event of Default under the terms and conditions of
the Asset Sale Agreement, and (ii) for any default or breach hereunder
occurring up to and including the Closing Date under the Asset Sale Agreement,
Seller shall be limited to the remedies set forth in Section 11.1 of the Asset
Sale Agreement, and for any default or breach hereunder occurring after the
Closing Date under the Asset Sale Agreement, Seller may avail itself of any
legal or equitable rights (including, without limitation, the right of specific
performance and/or money damages) which Seller may have at law or in equity or
under this Contract and under the Asset Sale Agreement. Seller shall be
reimbursed by Affiliate Purchaser or its assignee Qualified Affiliate for all
expenses, including reasonable attorneys' fees, incurred in connection with any
action brought under this Section 11 with respect to any default or breach
hereunder occurring after the Closing Date under the Asset Sale Agreement.
12. DEFAULT BY SELLER.
In the event Seller shall default in its obligations hereunder, then,
if prior to Closing under the Asset Sale Agreement, the Deposit shall be
returned to Purchaser and neither Purchaser, Affiliate Purchaser nor its
assignee Qualified Affiliate shall be entitled to monetary damages, except for
direct out-of-pocket expenses proved by Purchaser to have been expended by
delivering to Seller documentary evidence thereof satisfactory to Seller, but
may seek any equitable rights that may be available. If such default occurs
after the Closing under the Asset Sale Agreement, Purchaser, Affiliate
Purchaser or its assignee Qualified Affiliate may seek any legal or equitable
rights (including, without limitation, the right of specific performance and to
monetary damages) that may be available at law or in equity or under this
Contract or the Asset Sale Agreement, subject to the limitations set forth in
Section 11.2 of the Asset Sale Agreement. Purchaser, Affiliate Purchaser or
its assignee Qualified Affiliate, as the case may be, shall be reimbursed for
all expenses, including reasonable attorneys' fees, incurred in connection with
any successful action brought under this Section 12.
13. BROKER.
Each party hereto represents to the other that it has not dealt with
any broker or other party entitled to receive a commission or finder's fee in
connection with the execution of this Contract or the conveyance of the Real
Property. Each party hereto each covenants and agrees to indemnify, defend and
hold the other harmless from and against any and all loss, cost, damage
12
<PAGE> 102
Exhibit J to
Asset Sale Agreement
and expense (including attorneys' fees and charges) suffered or incurred by
Seller, in any capacity, in connection with a breach of the foregoing
representation.
14. WAIVER OF CONDITIONS.
Each party hereto reserves the right to waive any of the terms or
conditions of this Contract which are for the benefit of such party and to
consummate the transaction contemplated hereby in accordance with the terms and
conditions of this Contract which have not been so waived. Any such waiver
must be in writing signed by the party so waiving any of such terms or
conditions.
15. ASSIGNMENT.
Except as specifically provided in Paragraph 5 above or in the Asset
Sale Agreement, neither Affiliate Purchaser nor its assignee Qualified
Affiliate shall have the right to assign its rights, interests, duties and
obligations in and to this Contract or with respect to any Parcel of Real
Property to any party other than a Qualified Affiliate without the prior
written consent of the Seller.
16. NOTICES.
Unless otherwise provided for herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered, if sent by registered or
certified mail (return receipt requested), (b) when delivered, if delivered
personally, (c) when transmitted, if sent by facsimile if a confirmation of
transmission is produced by the sending machine (and a copy of each facsimile
promptly thereafter sent by ordinary mail), or (d) on the following Business
Day, if sent by overnight mail or overnight courier, in each case to the
parties at the following addresses or facsimile numbers (or at such other
addresses or facsimile numbers as shall be specified by like notice):
(a) If to Seller:
City National Bank
Executive Management
606 S. Olive Street, Suite 900
Los Angeles, CA 90014
Attention: Jeffery Puchalski,
Executive Vice President
Fax: (213) 629-3677
with a copy to:
13
<PAGE> 103
Exhibit J to
Asset Sale Agreement
City National Bank
Legal Department
9701 Wilshire Boulevard, 9th Floor
Beverly Hills, CA 90212-2050
Attention: Office of the General Counsel
Fax: (310) 273-5859
(b) If to Purchaser, at
WHC-THREE Investors, L.P.
c/o WHC-THREE Investors, Inc.
85 Broad Street, 19th Floor
New York, NY 10004
Attention: Neil Hasson
Fax: (212) 902-3000
with a copy to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Ave., N.W.
Washington, D.C. 20036-5339
Attention: Mark M. Katz, Esq.
Fax: (202) 857-6395
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication within any corporation or firm to the persons designated to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
17. ENTIRE AGREEMENT.
This Contract is part of several agreements entered into by and among
Seller, Purchaser and Affiliate Purchaser. This Contract shall be construed in
accordance with the agreements set forth in the Asset Sale Agreement, the Loan
and Security Agreement and such other documents as are deemed necessary by the
parties.
18. PARTIAL INVALIDITY.
If any terms, covenants or conditions of this Contract shall be held
invalid or unenforceable, the remainder of this Contract shall nevertheless
survive and be binding upon the parties hereto.
14
<PAGE> 104
Exhibit J to
Asset Sale Agreement
19. GOVERNING LAW; ARBITRATION.
19.1 GOVERNING LAW. This contract shall be governed by,
and construed and interpreted in accordance with the laws of the State of
California.
19.1 ARBITRATION. Any controversy or claim between
Affiliate Purchaser and, upon the assumption hereof by Qualified Affiliate,
Qualified Affiliate and Seller arising out of or relating to this Contract or
any actions or conduct of either in connection therewith (including, but not
limited to, any claim based on or arising from an alleged tort) shall at the
request of Affiliate Purchaser or Qualified Affiliate, as the case may be, or
Seller be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Contract, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall resolve all claims and defenses or other matters in dispute
in accordance with applicable law, including, but not limited to, all statutes
of limitation. Any controversy concerning whether an issue is arbitrable shall
be determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. No provision of this Contract shall
limit the right of either Affiliate Purchaser or Qualified Affiliate, as the
case may be, or Seller to exercise self-help remedies such as setoff, or
obtaining provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The institution and maintenance of any action for judicial relief
or pursuit of provisional or ancillary remedies shall not constitute a waiver
of the right of either Affiliate Purchaser or Qualified Affiliate, as the case
may be, or Seller to submit the controversy or claim to arbitration if the
other party contests such action for judicial relief.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION"
PROVISION OF THIS AGREEMENT DECIDED BY NEUTRAL ARBITRATION AS PROVIDED
BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS
TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING
IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHT TO DISCOVERY
AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION" PROVISIONS. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. THE UNDERSIGNED
HAVE READ
15
<PAGE> 105
Exhibit J to
Asset Sale Agreement
AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT
OF THE MATTERS INCLUDED IN THE "ARBITRATION" PROVISION TO NEUTRAL
ARBITRATION.
_______________________________ ________________________________
AFFILIATE PURCHASER'S INITIALS SELLER'S INITIALS
20. SURVIVAL.
Unless provided herein to the contrary, the provisions of this
Contract and the representations and warranties herein shall survive the
conveyance of title and payment of the Purchase Price and shall not be merged
therein.
21. RIGHT OF INSPECTION.
During such time as the Interim Mortgage remains outstanding, Seller
shall have the right to inspect the Real Property. Affiliate Purchaser and any
Qualified Affiliate shall have the right to inspect each Parcel of Real
Property prior to the Real Property Closing Date for each Parcel of Real
Property.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AFFILIATE PURCHASER: WHC-THREE INVESTORS, L.P., a Delaware
limited partnership
By: WHC-THREE INVESTORS, INC.,
a Delaware corporation.
general partner
By: ______________________
Its: _____________________
SELLER: CITY NATIONAL BANK, a
national banking association,
By: ____________________________
Its: ____________________________
16
<PAGE> 106
Exhibit J to
Asset Sale Agreement
INDEX OF EXHIBITS
Exhibits A1 - A17 - Descriptions of each Parcel of Real Property
Exhibit B - Form of Assignment to and Assumption by
Qualified Affiliate
Exhibit C - Schedule of Interim Mortgage Loans
17
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Exhibit J to
Asset Sale Agreement
EXHIBITS A-1 - A-17 TO SALES CONTRACT
<PAGE> 108
EXHIBIT A-1
LEGAL DESCRIPTION - ASSET NO. 1
The land referred to is situated in the State of California, County of
Riverside, unincorporated area, and is described as follows:
Portion of Lot 85 of the Murietta Portion of the Temecula Rancho, as shown by
Map recorded in Book 8, Page 359 of Maps, San Diego County Records, which lies
Northeast of the center line of Jefferson Avenue as now located.
Excepting therefrom that portion conveyed to the County of Riverside by Deed
recorded in Book 406, Page 285 of Deeds, Riverside County Records.
Excepting therefrom all mineral and oil rights as reserved unto Benjamin Wylie
Tarwater and Clara I. Tarwater by document recorded March 31, 1980 as
Instrument No. 60442, Official Records.
<PAGE> 109
ASSET NO 9.00
EXHIBIT A-2
LEGAL DESCRIPTION
PARCEL 1:
LOTS 1 TO 7, 10 TO 15 AND 34 TO 51 INCLUSIVE, OF TRACT NO. 10595, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161 PAGES 15
AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
LOT 16 AND THE EAST 1/2 OF LOT 17, OF TRACT NO. 10595, IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161 PAGES 15 AND 16
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 3:
LOTS 17 AND 18 OF TRACT NO. 10595, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 161 PAGES 15 AND 16 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE EAST 1/2 OF SAID LOT 17.
PARCEL 4:
THE SOUTHERLY 220.00 FEET OF LOTS 28 AND 29, OF TRACT NO. 10595, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161 PAGES 15
AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE EASTERLY 3.0 FEET OF SAID LOT 29.
PARCEL 5:
LOTS 28, 29 AND THE WESTERLY 7.00 FEET OF LOT 30, OF TRACT NO. 10595, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161
PAGES 15 AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE SOUTHERLY 220.00 FEET OF SAID LOT 28.
ALSO EXCEPTING THEREFROM, THE SOUTHERLY 220.00 FEET OF THE WESTERLY 47.00 FEET
OF SAID LOT 29.
PARCEL 6:
LOTS 30, 31 AND THE WESTERLY 33.00 FEET OF LOT 32, OF TRACT NO. 10595, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161
PAGES 15 AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE SOUTHERLY 200.00 FEET OF SAID LOTS 31 AND 32.
<PAGE> 110
ALSO EXCEPTING THEREFROM, THE SOUTHERLY 200.00 FEET OF THE EASTERLY 33.00 FEET
OF SAID LOT 30.
ALSO EXCEPTING THEREFROM, THE WESTERLY 7.00 FEET OF SAID LOT 30.
PARCEL 7:
THE SOUTHERLY 200.00 FEET OF LOTS 30, 31 AND 32, OF TRACT NO. 10595, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161
PAGES 15 AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE WESTERLY 17.00 FEET OF SAID LOT 30.
ALSO EXCEPTING THEREFROM, THE EASTERLY 33.00 FEET OF SAID LOT 32.
PARCEL 8:
LOT 33 AND THE EASTERLY 33.00 FEET OF LOT 32, OF TRACT NO. 10595, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 161 PAGES 15
AND 16 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 9:
LOTS 1 TO 4, 17, 18, 22, 23, 30, 31, 32, 33, 34 OF TRACT NO. 10596, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 163
PAGES 27 AND 28 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 10:
LOT 19 AND THE NORTHEASTERLY 1/2 OF LOT 20, OF TRACT NO. 10596, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 163 PAGES 27
AND 28 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 11:
LOTS 20 TO 21 OF TRACT NO. 10596, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 163 PAGES 27 AND 28 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE NORTHEASTERLY 1/2 OF SAID LOT 20.
PARCEL 12:
LOT 35 AND THE SOUTHEASTERLY 1/2 OF LOT 36, OF TRACT NO. 10596, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 163 PAGES 27
AND 28 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
<PAGE> 111
COUNTY.
PARCEL 13:
LOTS 36 AND 37 OF TRACT NO. 10596, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 163 PAGES 27 AND 28 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM, THE SOUTHEASTERLY 1/2 OF SAID LOT 36.
PARCEL 14:
LOT 1 OF TRACT NO. 10544, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS
PER MAP RECORDED IN BOOK 157 PAGES 5 AND 6 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.
PARCEL 15:
LOTS 8 TO 12 INCLUSIVE, AND LOTS 15 AND 16 OF TRACT NO. 10343, IN THE COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 151 PAGES 45 AND
47 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THAT PORTION OF SAID LOT 1 WITHIN THE LINES OF TRACT 10595, AS PER MAP
RECORDED IN BOOK 161 PAGE 15 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.
ALSO EXCEPT THAT PORTION OF SAID LOT 1 WITHIN THE LINES OF TRACT 10596, AS PER
MAP RECORDED IN BOOK 163 PAGE 27 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.
<PAGE> 112
EXHIBIT A-3
LEGAL DESCRIPTION - ASSET NO. 11
PARCEL 1:
THAT PORTION OF THE NORTHEAST HALF OF THE NORTHEAST 5 ACRES OF THE SOUTHWEST
HALF OF LOT 19 BIXBY'S SUBDIVISION OF A PORTION OF THE RANCHO LOS CERRITOS, IN
THE CITY OF BELLFLOWER, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 2 PAGES 234 AND 235 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
BEGINNING AT THE MOST EASTERLY CORNER OF SAID LOT 19; THENCE ALONG THE
SOUTHEASTERLY LINE OF SAID LOT 19, SOUTH 29 DEGREES 23 MINUTES 50
SECONDS WEST 590.85 FEET; THENCE SOUTH 89 DEGREES 44 MINUTES 35
SECONDS WEST 235.47 FEET TO A LINE THAT IS PARALLEL WITH AND DISTANT
NORTH 89 DEGREES 44 MINUTES 35 SECONDS EAST 300 FEET FROM THE EASTERLY
LINE OF LAKEWOOD BOULEVARD, 100 FEET WIDE, AS DESCRIBED IN DEED TO THE
STATE OF CALIFORNIA, RECORDED IN BOOK 14810 PAGE 321, OFFICIAL RECORDS
OF SAID COUNTY; THENCE ALONG SAID PARALLEL LINE NORTH 1 DEGREE 5
MINUTES 15 SECONDS WEST 200.00 FEET TO THE TRUE POINT OF BEGINNING;
THENCE NORTH 1 DEGREE 5 MINUTES 15 SECONDS WEST 75.00 FEET; THENCE
SOUTH 89 DEGREES 44 MINUTES 35 SECONDS WEST 300 FEET TO THE EASTERLY
LINE OF SAID LAKEWOOD BOULEVARD; THENCE ALONG SAID BOULEVARD SOUTH 1
DEGREE 5 MINUTES 15 SECONDS EAST 75 FEET TO A LINE THAT BEARS NORTH 89
DEGREES 44 MINUTES 35 SECONDS EAST AND THAT PASSES THROUGH THE TRUE
POINT OF BEGINNING; THENCE NORTH 89 DEGREES 44 MINUTES 35 SECONDS EAST
300 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL 2:
THAT PORTION OF LOT 19 OF J. BIXBY'S SUBDIVISION OF PART OF THE RANCHO LOS
CERRITOS, IN THE CITY OF BELLFLOWER, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 2 PAGES 234 AND 235 OF MISCELLANEOUS
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS
FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT; THENCE ALONG THE
SOUTHEASTERLY LINE OF SAID LOT, SOUTH 29 DEGREES 23 MINUTES 50 SECONDS
WEST 590.85 FEET; THENCE SOUTH 89 DEGREES 44 MINUTES 35 SECONDS WEST
TO A POINT WHICH IS NORTH 89 DEGREES 44 MINUTES 35 SECONDS EAST 300
FEET FROM THE EASTERLY LINE OF LAKEWOOD BOULEVARD, 100 FEET WIDE, AS
DESCRIBED IN DEED TO THE STATE OF CALIFORNIA, RECORDED IN BOOK 14810
PAGE 321, OFFICIAL RECORDS OF SAID COUNTY. SAID LAST MENTIONED POINT
BEING THE TRUE POINT OF BEGINNING; THENCE PARALLEL WITH SAID
BOULEVARD, NORTH 1 DEGREE 5 MINUTES 15 SECONDS WEST 200 FEET; THENCE
SOUTH 89 DEGREES 44 MINUTES 35 SECONDS WEST 150 FEET TO A POINT OF
SAID LAST MENTIONED POINT BEING NORTH 89 DEGREES 44 MINUTES 35 SECONDS
EAST 150 FEET FROM THE EASTERLY LINE OF LAKEWOOD BOULEVARD, 100 FEET
WIDE; THENCE PARALLEL WITH SAID BOULEVARD, SOUTH 1 DEGREE 05 MINUTES
15 SECONDS EAST 200 FEET TO A LINE BEARING SOUTH 89 DEGREES 44 MINUTES
35 SECONDS WEST FROM THE TRUE POINT OF BEGINNING; THENCE NORTH 89
DEGREES 44 MINUTES 35 SECONDS EAST 150 FEET TO THE TRUE POINT OF
BEGINNING.
<PAGE> 113
EXHIBIT A-4
LEGAL DESCRIPTION - ASSET NO. 12
LOT 65 OF TRACT NO. 5110, IN THE CITY OF PALMDALE, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 117 PAGES 28 AND 29 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
TOGETHER WITH THAT PORTION OF 12TH STREET EAST (FORMERLY ALDER AVENUE) 20 FEET
WIDE, IN THE COUNTY OF LOS ANGELES, AS SHOWN ON AND DEDICATED BY MAP OF TRACT
NO. 5110, FILED IN BOOK 117 PAGES 28 AND 29 OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY, WHICH EXTENDS FROM THE EASTERLY PROLONGATION OF
THE SOUTHERLY LINE OF LOT 65 OF SAID TRACT, NORTHERLY TO A LINE PARALLEL WITH
AND 20 FEET SOUTHERLY, MEASURED AT RIGHT ANGLES, FROM THE STRAIGHT LINE IN THE
NORTHERLY BOUNDARY OF LOT 65 OF SAID TRACT.
<PAGE> 114
EXHIBIT A-5
LEGAL DESCRIPTION - ASSET NO. 22
PARCEL 1:
LOTS 7 AND 8 OF TRACT NO. 43939, IN THE CITY OF LOS ANGELES, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1076 PAGES 93 AND 94
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
AN EASEMENT FOR PARKING OF AUTOMOTIVE AND COMMERCIAL VEHICLES IN AND TO THAT
PORTION OF THE EASTERLY 15 FEET (MEASURED AT RIGHT ANGLES TO THE EAST LINE) OF
LOT 6 OF TRACT NO. 43939, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN
BOOK 1076 PAGES 93 AND 94 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY, BOUNDED ON THE SOUTH BY THE FOLLOWING DESCRIBED LINE:
BEGINNING AT THE MOST SOUTHEASTERLY CORNER OF SAID LOT 6 OF TRACT NO. 43939;
THENCE ALONG THE EASTERLY LINE OF SAID LOT 6 NORTH 00 DEGREES 46 MINUTES 30
SECONDS WEST 167.39 FEET TO THE TRUE POINT OF BEGINNING; THENCE AT THE RIGHT
ANGLES TO SAID EASTERLY LINE SOUTH 89 DEGREES 13 MINUTES 30 SECONDS WEST 15
FEET.
BOUNDED ON THE NORTH BY A 15 FOOT LINE PERPENDICULAR TO SAID EASTERLY LINE OF
SAID LOT 6 AND DISTANT THEREON NORTH 00 DEGREES 46 MINUTES 30 SECONDS WEST
242.39 FEET FROM THE MOST SOUTHEASTERLY CORNER OF SAID LOT.
PARCEL 3:
AN EASEMENT FOR PARKING OF AUTOMOTIVE AND COMMERCIAL VEHICLES IN AND TO A 16
FOOT BY 97.50 FOOT STRIP OF LAND BEING THAT PORTION OF LOT 6 OF TRACT NO.
43939, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN BOOK 1076, PAGES 93
AND 94 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED
AS FOLLOWS:
BEGINNING AT THE MOST SOUTHEASTERLY CORNER OF SAID LOT 6 OF TRACT NO. 43939;
THENCE ALONG THE EASTERLY LINE OF SAID LOT 6, NORTH 00 DEGREES 46 MINUTES 30
SECONDS WEST 166.89 FEET TO A POINT; THENCE AT RIGHT ANGLES TO SAID EASTERLY
LINE SOUTH 89 DEGREES 13 MINUTES 30 SECONDS WEST 41.00 FEET TO THE TRUE POINT
OF BEGINNING; THENCE CONTINUING ALONG SAID LAST MENTIONED COURSE, SOUTH 89
DEGREES 13 MINUTES 30 SECONDS WEST 16 FEET TO A POINT; THENCE NORTH 00 DEGREES
46 MINUTES 30 SECONDS WEST 97.50 FEET; THENCE NORTH 89 DEGREES 13 MINUTES 30
SECONDS EAST 16 FEET; THENCE SOUTH 00 DEGREES 46 MINUTES 30 SECONDS EAST 97.50
FEET TO THE TRUE POINT OF BEGINNING.
<PAGE> 115
EXHIBIT A-6
LEGAL DESCRIPTION - ASSET NO. 28.00
PARCEL NO. 1:
THAT PORTION OF BLOCK 20 OF THE LANDS OF COLTON LAND AND WATER COMPANY
SUBDIVISION, IN THE CITY OF COLTON, COUNTY OF SAN BERNARDINO, STATE OF
CALIFORNIA, AS PER PLAT RECORDED IN BOOK 1 OF MAPS, PAGE 40, RECORDS OF SAID
COUNTY, DESCRIBED AS PARCEL NO. 1, IN THE CERTIFICATE OF COMPLIANCE, RECORDED
JANUARY 15, 1991, INSTRUMENT NO. 91-017037, OFFICIAL RECORDS, AND MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF OLIVE STREET (PEPPER
STREET) WITH THE WEST LINE OF MOUNT VERNON AVE., AS SAID INTERSECTION IS SHOWN
ON LICENSED LAND SURVEYOR'S MAP, RECORDED IN BOOK 82 OF RECORDS OF SURVEY, PAGE
16, RECORDS OF SAID COUNTY; THENCE SOUTH ALONG SAID WEST LINE OF MOUNT VERNON
AVENUE, 15.00 FEET; THENCE SOUTH 89 DEG. 58'25" WEST, PARALLEL TO THE SOUTH
LINE OF SAID OLIVE STREET, 15.00 FEET TO A POINT IN A LINE THAT IS 15.00 FEET
WEST OF AND PARALLEL TO THE WEST LINE OF SAID MOUNT VERNON AVENUE, SAID POINT
BEING THE TRUE POINT OF BEGINNING; THEN SOUTH ALONG SAID PARALLEL LINE, 97.00
FEET; THENCE SOUTH 89 DEG. 58'25" WEST, PARALLEL TO THE SOUTH LINE OF SAID
OLIVE STREET, 125.00 FEET; THENCE NORTH, PARALLEL TO THE WEST LINE OF SAID
MOUNT VERNON AVENUE, 20.00 FEET; THENCE SOUTH 89 DEG. 58'25" WEST, PARALLEL TO
THE SOUTH LINE OF SAID OLIVE STREET, 162.00 FEET; THENCE NORTH PARALLEL TO THE
WEST LINE OF SAID MOUNT VERNON AVENUE, 77.00 FEET TO A POINT IN A LINE THAT IS
15.00 FEET SOUTH OF AND PARALLEL TO THE SOUTH LINE OF SAID OLIVE STREET; THENCE
NORTH 89 DEG. 58'25" EAST ALONG SAID PARALLEL LINE, 287.00 FEET TO THE POINT OF
BEGINNING.
PARCEL NO. 2:
THAT PORTION OF BLOCK 20 OF LANDS OF THE COLTON LAND AND WATER COMPANY
SUBDIVISION, IN THE CITY OF COLTON, COUNTY OF SAN BERNARDINO, STATE OF
CALIFORNIA, AS PER PLAT RECORDED IN BOOK 1 OF MAPS, PAGE 40, RECORDS OF SAID
COUNTY, DESCRIBED AS PARCEL NO. 2, IN THE CERTIFICATE OF COMPLIANCE RECORDED
JANUARY 15, 1991, INSTRUMENT NO. 91-017038, OFFICIAL RECORDS, AND MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF OLIVE STREET (PEPPER
STREET) WITH THE WEST LINE OF MOUNT VERNON AVENUE, AS SAID INTERSECTION IS
SHOWN ON LICENSED LAND SURVEYOR'S MAP RECORDED IN BOOK 82 OF RECORDS OF SURVEY,
PAGE 16, RECORDS OF SAID COUNTY; THENCE SOUTH ALONG SAID WEST LINE OF MOUNT
VERNON AVENUE, 183.00 FEET; THENCE WEST, 15.00 FEET TO A POINT IN A LINE THAT
IS PARALLEL TO AND 15.00 FEET WEST OF SAID WEST LINE OF MOUNT VERNON AVENUE,
SAID POINT IS THE TRUE POINT OF BEGINNING;
-1-
<PAGE> 116
THENCE SOUTH ALONG SAID PARALLEL LINE, 105.00 FEET; THENCE WEST, 67.00 FEET;
THENCE NORTH, PARALLEL TO SAID WEST LINE OF MOUNT VERNON AVENUE, 105.00 FEET;
THENCE EAST, 67.00 FEET TO THE POINT OF BEGINNING.
PARCEL NO. 3:
THAT PORTION OF BLOCK 20 OF THE LANDS OF THE COLTON LAND AND WATER COMPANY
SUBDIVISION, IN THE CITY OF COLTON, COUNTY OF SAN BERNARDINO, STATE OF
CALIFORNIA, AS PER PLAT RECORDED IN BOOK 1 OF MAPS, PAGE 40, RECORDS OF SAID
COUNTY, DESCRIBED AS PARCEL NO. 3, IN THE CERTIFICATE OF COMPLIANCE RECORDED
JANUARY 15, 1991, INSTRUMENT NO. 91-017039, OFFICIAL RECORDS, AND MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF OLIVE STREET (PEPPER
STREET) WITH THE WEST LINE OF MOUNT VERNON AVE., AS SAID INTERSECTION IS SHOWN
ON LICENSED LAND SURVEYOR'S MAP, RECORDED IN BOOK 82 OF RECORDS OF SURVEY, PAGE
16, RECORDS OF SAID COUNTY; THENCE SOUTH ALONG SAID WEST LINE OF MOUNT VERNON
AVENUE, 630.61 FEET; THENCE WEST, 15.00 FEET TO A POINT IN A LINE THAT IS
PARALLEL TO AND 15.00 FEET WEST OF SAID WEST LINE OF MOUNT VERNON AVENUE, SAID
POINT IS THE TRUE POINT OF BEGINNING; THENCE CONTINUING WEST, 67.00 FEET;
THENCE NORTH PARALLEL TO SAID WEST LINE OF MOUNT VERNON AVENUE, 105.00 FEET;
THENCE EAST, 67.00 FEET TO A POINT IN SAID PARALLEL LINE; THENCE SOUTH ALONG
SAID PARALLEL LINE, 105.00 FEET TO THE POINT OF BEGINNING.
PARCEL NO. 4:
PORTION OF BLOCK 20 OF LANDS OF THE COLTON LAND AND WATER COMPANY SUBDIVISION,
IN THE CITY OF COLTON, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER
PLAT RECORDED IN BOOK 1 OF MAPS, PAGE 40, RECORDS OF SAID COUNTY, DESCRIBED AS
PARCEL NO. 4, IN THE CERTIFICATE OF COMPLIANCE RECORDED JANUARY 15, 1991,
INSTRUMENT NO. 91-017040, OFFICIAL RECORDS, AND MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF OLIVE STREET (PEPPER
STREET) WITH THE WEST LINE OF MOUNT VERNON AVENUE, AS SAID INTERSECTION IS
SHOWN ON LICENSED LAND SURVEYOR'S MAP RECORDED IN BOOK 82 OF RECORDS OF SURVEY,
PAGE 16, RECORDS OF SAID COUNTY; THENCE SOUTH ALONG SAID WEST LINE OF MOUNT
VERNON AVENUE, 819.61 FEET; THENCE WEST, 15.00 FEET TO THE POINT OF BEGINNING;
THENCE CONTINUING WEST, 42.25 FEET; THENCE NORTH, PARALLEL TO SAID WEST LINE OF
MOUNT VERNON AVENUE, 26.00 FEET; THENCE WEST, 63.30 FEET; THENCE SOUTH, 14.68
FEET; THENCE WEST, 38.20 FEET; THENCE SOUTH, 4.00 FEET; THENCE WEST, 9.00 FEET;
THENCE NORTH, 4.00 FEET; THENCE WEST, 24.00 FEET; THENCE SOUTH, 87.50 FEET;
THENCE SOUTH 81 DEG. 01'39" WEST, 99.18 FEET; THENCE
-2-
<PAGE> 117
NORTH 4 DEG. 07'29" WEST, 35.50 FEET; THENCE SOUTH 89 DEG. 57'54" WEST, 77.48
FEET; THENCE NORTH, 58.50 FEET; THENCE WEST, 100.56 FEET TO A POINT IN A LINE
THAT IS PARALLEL TO AND 20.00 FEET EAST OF THE EAST LINE OF TRACT NO. 3803,
RECORDED IN BOOK 50 OF MAPS, PAGES 98 AND 99, RECORDS OF SAID COUNTY; THENCE
NORTH ALONG SAID PARALLEL LINE, 235.30 FEET; THENCE WEST, 112.31 FEET; THENCE
NORTH, 80.67 FEET; THENCE WEST, 30.00 FEET; THENCE NORTH 136.00 FEET; THENCE
EAST, 20.00 FEET; THENCE NORTH, 199.67 FEET; THENCE WEST, 10.00 FEET; THENCE
NORTH, 150.48 FEET TO A POINT IN A LINE THAT IS PARALLEL TO AND 15.00 FEET
SOUTH OF SAID SOUTH LINE OF OLIVE STREET; THENCE NORTH 89 DEG. 58'25" EAST,
ALONG SAID PARALLEL LINE, 178.00 FEET; THENCE SOUTH, 549.20 FEET; THENCE EAST,
33.00 FEET; THENCE SOUTH, 87.21 FEET; THENCE SOUTH 45 DEG. 00'00" EAST, 43.84
FEET; THENCE EAST, 185.63 FEET; THENCE SOUTH, 12.00 FEET; THENCE EAST, 160.00
FEET TO A POINT THAT BEARS NORTH, 125.00 FEET FROM THE POINT OF BEGINNING;
THENCE SOUTH, 125.00 FEET TO THE POINT OF BEGINNING.
PARCEL NO. 5:
A NON-EXCLUSIVE EASEMENT FOR ACCESS, INGRESS AND EGRESS AND VEHICULAR PASSAGE
AND PARKING ON A FIRST-COME, FIRST-SERVED BASIS FREE OF CHARGE, AND AN EASEMENT
FOR (I) THE INSTALLATION, REPAIR, MAINTENANCE, OPERATION, DEMOLITION,
CONSTRUCTION, REMODELING, REPLACEMENT, RECONSTRUCTION, RELOCATION AND
REARRANGEMENT OF EXISTING AND FUTURE IMPROVEMENTS, LANDSCAPING, UTILITIES AND
RELATED FACILITIES; (II) SERVICE AND VEHICLE UNLOADING AND LOADING AREAS; (III)
GARBAGE CONTAINER STORAGE AREAS; (IV) TEMPORARY PARKING OR STANDING OF VEHICLES
AND STORAGE OF MATERIALS USED IN CONJUNCTION WITH THE EXERCISE OF THE
ACTIVITIES IN CLAUSES (I) THROUGH (III) ABOVE AND CLAUSE (VI) BELOW (V)
ENCROACHMENTS OF FOOTINGS, FOUNDATIONS AND OVERHANGS FROM THE ADJACENT
PROPERTY, AND (VI) THE INSTALLATION AND MAINTENANCE OF A MONUMENT SIGN TO BE
LOCATED ON THE PROPERTY ALONG MOUNT VERNON AVENUE, UPON, OVER, ACROSS, UNDER
AND THROUGH THE FOLLOWING DESCRIBED PROPERTY:
THAT PORTION OF BLOCK 20 OF THE LANDS OF COLTON LAND AND WATER COMPANY
SUBDIVISION, IN THE CITY OF COLTON, COUNTY OF SAN BERNARDINO, STATE OF
CALIFORNIA, AS PER PLAT RECORDED IN BOOK 1 OF MAPS, PAGE 40, RECORDS OF SAID
COUNTY, TOGETHER WITH A PORTION OF TWELFTH STREET, VACATED BY RESOLUTION NO.
1986 OF THAT CITY OF COLTON, RECORDED IN BOOK 4850, PAGE 183, OFFICIAL RECORDS,
DESCRIBED AS PARCEL NO. 5, IN THE CERTIFICATE OF COMPLIANCE RECORDED JANUARY
15, 1991, INSTRUMENT NO. 91-017041, OFFICIAL RECORDS AND MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE SOUTH LINE OF OLIVE STREET (PEPPER STREET)
WITH THE WEST LINE OF MOUNT VERNON AVENUE AS SAID INTERSECTION IS SHOWN ON
LICENSED LAND SURVEYOR'S MAP, RECORDED
-3-
<PAGE> 118
IN BOOK 82 OF RECORDS OF SURVEY, PAGE 16, RECORDS OF SAID COUNTY; THENCE SOUTH
ALONG SAID WEST LINE OF MOUNT VERNON AVENUE, 854.61 FEET TO A POINT 427.12 FEET
NORTH OF THE INTERSECTION OF THE SOUTH LINE OF SAID BLOCK 20, EXTENDED EASTERLY
AND SAID WEST LINE OF MOUNT VERNON AVENUE; THENCE SOUTH 89 DEG. 57'54" WEST,
PARALLEL TO SAID SOUTH LINE OF BLOCK 20, 150.05 FEET; THENCE SOUTH PARALLEL TO
SAID WEST LINE OF MOUNT VERNON AVENUE, 106.13 FEET TO A POINT 320.99 FEET NORTH
OF SAID SOUTH LINE OF BLOCK 20; THENCE SOUTH 89 DEG. 57'54" WEST, PARALLEL TO
SAID SOUTH LINE OF BLOCK 20, 340.26 FEET TO A POINT IN THE EAST LINE OF TRACT
NO. 3803, RECORDED IN BOOK 50 OF MAPS, PAGES 98 AND 99, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY; THENCE NORTH ALONG SAID EAST LINE OF TRACT NO.
3803, 342.43 FEET TO THE NORTHEAST CORNER OF SAID TRACT NO. 3803; THENCE SOUTH
89 DEG. 58'00" WEST ALONG THE NORTH LINE OF SAID TRACT NO. 3803, 120.00 FEET TO
THE NORTHWEST CORNER OF LOT 31 OF SAID TRACT NO. 3803, SAID CORNER BEING THE
BEGINNING OF A CURVE CONCAVE WESTERLY AND HAVING A RADIUS OF 230.00 FEET;
THENCE NORTHWESTERLY ALONG SAID CURVE, FROM A BACK TANGENT THAT BEARS NORTH 00
DEG. 00'15" WEST, THROUGH A CENTRAL ANGLE OF 16. DEG. 09'57", A DISTANCE OF
64.89 FEET TO THE BEGINNING OF A REVERSE CURVE CONCAVE EASTERLY AND HAVING A
RADIUS OF 170.00 FEET; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL
ANGLE OF 1 DEG. 40'38", A DISTANCE OF 4.98 FEET TO A POINT, SAID POINT BEARS
NORTH, 68.84 FEET FROM THE SOUTH LINE OF THE NORTH 1/2 OF SAID BLOCK 20, 41.63
FEET TO A POINT IN THE EAST LINE OF THE WEST 660.0 FEET OF THE NORTH 1/2 OF
SAID BLOCK 20; THENCE NORTH 0 DEG. 04'05" EAST ALONG THE EAST LINE OF THE WEST
660.00 FEET TO THE NORTH 1/2 OF SAID BLOCK 20, 549.56 FEET TO A POINT IN THE
SOUTH LINE OF SAID OLIVE STREET (PEPPER STREET); THENCE NORTH 89 DEG. 58'25"
EAST ALONG SAID SOUTH LINE OF OLIVE STREET, 661.71 FEET TO THE POINT OF
BEGINNING.
EXCEPTING THEREFROM THAT PORTION LYING WITHIN PARCELS 1, 2, 3 AND 4 DESCRIBED
ABOVE.
-4-
<PAGE> 119
EXHIBIT A-7
LEGAL DESCRIPTION - ASSET NO. 30.00
PARCEL 1:
LOT 1 AND THE SOUTHEAST 30 FEET OF LOT 2 OF TRACT NO. 8112, IN THE CITY OF SAN
FERNANDO, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 102 PAGES 34 AND 35 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
PARCEL 2:
LOTS 2, 3 AND 4 OF TRACT NO. 8112, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 102 PAGES 34 AND 35
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THE SOUTHEAST 30.00 FEET OF SAID LOT 2.
PARCEL 3:
LOT 7 OF TRACT NO. 8112, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 102 PAGES 34 AND 35 OF MAPS,
IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 4:
THE SOUTHWESTERLY 100.00 FEET OF THE NORTHWESTERLY HALF OF LOT 3, TRACT NO.
2891, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
AS PER MAP RECORDED IN BOOK 29 PAGE 17 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.
PARCEL 5:
THE SOUTHEASTERLY HALF OF LOT 3 AND THE NORTHWESTERLY HALF OF LOT 2 OF TRACT
NO. 2891, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 29 PAGE 17 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THE NORTHEASTERLY 146.00 FEET OF SAID LAND.
ALSO EXCEPT THEREFROM THE INTEREST CONVEYED IN THE SOUTHWESTERLY 20 FEET OF THE
NORTHEASTERLY 166 FEET OF SAID LOTS IN FEE SIMPLE TO BE USED FOR PUBLIC ALLEY
PURPOSES, TO THE CITY OF SAN FERNANDO, BY DEED RECORDED JANUARY 29, 1962 IN
BOOK D-1494 PAGE 859, OFFICIAL RECORDS.
PARCEL 6:
THE SOUTHWESTERLY 77.00 FEET MEASURED ALONG THE SOUTHEASTERLY AND NORTHWESTERLY
LINES OF THE SOUTHEAST ONE-HALF OF LOT 2 OF TRACT NO. 2891, IN THE CITY OF SAN
FERNANDO, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 29 PAGE 17 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 7:
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<PAGE> 120
THAT PART OF LOT 1 OF TRACT NO. 2891, IN THE CITY OF SAN FERNANDO, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 29 PAGE 17 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS
FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHEASTERLY LINE OF SAID LOT 1, DISTANT THEREON
SOUTH 48 DEGREES 26 MINUTES WEST 260 FEET FROM THE MOST EASTERLY CORNER
THEREOF; THENCE SOUTH 48 DEGREES 26 MINUTES WEST ALONG THE SOUTHEASTERLY LINE
OF SAID LOT 1, 56.06 FEET TO THE MOST SOUTHERLY CORNER OF SAID LOT; THENCE
NORTH 41 DEGREES 30 SECONDS WEST ALONG THE SOUTHWESTERLY LINE OF SAID LOT, 126
FEET TO THE MOST WESTERLY CORNER OF SAID LOT; THENCE NORTH 48 DEGREES 26
MINUTES EAST ALONG THE NORTHWESTERLY LINE OF SAID LOT, 56.06 FEET, MORE OR
LESS, TO THE MOST WESTERLY CORNER OF LAND CONVEYED IN DEED TO E.F. KIDDER, ET
UX., RECORDED IN BOOK 7678 PAGE 100, OFFICIAL RECORDS; THENCE SOUTH 41 DEGREES
30 MINUTES EAST 126 FEET TO THE POINT OF BEGINNING.
PARCEL 8:
THE NORTHEASTERLY 20.06 FEET OF THE SOUTHWESTERLY 170.06 FEET OF THE
SOUTHEASTERLY HALF OF LOT 3 AND THE NORTHEASTERLY 20.06 FEET OF THE
SOUTHWESTERLY 170.06 FEET OF THE NORTHWESTERLY HALF OF LOT 2 OF TRACT NO. 2891,
IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER
MAP RECORDED IN BOOK 29 PAGE 17 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.
PARCEL 9:
THOSE PORTIONS OF LOTS 3, 4 AND 5 OF TRACT NO. 2891, IN THE CITY OF SAN
FERNANDO, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 29 PAGE 17 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
DESCRIBED AS FOLLLOWS:
BEGINNING AT A POINT IN THE SOUTHWESTERLY LINE OF SAID LOT 5, DISTANT SOUTH 41
DEGREES 30 MINUTES EAST 30.00 FEET FROM THE MOST WESTERLY CORNER OF SAID LOT 5;
THENCE ALONG THE SOUTHWESTERLY LINES OF SAID LOTS 5 AND 4, SOUTH 41 DEGREES 30
MINUTES EAST 222 FEET TO THE MOST WESTERLY CORNER OF SAID LOT 3; THENCE ALONG
THE NORTHWESTERLY LINE OF SAID LOT 3, NORTH 48 DEGREES 26 MINUTES EAST 100.00
FEET; THENCE PARALLEL WITH THE SOUTHWESTERLY LINE OF SAID LOT 3, SOUTH 41
DEGREES 30 MINUTES EAST 63.00 FEET TO THE SOUTHEASTERLY LINE OF THE NORTHWEST
HALF OF SAID LOT 3; THENCE PARALLEL WITH SAID NORTHWESTERLY LINE OF LOT 3,
NORTH 48 DEGREES 26 MINUTES EAST 23.00 FEET; THENCE PARALLEL WITH THE
SOUTHWESTERLY LINE OF SAID LOT 3, AND ITS NORTHWESTERLY PROLONGATION, NORTH 41
DEGREES 30 MINUTES WEST 93.00 FEET; THENCE NORTH 56 DEGREES 04 MINUTES 09
SECONDS WEST 59.39 FEET TO A LINE THAT IS PARALLEL WITH AND DISTANT 208.00 FEET
SOUTHWESTERLY FROM THE NORTHEASTERLY LINES OF SAID LOTS 4 AND 5, DISTANT ALONG
SAID PARALLEL LINE, SOUTH 41 DEGREES 30 MINUTES EAST 164.50 FEET FROM THE
NORTHWESTERLY LINE OF SAID LOT 5; THENCE ALONG SAID PARALLEL LINE, NORTH 41
DEGREES 30 MINUTES WEST 134.50 FEET TO THE SOUTHEASTERLY LINE OF THE
NORTHWESTERLY 30.00 FEET TO THE SOUTHEASTERLY LINE OF THE NORTHWESTERLY 30.00
FEET OF SAID LOT 5; THENCE ALONG SAID SOUTHEASTERLY LINE, SOUTH 48 DEGREES 26
MINUTES WEST 108.06 FEET TO THE POINT OF BEGINNING.
PARCEL 10:
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<PAGE> 121
LOTS 7 AND 8 OF THE PAXTON'S SUBDIVISION OF BLOCK "I" OF MACLAY'S ADDITION TO
THE TOWN OF SAN FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 93 OF MISCELLANEOUS
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 11:
LOTS 9, 10 AND 11 OF PAXTON'S SUBDIVISION OF BLOCK "I" OF MACLAY'S ADDITION TO
THE TOWN OF SAN FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 93 OF MISCELLANEOUS
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 12:
THOSE PORTIONS OF LOTS 3 AND 4 OF TRACT NO. 2891, IN THE CITY OF SAN FERNANDO,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 29 PAGE
17 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS
FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE NORTHEASTERLY LINE OF SAID LOT 4, WITH THE
SOUTHEASTERLY LINE OF THE NORTHWESTERLY 36.00 FEET THEREOF; THENCE SOUTH 41
DEGREES 30 MINUTES 00 SECONDS EAST ALONG THE NORTHEASTERLY LINE OF SAID LOTS 4
AND 3, TO THE SOUTHEASTERLY LINE OF THE NORTHWESTERLY HALF OF SAID LOT 3;
THENCE SOUTH 48 DEGREES 26 MINUTES 00 SECONDS WEST ALONG SAID SOUTHEASTERLY
LINE, 193.06 FEET TO THE MOST EASTERLY CORNER OF THE LAND DESCRIBED IN THE DEED
TO JAB PROPERTIES, INC., RECORDED ON NOVEMBER 23, 1965 IN BOOK D-3123 PAGE 704,
OFFICIAL RECORDS, AS INSTRUMENT NO. 1119 OF SAID COUNTY; THENCE ALONG THE
NORTHEASTERLY BOUNDARY LINES OF SAID LAST MENTIONED DEED, AS FOLLOWS:
NORTH 41 DEGREES 30 MINUTES WEST 93.00 FEET, NORTH 56 DEGREES 04 MINUTES 09
SECONDS WEST 59.39 FEET AND NORTH 41 DEGREES 30 MINUTES WEST TO THE
SOUTHEASTERLY LINE OF SAID NORTHWESTERLY 36.00 FEET OF SAID LOT 4; THENCE NORTH
48 DEGREES 26 MINUTES 00 SECONDS EAST ALONG SAID SOUTHEASTERLY LINE TO THE
POINT OF BEGINNING.
EXCEPT THEREFROM THOSE PORTIONS OF LOTS 3 AND 4 OF TRACT NO. 2891, IN THE CITY
OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 29 PAGE 17 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE NORTHEASTERLY LINE OF SAID LOT 4, WITH THE
SOUTHEASTERLY LINE OF THE NORTHWESTERLY 36.00 FEET THEREOF; THENCE SOUTH 41
DEGREES 30 MINUTES 00 SECONDS EAST 152.94 FEET ALONG THE NORTHEASTERLY LINE OF
SAID LOTS 4 AND 3, TO THE SOUTHEASTERLY LINE OF THE NORTHWESTERLY HALF OF SAID
LOT 3; THENCE SOUTH 48 DEGREES 26 MINUTES 00 SECONDS WEST ALONG SAID
SOUTHEASTERLY LINE, 109.00 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE,
NORTH 41 DEGREES 30 MINUTES 00 SECONDS WEST 152.94 FEET TO THE SOUTHEASTERLY
LINE OF SAID NORTHWESTERLY 36.00 FEET OF SAID LOT 4; THENCE NORTH 48 DEGREES 26
MINUTES 00 SECONDS, 109.00 FEET EAST ALONG SAID SOUTHEASTERLY LINE TO THE POINT
OF BEGINNING.
PARCEL 13:
-3-
<PAGE> 122
LOT 29 TO 34 INCLUSIVE OF PAXTON'S SUBDIVISION OF BLOCK "I" OF MACLAY'S
ADDITION TO THE TOWN OF SAN FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 93 OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 14:
LOT 43 AND 44 OF PAXTON'S SUBDIVISION OF BLOCK "I" OF MACLAY'S ADDITION TO THE
TOWN OF SAN FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 93 OF MISCELLANEOUS RECORDS,
IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 15:
LOTS 45 AND 46 OF PAXTON'S SUBDIVISION OF BLOCK "I" OF MACLAY'S ADDITION TO THE
TOWN OF SAN FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 93 OF MISCELLANEOUS RECORDS,
IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 16:
LOTS 47 AND 48 OF PAXTON'S SUBDIVISION OF BLOCK "I" OF MACLAY'S ADDITION TO THE
TOWN OF SAN FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 93 OF MISCELLANEOUS RECORDS
OF SAID COUNTY.
PARCEL 17:
LOTS 14, 15 AND 16 IN BLOCK "K" OF MACLAY'S ADDITION TO THE TOWN OF SAN
FERNANDO, IN THE CITY OF SAN FERNANDO, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGES 11 AND 12 OF MISCELLANEOUS
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
-4-
<PAGE> 123
EXHIBIT A-8
LEGAL DESCRIPTION - ASSET NO. 32.00 AND 32.01
PARCEL 4 IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON PARCEL
MAP NO. 17271 FILED IN BOOK 194 PAGES 69 TO 73 INCLUSIVE OF PARCEL MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND LYING WITHIN THE LAND DESCRIBED IN
DEED RECORDED AUGUST 26, 1941, AS INSTRUMENT NO. 1360 IN BOOK 18714 PAGE 141,
OFFICIAL RECORDS, 40 PERCENT IN AND TO ALL OIL, GAS, GASOLINE OR OTHER
HYDROCARBON SUBSTANCES IN, UNDER OR UPON SAID LAND OR ANY PART THEREOF,
TOGETHER WITH THE RIGHT OF INGRESS OR EGRESS FOR THE PURPOSE OF REMOVING ANY OF
SAID OIL, GAS, GASOLINE OR OTHER HYDROCARBON SUBSTANCES AND FOR THE PURPOSE OF
DRILLING AN OIL OR GAS WELL UPON SAID LAND AS RESERVED BY REMI F. NADEAU, HIS
HEIRS, ASSIGNS AND SUCCESSORS IN INTEREST, IN DEED ABOVE-MENTIONED FROM REMI E.
NADEAU AND MARGUERITE M. NADEAU, HIS WIFE, TO REMI NADEAU, A SINGLE MAN.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND LYING WITHIN THE LAND DESCRIBED IN
THE PATENT RECORDED MARCH 23, 1931, AS INSTRUMENT NO. 1071 IN BOOK 10676 PAGE
327, OFFICIAL RECORDS, AN UNDIVIDED ONE-SIXTEENTH OF ALL COAL, OIL AND OTHER
MINERAL DEPOSITS IN SAID LAND, AS RESERVED BY UNITED STATES OF AMERICA, IN THE
ABOVE-MENTIONED PATENT.
<PAGE> 124
EXHIBIT A-9
LEGAL DESCRIPTION - ASSET NO. 32.02
LOT 1 OF TRACT NO. 50484, IN THE CITY OF SANTA CLARITA, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1180, PAGES 19 TO 25 INCLUSIVE
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND AS AMENDED BY
A CERTIFICATE OF CORRECTION RECORDED JUNE 7, 1993 AS INSTRUMENT NO. 93-1076717,
OFFICIAL RECORDS.
<PAGE> 125
Legal Description
Asset #33.00
EXHIBIT A-10
LOT 1 OF TRACT NO. 27195, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 895 PAGES 88 AND 89 OF MAPS,
IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT UNITS 1 TO 104 INCLUSIVE AS SHOWN AND DEFINED ON THE CONDOMINIUM PLAN
RECORDED AUGUST 11, 1980 AS INSTRUMENT NO. 80-764908, OFFICIAL RECORDS.
PARCEL 2:
UNITS 1 TO 104 INCLUSIVE AS SHOWN AND DEFINED ON THE CONDOMINIUM PLAN ABOVE
MENTIONED.
<PAGE> 126
Legal Description
Asset #33.01
EXHIBIT A-11
LOT 2 OF TRACT NO. 34766, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 920 PAGES 31 THROUGH 34
INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
<PAGE> 127
EXHIBIT A-12
LEGAL DESCRIPTION - ASSET NO. 34.00
PARCEL 1:
THE NORTHEAST QUARTER OF LOT 16 OF SECTION 29, TOWNSHIP 6 NORTH, RANGE 11 WEST,
SAN BERNARDINO MERIDIAN, IN THE CITY OF PALMDALE, IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP OF A PORTION OF PALMDALE COLONY LAND RECORDED
IN BOOK 11 PAGES 11 AND 12 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
THE NORTHWEST QUARTER OF LOT 16 OF SECTION 29, TOWNSHIP 6 NORTH, RANGE 11 WEST,
SAN BERNARDINO MERIDIAN, IN THE CITY OF PALMDALE, IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP OF A PORTION OF PALMDALE COLONY LAND RECORDED
IN BOOK 11 PAGES 11 AND 12 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.
PARCEL 3:
THE SOUTHWEST QUARTER OF LOT 16 OF SECTION 29, TOWNSHIP 6 NORTH, RANGE 11 WEST,
SAN BERNARDINO MERIDIAN, IN THE CITY OF PALMDALE, IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP OF A PORTION OF PALMDALE COLONY LAND RECORDED
IN BOOK 11 PAGES 11 AND 12 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.
<PAGE> 128
EXHIBIT A-13
LEGAL DESCRIPTION - ASSET NO. 34.01
PARCEL A:
PARCEL 3 IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON PARCEL
MAP NO. 17271 FILED IN BOOK 194 PAGES 69 TO 73 INCLUSIVE OF PARCEL MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPTING THEREFROM LOTS 1 AND 2 OF TRACT NO. 50484, IN THE CITY OF SANTA
CLARITA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 1180, PAGES 19 TO 25 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, AND AS AMENDED BY A CERTIFICATE OF CORRECTION RECORDED
JUNE 7, 1993 AS INSTRUMENT NO. 93-1076717, OFFICIAL RECORDS.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND LYING WITHIN THE LAND DESCRIBED IN
DEED RECORDED AUGUST 26, 1941, AS INSTRUMENT NO. 1360 IN BOOK 18714 PAGE 141,
OFFICIAL RECORDS, 40 PERCENT IN AND TO ALL OIL, GAS, GASOLINE OR OTHER
HYDROCARBON SUBSTANCES IN, UNDER OR UPON SAID LAND OR ANY PART THEREOF,
TOGETHER WITH THE RIGHT OF INGRESS AND EGRESS FOR THE PURPOSE OF REMOVING ANY
OF SAID OIL, GAS, GASOLINE OR OTHER HYDROCARBON SUBSTANCES AND FOR THE PURPOSE
OF DRILLING AN OIL OR GAS WELL UPON SAID LAND AS RESERVED BY REMI F. NADEAU,
HIS HEIRS, ASSIGNS AND SUCCESSORS IN INTEREST, IN DEED ABOVE MENTIONED FROM
REMI E. NADEAU AND MARGUERITE M. NADEAU, HIS WIFE, TO REMI NADEAU, A SINGLE
MAN.
ALSO EXCEPT FROM THAT PORTION OF SAID LAND LYING WITHIN THE LAND DESCRIBED IN
THE PATENT RECORDED MARCH 23, 1931, AS INSTRUMENT NO. 1071 IN BOOK 10676 PAGE
327, OFFICIAL RECORDS, AN UNDIVIDED ONE-SIXTEENTH OF ALL COAL, OIL AND OTHER
MINERAL DEPOSITS IN SAID LAND, AS RESERVED BY UNITED STATES OF AMERICA IN THE
ABOVE-MENTIONED PATENT.
-1-
<PAGE> 129
PARCEL B:
THAT PORTION OF THE WEST HALF OF THE NORTHWEST QUARTER OF SECTION 28, TOWNSHIP
4 NORTH, RANGE 15 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT THEREOF, BOUNDED ON THE
NORTHEAST BY THE SOUTHWESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO THE
STATE OF CALIFORNIA, RECORDED MARCH 20, 1967 AS INSTRUMENT NO. 365 IN BOOK
D-3587 PAGE 935, OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY, BOUNDED ON THE EAST BY THE EASTERLY LINE OF THE WEST HALF OF THE
NORTHWEST QUARTER OF SAID SECTION 28; BOUNDED ON THE SOUTHWEST AND WEST BY THE
NORTHEASTERLY AND EASTERLY LINES OF THE LAND DESCRIBED AS PART A AND PART C IN
THE DEED TO THE COUNTY OF LOS ANGELES, RECORDED SEPTEMBER 4, 1970 AS INSTRUMENT
NO. 3720 IN BOOK D-4824 PAGE 816 OFFICIAL RECORDS, OF SAID COUNTY AND BOUNDED
NORTHWESTERLY BY THE SOUTHEASTERLY LINE OF THE LAND DESCRIBED AS PARCEL 31-7 IN
THE DEED TO THE COUNTY OF LOS ANGELES, RECORDED SEPTEMBER 5, 1967 AS INSTRUMENT
NO. 2143 IN BOOK D-3757 PAGE 566 OFFICIAL RECORDS OF SAID COUNTY.
EXCEPT AN UNDIVIDED ONE-HALF INTEREST IN AND TO THE OIL AND MINERAL RIGHTS, AS
RESERVED IN THE DEED FROM EDWARD SMALL, A MARRIED MAN, AND ELSIE SMALL, HIS
WIFE, RECORDED FEBRUARY 25, 1953 AS INSTRUMENT NO. 1999 IN BOOK 41050 PAGE 328,
OFFICIAL RECORDS.
ALSO EXCEPT THEREFROM ALL RIGHTS TO MINERALS, OIL, GAS, TARS, HYDROCARBON
SUBSTANCES OF EVERY KIND, GEOTHERMAL STEAM, NATURALLY HEATED WATERS, THERMAL
ENERGY AND GAS AND ALL OTHER MINERALS OF EVERY KIND OR CHARACTER, IN, OR UNDER
SAID PROPERTY, TOGETHER WITH THE RIGHT TO DRILL OR MINE FOR THE SAME WITHOUT,
HOWEVER, THE RIGHT TO DRILL OR MINE THROUGH THE SURFACE OR UPPER FIVE HUNDRED
FEET (500') OF THE SUB-SURFACE OF SAID PROPERTY AS RESERVED BY THE NEWHALL LAND
AND FARMING COMPANY (A CALIFORNIA LIMITED PARTNERSHIP), A LIMITED PARTNERSHIP
IN DEED RECORDED FEBRUARY 27, 1990 AS INSTRUMENT NO. 90-311581, OFFICIAL
RECORDS.
-2-
<PAGE> 130
Legal Description
Asset #35.00
EXHIBIT A-14
(CANYON PARK PRINCESSA)
LOT 12 OF TRACT NO. 44328, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
AS PER MAP RECORDED IN BOOK 1129 PAGES 81 TO 86 INCLUSIVE OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT AN UNDIVIDED ONE-HALF INTEREST IN AND TO THE OIL AND MINERAL RIGHTS, AS
RESERVED IN THE DEED FROM EDWARD SMALL, A MARRIED MAN, AND ELSIE SMALL, HIS
WIFE, RECORDED FEBRUARY 26, 1953, AS INSTRUMENT NO. 1999 IN BOOK 41050 PAGE
328, OFFICIAL RECORDS.
ALSO EXCEPT ALL RIGHT, TITLE AND INTEREST IN ALL OF THE SUBSURFACE OIL, GAS,
CASINGHEAD GAS AND OTHER SOLID, LIQUID OR GASEOUS HYDROCARBONS AND OTHER
SUBSURFACE MINERALS AS QUITCLAIMED TO NEWHALL RESOURCES, A CALIFORNIA LIMITED
PARTNERSHIP BY DOCUMENT ENTITLED "MINERAL DEED" RECORDED MARCH 31, 1983 AS
INSTRUMENT NO. 83-352390 OFFICIAL RECORDS.
ALL OF THE SURFACE AND THE SUBSURFACE TO A DEPTH OF 500 FEET FROM THE SURFACE
AND INGRESS AND EGRESS TOGETHER WITH ALL DRILL THRU RIGHTS HAVE BEEN
QUITCLAIMED BY DEED DATED MARCH 27, 1986 EXECUTED BY NEWHALL RESOURCES, A
CALIFORNIA LIMITED PARTNERSHIP, RECORDED APRIL 2, 1986 AS INSTRUMENT NO.
86-405315 OFFICIAL RECORDS AND RE-RECORDED APRIL 24, 1986 AS INSTRUMENT NO.
86-502563 OFFICIAL RECORDS.
<PAGE> 131
EXHIBIT A-15
LEGAL DESCRIPTION - ASSET NO. 37
PARCEL 1:
LOTS 22 AND 23 IN BLOCK 44 OF TRACT NO. 7555, IN THE CITY OF LOS ANGELES,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 88
PAGES 79 TO 84 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
PARCEL 2:
THAT PORTION OF LOT 24, IN BLOCK 44 OF TRACT NO. 7555, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 88 PAGES 79 TO 84 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY, LYING NORTH OF A LINE DRAWN FROM A POINT IN THE EAST LINE OF
SAID LOT DISTANT SOUTHERLY THEREON 20 FEET FROM THE NORTHEASTERLY CORNER OF
SAID LOT TO A POINT IN THE WESTERLY LINE OF SAID LOT TO A POINT IN THE WESTERLY
LINE OF SAID LOT DISTANT SOUTHERLY THEREON 18.47 FEET FROM THE NORTHWEST CORNER
OF SAID LOT.
PARCEL 3:
LOTS 24, 25 AND 26 IN BLOCK 44 OF TRACT NO. 7555, IN THE CITY OF LOS ANGELES,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 88
PAGES 79 TO 84 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
EXCEPT THAT PORTION OF SAID LOT 24 LYING NORTH OF A LINE DRAWN FROM A POINT IN
THE EAST LINE OF SAID LOT DISTANT SOUTHERLY THEREON 20 FEET FROM THE
NORTHEASTERLY CORNER OF SAID LOT TO A POINT IN THE WESTERLY LINE OF SAID LOT,
DISTANT SOUTHERLY THEREON 18.47 FEET FROM THE NORTHWEST CORNER OF SAID LOT.
EXCEPTING AND RESERVING HEREFROM ALL OIL, GAS, WATER, MINERAL AND GEOTHERMAL
RIGHTS BELOW A DEPTH OF 500 FEET UNDER THE SURFACE THEREOF, AND ALL INCOME
THEREFROM, WITHOUT THE RIGHT OF SURFACE ENTRY, AS RESERVED BY AL R. BROOKS AND
HARRIET D. BROOKS, HUSBAND AND WIFE AS COMMUNITY PROPERTY, IN DEED RECORDED ON
JULY 3, 1979 AS INSTRUMENT NO. 79-727280, OFFICIAL RECORDS.
<PAGE> 132
Asset No. 42.00
EXHIBIT "A"-16
THAT PORTION OF LOT 13 OF TRACT NO. 1212, IN THE CITY OF LOS ANGELES, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 18
PAGES 126 AND 127 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
AS ACQUIRED BY THE STATE OF CALIFORNIA BY DEED 430 RECORDED IN BOOK 49662 PAGE
107 OF OFFICIAL RECORDS IN SAID OFFICE, TOGETHER WITH THAT PORTION OF LOT 12 OF
SAID TRACT ACQUIRED BY THE STATE OF CALIFORNIA BY PARCEL 1 OF DEED 434 RECORDED
IN BOOK 48728 PAGE 256 OF SAID OFFICIAL RECORDS, AND THAT PORTION OF SAID LOT
13 ACQUIRED BY THE STATE OF CALIFORNIA BY DEED 436 RECORDED IN BOOK 43618 PAGE
90 SAID OFFICIAL RECORDS, ALL LYING EASTERLY OF THE FOLLOWING DESCRIBED LINE:
BEGINNING AT THE INTERSECTION OF THE SOUTHERLY LINE OF THE NORTHERLY 186.03
FEET TO SAID LOT 13 WITH THE EASTERLY LINE OF PARCEL 9A OF THE LAND ACQUIRED BY
THE STATE OF CALIFORNIA BY FINAL ORDER OF CONDEMNATION FILED IN SUPERIOR COURT
CASE NO. 819813, IN AND FOR SAID COUNTY, A CERTIFIED COPY OF SAID FINAL ORDER
BEING RECORDED IN BOOK D4485 PAGE 216 OF SAID OFFICIAL RECORDS; THENCE
NORTHERLY IN A DIRECT LINE TO THE SOUTHEASTERLY TERMINUS OF THE COURSE
DESCRIBED AS HAVING A BEARING AND DISTANCE OF SOUTH 11 DEGREES 23 MINUTES 23
SECONDS EAST, 57.95 FEET IN PARCEL 108 OF FINAL ORDER OF CONDEMNATION, SUPERIOR
COURT CASE NO. 819813, RECORDED IN BOOK D3733 PAGE 228 OF SAID OFFICIAL
RECORDS.
SAID LAND IS ALSO KNOWN BY THE LOS ANGELES COUNTY TAX ASSESSOR AS 12565
STRATHERN ST., NORTH HOLLYWOOD CA.
<PAGE> 133
Asset #44.00
Exhibit A-17
DESCRIPTION: THE LAND REFERRED TO HEREIN IS SITUATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCEL NO. 1:
LOTS 11 AND 12 OF TRACT NO. 7170, AS PER MAP RECORDED IN BOOK 76 PAGE
12 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPTING THEREFROM ALL OIL, GAS AND HYDROCARBON SUBSTANCES BENEATH A
DEPTH OF 500 FEET BELOW THE SURFACE OF SAID LOTS 11 AND 12, BUT
WITHOUT THE RIGHTS OF SURFACE ENTRY, AS RESERVED BY EMANUEL O.
BACHMANN AND ALICE SUTER BACHMANN, HUSBAND AND WIFE, RECORDED MAY 27,
1983 AS INSTRUMENT NO. 83-598224, OFFICIAL RECORDS.
THE INTEREST OF EMANUEL O. BACHMANN AND ALICE SUTER BACHMANN WAS
CONVEYED TO ALICE S. BACHMANN, JOHN G. BACHMANN AND PAUL DENNIS
BACHMANN, AS TRUSTEES OF THE ALICE S. BACHMANN TRUST DATED APRIL 15,
1985 BY DEED RECORDED JULY 16, 1986 AS INSTRUMENT NO. 86-895015,
OFFICIAL RECORDS, AND BY OTHER DEEDS OF RECORD.
PARCEL NO. 2:
A PATIO EASEMENT AS GRANTED IN THAT CERTAIN PATIO AREA EASEMENT
AGREEMENT DATED AS OF OCTOBER 13, 1993, RECORDED NOVEMBER 18, 1993 AS
INSTRUMENT NO 93-2274585, OFFICIAL RECORDS AND MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
THOSE PORTIONS OF LOTS 10 AND 11 OF TRACT NO 7170 IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, PER MAP FILED IN
BOOK 76 PAGE 12 OF MAPS, RECORDS OF SAID COUNTY, LYING WITHIN THE
FOLLOWING DESCRIBED BOUNDARIES.
BEGINNING AT A POINT IN THE SOUTHERLY LINE OF LOT 10 OF SAID TRACT
DISTANT THEREON SOUTH 89# 52' 05" WEST 40.05 FEET FROM THE SOUTHEAST
CORNER OF SAID LOT 10; THENCE
21.0.1 LEAVING SAID SOUTHERLY LINE NORTH 00# 07' 55" WEST 19.75 FEET; THENCE
21.0.2 SOUTH 89# 52' 05" WEST 30.33 FEET; THENCE
21.0.3 SOUTH 00# 07' 55" EAST 39.50 FEET; THENCE
21.0.4 NORTH 89# 52' 05" EAST 30.33 FEET; THENCE
21.0.5 NORTH 00# 07' 55" WEST 19.75 FEET TO THE POINT OF
BEGINNING.
IN THE CASE OF A DISCREPANCY BETWEEN THE LEGAL DESCRIPTION AND THE PATIO
LOCATION, THE BOUNDARY OF SAID EASEMENT SHALL BE THE LIMITS OF THE PATIO WHERE
IT EXISTS.
<PAGE> 134
Exhibit J to
Asset Sale Agreement
EXHIBIT B TO SALES CONTRACT
FORM OF ASSIGNMENT TO AND ASSUMPTION BY
QUALIFIED AFFILIATE OF REAL PROPERTY SALES CONTRACT
FOR VALUE RECEIVED, as of the ____ day of ________________________,
1994, the undersigned,
_____________________________________________________________________, a
_______________________________________________ corporation (the "Assignor"),
hereby assigns, transfers, sets over, grants and conveys unto
______________________________________________, a _________________________
[corporation/partnership], its successors and assigns (the "Assignee") all of
its right, title, privilege and interest in and to that certain Real Property
Sales Contract dated _____________________________, 1993 between the Assignor
and City National Bank.
In consideration of this Assignment, Assignee shall pay to Assignor
the sum of $_____________________.
Assignee hereby accepts this Assignment and assumes all of the
obligations of Assignor under the aforementioned Sales Contract from and after
the date hereof.
This Assignment shall be binding upon and shall inure to the benefit
of Assignor and Assignee and their respective successors and assigns.
The Assignee hereby accepts the foregoing Assignment, and agrees to
perform each and every duty and obligation of the Assignor incurred as of the
date hereof and hereafter relating to the subject matter of this Assignment, as
fully and completely as though the Assignee was the party named as the Assignor
in the instruments hereby assigned.
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned
has executed this Assignment under seal as of the day and year first
hereinabove written.
WITNESS/ATTEST: ASSIGNOR:
____________________________
[Corporation/Partnership]
____________________________ By: ________________________
[corporate seal]
Its: _______________________
(Signatures continued on next page)
19
<PAGE> 135
Exhibit J to
Asset Sale Agreement
(Signatures continued from previous page)
WITNESS/ATTEST: ASSIGNEE:
____________________________
[Corporation/Partnership]
____________________________ By: ________________________
[corporate seal]
Its: _______________________
20
<PAGE> 136
Exhibit J to
Asset Sale Agreement
EXHIBIT C TO REAL PROPERTY SALES CONTRACT
Schedule of Interim Mortgage Loans
21
<PAGE> 137
CITY NATIONAL BANK EXHIBIT C
SCHEDULE OF INTERIM MORTGAGE LOANS POOLS 2-6 Page 1
11/17/93
<TABLE>
<CAPTION> Interim
Asset Pool Zip Mortgage
# No. Asset Name Street Address City County State Code Amount
- ----- ---- -------------------- ----------------------- --------------- ----------- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
33.00 2 Villa Del Sol Apts. 10025 De Soto Ave Chatsworth Los Angeles CA 91311 2,175,824.56
- ----- ---- -------------------- ----------------------- --------------- ----------- ----- ----- -------------
22.00 3 Santa Fe Industrial 2209 So. Santa Fe Los Angeles Los Angeles CA 90058 975,451.36
Avenue
30.00 3 San Fernando 1501 1st Street San Fernando Los Angeles CA 91341 1,699,631.44
Industrial
42.00 3 12565 Strathern 12565 Strathern Street North Hollywood Los Angeles CA 90021 896,858.56
Street
- ----- ---- -------------------- ----------------------- --------------- ----------- ----- ----- -------------
1.00 4 Jefferson Industrial SEC Jefferson Ave and Murrieta Riverside CA 92562 292,653,92
Flg Street
9.00 4 Malibu Highlands Thrift Road, Birdella Malibu Los Angeles CA 90265 455,520.00
and Latigo Canyon Road
11.00 4 Lakewood and 13526 Lakewood Blvd Bellflower Los Angeles CA 90706 146,411.20
Rosecrans and 9025 Rosecrans Ave.
12.00 4 Palmdale Industrial SWC Avenue P & 12th Palmdale Los Angeles CA NAV 88,210.72
Development Street East
32.00 4 The Plaza S/S of Via Princessa Santa Clarita Los Angeles CA NAV 1,157,478.40
btwn Sierra Hwy. &
Antelope Valley Fwy
32.01 4 The Arbors S/S of Via Princessa Santa Clarita Los Angeles CA NAV 554,954.40
btwn Sierra Hwy. &
Antelope Valley Fwy
32.02 4 The Courtyard North line of Via Santa Clarita Los Angeles CA NAV 251,425.20
Princessa, West of Jason
Road
34.00 4 40th St. & Ave "R" Avenue R & 40th St East Palmdale Los Angeles CA 93550 120,640.00
34.01 4 The Crossroads Via Princessa and Sierra Santa Clarita Los Angeles CA 93550 785,200.00
Highway
35.00 4 The Marketplace SW corner of Sierra Santa Clarita Los Angeles CA NAV 2,245,360.00
Highway and Via
Princessa
- ----- ---- -------------------- ------------------------ ---------------- ----------- ----- ----- -------------
33.01 5 Casa Balboa Center 16810 Ventura Blvd. Encino Los Angeles CA NAV 1,865,758.96
37.00 5 Fairfax Plaza 301 South Fairfax Los Angeles Los Angeles CA 90036 3,853,583.76
44.00 5 Robertson Office 1030 S. Robertson Blvd. Beverly Hills Los Angeles CA 90035 530,223.20
Plaza
28.00 6 Plaza Las Glorias SWC Mount Vernon Ave and Colton San Bernard CA 92324 4,719,116.48
Olive Street
-------------
TOTAL 22,814,302.16
=============
</TABLE>
22
<PAGE> 138
Exhibit L to
Asset Sale Agreement
Form of
INTERIM MORTGAGE
(Exhibit L continued on next page)
<PAGE> 139
Recording Requested By And When |
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Form of
INTERIM MORTGAGE
DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This Deed of Trust, Assignment of Rents and Security Agreement (the
"Mortgage") is made this ___ day of 1993, between CITY NATIONAL BANK, A
NATIONAL BANKING ASSOCIATION, herein called TRUSTOR, whose address is 606 S.
Olive Street, 20th Floor, Los Angeles, CA, CHICAGO TITLE INSURANCE COMPANY, a
California corporation, herein called TRUSTEE, and
____________________________, California ______________, herein called
BENEFICIARY. Unless otherwise defined herein, each capitalized term used in
this Mortgage shall have the same meaning ascribed thereto in the Loan and
Security Agreement or the Interim Mortgage Note, both of even date herewith.
Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to TRUSTEE IN TRUST,
WITH POWER OF SALE, that property in __________________________ County,
California, described in Exhibit A attached hereto and made a part hereof (the
"Land"):
TOGETHER with all right, title and interest of Trustor, including any
after-acquired title or reversion, in and to any strips and/or gores and/or the
beds of the ways, streets, avenues, and alleys adjoining the Land; and
TOGETHER with all and singular the tenements, hereditaments,
easements, appurtenances, mineral rights, air, development and zoning rights,
working interests, passage, water rights, water courses, riparian rights,
utility commitments and/or reservations, permits, other rights, liberties and
privileges thereof or in any way now or hereafter appertaining to the Land,
including any homestead or other claim at law or in equity, as well as any
after-acquired title, franchise or license and reversion and reversions and
remainder and remainders thereof; and
TOGETHER with all buildings and improvements of every kind and
description now or hereafter erected or placed thereon (collectively, the
"Improvements"), and all materials now or hereafter owned by Trustor intended
for construction, reconstruction, alterations and repairs of the Improvements
now or hereafter erected thereon, all of which materials shall be deemed to be
included within the Property hereby conveyed immediately upon the delivery
thereof to the Land, and all fixtures and articles of personal property now or
hereafter owned by the Trustor and attached to or contained in and used in
connection with the Land or the Improvements, including, but not limited to,
the Equipment (as defined in Section 6.2 below); and all spare parts, renewals,
or replacements thereof or articles in substitution therefor, whether or not
the same are or shall
1 Exhibit L to the
Asset Sale Agreement
Form of
INTERIM MORTGAGE
<PAGE> 140
be attached to said building or buildings in any manner; and all proceeds
thereof; it being mutually agreed that all the aforesaid property owned by
Trustor and placed by it on the Land shall so far as permitted by law, be
deemed to be fixtures and affixed to the realty and encumbered by this
Mortgage; and
TOGETHER with all judgments, insurance proceeds, awards of damages and
settlements hereafter made as a result or in lieu of any taking, permanent or
temporary, of the Land and the Improvements or any part thereof under the power
of eminent domain, or by deed in lieu thereof, or for any damage, whether
caused by such taking or otherwise, to the Land and the Improvements or any
part thereof, and all insurance policies and insurance proceeds pertaining to
the Land and the Improvements, as hereinafter defined, and all awards and
payments that shall become payable with respect to any damage to the Land and
the Improvements or any part thereof; and
TOGETHER with any and all other, further or additional right, title,
or interest in or to any of the foregoing described collateral, which may at
any time hereafter be acquired by Trustor (or any entity in any way related to
Trustor).
The aggregate of the Land, the Improvements, the Equipment and all of
the other rights and interests described above is hereinafter collectively
referred to as the "Property."
In addition to the foregoing, Trustor hereby absolutely and
unconditionally assigns to Beneficiary, as a present assignment and not as an
assignment for security purposes, all leases of the Land and/or the
Improvements, or any parts thereof, now or hereafter entered into and all
right, title and interests of Trustor thereunder, and all of the rents, issues
and profits of the Land and/or the Improvements, as more fully provided in
Section 6.1 below.
This Mortgage is made for the purpose of securing:
1. Performance of each agreement of Trustor herein contained, and
repayment of any funds advanced by Beneficiary or Trustee or which Beneficiary
or Trustee become obligated to advance under this Mortgage.
2. Payment of the indebtedness evidenced by one Interim Mortgage Note of
even date herewith, and any extension or renewal thereof, in the principal sum
of $________________________ executed by Trustor in favor of Beneficiary or
order.
3. Payment of such further sums as the then record owner of the Property
hereafter may borrow from Beneficiary, when evidenced by a promissory note or
notes reciting it is so secured.
TO PROTECT THE SECURITY OF THIS MORTGAGE, TRUSTOR COVENANTS TO AND AGREES WITH
BENEFICIARY AS FOLLOWS:
4. Trustor shall, with respect to the Property:
4.1 Keep the Property in good condition and repair;
4.2 Not remove or demolish any building or other structure;
2 Exhibit L to the
Sale Agreement
<PAGE> 141
4.3 Complete or restore promptly and in good and workmanlike
manner any building or other structure which may be constructed, damaged or
destroyed and pay when due all claims for labor performed and materials
furnished therefor;
4.4 Comply with all laws affecting the Property or requiring any
alterations or improvements to be made thereon;
4.5 Not commit, suffer or permit waste;
4.6 Not commit, suffer or permit any act upon the Property in
violation of law, including but not limited to all Federal, state and local
statutes, ordinances or regulations relating to hazardous or toxic waste;
4.7 Cultivate, irrigate, fertilize, fumigate, prune and do all
other acts which from the character or use of the Property may be reasonably
necessary to maintain its value, the specific enumerations herein not excluding
the general;
4.8 Provide, maintain and deliver to Beneficiary such evidence of
insurance coverage as is satisfactory to and with loss payable to Beneficiary.
4.9 Appear in and defend any action or proceeding purporting to
affect the security hereof or the rights or powers of Beneficiary or Trustee;
and pay all costs and expenses, including cost of evidence of title and
attorneys' fees in a reasonable sum, in any such action or proceeding in which
Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to
foreclose this Mortgage.
4.10 Pay at least ten (10) days before delinquency all taxes and
assessments affecting the Property, including assessments on appurtenant water
stock;
4.11 Pay when due, all encumbrances, charges and liens which appear
to be prior or superior to the lien created by this Mortgage, together with any
interest, costs or other sums secured thereby;
4.12 Cure within the time specified in any lease or sublease, or
immediately if not specified, any defaults or breaches thereof and do all acts
necessary to insure that any such lease or sublease remain in full force and
effect;
4.13 With respect to any property described above which is less
than a fee-simple estate, including but not limited to a leasehold estate:
4.13.1 Trustor shall cure within the time specified in the
above-described lease, or other agreement, or immediately if
not specified therein, any default or breaches thereof and to
do all acts necessary to insure the above-described lease or
other agreement remains in full force and effect;
4.13.2 Trustor shall not voluntarily terminate, surrender or
subordinate any leasehold or other estate encumbered hereby
and any attempt by Trustor to do so shall be wholly void and
without any force and effect.
5. Trustor covenants and agrees that to effectuate the terms and
conditions of this Mortgage:
5.1 Trustor shall, upon reasonable notice by Beneficiary, during
normal business hours or at such other time if reasonably required, permit
Beneficiary, and any of its agents or employees to inspect the Property and
copy such records of Trustor that pertain to the Property, whether or not
located at the Property.
5.2 Should Trustor fail to make any payment or to do any act as
herein provided, then Beneficiary or Trustee, but without obligation so to do
and without notice to or demand upon Trustor and without releasing Trustor from
any obligation hereof, may: make or do the same in
3 Exhibit L to the
Asset Sale Agreement
<PAGE> 142
such manner and to such extent as either may deem necessary to protect the
security hereof, Beneficiary or Trustee being authorized to enter upon the
Property for such purposes; appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Beneficiary
or Trustee; pay, purchase, contest or compromise any encumbrance, charge or
lien which in the judgment of either appears to be prior or superior hereto;
and, in exercising any such powers, pay necessary expenses, employ counsel and
pay his reasonable fees. Trustor shall pay immediately and without demand all
sums so expended by Beneficiary or Trustee, with interest from date of
expenditure at the amount set forth in the obligation secured hereby, or if the
obligation secured hereby does not specify a rate of interest, at a rate of
interest equal to the Trustor's Prime Rate as it may exists from time to time
plus three percent (3.0%) but in no event less than ten percent (10.0%) per
annum.
5.3 Trustor agrees to indemnify and hold Beneficiary, and any of
its successors in interest, harmless from any waste or violations of law,
including but not limited to all Federal, state and local statutes, ordinances
or regulations relating to hazardous or toxic wastes.
5.4 Any award of damages in connection with any condemnation for
public use of or injury to the Property is hereby assigned and shall be paid to
Beneficiary who shall apply said moneys in reduction of the principal amount of
the indebtedness secured to the extent necessary to render its security
unimpaired. If the obligation secured hereby includes obligations to reimburse
the Beneficiary for moneys the Beneficiary is committed to advance to Trustor
or third persons in the future, said award of damages shall be held as
collateral for such reimbursement obligation in lieu of the property which is
condemned. In the event of a partial taking in condemnation, the proceeds
shall be apportioned in accord with the provisions of California Code of Civil
Procedure Section 1265.225, as it is in effect at the time of the award. An
action for inverse condemnation shall be deemed an action for condemnation
under this paragraph.
5.5 Insurance proceeds shall be held, in trust, by Beneficiary and
applied to the reasonable costs of repair and restoration of the Property if
such proceeds, together with funds supplied by Trustor, are sufficient to
restore the Property in such a manner that the Beneficiary's security interest
hereunder remains unimpaired. If the insurance proceeds, together with funds
supplied by Trustor, are not sufficient to restore the Property in such a
manner that the Beneficiary's security interest hereunder remains unimpaired,
said proceeds, at the option of Beneficiary, may be applied to the obligation
secured hereby or to restoration of the Property. If Trustor disagrees with
Beneficiary's disposition of insurance proceeds hereunder, Trustor agrees to
submit the matter to binding arbitration before a three-member panel (or
one-member panel if the insurance proceeds are less than $200,000) of the
American Arbitration Association pursuant to the rules and regulations of the
American Arbitration Association. The arbitrators shall also apportion the
costs of arbitration, including attorneys' fees, to the extent each party has
prevailed.
5.6 Trustor covenants and agrees (i) to pay, for the purpose of
establishing an escrow account (the "Estimated Accrual Account") to be held by
Trustor for the benefit of Beneficiary (which account shall not bear interest),
an initial amount equal to the Proration Amount, as such term is defined below,
and (ii) thereafter to continue to pay into the Estimated Accrual Account
monthly to the extent available from Cash Flow, on each and every monthly
payment date, One-Twelfth (1/12th) of the estimated annual real estate taxes,
assessments and hazard insurance premiums on the Property, as Permitted
Expenses. The amount of such real estate taxes, assessments and hazard
insurance premiums, when unknown, shall be reasonably estimated by Trustor).
Such deposits shall be used by Trustor or, if title to the Real Property has
been then transferred, Beneficiary to pay such real estate taxes, assessments,
and hazard insurance
4 Exhibit L to the
Asset Sale Agreement
<PAGE> 143
premiums when due. The enforceability of the covenants relating to Trustor's
payment of real estate taxes, assessments and hazard insurance premiums herein
otherwise provided shall not be affected except insofar as those obligations
have been met by compliance with this Section 5.6. As used herein, "Proration
Amount" means that amount of real estate taxes, assessments and hazard
insurance premiums which would be payable by Beneficiary as Seller if the Real
Property were transferred to Beneficiary as Purchaser on the Closing Date.
6. Trustor hereby assigns to Beneficiary the following additional rights
and interests:
6.1 All leases, whether written or oral, and all other agreements
for use or occupancy of any portions of the Land and/or the Improvements,
together with any and all extensions and renewals thereof and any and all
further leases, lettings or agreements (including, but not limited to,
subleases thereof and tenancies following attornment) upon or covering use of
occupancy of all or any part of the Land and/or the Improvements, together with
any and all guarantees of any lessee's performance under any of said leases or
other agreements; and the immediate and continuing right, power and authority,
during the continuance of these Trusts, to collect the rents, issues and
profits of the Property, reserving unto Trustor the right, prior to any default
by Trustor in payment of any indebtedness secured hereby or in performance of
any agreement hereunder, to collect and retain such rents, issues and profits
as they become due and payable. Upon any such default, Beneficiary may at any
time without notice, either in person, by agent, or by a receiver to be
appointed by a court, and without regard to the adequacy of any security for
the indebtedness hereby secured, enter upon and take possession of the Property
or any part thereof, in its own name sue for or otherwise collect such rents,
issues and profits, including those past due and unpaid, and apply the same,
less costs and expenses of operation and collection, including reasonable
attorneys' fees, upon any indebtedness secured hereby, and in such order as
Beneficiary may determine. The entering upon and taking possession of the Land
and the Improvements, the collection of such rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any default or notice
of default hereunder or invalidate any act done pursuant to such notice. The
absolute assignment of leases, rents, issues and profits contained in this
Section 6.1 constitutes an absolute, unconditional and present transfer of
Trustor's interest in existing and future leases, rents, issues and profits
with respect to the Property described in this Mortgage effective upon the
execution and delivery of this Mortgage and such assignment is not intended to
be, and shall not be construed to be, a conditional assignment or an assignment
for security purposes only; and
6.2 A security interest under the applicable Uniform Commercial
Code in and to the following Property (hereinafter referred to as the
"Collateral"), as additional security for the payment and performance of the
obligations secured by this Mortgage:
6.2.1 All of the personal property of any kind whatsoever
(excluding all such Property which is owned by occupancy tenants of the Trustor
and installed for the purposes of their tenancy if such occupancy tenant has
the right to remove the same at or before the expiration of the term of the
applicable lease), including, but not limited to, all materials, machinery,
apparatus, equipment, furnishings, furniture, fixtures and all other goods,
chattels and articles of personal Property including, without limitation, all
building materials and supplies, all construction equipment, all medical
equipment and supplies, furniture, rugs and carpets, linens and bedding
materials, televisions, radios and other sound equipment, kitchen fixtures,
utensils, and all cooking and serving equipment, furnaces, boilers, oil
burners, refrigeration, air conditioning and sprinkler systems, awnings,
screens, window shades, draperies, motors, dynamos, incinerators, plants
5 Exhibit L to the
Asset Sale Agreement
<PAGE> 144
and shrubbery, and all other equipment, machinery, appliances, fittings and
fixtures, whether personal Property, inventory or fixtures, whether now owned
or hereafter from time to time acquired by the Trustor, together with all
substitutions, replacements, additions, attachments, accessories, accretions,
their component parts thereto or thereof, all other items of like Property
(collectively, the "Equipment").
6.2.2 All accounts and contract rights covering or relating
to any or all thereof, including any proceeds and products thereof, whether now
in existence or hereafter arising, and relating to, situated or located on, or
used or usable in connection with, the construction, maintenance or operation
of the Property and all receipts, earnings, revenues, rents, issues, profits,
avails and other income due to or received by Trustor from the operation,
ownership or leasing of the improvements or any part thereof and all rights to
receive the same, whether in the form of accounts receivable or otherwise.
6.2.3 All judgments, insurance proceeds, awards of damages
and settlements hereafter made as a result or in lieu of any taking, permanent
or temporary, of the Property or any part thereof under the power of eminent
domain, or by deed in lieu thereof, or for any damage, whether caused by such
taking or otherwise, to the Property or any part thereof, and all insurance
policies and insurance proceeds pertaining to the Property and all awards and
payments that shall become payable with respect to any damage to the Property
or any part thereof.
6.2.4 All construction contracts, purchase orders,
subcontracts, architectural and engineering contracts, the Approved Plans and
Specifications, all building permits, any bonds in favor of Trustor, and all
other contracts, agreements, permits, authorizations, or guarantees of work,
material or performance in any way relating to the construction of the
Improvements, now existing or arising at any time hereafter during the term of
the Loan, including all amendments, modifications, replacements and/or
additions to any of the foregoing.
6.2.5 Any and all other, further, or additional right,
title, or interest in or to any of the foregoing described collateral, which
may at any time hereafter be accrued by the Trustor (or any entity in any way
related to Trustor or any of its partners), to secure payment of the Note, as
well as to secure the performance by the Trustor of its obligations under this
Mortgage.
6.3 Incident thereto, Trustor agrees with Beneficiary as follows:
6.3.1 Trustor warrants and represents that:
6.3.2 At its option, Beneficiary may, but shall not be
required to, discharge taxes, liens or security interests or other encumbrances
at any time levied or placed on the Collateral; may, but shall not be required
to, pay for insurance on the Collateral; and may, but shall not be required to,
pay for the maintenance and preservation of the Collateral. Trustor agrees to
reimburse Beneficiary on demand for any payment made, or any expense incurred,
by Beneficiary pursuant to the foregoing authorization together with interest
thereon at the rate set forth in the Note, from the date incurred until
reimbursed by Trustor. Until default, Trustor may have possession of the
Collateral and use it at all times as personal Property and for business
purposes, and in a lawful manner not inconsistent with the provisions hereof
and not inconsistent with any policy of insurance thereon.
6.3.3 Upon any Event of Default and at any time thereafter,
Beneficiary may exercise, in addition to but not in replacement of any remedy
set forth in Section 11 below, all of the rights and remedies of a Secured
Party under the Uniform Commercial Code of the state in which the Collateral is
located or otherwise as provided by law, including, without limitation, the
6 Exhibit L to the
Asset Sale Agreement
<PAGE> 145
right to sell all or any part of the Collateral at public or private sale. In
any case where Beneficiary determines to give notice of any sales or other
dispositions of Collateral, the mailing of notice to Trustor at least ten (10)
days before any sale or other disposition, conclusively shall be deemed
reasonable notice thereof.
Expenses of retaking, holding, preparing for sale, selling or
the like shall include Beneficiary's attorneys' fees and legal expenses and are
secured hereby as part of said obligations. If the proceeds realized from
disposition of the Collateral shall fail to satisfy Trustor's obligations
(including the expenses mentioned above) Trustor shall immediately pay any
deficiency balance to Beneficiary.
6.3.4 In the event Beneficiary elects to dispose of the
Collateral by public sale, it shall advertise for sale under this Mortgage, by
notice of such sale published in some newspaper published in the jurisdiction
where the Collateral is located for such number of times as is required by all
applicable laws and rules of the jurisdiction in which the Collateral is
located, giving notice of the time, place and terms of such sale. Beneficiary
may, at its option, sell the Collateral as a whole or in parcels and such sale
may be held at the courthouse door in the jurisdiction where the Collateral is
located, at the place where the Collateral is located, or at any other
commercially reasonable place, all at the option of Beneficiary, but in no
event shall it be necessary that the Collateral be present at the sale.
6.3.5 Upon the occurrence of an Event of Default,
Beneficiary may enter upon the Property to take possession of the Property and
the Collateral, or at its option may require Trustor to assemble the Collateral
at any place designated by Beneficiary reasonably convenient to the parties.
If necessary to obtain the possession provided for above, Beneficiary may
invoke any and all available legal remedies to dispossess Trustor, including
without limitation, one or more actions for forcible entry and detainer,
trespass to try title, restitution and appointment of a receiver.
6.3.6 Trustor will do all acts requested by the
Beneficiary, including but not limited to the execution and filing of all
instruments (such as security agreements, financing statements, and
continuation statements) necessary to establish, maintain and continue
perfected the security interests of Beneficiary in the Collateral, will
promptly on demand pay all costs of any searches deemed necessary by
Beneficiary to establish and determine the validity and the priority of the
security interest of Beneficiary, and also all other claims and charges which
in the opinion of Beneficiary might prejudice, imperil or otherwise affect the
Collateral or Beneficiary's security interest therein.
6.3.7 No waiver by Beneficiary of any default shall operate
as a waiver of any other default or of the same default on a future occasion.
All rights of Beneficiary hereunder shall inure to the benefit of its
successors and assigns; and all obligations of Trustor shall bind its
successors and assigns.
6.3.8 No delay or failure on the part of Beneficiary in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by Beneficiary of any right or remedy shall operate
as a waiver thereof, or the exercise of any other right or remedy.
6.3.9 Trustor further specifically agrees that, in any
exercise of the rights of Beneficiary under this or any other instrument, any
combination or all of the Property, rights or security given to secure
Trustor's indebtedness to Beneficiary may be offered for sale for one total
price, and the proceeds of any such sale accounted for in one account without
distinction between
7 Exhibit L to the
Asset Sale Agreement
<PAGE> 146
the items of security or without assigning to them any proportion of such
proceeds, Trustor hereby waiving the application of any doctrine of
marshalling.
7. Trustor or any other person legally entitled thereto agrees to pay
$60.00 for any statement provided for by law in effect at the date hereof
regarding the obligation secured hereby.
7.3.1.1 Trustor is the lawful owner of such
Collateral and is, or when it acquires same it will be, in possession of the
same free and clear from any lien, security interest or encumbrance; no
Financing Statement or other notice of lien agreement or lien is on file or
record at any public office which relates to any of the Collateral or which
could through general language relate thereto; Trustor has good right to
pledge, sell, consign, assign, transfer and create a security interest in the
same; and Trustor at its cost and expense will protect and defend the security
interest created herein and the Collateral against all adverse claims that any
of the Collateral has ceased to be personal Property;
7.3.1.2 The Collateral shall continue to be free from
all pledges, liens, encumbrances and security interests or other claims in
favor of others; and the Trustor shall warrant, and, at the Beneficiary's
request, defend the same from all claims and demands of all persons;
7.3.1.3 The Collateral will only be used by Trustor
in the construction, maintenance and operation of the Property, and will not be
held for sale, lease or transfer to others, or otherwise disposed of by the
Trustor without the written consent of the Beneficiary, except as may be
specifically permitted herein;
7.3.1.4 The tangible Collateral will be located at
the Property, and the Collateral will not be removed therefrom without the
prior written consent of the Beneficiary unless Collateral is immediately
replaced with similar items owned by the Trustor and which are of equal or
greater value; and
7.3.1.5 Trustor will, at its own cost and expense,
keep the Collateral in as good and substantial order, repair and condition as
the same is in at this date, or as the same is when acquired, reasonable wear
and tear alone excepted, making replacements when and as necessary, and, in
this connection, Beneficiary hereby gives its written consent to the removal by
Trustor of the same, or any part thereof, from the Property if such removal is
necessary so to do in connection with Trustor's fulfilling of its obligations
under this subsection 6.3.1.5, and if the priority of its security interest
therein will not be materially jeopardized.
7.0.1 Trustor agrees that Beneficiary, or its agents,
may enter upon the Property at any time, and from time to time, for the
purpose of inspecting the Collateral, and any and all records pertaining
thereto. Trustor agrees to notify Beneficiary promptly of any change in its
mailing address or principal place of business, in order that a prompt refiling
of any outstanding notices may be made, if necessary. Trustor also is to advise
Beneficiary, within thirty (30) days, of any new facts which, under applicable
provisions of law, would affect the priority of the security interest granted to
Beneficiary by this instrument.
8. Beneficiary, or any successor in ownership of any indebtedness secured
hereby, may from time to time, by instrument in writing, substitute a successor
or successors to any Trustee named herein or acting hereunder, which
instrument, executed by Beneficiary and duly acknowledged and recorded in the
office of the recorder of the county or counties where the Property is
situated, shall be conclusive proof of proper substitution of such successor
Trustee or Trustees, who shall, without conveyance from Trustee predecessor,
succeed to all its title, estate, rights, powers and duties. Said
8 Exhibit L to the
Asset Sale Agreement
<PAGE> 147
instrument must contain the name of the original Trustor, Trustee and
Beneficiary hereunder, the book and page where this Mortgage is recorded and
the name and address of the new Trustee.
9. At any time or from time to time, without liability therefor and
without notice, upon written request of Beneficiary and presentation of this
Mortgage and the evidence of the obligation secured hereby for endorsement, and
without affecting the personal liability of any person for payment of the
indebtedness secured hereby, Trustee may: reconvey any part of the Property;
consent to the making of any map or plat thereof; join in granting any easement
thereon; or join in any extension agreement or any agreement subordinating the
lien or charge hereof.
10. Upon written request of Beneficiary stating that all sums secured
hereby have been paid, if applicable, Beneficiary's statement that no further
commitment exists to make future advances or extend credit, and upon surrender
of this Mortgage and the evidence of the obligation secured hereby to Trustee
for cancellation and retention and upon payment of its fees, Trustee shall
reconvey, without warranty, the Property then held hereunder. Upon written
request of Beneficiary, if less than all sums secured hereby have been paid,
Trustee shall reconvey, without warranty, the portion of the Property then held
hereunder specified by Beneficiary. The recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof. The
grantee in such reconveyance may be described as "the person or persons legally
entitled thereto." Five (5) years after issuance of such full reconveyance,
Trustee may destroy the evidence of indebtedness and this Mortgage (unless
directed in such request to retain them).
11. Upon default by Trustor in payment of any indebtedness secured hereby
or in performance of any agreement hereunder, the following provisions shall
apply:
11.1 Beneficiary may declare all sums secured hereby immediately
due and payable by delivery to Trustee of written declaration of default and
demand for sale and of written notice of default and of election to cause to be
sold the Property, which notice Trustee shall cause to be filed for record.
Beneficiary also shall deposit with Trustee this Mortgage, the evidence of the
obligation secured hereby and all documents evidencing expenditures secured
hereby.
11.2 To the extent the obligation secured hereby arises from a
commitment of Beneficiary to make future advances either to Trustor or a third
party or extend credit subsequent to the recordation of a notice of default
hereunder, the sums secured hereby shall also include the amount of such
commitment to make future advances or extend credit, and subject to
acceleration as provided in the previous paragraph. The Trustee shall pay such
amount at such time as it pays all other sums secured hereby and the
Beneficiary shall hold same as additional collateral for the obligation secured
hereby, at such interest as is available to Beneficiary's customers in an
insured deposit account with no restrictions on withdrawal.
11.3 After the lapse of such time as may then be required by law
following the recordation of said notice of default, and notice of sale having
been given as then required by law, Trustee, without demand on Trustor, shall
sell the Property at the time and place fixed by it in said notice of sale,
either as a whole or in separate parcels, and in such order as it may
determine, at public auction to the highest bidder for cash in lawful money of
the United States, payable at the time of sale. Trustee may postpone sale of
all or any portion of the Property by public announcement at such time and
place of sale, and from time to time thereafter may postpone sale by public
announcement at the time fixed by the preceding postponement. Trustee shall
deliver to such purchaser its deed conveying the Property so sold, but without
any covenant or warranty,
9 Exhibit L to the
Asset Sale Agreement
<PAGE> 148
express or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Trustor,
Trustee or Beneficiary may purchase at such sale.
11.4 If the Property consists of more than one lot or parcel, the
lots or parcels may be sold separately, together or in any combination, at the
sole discretion of Beneficiary. Trustor waives the right to direct the order
in which the Property may be sold when it consists of more than one lot or
parcel. The order of sale of the Property when it consists of more than one
lot or parcel shall be at the sole discretion of the Beneficiary.
11.5 After deducting all costs, fees and expenses of Trustee and of
this Trust, including cost of evidence of title in connection with sale,
Trustee shall apply the proceeds of sale to payment of: all sums expended
under the terms hereof, not then repaid, with accrued interest at the amount
allowed by law in effect at the date hereof; all other sums then secured
hereby; and the remainder, if any, to the person or persons legally entitled
thereto.
12. This Mortgage applies to, inures to the benefit of, and binds all
parties hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns. The term "Beneficiary" shall mean the owner and
holder, including pledgees, of the evidence of the obligation secured hereby,
whether or not named as Beneficiary herein. In this Mortgage, whenever the
context so requires, the masculine gender includes the feminine and/or neuter,
and the singular number includes the plural. By accepting payment of any sum
secured hereby after its due date, Beneficiary does not waive its right either
to require prompt payment when due of all other sums so secured or to declare
default for failure so to pay.
13. That Trustee accepts this Trust when this Mortgage, duly executed and
acknowledged, is made a public record as provided by law. Trustee is not
obligated to notify any party hereto of pending sale under any other Mortgage
or of any action or proceeding in which Trustor, Beneficiary or Trustee shall
be a party unless brought by Trustee.
14. SHOULD TRUSTOR OR ITS SUCCESSOR IN INTEREST WITHOUT THE PRIOR WRITTEN
CONSENT OF BENEFICIARY, SELL, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATE, ASSIGN
OR ENCUMBER ITS INTEREST IN THE PROPERTY (OR ANY PART THEREOF), WHETHER
VOLUNTARILY OR INVOLUNTARILY, THEN BENEFICIARY MAY AT ITS ELECTION DECLARE ALL
SUMS SECURED HEREBY IMMEDIATELY DUE AND PAYABLE. THIS PROVISION SHALL APPLY TO
EACH AND EVERY SALE, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR
ENCUMBRANCE REGARDLESS WHETHER OR NOT BENEFICIARY HAS CONSENTED TO, OR WAIVED,
ITS RIGHT HEREUNDER, WHETHER BY ACTION OR NON-ACTION, IN CONNECTION WITH ANY
PREVIOUS SALE, TRANSFER, MORTGAGE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR
ENCUMBRANCE, WHETHER ONE OR MORE.
15. ANYTHING CONTAINED IN ANY PROVISION OF THIS MORTGAGE OR THE INTERIM
MORTGAGE NOTE SECURED HEREBY TO THE CONTRARY NOTWITHSTANDING, IF ANY
FORECLOSURE PROCEEDING IS BROUGHT UNDER THE PROVISIONS OF THIS MORTGAGE OR IF
ANY OTHER ACTION IS BROUGHT TO ENFORCE THE PROVISIONS OF THIS MORTGAGE OR THE
INTERIM MORTGAGE NOTE SECURED HEREBY, BENEFICIARY SHALL NOT BE ENTITLED TO TAKE
ANY
10 Exhibit L to the
Asset Sale Agreement
<PAGE> 149
ACTION TO PROCURE ANY MONEY JUDGMENT IN PERSONAM OR ANY DEFICIENCY DECREE
AGAINST TRUSTOR EXCEPT TO THE EXTENT OF TRUSTOR'S INTEREST IN THE PROPERTY OR
THE COLLATERAL; PROVIDED, HOWEVER, THAT NOTHING IN THE PROVISIONS OF THIS
MORTGAGE SHALL BE DEEMED TO LIMIT OR IMPAIR THE ENFORCEMENT AGAINST THE
PROPERTY OR THE COLLATERAL OR ANY OTHER COLLATERAL WHICH MAY FROM TIME TO TIME
TO BE GIVEN TO BENEFICIARY, OR HELD BY TRUSTOR IN TRUST ON BEHALF OF
BENEFICIARY, AS SECURITY FOR THE PERFORMANCE OF TRUSTOR'S OBLIGATIONS HEREUNDER
OR UNDER THE PROVISIONS OF THE INTERIM MORTGAGE NOTE SECURED HEREBY OR ANY
OTHER INSTRUMENT EXECUTED IN CONNECTION HEREWITH, OR TO LIMIT OR IMPAIR THE
RIGHTS AND REMEDIES OF BENEFICIARY THEREUNDER OR UNDER ANY OF THE PROVISIONS
THEREOF; AND PROVIDED FURTHER, THAT TRUSTOR SHALL REMAIN LIABLE TO ACCOUNT FOR
THE USE OF THE NET PROPERTY PROCEEDS RECEIVED BY TRUSTOR AND NOT APPLIED ON A
CURRENT BASIS AS RECEIVED BY TRUSTOR IN ACCORDANCE WITH THE PROVISIONS OF THIS
MORTGAGE AND THE INTERIM MORTGAGE NOTE SECURED HEREBY.
16. The undersigned Trustor requests that a copy of any Notice of Default
and of any Notice of Sale hereunder be mailed to him at his address
hereinbefore set forth.
Signature of Trustor
CITY NATIONAL BANK,
a national banking association
By: _______________________________________
Its: _____________________________________
11 Exhibit L to the
Asset Sale Agreement
<PAGE> 150
Exhibit M to
Asset Sale Agreement
Form of
INTERIM MORTGAGE NOTE
$____________________ November ____, 1993
(Initial Loan Amount)
FOR VALUE RECEIVED, the undersigned, CITY NATIONAL BANK, a national
banking association ("Grantor"), promises to pay to the order of
___________________________________
__________________________________________________, offices located at
_____________________________________________, County of ________________,
State of __________________ ("Grantee"), the principal sum of
_______________________________________________________ DOLLARS U.S.
($________________)*, together with interest thereon from the date hereof on
any outstanding balance of principal plus any amounts added to the principal
amount hereof, until paid, including interest at the rate or rates hereinafter
set forth. This note ("Note") is secured by a deed of trust of even date
herewith between Grantor and Grantee ("Interim Mortgage"). Capitalized terms
not defined herein or in the Interim Mortgage or in Exhibit A hereto shall have
the meanings set forth in the Asset Sale Agreement.
Interest on the outstanding principal balance of this Note shall
accrue at a per annum rate equal to the ask yield published in the Wall Street
Journal under Treasury Bonds, Notes & Bills as of the Business Day immediately
prior to the Closing Date corresponding to the 6-7/8 Treasury Notes due in
February 1994, ("Applicable Rate"), based upon a 360-day year for the actual
number of days elapsed. The Applicable Rate shall be paid from Net Cash Flow,
which amount shall be payable on the first day of each month, or, if such first
day is not a Business Day, then on the following Business Day ("Due Date");
provided, however, that in the event Net Cash Flow for the calendar month
immediately preceding the Due Date is insufficient to pay in full the accrued
interest on any Due Date, such accrued and unpaid interest shall thereafter
accrue interest at the Applicable Rate and be paid in accordance herewith.
The amount due hereunder on each Due Date shall be equal to the sum of
(i) Net Property Proceeds plus (ii) Late Charges and Outstanding Lender
Advances, together with accrued interest thereon at a rate equal to two percent
(2.0%) per annum in excess of the Applicable Rate then in effect under this
Note, but in no event in excess of the maximum permissible interest rate under
applicable law (the "Default Rate"). All payments received hereon shall be
applied first, to Late Charges and Outstanding Lender Advances, together with
accrued interest thereon at the Default Rate; second, to interest at the
Default Rate on any delinquent amounts due and payable hereunder; third, to the
payment of delinquent amounts; fourth, to Interest at the Applicable Rate on
the outstanding principal balance hereof that accrued during the immediately
preceding month, plus accrued and unpaid Interest at the Applicable Rate on
amounts that accrued and were not paid (due to an insufficiency in Net Property
Proceeds and not to any delinquency) for periods
1
<PAGE> 151
Exhibit M to
Asset Sale Agreement
prior to the month immediately preceding the Due Date; and fifth, to reduce the
outstanding principal balance. Principal, Late Charges, accrued interest,
repayment of Outstanding Lender Advances and any other sums secured by the
Interim Mortgage shall be due and payable in all events on
______________________, 1994, subject to extension for up to ________ months,
if Purchaser under the Asset Sale Agreement has delivered a Certificate of
Defective Asset to Seller thereunder, and Seller has elected to cure or revalue
the Defective Asset (the "Maturity Date").
All payments due hereunder shall be remitted to Grantee in lawful
currency of the United States of America in federal or other funds currently
due and immediately available with all charges prepaid, as follows:
[Insert Account Information]
or, upon prior written notice by Grantee, to such other accounts or designees
as Grantee shall from time to time request.
In the event that any payment or part of any payment due hereunder is
not made on the date the same as due, the full amount outstanding hereunder
shall bear interest at the Default Rate until such amount is paid, subject to
the right to accrue unpaid Interest to the extent that Net Property Proceeds
for the month immediately preceding any Due Date are not sufficient to pay such
Interest.
In the event that any payment or part of any payment due hereunder is
not made within five (5) days after the date when the same is due, Grantor
shall pay to Grantee a late charge equal to five percent (5%) of the late
payment ("Late Charge"), which Late Charge shall bear interest at the Default
Rate if not paid when due [subject to the right to accrue unpaid Interest to
the extent that Net Property Proceeds for the month immediately preceding any
Due Date are not sufficient to pay such Interest]. This charge shall be in
addition to any other sums due hereunder and any other rights or remedies the
holder of this Note may have.
Grantor shall have the right to prepay the principal balance of this
Note in whole upon receipt of a Certificate of Defective Asset at any time
during the term of this Note without penalty or premium upon the remittance to
Grantee of all amounts due hereunder, and upon the satisfaction by Borrower of
all obligations required for the release of the Mortgage Loan evidenced hereby
from the lien of the Loan and Security Agreement.
[This language will be added to the related Interim Mortgage.]
Grantee acknowledges that in the making of the Interim Mortgage Loan
evidenced hereby and secured by the Interim Mortgage, Grantee is relying to a
material extent upon the creditworthiness and business expertise of the
Grantor. Therefore, in order to protect Grantee, Grantor agrees that if
Grantor sells, conveys, transfers, disposes of or leases (except as to those
leases of space in improvements which do not provide for an option to purchase)
the Property or any portion thereof, either voluntarily, involuntarily, or
otherwise or enters into an agreement so
2
<PAGE> 152
Exhibit M to
Asset Sale Agreement
to do without the prior written consent of Grantee, Grantor shall, not less
than thirty (30) days prior to any such event, notify Grantee in writing of the
occurrence of such event, and Grantee, whether or not it receives such notice,
upon the occurrence of any one or more of such events, shall have the right to
declare the then current outstanding principal of this Note immediately due and
payable, together with all accrued interest and unpaid interest and other
amounts due hereunder, which shall be applied, after being applied to payment
of all other sums secured hereby then due and payable in such order as Grantee
may determine, to the reduction of the outstanding principal balance of this
Note. The foregoing right to accelerate the indebtedness may be exercised at
any time in Grantee's sole discretion after the occurrence of any event
described above and the acceptance of one or more installments from any person
thereafter shall not constitute a waiver of Grantee's right.
Notwithstanding the foregoing, after the execution hereof, Grantor
shall convey the Property to a Qualified Affiliate as the purchaser thereof in
accordance with the terms of the Interim Mortgage and the Sales Contract and
Grantor's obligations hereunder shall be satisfied in full. Then and in such
event, Grantor shall be relieved of any and all liability whatsoever hereunder.
Subject to the terms of the Interim Mortgage and the Sales Contract, Grantor
shall have such one-time right to transfer the Property to a Qualified
Affiliate, provided that Grantor is not in default hereunder or under the
Interim Mortgage.
This Note is secured by the Interim Mortgage. All of the terms,
covenants, provisions, conditions, stipulations, promises and agreements
contained in the Interim Mortgage to be kept, observed and performed by Grantor
therein are hereby made a part of this Note and are incorporated herein by this
reference to the same extent, and with the same force and effect, as if they
were fully set forth herein, and Grantor promises and agrees to keep, observe
and perform them, or cause them to be kept, observed and performed, strictly in
accordance with the terms and provisions thereof.
Grantor hereby expressly agrees that (i) if default be made in the
payment of any installment of accrued interest, or principal, or in the payment
of Late Charges or the repayment of Outstanding Lender Advances due under this
Note and such default shall continue uncorrected; or (ii) if default be made in
the performance of or compliance with the terms, covenants and conditions of
this Note, the Interim Mortgage securing this Note, the Loan and Security
Agreement, the Promissory Note as defined in the Loan and Security Agreement,
or any other instrument or collateral related thereto and such default shall
continue uncorrected beyond any applicable grace or cure period then, and in
any or all such events, the entire outstanding principal balance and accrued
interest, and all other sums evidenced by this Note and secured by the Interim
Mortgage, shall at once be and become due and payable at the option of the
holder of this Note without further notice or demand.
The failure of Grantee to exercise the option for acceleration of
maturity of this Note or of foreclosure during any default or to exercise any
other option granted to it hereunder, or under the Interim Mortgage, in any one
or more instances, or the acceptance by Grantee of partial payments or partial
performance, shall not constitute a waiver of any such default, but such
options
3
<PAGE> 153
Exhibit M to
Asset Sale Agreement
shall remain continuously in force during the pendency of the default. Time is
of the essence hereof, and any failure to declare a default hereunder or to
accelerate this Note or to impose Late Charges or interest at the Default Rate,
notwithstanding that one or more payments due hereunder have not been remitted
on a timely basis, shall not constitute a waiver of Grantee's right to declare
such a default or to impose Late Charges and interest at the Default Rate.
It is expressly stipulated and agreed to be the intent of Grantor and
the holder of this Note at all times to comply with the applicable usury and
other applicable law of the State of California. If the laws of the State of
California or of the United States of America are revised, repealed or
judicially interpreted so as to render usurious any amount called for under
this Note or any document securing payment of this Note, including, but not
limited to, the Interim Mortgage, or contracted for, charged or received with
respect to the Interim Mortgage Loan evidenced by this Note, or if exercise by
the holder of this Note of the option herein contained to accelerate the
maturity of this Note or if any prepayment by Grantor results in Grantor's
having paid any interest in excess of that permitted by law, then it is
Grantor's and the holder's express intent that all excess amounts theretofore
collected by the holder of this Note be credited to the principal balance of
this Note in inverse order of maturity of the installments of principal (or, if
this Note has been paid in full, refunded to Grantor), and the provisions of
this Note and all documents securing the payment of this Note, including, but
not limited to, the Interim Mortgage, shall immediately be deemed reformed and
the amounts thereafter collectible hereunder and thereunder reduced, without
the necessity of execution of any new document, so as to comply with applicable
law, but so as to permit the recovery of the fullest amount otherwise called
for hereunder and thereunder.
It is further agreed that, without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note and under such other documents securing payment of this Note, or
which are interpreted for the purpose of determining whether such rate would
exceed the maximum lawful contract rate, shall be made, to the extent permitted
by the law of the State of California, by amortizing, prorating, allocating and
spreading during the period of the full stated term of the Interim Mortgage
Loan evidenced by this Note, all interest at any time contracted for, charged
or received from Grantor or otherwise by the holder of this Note.
In the event it shall become necessary to employ counsel to collect
this obligation or to protect the security herefor, Grantor agrees to pay
reasonable attorneys' fees, whether suit be brought or not, and all other costs
and expenses actually and reasonable incurred by the holder of this Note in
connection with collection, the protection of the security for the debt
evidenced hereby or the enforcement of each and every covenant and agreement by
the Grantor, or of any remedies herein given to secure this Note, or any
instrument collateralized or related thereto or the enforcement of any
guaranty.
The undersigned and any endorsers, guarantors or sureties jointly and
severally waive presentment, protest and demand, notice of protest, notice of
intent to accelerate, notice of acceleration, demand and dishonor, and
nonpayment of this Note and any and all lack of diligence or delays in the
collection or enforcement hereunder may be extended from time to time without
notice to any party and without in any way affecting the liability of the
undersigned or any
4
<PAGE> 154
Exhibit M to
Asset Sale Agreement
endorsers, guarantor or surety hereof. This Note shall be binding on Grantor
and Grantor's successors and assigns.
Grantor hereby represents and warrants that it is a business or
commercial entity and that the Interim Mortgage Loan evidenced hereby was made
and transacted solely for the purpose of carrying on or acquiring a business or
commercial investment.
THE VALIDITY AND CONSTRUCTION OF THIS NOTE AND ALL MATTERS PERTAINING
HERETO ARE TO BE DETERMINED ACCORDING TO THE LAW OF THE STATE OF CALIFORNIA.
In the event any provision of this Note (or any part of any provision)
is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note, but this Note shall be construed as if such invalid,
illegal or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal or unenforceable.
This Note may not be changed orally, but only by an agreement in
writing signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.
Anything contained in any provision of this Note or the Interim
Mortgage to the contrary notwithstanding, if any foreclosure proceeding is
brought under the provisions of the Interim Mortgage or if any other action is
brought under the provisions of the Interim Mortgage or if any other action is
brought to enforce provisions of the Interim Mortgage or those of this Note,
the holder hereof shall not be entitled to take any action to procure any money
judgment in personam or any deficiency decree against the Grantor except to the
extent of its interest in the Property or Collateral (as such term is defined
in the Interim Mortgage); provided, however, that nothing in the provision of
this Note shall be deemed to limit or impair the enforcement against the
Property or Collateral covered by the Interim Mortgage or any other collateral
which may from time to time be given to Grantee, or held by Grantor in trust on
behalf of Grantee; as security for the performance of the Grantor's obligations
hereunder or under the provisions of this Note and the Interim Mortgage or any
other instrument executed in connection therewith, or to limit or impair the
rights and remedies of Grantee thereunder or under any of the provisions
thereof; and provided further, that the Grantor shall remain liable to account
for the use of the Property Proceeds received by Grantor and not applied on a
current basis as received by Grantor in accordance with the provisions of this
Note and the Interim Mortgage.
* * * * * *
5
<PAGE> 155
Exhibit M to
Asset Sale Agreement
IN WITNESS WHEREOF, Grantor has caused this Note to be executed by
_________ ________________, its _______________________, and its corporate
seal to be affixed hereto, and does hereby deliver this instrument as its act
and deed effective on the date first above written.
CITY NATIONAL BANK, a national banking
association
By: _________________________________
Its: _________________________________
6
<PAGE> 156
Exhibit N to
Asset Sale Agreement
Form of
GRANT DEED
[Exhibit omitted from original]
<PAGE> 1
EXHIBIT 10.20
Agreement for Separation from Employment and Release by and between
Alexander L. Kyman and City National Bank,
dated November 3, 1993
<PAGE> 2
EXHIBIT 10.20
AGREEMENT FOR SEPARATION FROM EMPLOYMENT AND RELEASE
This Agreement for Separation of Employment and Release ("Agreement")
is made and entered into between ALEXANDER L. KYMAN ("Kyman") and CITY NATIONAL
BANK, a national banking association ("CNB"), with reference to the following:
A. Kyman was hired by CNB on February 28, 1966;
B. Kyman has suffered permanent disabilities not arising out of
or relating to the course and scope of Kyman's employment with
CNB;
C. Both Kyman and CNB now wish, by the terms of this Agreement,
to forever and finally resolve all of their respective rights
and obligations relating to Kyman's employment relationship
with CNB and separation therefrom, except respecting the
parties' rights and obligations under and arising out of this
Agreement.
Based on the foregoing, Kyman and CNB knowingly and voluntarily agree
as follows:
1. Kyman's last day of work and last day on the payroll at CNB
will be December 31, 1993. Kyman's separation from employment will be
effective December 31, 1993. Because of Kyman's disabilities, he will not be
required to report to work or to perform any services prior to December 31,
1993, except as set forth in Paragraph 9.3 below.
2. Until December 31, 1993, CNB will pay Kyman at a rate based on
his net salary from CNB (the gross amount of which is $300,000.00 per year) on
CNB's regular semi-monthly pay period dates (and after deducting required
taxes, other required governmental withholdings, and any other deductions
authorized by Kyman) by deposit to his present CNB checking account and with
pay advice thereof mailed to his residence address as reflected in his CNB
personnel file.
3. Provided Kyman does not revoke this Agreement in the manner
set forth in Paragraph 24 below, on January 3, 1994, or such later date as
Kyman may elect, CNB will deposit to Kyman's CNB checking account the amount of
$165,000.00 and will mail an advice thereof to his residence address as
reflected in his CNB personnel file. Said payment is made in full, complete
and final settlement of Kyman's claims for alleged personal injury, pain,
suffering and emotional injury and stress arising out of Kyman's employment
with CNB or the termination thereof, or arising out of any matter occurring on
or before the date Kyman executes this Agreement, except as to the parties'
rights and obligations arising out of this Agreement. Kyman understands that
the amount paid under this Paragraph need not be reported on an Internal
Revenue Service Form 1099 inasmuch as it represents the settlement of a tort
claim, and therefore CNB agrees not to file a Form 1099 reporting its payment
to Kyman under this Paragraph. Kyman agrees and warrants that if any
governmental entity finds any or all of this settlement payment to
1
<PAGE> 3
represent taxable earnings, Kyman will be responsible for the payment of any
income taxes, interest, fines, penalties or any other payment or liability
owed thereon, and to the extent CNB may be held responsible for any such
payment, Kyman agrees to indemnify and hold CNB harmless for such payment or
liability.
4. Kyman will continue to be eligible for all CNB employee
insurance benefits through December 31, 1993. Because Kyman is under age 65,
he may be eligible for continued group health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") after December
31, 1993, at his own expense. Kyman will be paid for all his unused vacation
(less required taxes and other governmental withholdings) in the payment due
him on December 31, 1993, referenced in Paragraph 2 above.
5. Kyman understands that all the payments and benefits set forth
in Paragraphs 2, 3 and 4, above, except payment for his accrued, unused
vacation, are not required by any of CNB's policies or procedures.
6. Any costs or expenses of Kyman which would normally be
reimbursed by CNB (including, but not limited to, club membership, business
development expenses, mileage, meals, etc.) will only be paid by CNB if
incurred on or before December 31, 1993, and to the extent they satisfy CNB
reimbursement requirements. Any such costs or expenses incurred after that
date by Kyman are the sole responsibility of and are fully assumed by Kyman.
7. Kyman's rights and status as a participant under the CNB
Profit Sharing Plan will continue through December 31, 1993. Kyman
acknowledges his rights and status under that Plan and his entitlement, if any,
to benefits under it will be determined in accordance with its terms except as
otherwise specifically provided in this Agreement, including those respecting
exercise rights upon termination of employment, which date, for purposes
thereof and consistent with the intent of this Agreement, is December 31, 1993.
8. All CNC incentive and non-statutory stock options awarded to
Kyman through December 31, 1993, will be fully vested effective December 31,
1993, and the period within which Kyman may exercise such options is extended
to the earlier of the date each option expires by its own terms (excluding any
terms accelerating the expiration date thereof), or December 31, 1998, all
subject to execution of a written amendment to Kyman's written stock option
agreements. Kyman understands that as a result of the exercise periods of
these options being extended beyond their original terms, the options will no
longer be treated as incentive stock options for federal income tax purposes
effective three years after December 31, 1993. This change will result in
significant differences in the tax treatment of these options, as more fully
discussed in Kyman's Participant's Guide to City National Corporation 1983 and
1985 Stock Option Plans. Except as otherwise specifically provided in this
Agreement, all Kyman's rights and benefits respecting his stock options are
determined in accordance with the terms of the Plans.
9. Kyman, as stated below, will do or not do the following:
9.1 Kyman has had access to, learned of or obtained
customer lists, financial information, pricing information, trade secrets,
trade knowledge, know-how, unprinted or printed data, confidential information
or other related tangible or intangible property ("Trade
2
<PAGE> 4
Secrets") belonging to, used or developed by or for the benefit of, within the
possession or control of, or concerning CNB and/or any current or former
customers or shareholders. All such Trade Secrets must be kept strictly
confidential by Kyman and he will never use, divulge, disclose, or communicate
them, either directly or indirectly, in any way to any other person or entity
except as compelled by law or with the prior written permission of CNB's Chief
Executive Officer or President;
9.2 Kyman acknowledges and agrees that in the event of
any breach by him of the promises or obligations set forth in Paragraph 9.1
above, CNB would suffer great and irreparable harm, injury, and damage, would
encounter extreme difficulty in attempting to prove the actual amount of
damages suffered by it as a result of such breach, and would therefore not be
reasonably or adequately compensated in damages in any action at law. Kyman
therefore agrees that in addition to any other remedy CNB may have at law, in
equity, by statute, or otherwise, in the event of any breach by him of any of
his promises or obligations set forth in Paragraph 9.1, CNB will be entitled to
seek and receive temporary, preliminary and permanent injunctive and other
equitable relief from any court of competent jurisdiction to enforce those
promises or obligations, or otherwise to prevent the violation of any of the
terms or provisions of Paragraph 9.1, without the necessity of proving the
amount of any actual damage to CNB resulting therefrom. However, nothing in
this paragraph is intended as a waiver by CNB of any other rights it may have
against Kyman at law, in equity, by statute, or otherwise, arising out of, in
connection with or resulting from any breach by Kyman of this Agreement;
9.3 After December 31, 1993, Kyman will not be required
to perform any services for CNB except as may be reasonably necessary to
cooperate and assist at CNB's expense in an orderly transition and the
investigation and handling (including, but not limited to, providing
information or testifying) of any actual or threatened court action,
arbitration or administrative proceeding relating to any matter involving Kyman
or any of his duties or responsibilities during his employment with CNB;
9.4 Kyman will immediately return to CNB all files,
records, documents, plans, drawings, specifications, equipment (other than the
car telephone in Kyman's automobile, which will become the property of Kyman),
pictures, videotapes, keys and similar items which are the property of or
relate to CNB and/or any current or former customers or shareholders in his
possession or control;
9.5 Kyman will not assist in any litigation against CNB
relating to any act or omission occurring prior to the date Kyman executes this
Agreement, except as compelled by law, or in his own defense if Kyman is named
as a defendant in such litigation; and
9.6 Kyman will not directly or indirectly offer or
encourage CNB's officers or employees to seek employment elsewhere unless given
prior permission in writing by CNB's Chief Executive Officer or President,
provided, however, that nothing contained herein will prohibit Kyman from
giving references if requested.
10. This Agreement, its contents, and the parties' discussions
pertaining to it are confidential. Neither party will communicate in any
manner (written, oral, or otherwise) with respect thereto, except (1) by Kyman
to his spouse, family members, attorneys, and tax advisors,
3
<PAGE> 5
if any, who must be informed of and bound by this confidentiality provision; or
(2) as compelled by law. Also, neither party will ever make any disparaging
statements or remarks about the other.
11. By signing this Agreement, Kyman and his heirs, executors,
administrators, successors and assigns, if any, hereby absolutely and forever
release and discharge CNB and its parent, subsidiaries, affiliates, related and
correspondent entities and any of its or their current or former directors,
officers, employees, representatives, administrators, agents and attorneys, and
any successors-in-interest and assigns (collectively "CNB Parties") from any
and all claims, demands, losses, actions, causes of action, suits, liabilities,
obligations, controversies, damages, compensation, costs, expenses, attorneys'
fees, or the like, of every kind, nature or character, whether known or
unknown, suspected or unsuspected, direct or indirect, derivative or otherwise,
which Kyman now holds or owns or at any time heretofore held or owned, or may
at any time in the future hold or own, based on, arising out of or in
connection with any matter relating to Kyman's employment with CNB, the
termination of that employment, or any basis therefor, or any other matter
occurring or arising on or before the date Kyman executes this Agreement,
except as provided in this Agreement (collectively "Claims"). Claims released
under this Agreement include but are not limited to: (i) Claims for injuries to
Kyman arising out of or relating to the course and scope of his employment with
CNB; (ii) Claims for alleged violations of any contracts, express or implied,
or any covenants of good faith and fair dealing, express or implied; (iii)
Claims of any legal restrictions on CNB's right to discipline or terminate
employees, any "constructive discharge" or "wrongful discharge," or any tort;
(iv) Claims for defamation, invasion of privacy, emotional and/or personal
injury or distress or the like; (v) Claims for sick leave, vacation,
compensated time off, workers' compensation, separation pay or severance; or
(vi) Claims for violation of any local, state, federal or other governmental
statute, regulation or ordinance, as amended, including, without limitation:
(1) Title VII of the Civil Rights Act of 1964 (race, color, religion, sex
(including pregnancy), and national origin discrimination); (2) 42 U.S.C.
Section 1981 (discrimination in the making and enforcement of contracts); (3)
the Age Discrimination in Employment Act (42 U.S.C. Sections 621-634);
(4) the Federal and California Equal Pay Acts (29 U.S.C. Section 206(d)(1) and
California Labor Code Sections 3200, et seq.); (5) the California Fair
Employment and Housing Act (California Govt. Code Section 12940 et seq.)
(discrimination, including race, color, national origin, ancestry, physical
handicap, medical condition, marital status, sex (including pregnancy), or
age); (6) Executive Order 11246 (race, color, religion, sex (including
pregnancy), and national origin discrimination); (7) Executive Order 11141 (age
discrimination); (8) the Rehabilitation Act of 1973 (29 U.S.C. Sections
503 and 504); (9) the Older Workers Benefit Protection Act amendments to the
Age Discrimination in Employment Act (29 U.S.C. Sections 621 et seq.);
(10) the Civil Rights Act of 1991; (11) the Workers' Compensation Act
(California Labor Code Section 1197.5, et seq.); (12) the Americans with
Disabilities Act; and (13) the Employee Retirement Income Security Act of 1974
("ERISA"). This Agreement, however, does not include a release of (a) Kyman's
right, if any, to pension, retiree health, or similar benefits under any
standard retirement program of CNB, or rights or claims Kyman may have under
the Age Discrimination in Employment Act which arise after the date he executes
this Agreement; (b) any of Kyman's rights with respect to his long term
disability insurance coverage and benefits; or (c) any right Kyman may have to
participate in any recovery in any class action solely as a class member,
provided Kyman has not served as a named plaintiff or representative of the
class or otherwise assisted in such litigation in violation of Paragraph 9.5
above.
12. By signing this Agreement, CNB and its successors and assigns,
if any, hereby absolutely and forever release and discharge Kyman from any and
all claims, demands, losses,
4
<PAGE> 6
actions, causes of action, suits, liabilities, obligations, controversies,
damages, compensation, costs, expenses, attorneys' fees, or the like, of every
kind, nature or character, whether known or unknown, suspected or unsuspected,
direct or indirect, derivative or otherwise, which CNB now holds or owns or at
any time heretofore held or owned, or may at any time in the future hold or
own, based on, arising out of or in connection with any matter relating to
Kyman's employment with CNB, the termination of that employment, or any basis
therefor, or any other matter occurring or arising on or before the date CNB
executes this Agreement, except as provided in this Agreement.
13. Each party intends and agrees that this Agreement will be
effective as a full, final and general release of and from all matters covered
herein. In furtherance thereof, each party acknowledges that such party is
familiar with, and that such party's attorney of record, if any, has advised
him or it of, California Civil Code Section 1542, which provides as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of execution of
the release, which if known by him must have materially affected his
settlement with the debtor.
Each party expressly waives and releases any right or benefit which that party
has or may in the future have under California Civil Code Section 1542 to the
fullest extent that he or it may do so lawfully. Further, each party
acknowledges that he or it may hereafter discover facts different from or in
addition to those facts now known to such party or believed by such party to be
true with respect to any or all of the matters covered by this Agreement, and
agrees that this Agreement will nevertheless be binding and remain in full and
complete force and effect.
14. Kyman represents that he has not filed any complaint(s),
charge(s), claim(s), or application(s) against any CNB Party with any local,
state or federal agency or court. Kyman represents and agrees that he will
never file any such complaint, charge, claim or application against CNB at any
time hereafter based upon any matter relating to his employment with CNB or his
separation therefrom, or based upon any matter arising on or before the date
Kyman executes this Agreement, except respecting his rights set forth in this
Agreement. Kyman further represents and agrees that if any agency or court
assumes jurisdiction of any such complaint, charge, claim or application
against CNB on behalf of Kyman, he will request such agency or court to
withdraw from and/or to dismiss the matter with prejudice; and if withdrawal or
dismissal cannot be or is not effected, Kyman agrees that CNB will be entitled
to a credit from Kyman in an amount equivalent to all payments and benefits to
him by CNB under Paragraphs 3 and 4 of this Agreement, for any amount Kyman
receives as a result of any such complaint, charge, claim or application.
15. Nothing contained in this Agreement is to be construed as an
admission of liability or wrongdoing of any kind by any party hereto, and all
such liability or wrongdoing is expressly denied.
16. Kyman acknowledges that if this Agreement becomes effective,
his employment with CNB will end voluntarily, irrevocably and forever on
December 31, 1993, and will not be resumed at any time in the future.
5
<PAGE> 7
17. Kyman acknowledges that before signing this Agreement, he has
been encouraged by CNB to consult, and in fact has consulted, with an attorney
about this Agreement's terms.
18. Kyman agrees to pay his own attorneys' fees and costs, if any,
arising out of or in connection with this Agreement or its subject matter. The
parties agree that if a court of competent jurisdiction determines that either
of them has breached any provision of this Agreement, he or they will pay all
costs, damages, expenses and reasonable attorneys' fees, including those of
in-house counsel, incurred by the other in enforcing the Agreement against the
breaching party's claims.
19. Any alteration or modification to this Agreement must be in
writing and signed by each party to it or its duly authorized representative.
In the event a court of competent jurisdiction or a governmental agency
determines, upon the request or petition of Kyman, that any provision of this
Agreement, or application of it, is void, invalid, unenforceable, or contrary
to law for any reason, its remaining provisions will, at CNB's option, continue
to be binding and fully enforceable; in such a case, if CNB elects not to
enforce the remainder of this Agreement, Kyman agrees to return, in full or in
part, as determined by CNB, any and all payments received in exchange for
agreeing to this Agreement.
20. Each party to this Agreement represents and warrants that he
or it has not assigned, transferred and/or granted to any other person any
claim or portion thereof against any other party to this Agreement.
21. This Agreement will be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto, provided,
however, that Kyman will not be entitled to encumber, create a lien upon,
assign or transfer any payments due under this Agreement.
22. This Agreement will be construed and enforced in accordance
with the laws of California to the extent such laws are not preempted by
applicable federal law.
23. This Agreement will not impair or alter Kyman's rights, if
any, to indemnification or payment of defense costs or expenses from CNB as
provided by CNB's Articles of Association and/or applicable law or from CNC
pursuant to that certain written agreement between it and Kyman, dated April
21, 1987, a true and correct copy of which is attached hereto and incorporated
herein by this reference as Exhibit "1".
24. Kyman understands that he was given a period of at least 21
consecutive calendar days to review and consider this Agreement before signing
it. Kyman further understands he may revoke this Agreement within 7 days after
signing it. Revocation is effective upon written notice thereof being received
by Marjorie Luttenbacher, Executive Vice President and Manager of CNB's Human
Resources Division, 120 South Spalding Drive, Suite 300, Beverly Hills,
California 90212, no later than the close of business on the 7th day after
Kyman signs this Agreement. If Kyman revokes this Agreement, it will not be
effective or enforceable, and Kyman will not receive, or will be required to
immediately and fully reimburse CNB for, any payments or benefits to him
pursuant to this Agreement. If Kyman does not revoke the Agreement, it will
become effective on the 8th day after he signs it.
6
<PAGE> 8
THE UNDERSIGNED PARTIES, AND EACH OF THEM, ACKNOWLEDGE THAT THEY HAVE
CAREFULLY READ THIS AGREEMENT FOR SEPARATION OF EMPLOYMENT AND RELEASE IN ITS
ENTIRETY, HAVE HAD THE OPPORTUNITY TO DISCUSS THE CONTENTS OF THE AGREEMENT
WITH THEIR RESPECTIVE ATTORNEYS, IF ANY, AND, AS A RESULT, FULLY UNDERSTAND THE
TERMS AND CONSEQUENCES OF THE AGREEMENT. BASED ON THEIR KNOWLEDGE AND
UNDERSTANDING OF THE AGREEMENT, THE PARTIES REPRESENT AND WARRANT THAT THEY
FREELY AND VOLUNTARILY ENTER INTO IT ON THE DATE SET FORTH BELOW.
Dated: November 3, 1993 /s/ Alexander L. Kyman
-----------------------------------
ALEXANDER L. KYMAN
CITY NATIONAL BANK, a national
banking association
By: /s/ Bram Goldsmith
------------------------------
BRAM GOLDSMITH
Chairman of the Board and
Chief Executive Officer
APPROVED AS TO FORM
AND CONTENT:
OFFICE OF THE GENERAL COUNSEL
By: /s/ Steven L. Strange
------------------------------
STEVEN L. STRANGE
Senior Counsel Attorney for
CITY NATIONAL BANK
7
<PAGE> 9
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into this 21st day
of April, 1987, between City National Corporation, a Delaware corporation (the
"Company") and ALEXANDER L. KYMAN (the "Indemnitee"), an officer and/or member
of the Board of Directors of the Company.
RECITALS
--------
A. The Indemnitee is an officer and/or member of the Board of
Directors of the Company.
B. The Board of Directors of the Company has determined that
highly competent persons will be difficult to retain as officers and/or
directors of the Company unless such persons are adequately protected against
liabilities incurred in performances of their services as officers and/or
directors of the Company.
C. It is, therefore, in the best interests of the Company to
attract and retain such officers and/or directors by providing adequate
protection against such liabilities by means of Indemnification Agreements with
individual officers and/or directors, such as the Indemnitee.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the promises and covenants
contained herein and as an inducement to the Indemnitee to continue to serve as
an officer and/or director of the Company, the Company and the Indemnitee do
hereby agree as follows:
1. Indemnity of Director/Officer. The Company agrees to
indemnify and hold harmless the Indemnitee to the fullest extent permissible
under its Certificate of Incorporation, Bylaws and applicable law, as the same
exists or may be amended from time to time. Provided, however, that no
amendments to the Certificate of Incorporation or Bylaws subsequent to the date
hereof shall eliminate or lessen the availability or scope of indemnification
herein. In addition, the Indemnitee's indemnification rights shall include but
not be limited to the rights contained in the following Paragraphs except to
the extent expressly prohibited by applicable law.
2. Indemnification in Third-Party Actions. The Company shall
indemnify and hold harmless the Indemnitee from and against all expenses
(including attorneys' fees), liability, judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with
any present or future threatened, pending or completed action, suit or
proceeding, or appeal thereof, whether civil, criminal, administrative or
investigative (other than an action by or in the
EXHIBIT 1
-1-
<PAGE> 10
right of the Company) if the indemnitee is a party or threatens to be made a
party to such action, suit or proceeding by reason of the fact that Indemnitee
is or was a director, member of any committee of the board, officer, employee
or agent of the Company, or of any subsidiary of the Company, or is or was
serving at the request of the Company as a director, member of any committee of
the board, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise; provided, however, that the
Indemnitee shall be entitled to such indemnification only if Indemnitee acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
3. Indemnification in Proceedings by or in the Name of the
Company. The Company shall indemnify and hold harmless the Indemnitee from and
against expenses (including attorneys' fees), judgments and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with
the defense or settlement of any present or future threatened, pending or
completed action or suit, or appeal thereof, by or in the right of the Company
to procure a judgment in its favor if the Indemnitee is a party or threatened
to be a party to such action or suit by reason of the fact that Indemnitee is
or was a director, member of any committee of the board, officer, employee or
agent of the Company, or of any subsidiary of the Company, or is or was serving
at the request of the Company as a director, member of any committee of the
board, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; provided, however, that the Indemnitee
shall be entitled to such indemnification only if Indemnitee acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable in the performance of his or her duty to the
Company if and to the extent that the court in which such action or suit was
brought shall determine that the Indemnitee is not entitled to such
indemnification.
4. Liability Insurance. The Company will undertake reasonable
efforts to maintain policies of Directors and Officers Liability Insurance in
reasonable amounts from established and reputable insurers. The Company shall
not be liable under this Indemnification Agreement for any amount of any claim
for which the Indemnitee has been paid, or is legally entitled to payment,
under such insurance policies or under any other valid insurance policies
maintained in the future by the Company for Indemnitee's benefit.
Any such policies maintained by the Company will expire under
expiration terms as therein set forth. The Company is uncertain whether such
policies will be renewed or if not renewed can be replaced with policies of
similar coverage at reasonable cost. The Company shall not be required to
maintain the policies presently in effect or to replace such policies if, in
the judgment of the Board of Directors of the Company, the cost of such
policies is not reasonable in relation to the coverage provided. If the
Company so decides not to maintain the current policies or replace them with
policies of similar coverage, the Company agrees to indemnify and hold harmless
the Indemnitee to the extent of coverage which would have been
-2-
<PAGE> 11
provided by such policies to the fullest extent permissible under applicable
law, in addition to any other indemnification provided by this Agreement.
5. Advances of Expenses. Expenses incurred by the Indemnitee in
connection with any action, suit, proceeding or appeal thereof, described in
Paragraphs 2 and 3 above, shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding within twenty (20) days of
receipt of an undertaking by the Indemnitee to repay such amount if it is
ultimately determined by the Board of Directors, independent counsel, the
shareholders or a court, as provided in Paragraph 8 of this Indemnification
Agreement, that Indemnitee is not entitled to be indemnified by the Company or
not entitled to full indemnification by the Company.
6. Indemnification Hereunder Not Exclusive. Indemnification and
advancement of expenses set forth in this Indemnification Agreement shall not
be exclusive of other rights the Indemnitee may have under applicable law,
other agreements between the Company and the Indemnitee, the Certificate of
Incorporation or Bylaws of the Company, by vote of disinterested directors of
the Company or by vote of the shareholders of the Company.
7. Continuation of Indemnity. The indemnification and advancement
of expenses provided by, or granted pursuant to this Indemnification Agreement
shall continue after the Indemnitee has ceased to be an officer and/or director
of the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
8. Indemnification Procedure; Determination of Right to
Indemnification. Upon written request by the Indemnitee for indemnification
under Paragraphs 2 and 3 above, the Indemnitee's entitlement to such
indemnification shall be made by (1) the Board of Directors of the Company by a
majority vote of a quorum consisting of directors who were not parties to the
action, suit, settlement or proceeding, or (2) if such quorum is not
obtainable, by independent counsel, in a written opinion, or (3) by the
shareholders of the Company. Determination of entitlement to indemnification
shall be made within sixty (60) days of receipt by the Company of a written
request for indemnification by the Indemnitee. The Indemnitee's request shall
be accompanied by documentation reasonably available to the Indemnitee relating
to the Indemnitee's entitlement to be indemnified. All reasonable expenses
(including attorney's fees) relating to the Indemnitee's request for
indemnification under the Indemnification Agreement shall be paid by the
Company regardless of the outcome of the determination as to the Indemnitee's
entitlement to indemnification. If such determination is unfavorable to the
Indemnitee or if the Indemnitee has made no request for indemnification under
or no determination is otherwise made, the Indemnitee may, within two (2) years
after such determination, or, if no determination has been made, within two (2)
years after the Indemnitee has incurred the expense or otherwise made a payment
for which the Indemnitee seeks indemnification, petition the Court of Chancery
of the State of Delaware or any other of competent jurisdiction to determine
whether the Indemnitee is entitled to indemnification hereunder the terms of
this Indemnification Agreement. The Indemnitee shall not be prejudiced in such
judicial proceeding by a prior determination that the Indemni-
-3-
<PAGE> 12
tee is not entitled to indemnification. The Company shall be precluded from
asserting in such court that it is not bound by the provisions of the
Indemnification Agreement. The Company shall pay all expenses (including
attorneys' fees) actually and reasonably incurred by the Indemnitee in
connection with such judicial determination.
9. No Presumption. If any action, suit or proceeding described
in Paragraphs 2 and 3 above shall be terminated by judgment, order, settlement
or conviction or upon a plea of nolo contendere or its equivalent, no
presumption shall be created that the Indemnitee did not act in good faith and
in a manner which such Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company, and, with respect to any criminal action
or proceeding, that the Indemnitee had reasonable cause to believe that his or
her conduct was unlawful.
10. Limitations on Indemnification. Notwithstanding any other
provision of the Indemnification Agreement, the Company shall not be liable to
indemnify the Indemnitee in connection with any claim against Indemnitee:
10.1 for which the Indemnitee is indemnified by the Company other
than under this Indemnification Agreement;
10.2 if a court of competent jurisdiction has rendered a final
decision that indemnification relating to the claim would be unlawful;
10.3 if, pursuant to Section 16(b) of the Securities Exchange Act
of 1934, as amended, or similar provisions of any state or federal statutory
law, the claim is for an accounting of profits made from the purchase and sale
by the Indemnitee of securities of the Company;
10.4 if a final decision by a court of competent jurisdiction shall
adjudge the Indemnitee's conduct to have been knowingly fraudulent or
deliberately dishonest and to be material to the claim adjudicated by the
court; or
10.5 if the claim was based upon the Indemnitee's deriving an
unlawful personal benefit and a court of competent jurisdiction adjudges that
such benefit was unlawful in a final decision.
11. Savings Clause. if any provision of this Indemnification
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions (including portions of
any paragraph of this Indemnification Agreement containing an invalid, illegal
or unenforceable provision) shall not be impaired thereby. To the extent
practicable, any invalid, illegal or unenforceable provision of this
Indemnification Agreement shall be deemed modified as necessary to comply with
all applicable laws.
-4-
<PAGE> 13
12. Counterparts. This Indemnification Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
13. Interpretation; Governing Law. Headings are for convenience
only and shall not be used in construing meaning. This Indemnification
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware.
14. Notices. All notices or other communication hereunder shall
be in writing and shall be deemed to be effective and to have been duly given
if delivered by certified mail, postage prepaid, return receipt requested to
the respective parties, as follows:
"Company" City National Corporation
400 North Roxbury Drive
Beverly Hills, CA 90210
Attn: General Counsel
"Indemnitee" ALEXANDER L. KYMAN
ALSO SEND 4411 WESTCHESTER DRIVE
COPIES TO DAVID KYMAN WOODLAND HILLS, CA 91364
C/O BUCHALTER, NEMER, FIELDS, __________________________________
CHRYSTIE & YOUNGER.
or to such other address as a party may have furnished to the other in writing
in accordance with this paragraph, except that notice of change of address
shall only be effective upon receipt.
15. Successors and Assigns. This Indemnification Agreement shall
be binding upon the Company and its successors and assigns and shall inure to
the benefit of the Indemnitee and his or heirs, executors and administrators.
16. Amendment, Waiver. No amendment of this Indemnification
Agreement shall be binding unless executed in writing by both parties hereto.
No waiver of any provision of this Indemnification Agreement shall constitute a
waiver of any other provision hereof.
*****
-5-
<PAGE> 14
17. Notification of Claims. The Indemnitee shall promptly notify
the Company in writing upon being served with any summons, citation, subpoena,
indictment, complaint, information or other document relating to any matter
concerning which the Indemnitee may be entitled to indemnification hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be duly executed and signed as of the date first
above written.
"Company" City National Corporation, a
Delaware corporation
By: /s/ James P. Del Guercio
-----------------------------
Its: VICE PRESIDENT
-----------------------------
"Indemnitee" /s/ Alexander L. Kyman
-----------------------------------
ALEXANDER L. KYMAN
-6-
<PAGE> 1
EXHIBIT 10.20.1
Letter from City National Bank to Alexander L. Kyman,
dated November 3, 1993
<PAGE> 2
EXHIBIT 10.20.1
[CITY NATIONAL BANK LOGO]
November 3, 1993
Mr. Alexander L. Kyman
4411 Westchester Drive
Woodland Hills, CA 91364
Re: AGREEMENT FOR SEPARATION FROM EMPLOYMENT AND RELEASE
Dear Mr. Kyman:
When countersigned by you in the space provided below, this letter
will confirm the agreement between City National Bank ("CNB") and you with
respect to the matters set forth below.
CNB and you are parties to an Agreement (the "Country Club Agreement")
dated August 31, 1967, whereby you are obligated to reimburse CNB for the cash
sale value of your membership in the El Caballero Country Club (the "Club") in
the event of your leaving the employment of CNB or your retirement. CNB and
you have also entered into an Agreement for Separation From Employment and
Release (the "Separation Agreement") pursuant to which your employment with CNB
will be terminated effective December 31, 1993. CNB hereby agrees that the
Country Club Agreement will be terminated effective December 31, 1993, and that
you will not be required to make any reimbursement or other payment to CNB
thereunder.
Notwithstanding anything to the contrary in the Separation Agreement,
including without limitation Paragraph 9.1 thereof, CNB acknowledges that you
have worked in the banking industry for your entire career and have developed
extensive knowledge and experience in all aspects of the banking industry, and
nothing in the Separation Agreement prohibits or in any way will impair you
from consulting or otherwise working in any aspect of such industry. CNB
acknowledges that you have informed CNB of your intent to act as a financial
consultant subsequent to the termination of your employment with CNB, and CNB
hereby consents to your communication with clients and prospective clients who
may be customers of CNB with respect to your consulting practice. In addition,
CNB acknowledges that from time to time, you may be consulted by customers of
CNB, prospects or others regarding their banking arrangements, during the
course of which you may become privy to further information concerning CNB,
including pricing and terms offered to CNB customers, which subsequently
acquired information will not be deemed to constitute a Trade Secret (as
defined in the Separation Agreement) unless such information is confidential
and acquired from an employee, officer or agent of CNB. You will use your best
efforts to refer all inquiries regarding new banking business to CNB, provided
that if CNB fails or refuses to accept any such new business, nothing in the
Separation Agreement will prohibit you from in good faith referring such new
business to other financial institutions.
<PAGE> 3
Mr. Alexander L. Kyman
November 3, 1993
Page 2
This letter and the Separation Agreement contain and express the
entire and final agreement of the parties with respect to the matters covered
herein and therein, and supersede all negotiations, prior discussions and
preliminary agreements. No promises or representations, express or implied,
concerning this letter or the Separation Agreement have been made by either
party to the other, other than those contained herein and in the Separation
Agreement.
Very truly yours,
CITY NATIONAL BANK, a national
banking association
By: /s/ Bram Goldsmith
------------------------------
Its: Chairman/CEO
------------------------------
AGREED AND ACCEPTED:
/s/ Alexander L. Kyman
- ------------------------------
ALEXANDER L. KYMAN
<PAGE> 1
EXHIBIT 13
Pages 7 through 53 of Annual Report to Security Holders
for the year ended December 31, 1993
<PAGE> 2
EXHIBIT 13
FINANCIAL REVIEW
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Interest income.............................. $ 169,792 $ 233,049 $ 360,834 $ 425,538 $ 408,711
Interest expense............................. 41,996 84,433 180,319 228,935 220,342
Provision for credit losses.................. 30,000 114,500 118,000 43,000 15,146
Noninterest income........................... 45,810 45,365 43,332 38,524 39,327
Gains and losses on securities
transactions............................... -- 1,629 -- 45 65
Noninterest expense (other than ORE and
consolidation charge)...................... 129,226 152,887 148,302 134,577 124,351
Consolidation charge......................... 12,000 -- -- -- --
ORE expense.................................. 25,674 20,825 2,548 -- 65
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations
before taxes............................... (23,294) (92,602) (45,003) 57,595 88,199
Income taxes (benefit)....................... (9,260) (32,450) (22,387) 18,800 32,130
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations..... (14,034) (60,152) (22,616) 38,795 56,069
Income from discontinued operations.......... 7,128 804 1,396 5,202 4,149
---------- ---------- ---------- ---------- ----------
Net income (loss)............................ $ (6,906) $ (59,348) $ (21,220) $ 43,997 $ 60,218
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Income (loss) per share from continuing
operations................................. $ (.35) $ (1.87) $ (.70) $ 1.19 $ 1.73
Net income (loss) per share.................. (.17) (1.84) (.66) 1.35 1.86
Cash dividends declared...................... -- -- .320 .640 .576
Book value per share......................... 6.62 7.07 8.91 9.89 9.12
Shares used to compute income (loss) per
share...................................... 39,580,069 32,239,714 32,214,230 32,500,543 32,425,828
BALANCE SHEET DATA -- AT PERIOD END
Assets....................................... $3,100,626 $3,514,102 $4,571,262 $4,962,826 $4,769,368
Loans........................................ 1,620,556 2,075,202 2,615,201 3,057,735 2,738,095
Investment securities........................ 902,481 413,645 731,196 622,318 555,003
Interest-earning assets...................... 2,830,451 3,013,188 3,993,881 4,554,412 4,232,117
Deposits..................................... 2,526,767 2,911,276 3,664,219 4,102,098 3,911,608
Shareholders' equity......................... 298,074 227,944 287,064 317,688 288,036
BALANCE SHEET DATA -- AVERAGE BALANCES
Assets....................................... $2,944,461 $3,918,949 $4,605,075 $4,602,373 $4,217,763
Loans........................................ 1,737,401 2,315,285 2,852,311 2,875,154 2,527,224
Investment securities........................ 501,644 547,493 665,071 597,677 513,523
Interest-earning assets...................... 2,597,902 3,462,548 4,164,090 4,103,452 3,744,695
Deposits..................................... 2,380,106 3,133,109 3,706,621 3,726,727 3,416,472
Shareholders' equity......................... 260,649 259,629 318,776 312,348 266,890
ASSET QUALITY
Nonaccrual loans............................. $ 71,056 $ 160,299 $ 152,555 $ 68,408 $ 15,810
ORE.......................................... 5,559 94,065 64,510 2,130 --
---------- ---------- ---------- ---------- ----------
Total nonaccrual loans and ORE............... $ 76,615 $ 254,364 $ 217,065 $ 70,538 $ 15,810
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Assets held for accelerated disposition...... $ 17,450 $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
PERFORMANCE RATIOS
Return on average assets..................... (.23)% (1.51)% (.46)% .96% 1.43%
Return on average shareholders' equity....... (2.65) (22.84) (6.65) 14.09 22.56
Net interest spread.......................... 4.19 3.61 3.33 3.59 3.69
Net interest margin.......................... 4.97 4.41 4.48 4.95 5.22
Average shareholders' equity to average
assets..................................... 8.85 6.62 6.92 6.79 6.33
ASSET QUALITY RATIOS
Nonaccrual loans to total loans.............. 4.38% 7.72% 5.83% 2.24% .58%
Nonaccrual loans and ORE to total loans and
ORE........................................ 4.71 11.73 8.10 2.31 .58
Allowance for credit losses to total loans... 6.82 6.56 4.81 1.97 1.34
Allowance for credit losses to nonaccrual
loans...................................... 155.51 84.90 82.44 87.83 231.59
Net charge offs to average loans............. 3.12 4.50 1.83 .68 .28
</TABLE>
7
<PAGE> 3
OVERVIEW
City National Corporation (the "Corporation") is the holding company for
City National Bank (the "Bank"). Because the Bank comprises substantially all of
the business of the Corporation, references to the "Company" in this Annual
Report reflect the consolidated activities of the Corporation and the Bank.
The Company recorded a consolidated net loss of $6.9 million, or $.17 per
share, in 1993. The net loss was largely due to the provision for credit losses
of $30.0 million, Other Real Estate (ORE) expenses of $25.7 million and a
consolidation charge of $12.0 million. The Company's 1993 loss of $6.9 million
compares with a loss of $59.3 million, or $1.84 per share, in 1992. The smaller
loss in 1993 was primarily the result of an $84.5 million decrease in the
provision for credit losses, a $23.7 million decrease in noninterest expense
before the consolidation charge and ORE expense, and a $7.1 million aftertax
gain from the sale of the Bank's data processing division in 1993. These factors
were partially offset by a $20.8 million decrease in net interest income due to
lower interest-earning assets, a $4.8 million increase in ORE expense and the
$12.0 million consolidation charge.
The return on average assets was a negative .23% and the return on average
shareholders' equity was a negative 2.65% in 1993, compared with a negative
1.51% and a negative 22.84%, respectively, in 1992.
Average assets declined from $3,918.9 million in 1992 to $2,944.5 million
in 1993, a decrease of $974.4 million, or 24.9%, largely due to the decrease in
average loans and federal funds sold, and securities purchased under resale
agreements. Total average loans decreased $577.9 million or 25.0% between 1992
and 1993 due to decreased loan demand because of the recession, the Bank's
continuing efforts to achieve a more diversified risk profile in its loan
portfolio and the sale of $73.7 million of equity lines of credit (ELC) loans in
April 1993. Average core deposits (checking, savings and money market accounts,
and time certificates of deposit of less than $100,000) declined from $2,617.3
million in 1992 to $2,176.9 million in 1993, a decrease of $440.4 million, or
16.8%. Average time deposits of $100,000 or more decreased by $312.6 million, or
60.6%, between 1992 and 1993.
Nonaccrual loans totaled $71.1 million at December 31, 1993, or 4.38% of
related credits, down from $160.3 million, or 7.72%, a year earlier. ORE totaled
$5.6 million at year end, down from $94.1 million a year earlier, primarily due
to the sale of certain ORE as part of the accelerated asset disposition program
discussed below.
The allowance for credit losses at December 31, 1993 was $110.5 million, or
6.82% of loans outstanding at year end, up from 6.56% a year earlier. Net charge
offs totaled $54.1 million in 1993, or 3.12% of average loans, down from $104.2
million, or 4.50% of average loans, in 1992.
Total shareholders' equity averaged $260.6 million in 1993, up slightly
from $259.6 million in the prior year. In June 1993, the Corporation completed
an offering and sale of 12.7 million shares of common stock (the Offering) at a
price of $6.375 per share. The gross proceeds of the Offering were $81.1 million
before expenses of issuance of $4.6 million. Upon completion of the Offering,
the Corporation contributed $65 million in capital to the Bank to comply with
the $65 million capital-raising requirement in the Bank's agreement (the
Agreement) with the Office of the Comptroller of the Currency (OCC).
In March 1993, the Bank adopted an accelerated asset disposition program
(the Disposition Program) to aggressively dispose of ORE and certain problem
loans with an aggregate book value before the Disposition Program of $119.5
million. The Bank signed a definitive agreement, as of November 1, 1993, to sell
the remaining assets in the Disposition Program, which were reduced by sales and
pay downs of individual Disposition Program assets during the second and third
quarters, to WHC-THREE Investors, L.P., a limited partnership. The transaction,
which was 75% financed by the Bank, resulted in a pretax gain of $12.8 million
in the fourth quarter of 1993, and is expected to result in an additional pretax
gain of approximately $3.5 million in the first part of 1994, when the final
phase of the sale closes.
8
<PAGE> 4
In November 1993, the Bank announced a consolidation plan to improve
efficiency and operational productivity in its branch network. The streamlining
will reduce the Bank's total number of branches from 22 to 16, while
designating four of the remaining locations as regional commercial lending
centers. In addition to providing a full array of regular banking services, the
centers will also house teams of lenders specializing in serving midsize
businesses, as well as the Bank's larger, more complex relationships. The Bank
anticipates completing the closures by early 1994. To cover the costs
associated with this action, the Bank recorded a consolidation charge of $12.0
million in the fourth quarter of 1993. Completion of ongoing branch
restructuring, including the closures announced in November 1993, is expected
to result in an expense savings of approximately $8.0 million per year, before
the effect of inflation and other factors. However, this will be partially
offset by decreased income resulting from reductions in loans and deposits
caused by the consolidation.
Ongoing weakness in the Southern California economy, particularly the value
of Southern California real estate, continued to affect the Company's financial
performance during 1993. This was manifested, among other ways, in the continued
lack of loan demand, resulting in the ongoing decline in the size of the loan
portfolio, and the continued high but declining level of nonaccrual loans and
problem assets.
Management does not anticipate a meaningful economic recovery in Southern
California in 1994 and therefore expects that economic conditions will continue
to adversely affect the Bank's loan portfolio and the Company's financial
performance. However, based on its review of the loan portfolio, management
anticipates that net charge offs and provisions for credit losses for 1994 will
decrease from the 1993 levels, unless there is significant additional
deterioration of economic conditions.
On January 21, 1994, the OCC lifted the Agreement that had been in effect
since November 18, 1992. The Agreement had required the Bank, among other
things, to raise $65 million of new Tier 1 capital (a category consisting
principally of common shareholders' equity) so as to maintain Tier 1 capital of
at least 10% of risk-weighted assets and at least 7% of adjusted average total
assets. This requirement was satisfied in June 1993 when the Corporation
contributed $65 million to the Bank as Tier 1 capital, out of the proceeds of
the Offering. In February 1994, the Federal Reserve Bank of San Francisco
notified the Corporation that the Memorandum of Understanding (MOU), which it
had entered into with the Corporation in February 1993, was also terminated.
The Corporation ceased paying a dividend in August 1991. Dividend payments
are expected to resume, based on achieved earnings, and when the Board of
Directors determines that such payments are consistent with the long-term
objectives of the Company.
On January 17, 1994 and during the days thereafter, Los Angeles was struck
by a series of strong earthquakes. The Bank is currently accumulating data on
the collateral securing its loans in the effected area. Based on the information
currently available, the Bank does not believe earthquake related losses,
including those related to its facilities, will be material to the Bank's
financial position.
9
<PAGE> 5
OPERATIONS SUMMARY
<TABLE>
<CAPTION>
INCREASE INCREASE
(DECREASE) (DECREASE)
-------------- ----------------
1993 AMOUNT % 1992 AMOUNT % 1991 1990 1989
-------- -------- --- -------- --------- ---- -------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income(1)..................... $171,134 $(66,149) (28) $237,283 $(129,760) (35) $367,043 $432,074 $415,934
Interest expense....................... 41,996 (42,437) (50) 84,433 (95,886) (53) 180,319 228,935 220,342
-------- -------- --- -------- --------- ---- -------- -------- --------
Net interest income.................... 129,138 (23,712) (16) 152,850 (33,874) (18) 186,724 203,139 195,592
Less provision for credit losses....... 30,000 (84,500) (74) 114,500 (3,500) (3) 118,000 43,000 15,146
Noninterest income..................... 45,810 (1,184) (3) 46,994 3,662 8 43,332 38,569 39,392
Less noninterest expense:
Staff expense........................ 69,783 (13,780) (16) 83,563 352 -- 83,211 78,629 72,735
Other expense........................ 59,443 (9,881) (14) 69,324 4,233 7 65,091 55,948 51,616
Consolidation charge................. 12,000 12,000 100 -- -- -- -- -- --
ORE expense.......................... 25,674 4,849 23 20,825 18,277 717 2,548 -- 65
-------- -------- --- -------- --------- ---- -------- -------- --------
Total.......................... 166,900 (6,812) (4) 173,712 22,862 15 150,850 134,577 124,416
-------- -------- --- -------- --------- ---- -------- -------- --------
Income (loss) before income taxes...... (21,952) 66,416 75 (88,368) (49,574) (128) (38,794) 64,131 95,422
Income tax provision (benefit)......... (9,260) (23,190) (71) (32,450) 10,063 45 (22,387) 18,800 32,130
Less adjustments(1).................... 1,342 2,892 68 4,234 1,975 32 6,209 6,536 7,223
-------- -------- --- -------- --------- ---- -------- -------- --------
Income (loss) from continuing
operations........................... (14,034) 46,118 77 (60,152) (37,536) (166) (22,616) 38,795 56,069
Income from discontinued operations.... 7,128 6,324 787 804 (592) (42) 1,396 5,202 4,149
-------- -------- --- -------- --------- ---- -------- -------- --------
Net income (loss)...................... $ (6,906) $ 52,442 88 $(59,348) $ (38,128) (180) $(21,220) $ 43,997 $ 60,218
-------- -------- --- -------- --------- ---- -------- -------- --------
-------- -------- --- -------- --------- ---- -------- -------- --------
Earnings (loss) per share.............. $ (.17) $ 1.67 91 $ (1.84) $ (1.18) (179) $ (.66) $ 1.35 $ 1.86
-------- -------- --- -------- --------- ---- -------- -------- --------
-------- -------- --- -------- --------- ---- -------- -------- --------
</TABLE>
- ---------------
(1) Includes amounts to convert nontaxable income to a fully taxable equivalent
basis.
RATIOS TO AVERAGE ASSETS
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest income(1)....................................... 4.39% 3.90% 4.05% 4.41% 4.64%
Noninterest income........................................... 1.56 1.20 .94 .84 .93
Less provision for credit losses............................. 1.02 2.92 2.56 .93 .36
Less noninterest expense:
Staff expense.............................................. 2.37 2.13 1.81 1.71 1.72
Other expense.............................................. 2.02 1.77 1.41 1.22 1.23
Consolidation charge....................................... .41 -- -- -- --
ORE expense................................................ .87 .53 .06 -- --
---- ---- ---- ---- ----
Total.............................................. 5.67 4.43 3.28 2.93 2.95
---- ---- ---- ---- ----
Income (loss) before income taxes(1)......................... (.74) (2.25) (.85) 1.39 2.26
---- ---- ---- ---- ----
Income (loss) from continuing operations..................... (.47) (1.53) (.49) .84 1.33
Income from discontinued operations.......................... .24 .02 .03 .12 .10
---- ---- ---- ---- ----
Net income (loss)............................................ (.23) (1.51) (.46) .96 1.43
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) Fully taxable equivalent basis.
10
<PAGE> 6
NET INTEREST INCOME
1993 COMPARED WITH 1992
Taxable equivalent net interest income totaled $129.1 million in 1993, down
$23.7 million, or 15.5%, from 1992. The decrease from 1992 to 1993 was due to a
$864.6 million, or 25.0%, decrease in average interest-earning assets. Although
net interest income declined, the net interest margin improved from 4.41% in
1992 to 4.97% in 1993, because of the greater proportional decrease
in low-yielding interest-earning assets, primarily federal funds sold and
securities purchased under resale agreements, and decreases in time deposits of
$100,000 and over, which are among the most expensive categories of funds for
the Bank.
Average loans declined from $2,315.3 million in 1992 to $1,737.4 million in
1993, a decrease of $577.9 million, or 25.0%. The majority of this decrease
reflects lower average commercial loans outstanding, down $313.1 million, or
23.8%. This decline resulted from decreased loan demand because of the recession
in Southern California, the Bank's efforts to achieve a more diversified risk
profile in its loan portfolio and gross loan charge offs during 1992 and 1993 of
$202.7 million. Average construction loans decreased $148.7 million, or 67.7%,
primarily because of the transfer of certain construction loans to the real
estate mortgage category after completion of construction and because the Bank
curtailed new construction loan commitments beginning in late 1990. Average real
estate mortgage loans decreased $102.4 million, or 14.3%, partially due to the
sale of $73.7 million of ELC loans in April 1993.
The Bank is committed to its efforts to improve credit quality and reduce
its exposure to the commercial real estate sector, which will limit the growth,
if any, in the loan portfolio in 1994. Loan balances are also likely to be
negatively affected by the continued impact of the recession.
Average taxable securities increased $37.6 million, or 8.1%, between 1992
and 1993, as a result of investment of the Bank's excess liquidity in the second
half of 1993 in government and agency securities. Average nontaxable securities
decreased $69.3 million, or 79.8%, between 1992 and 1993, due to maturities and
the sale of $32.4 million of municipal securities in December 1992.
Average federal funds sold and securities purchased under resale agreements
decreased $246.5 million, or 44.5%, between 1992 and 1993. Average federal funds
purchased and securities sold under repurchase agreements declined $223.4
million, or 45.7%, between 1992 and 1993. The Bank has reduced its federal funds
arbitrage activity due to the low profit margin from this business and its
impact on the Bank's Tier 1 leverage ratio.
Average noninterest-bearing deposits declined from $1,029.8 million in 1992
to $914.6 million in 1993, a decrease of $115.2 million, or 11.2%, while average
interest-bearing core deposits declined from $1,587.5 million in 1992 to
$1,262.3 million in 1993, a decrease of $325.2 million, or 20.5%. Average time
deposits of $100,000 or more decreased $312.6 million, or 60.6%, between 1992
and 1993. The Bank's interest-and noninterest-bearing deposits decreased as a
result of the continued weak economy, the uncertainty caused by the Bank's
losses and the Agreement, and the low interest rates paid on interest-bearing
deposits compared with other available investment alternatives. Although some
additional loss of deposits is expected to result from the Bank's closure of six
offices in 1994, it is not anticipated to have a significant effect on the
Bank's overall deposit levels.
11
<PAGE> 7
Net Interest Income Summary
The following table presents the components of net interest income for the
five years ended December 31, 1993.
<TABLE>
<CAPTION>
1993 1992
------------------------------------ ------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ INTEREST AVERAGE INCOME/ INTEREST
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- -------- -------- ---------- -------- --------
DOLLARS IN THOUSANDS -- FULLY TAXABLE EQUIVALENT BASIS(1)
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Earning assets(2)
Loans:
Commercial loans......................... $1,001,965 $ 74,413 7.50% $1,315,112 $ 95,088 7.34%
Real estate -- construction.............. 70,783 5,023 7.10 219,456 15,761 7.18
Real estate -- mortgage.................. 612,393 46,480 7.59 714,753 57,497 8.04
Installment loans........................ 52,260 5,234 10.02 65,964 6,836 10.36
---------- -------- -------- ---------- -------- --------
Total loans(3)........................... 1,737,401 131,150 7.59 2,315,285 175,182 7.62
---------- -------- -------- ---------- -------- --------
Interest-bearing deposits in other banks... 835 30 3.59 2,637 67 2.54
State and municipal securities............. 17,575 1,123 9.24 86,863 5,562 9.63
Other securities........................... 499,484 26,973 5.40 461,871 31,068 6.73
Federal funds sold and securities purchased
under resale agreements.................. 307,078 9,357 3.05 553,540 19,592 3.54
Trading account securities................. 35,529 1,159 3.54 42,352 1,578 3.92
---------- -------- -------- ---------- -------- --------
Total interest-earning assets............ 2,597,902 169,792 6.59 3,462,548 233,049 6.85
---------- -------- -------- ---------- -------- --------
Allowance for credit losses................ (129,873) (141,537)
Cash and due from banks.................... 272,610 368,297
Other nonearning assets.................... 203,822 229,641
---------- -------- -------- ---------- -------- --------
Total assets............................. $2,944,461 $3,918,949
---------- -------- -------- ---------- -------- --------
---------- -------- -------- ---------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits................. $ 914,642 -- -- $1,029,758 -- --
Interest-bearing deposits:
Interest checking accounts................. 283,871 3,379 1.19 328,555 6,175 1.88
Money market accounts...................... 767,121 17,858 2.33 1,023,280 31,386 3.07
Savings deposits........................... 103,161 2,255 2.19 106,608 3,135 2.94
Time deposits -- under $100,000............ 108,135 4,063 3.76 129,105 6,106 4.73
Time deposits -- $100,000 and over......... 203,176 6,419 3.16 515,803 20,888 4.05
---------- -------- -------- ---------- -------- --------
Total interest-bearing deposits.......... 1,465,464 33,974 2.32 2,103,351 67,690 3.22
---------- -------- -------- ---------- -------- --------
Total deposits........................... 2,380,106 3,133,109
Federal funds purchased and securities sold
under repurchase agreements.............. 265,082 7,499 2.83 488,520 16,220 3.32
Other borrowings........................... 16,147 523 3.24 14,279 523 3.66
---------- -------- -------- ---------- -------- --------
Total interest-bearing liabilities..... 1,746,693 41,996 2.40 2,606,150 84,433 3.24
---------- -------- -------- ---------- -------- --------
Other liabilities............................ 22,477 23,412
Shareholders' equity......................... 260,649 259,629
---------- -------- -------- ---------- -------- --------
Total liabilities and shareholders'
equity................................. $2,944,461 $3,918,949
---------- -------- -------- ---------- -------- --------
---------- -------- -------- ---------- -------- --------
Net interest income/spread................... 127,796 4.19 148,616 3.61
---------- -------- -------- ---------- -------- --------
---------- -------- -------- ---------- -------- --------
Fully taxable equivalent net interest
income..................................... $129,138 $152,850
---------- -------- -------- ---------- -------- --------
---------- -------- -------- ---------- -------- --------
Net interest margin(4)....................... 4.97% 4.41%
</TABLE>
- ---------------
(1) The average rate data in this table are presented on a taxable equivalent
basis based on adjusting interest income exempt from federal income taxes,
or income taxed at a rate less than the statutory tax rates, using the
federal income tax rates in effect during the years presented.
12
<PAGE> 8
<TABLE>
<CAPTION>
1991 1990 1989
- ----------------------------------- ----------------------------------- -----------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ INTEREST AVERAGE INCOME/ INTEREST AVERAGE INCOME/ INTEREST
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,618,442 $150,814 9.44% $1,623,120 $176,305 10.98% $1,485,903 $172,485 11.78%
396,934 39,255 9.89 425,722 53,094 12.47 332,232 44,975 13.54
761,675 74,884 9.83 746,851 85,926 11.51 628,543 75,649 12.04
75,260 8,675 11.53 79,461 9,514 11.97 80,546 9,621 11.94
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
2,852,311 273,628 9.66 2,875,154 324,839 11.37 2,527,224 302,730 12.07
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
3,534 297 8.40 12,176 1,009 8.29 20,311 1,857 9.14
127,540 8,367 9.76 127,993 8,350 9.70 141,961 9,217 9.80
537,531 41,410 7.70 469,684 40,000 8.52 371,562 31,793 8.56
578,622 33,450 5.78 556,487 46,468 8.35 634,122 58,826 9.28
64,552 3,682 5.85 61,958 4,872 8.00 49,515 4,288 8.87
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
4,164,090 360,834 8.81 4,103,452 425,538 10.53 3,744,695 408,711 11.11
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(74,240) (38,320) (33,564)
374,353 416,587 387,827
140,872 120,654 118,805
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
$4,605,075 $4,602,373 $4,217,763
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
$ 961,072 -- -- $ 943,038 -- -- $ 926,093 -- --
301,338 11,018 3.66 285,729 10,791 3.78 270,782 10,283 3.80
986,438 48,394 4.91 917,080 53,035 5.78 867,358 50,899 5.87
86,606 3,810 4.40 87,459 3,811 4.36 95,532 4,210 4.41
150,544 8,981 5.97 139,727 11,242 8.05 105,040 8,106 7.72
1,220,623 78,698 6.45 1,353,694 110,171 8.14 1,151,667 104,602 9.08
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
2,745,549 150,901 5.50 2,783,689 189,050 6.79 2,490,379 178,100 7.15
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
3,706,621 3,726,727 3,416,472
531,590 28,550 5.37 499,178 38,628 7.74 463,518 40,729 8.79
14,561 868 5.96 14,265 1,257 8.81 14,106 1,513 10.73
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
3,291,700 180,319 5.48 3,297,132 228,935 6.94 2,968,003 220,342 7.42
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
33,527 49,855 56,777
318,776 312,348 266,890
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
$4,605,075 $4,602,373 $4,217,763
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
180,515 3.33 196,603 3.59 188,369 3.69
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
$186,724 $203,139 $195,592
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
- ---------- -------- ------- ---------- -------- ------- ---------- -------- -------
4.48% 4.95% 5.22%
</TABLE>
- ---------------
(2) Includes average nonaccrual loans of $106,119, $159,420, $136,096, $31,726
and $16,287 for 1993, 1992, 1991, 1990 and 1989, respectively.
(3) Loan income includes loan fees of $5,304, $5,427, $7,287, $9,487 and $7,578
for 1993, 1992, 1991, 1990 and 1989, respectively.
(4) Fully taxable net interest income divided by interest-earning assets.
13
<PAGE> 9
1992 Compared With 1991
Fully taxable equivalent net interest income decreased $33.9 million, or
18.1%, from 1991 to 1992. The decline in volume of interest-earning assets
accounted for $23.1 million of the decrease. The balance of the decrease
resulted from the lower interest income earned on the Company's net
interest-earning assets due to the decline in interest rates from 1991 to 1992.
As a result, the net interest margin declined to 4.41% in 1992 from 4.48% in
1991.
Average loans declined from $2,852.3 million in 1991 to $2,315.3 million in
1992, a decrease of $537.0 million, or 18.8%, between 1991 and 1992 due to
decreases of $303.3 million, or 18.7%, in commercial loans, $177.5 million, or
44.7%, in construction loans and $46.9 million, or 6.2%, in real estate mortgage
loans. These decreases resulted from reduced loan demand caused by the recession
and because the Bank curtailed new construction commitments beginning in late
1990.
Average taxable and nontaxable securities decreased $75.7 million, or
14.1%, and $40.7 million, or 31.9%, respectively, between 1991 and 1992. Average
federal funds sold and securities purchased under resale agreements decreased
$25.1 million, or 4.3%, between 1991 and 1992.
Average noninterest-bearing deposits increased $68.7 million, or 7.1%.
Average interest-bearing core deposits increased $62.6 million, or 4.1%, while
average time deposits of $100,000 and over decreased $704.8 million, or 57.7%.
Due to the decline in the Bank's assets in 1992 compared with 1991 and because
of the increase in core deposits, the Bank was able to reduce its dependence on
time deposits of $100,000 and over.
Change in Net Interest Income
The following table sets forth a summary of the changes in interest earned
and paid resulting from changes in volume and rate. Average balances in all
categories in each reported period were used in the volume computations. Average
yields and rates in each reported period were used in rate computations.
<TABLE>
<CAPTION>
1993 VS. 1992 1992 VS. 1991
------------------------------- -------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO(2): DUE TO(2):
-------------------- NET -------------------- NET
VOLUME(1) RATE(1) DECREASE VOLUME(1) RATE(1) DECREASE
--------- -------- -------- --------- -------- --------
DOLLARS IN THOUSANDS -- FULLY TAXABLE EQUIVALENT BASIS
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Interest-bearing deposits in other
banks........................... $ (58) $ 21 $ (37) $ (61) $ (169) $ (230)
Loans............................. (43,943) (695) (44,638) (46,725) (52,408) (99,133)
Taxable securities................ 2,390 (6,485) (4,095) (5,458) (4,884) (10,342)
Nontaxable securities............. (6,416) (327) (6,743) (3,917) (164) (4,081)
Trading account securities........ (250) (151) (401) (1,080) (1,036) (2,116)
Federal funds sold and securities
purchased under resale
agreements...................... (7,808) (2,427) (10,235) (1,394) (12,464) (13,858)
--------- -------- -------- --------- -------- --------
Total interest-earning
assets..................... (56,085) (10,064) (66,149) (58,635) (71,125) (129,760)
--------- -------- -------- --------- -------- --------
Interest paid on:
Interest checking................. (756) (2,040) (2,796) 922 (5,765) (4,843)
Money market deposits............. (6,892) (6,636) (13,528) 1,748 (18,756) (17,008)
Savings deposits.................. (99) (781) (880) 761 (1,436) (675)
Other time deposits............... (11,980) (4,532) (16,512) (36,778) (23,907) (60,685)
Short-term borrowings............. (6,571) (2,150) (8,721) (2,170) (10,505) (12,675)
--------- -------- -------- --------- -------- --------
Total interest-bearing
liabilities................ (26,298) (16,139) (42,437) (35,517) (60,369) (95,886)
--------- -------- -------- --------- -------- --------
$(29,787) $ 6,075 $(23,712) $(23,118) $(10,756) $(33,874)
========= ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) The changes in interest due to both rate and volume have been allocated to
the change due to volume and rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
(2) The changes in interest income in this table are presented on a fully
taxable equivalent basis. Interest income exempt from federal income taxes,
or income taxed at a rate less than the statutory tax rates, has been
adjusted to a fully taxable equivalent basis using the federal income tax
rates in effect during the years presented.
14
<PAGE> 10
PROVISION FOR CREDIT LOSSES
The provision for credit losses charged to operations reflects management's
judgment of the adequacy of the allowance for credit losses and is determined
through periodic analysis of the loan portfolio. This analysis includes a
detailed review of the classification and categorization of problem and
potential problem loans and loans to be charged off; an assessment of the
overall quality and collectibility of the portfolio; and consideration of the
loan loss experience, trends in problem loans and concentrations of credit risk,
as well as current and expected future economic conditions (particularly in
Southern California). The Bank has an internal risk analysis and review staff
that reports to the Audit and Examining Committee of the Board of Directors and
continuously reviews loan quality. Such reviews also assist management in
establishing the level of the allowance for credit losses.
For 1993, the provision for credit losses totaled $30.0 million, down from
$114.5 million in 1992 and $118.0 million in 1991. During the second half of
1991, the Bank recorded large credit loss provisions as it became clear that the
impact of the recession and the softening of the local real estate market on the
Bank's loan portfolio would be more prolonged and severe than initially
expected.
In 1992, net charge offs totaled $104.2 million, or 4.50% of related
average credits, up from $52.3 million, or 1.83%, in 1991. Because of the
increased level of charge offs and the continued migration of loans to
nonaccrual or loss status due to the continuing difficult economic situation in
Southern California, including further declines in real estate values, the
provision for credit losses remained high in 1992, particularly in the first
half of the year.
In 1993, net charge offs totaled $54.1 million, or 3.12% of related average
credits, compared with $104.2 million, or 4.50% of related average credits, in
1992. Nonaccrual loans decreased from $160.3 million at December 31, 1992 to
$71.1 million at December 31, 1993, due in part to the decrease in the second
half of 1993 in the inflow of loans into nonaccrual status. As a result, the
provision for credit losses decreased to $30.0 million in 1993.
Based on management's review of the loan portfolio, net charge offs and
provisions for credit losses for 1994 are expected to decrease from 1993 levels,
even though no meaningful economic recovery is expected in Southern California.
However, no assurance can be given that the Bank will not, in any particular
period, sustain credit losses that are sizable in relation to the amount
provided, or that subsequent evaluations of the loan portfolio by management or
the regulators, in light of the factors then prevailing, including economic
conditions and further declines in property values, will not require significant
increases in the allowance for credit losses.
NONINTEREST INCOME
Noninterest income from continuing operations totaled $45.8 million, down
$1.2 million from 1992, which was up $3.7 million from 1991. A breakdown of
noninterest income by category is reflected on page 16.
Service charges on deposit accounts increased $1.0 million, or 9.4%,
compared with a 14.0% increase in 1992. Growth in both 1993 and 1992 was due to
higher amounts collected from deposit customers for account analysis deficits.
Customer trading account income in 1993 decreased $.1 million, or 1.6%,
compared with a 25.5% increase the preceding year. The decrease from 1992 to
1993 was due primarily to lower volumes and reduced spreads on trading account
transactions with customers, due to the decline in the level of interest rates.
The increase from 1991 to 1992 was due to increased volume. Trust fees remained
relatively unchanged during the last three years. All other income categories,
which include foreign exchange, letter of credit fees, escrow and proof of
deposit fees, in addition to other miscellaneous income, decreased during the
last three years due to lower volumes.
The Bank sold its merchant draft business to NOVA Information Systems as of
January 1, 1993, for a pretax gain of $1.9 million. Merchant credit card fees
were $4.5 million in 1992 and $4.1 million in 1991. The Bank's sale of $73.7
million in ELC loans, in April 1993, generated a pretax gain of $4.5 million.
15
<PAGE> 11
In December 1992, in conjunction with tax planning strategies, the Bank
sold $32.4 million of municipal securities for a gain of $1.6 million. There
were no investment securities gains or losses in 1993 or 1991.
In December 1992, the Bank entered into an agreement to sell its data
processing business, City National Information Systems (CNIS), to Systematics,
Inc. for $12.0 million. A pretax gain of $10.8 million was recognized at
closing, June 1, 1993. All income and expense related to CNIS have been removed
from continuing operations and are now included in the Consolidated Statement of
Operations under the caption "Income from discontinued operations." Prior
periods have been restated to conform for reporting for a discontinued
operation.
Analysis of Changes in Noninterest Income
<TABLE>
<CAPTION>
INCREASE INCREASE
(DECREASE) (DECREASE)
-------------- -------------
1993 AMOUNT % 1992 AMOUNT % 1991
----- ------ ----- ----- ------ ---- -----
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts................... $11.6 $ 1.0 9.4 $10.6 $ 1.3 14.0 $ 9.3
Trust fees............................................ 7.4 (.1) (1.3) 7.5 .4 5.6 7.1
Customer trading account income....................... 6.3 (.1) (1.6) 6.4 1.3 25.5 5.1
Credit card merchant fees............................. -- (4.5) NM 4.5 .4 9.8 4.1
Gain on sale of selected ELC loans.................... 4.5 4.5 NM -- -- NM --
Gain on sale of merchant draft business............... 1.9 1.9 NM -- -- NM --
Net gain on securities available for sale............. -- (1.6) NM 1.6 1.6 NM --
Other income.......................................... 14.1 (2.3) (14.0) 16.4 (1.3) (7.3) 17.7
----- ------ ----- ----- ------ ---- -----
Total............................................. $45.8 $(1.2) (2.6) $47.0 $ 3.7 8.5 $43.3
----- ------ ----- ----- ------ ---- -----
----- ------ ----- ----- ------ ---- -----
</TABLE>
NONINTEREST EXPENSE
Noninterest expense totaled $166.9 million in 1993, down $6.8 million, or
3.9%, from 1992, which compares with an increase of 15.1% from 1991 to 1992.
This decrease was substantially the result of expense reduction measures
implemented by the Company.
Staff expense decreased 16.5% in 1993, compared with a .5% increase in
1992. On a full-time equivalent basis, staff levels have declined from
approximately 2,000 at December 31, 1991 to 1,350 at year-end 1993. The decrease
includes approximately 100 employees of the discontinued CNIS operation. Staff
levels are expected to continue to decline in 1994 but at a reduced rate due to
the closure of branches and continued cost reduction measures.
The expense categories other than staff, ORE and the consolidation charge,
decreased $9.9 million, or 14.3%, between 1992 and 1993. These expenses
increased $4.1 million, or 6.3%, between 1991 and 1992. The decrease between
1992 and 1993 resulted from the Bank's efforts to reduce expenses, writedowns of
$2.3 million in 1992 resulting from updated valuations of in-substance
foreclosures of non-real estate assets and a $2.8 million decrease in merchant
credit card processing expense due to the sale of the business. The increase
from 1991 to 1992 was due to higher severance and litigation expenses in 1992
and the $2.3 million writedown discussed above.
As a result of writedowns, including those resulting from the Disposition
Program, net costs of ORE totaled $25.7 million in 1993, up from $20.8 million
in 1992 and $2.5 million in 1991. Net ORE expense for 1993 included a $12.8
million gain recorded in the fourth quarter upon the sale of a portion of the
assets in the Disposition Program. Based on the Bank's current ORE portfolio and
workout strategies, management anticipates that ORE expense in 1994 will
decrease from 1993 levels.
Due to declines in total deposits, the increases in FDIC insurance
assessment rates, that became effective in July 1, 1992 and January 1, 1993 did
not result in an increase in FDIC insurance assessment expense.
16
<PAGE> 12
In November 1993, the Bank announced a consolidation plan to improve
efficiency and operational productivity in its branch network. The streamlining
will reduce the Bank's total number of branches from 22 to 16, while designating
four of the remaining locations as regional commercial lending centers. The Bank
anticipates completing the closures by early 1994. To cover the costs associated
with this action, the Bank recorded a consolidation charge of $12.0 million in
the fourth quarter of 1993 comprised of $7.5 million for disposition of lease
commitments, $1.5 million for disposition of fixed assets, and $3.0 million for
severance costs and other expenses directly related to the consolidation.
Completion of ongoing branch restructuring, including the closures announced in
November 1993, is expected to result in an expense savings of approximately $8.0
million per year, before the effect of inflation and other factors. However,
this will be partially offset by decreased income resulting from reductions in
loans and deposits caused by the consolidation.
Analysis of Changes in Noninterest Expense
<TABLE>
<CAPTION>
INCREASE INCREASE
(DECREASE) (DECREASE)
-------------- --------------
1993 AMOUNT % 1992 AMOUNT % 1991
------ ------ ----- ------ ------ ----- ------
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Staff expense................................. $ 69.8 $(13.8) (16.5) $ 83.6 $ .4 .5 $ 83.2
------ ------ ----- ------ ------ ----- ------
All other:
Net occupancy of premises................... 11.8 .3 2.6 11.5 .2 1.8 11.3
Data processing............................. 7.8 (.2) (2.5) 8.0 .1 1.3 7.9
Professional................................ 7.3 (1.1) (13.1) 8.4 .5 6.3 7.9
FDIC insurance.............................. 7.2 (.3) (4.0) 7.5 (.4) (5.1) 7.9
Office supplies............................. 5.0 (1.0) (16.7) 6.0 (.1) (1.6) 6.1
Depreciation................................ 4.5 (.2) (4.3) 4.7 (.2) (4.1) 4.9
Promotion................................... 1.9 (1.1) (36.7) 3.0 (.6) (16.7) 3.6
Equipment................................... 2.0 (.3) (13.0) 2.3 (.4) (14.8) 2.7
Other....................................... 11.9 (6.0) (33.5) 17.9 5.0 38.8 12.9
------ ------ ----- ------ ------ ----- ------
All other................................... 59.4 (9.9) (14.3) 69.3 4.1 6.3 65.2
------ ------ ----- ------ ------ ----- ------
Consolidation charge.......................... 12.0 12.0 100.0 -- -- -- --
ORE expense................................... 25.7 4.9 23.6 20.8 18.3 NM 2.5
------ ------ ----- ------ ------ ----- ------
Total................................ $166.9 $(6.8) (3.9) $173.7 $22.8 15.1 $150.9
------ ------ ----- ------ ------ ----- ------
------ ------ ----- ------ ------ ----- ------
</TABLE>
INCOME TAXES
The 1993 effective tax benefit rate was 39.8%, up from 35.0% last year. The
effective rates differed from the applicable statutory federal tax rate due to
various factors, including state taxes, tax exempt income and higher income tax
rates in carry back years.
No California tax benefit was reflected for the book losses for 1991, 1992
or 1993. If the Company should experience additional California book losses in
future years, no California benefit can be recognized unless it is more likely
than not that the benefit of such losses can be realized.
The federal tax benefits of $9.3 million, $32.5 million and $22.4 million
for 1993, 1992 and 1991, respectively, were recorded based on the Company's
ability to carry back the loss on both a book income and tax return basis to
prior years, as well as the availability of reversing taxable temporary
differences and projected taxable income for 1994 to justify the realization of
reversing deductible temporary differences.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," effective January 1, 1993. The cumulative
effect of adopting this statement did not have a material impact on the
financial position or results of operations of the Company.
17
<PAGE> 13
BALANCE SHEET ANALYSIS
SOURCES AND USES OF FUNDS
The discussion in this section focuses on changes between December average
balances in 1993 and 1992 as depicted on the following table. Management
believes that a comparison of December averages gives a clearer picture of
changes in the balance sheet during the year than a comparison of annual
averages, which may conceal trends during the year, or year-end balances, which
may be distorted by significant end-of-year fluctuations.
The Company manages its balance sheet to meet the needs of its business
strategy, which it adapts to the changing economic environment and business and
competitive conditions in the financial services market. Understanding changes
in the balance sheet requires an examination of changes in the size and
composition of the Company's earning assets and sources of funds.
Based on December averages, assets decreased 8.0% in 1993, compared with a
25.9% decrease in 1992.
Net loans decreased at a 23.8% rate in 1993, compared with a 22.9% decrease
in 1992. Commercial loans decreased 23.2% and 20.1% in 1993 and 1992,
respectively, reflecting reduced loan demand because of the recession and the
Bank's efforts to achieve a more diversified risk profile in its loan portfolio.
Real estate loans decreased 23.3% in 1993, and 21.1% in 1992, reflecting
transfers to ORE, pay downs, charge offs and because the Bank curtailed new real
estate loan commitments beginning in late 1990.
Securities increased 77.0% in 1993, compared with a 42.2% decrease in 1992.
The increase in 1993 resulted from the lack of loan demand and the investment of
the proceeds of the Offering, while the decrease in 1992 was caused by the
decline in deposits and the Company's need for liquidity.
The Company's primary sources for funding earning assets are core deposits,
certificates of deposits and short-term purchased funds. Core deposits decreased
6.4% in 1993, compared with a decrease of 11.0% in 1992. During 1993,
certificates of deposit of $100,000 and over were reduced by 41.2% from 1992,
compared with a reduction of 62.6% from 1991 to 1992. Due to the decrease in
loan volume, the Bank has reduced its funding from these more expensive funds.
Federal funds purchased and securities sold under repurchase agreements
decreased 29.0% in 1993 and 45.8% in 1992 as the Bank reduced its arbitrage
activities.
The Company expects stabilization of deposits to continue and does not
expect the branch consolidation program to result in significant declines in
deposit levels.
18
<PAGE> 14
SOURCES AND USES OF FUNDS TRENDS
<TABLE>
<CAPTION>
INCREASE INCREASE
DECEMBER (DECREASE) DECEMBER (DECREASE) DECEMBER
1993 ------------- 1992 ----------------- 1991
AVERAGE AMOUNT % AVERAGE AMOUNT % AVERAGE
--------- ------- --- -------- --------- ----- --------
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C> <C> <C>
USES OF FUNDS
Earning Assets:
Interest-bearing deposits in other banks................... $ .6 $(17.1) (97) $ 17.7 $ 17.7 -- $ --
Securities................................................. 786.6 342.3 77 444.3 (324.8) (42) 769.1
Trading account securities................................. 52.7 17.6 50 35.1 (40.8) (54) 75.9
Federal funds sold and securities purchased under resale 331.5 59.1 22 272.4 (280.1) 51) 552.5
agreements...............................................
Loans:
Commercial loans......................................... 903.0 (273.2) (23) 1,176.2 (296.3) (20) 1,472.5
Real estate loans........................................ 644.3 (195.9) (23) 840.2 (224.3) (21) 1,064.5
Installment loans........................................ 45.6 (15.9) (26) 61.5 (10.4) (14) 71.9
--------- ------- --- -------- --------- ----- --------
Total loans.............................................. 1,592.9 (485.0) (23) 2,077.9 (531.0) (20) 2,608.9
Less allowance for credit losses........................... 117.7 (23.8) (17) 141.5 44.9 46 96.6
--------- ------- --- -------- --------- ----- --------
Net loans................................................ 1,475.2 (461.2) (24) 1,936.4 (575.9) (23) 2,512.3
--------- ------- --- -------- --------- ----- --------
Total earning assets(1).................................. 2,764.3 (83.1) (3) 2,847.4 (1,159.0) (29) 4,006.4
Cash and due from banks.................................... 271.3 (110.1) (29) 381.4 (29.7) (7) 411.1
Other nonearning assets.................................... 148.9 (99.0) (40) 247.9 67.7 38 180.2
--------- ------- --- -------- --------- ----- --------
Total assets............................................. $3,066.8 $(268.4) (8) $3,335.2 $(1,165.9) (26) $4,501.1
--------- ------- --- -------- --------- ----- --------
--------- ------- --- -------- --------- ----- --------
SOURCES OF FUNDS
Core deposits:
Demand deposits............................................ $1,000.4 $(82.2) (8) $1,082.6 $ (4.7) -- $1,087.3
Interest checking deposits................................. 302.2 .1 -- 302.1 (29.9) (9) 332.0
Money market accounts...................................... 787.8 (68.2) (8) 856.0 (233.9) (21) 1,089.9
Savings deposits........................................... 104.6 9.3 10 95.3 (.3) -- 95.6
Time deposits -- under $100,000............................ 99.2 (16.8) (14) 116.0 (35.2) (23) 151.2
--------- ------- --- -------- --------- ----- --------
Total core deposits...................................... 2,294.2 (157.8) (6) 2,452.0 (304.0) (11) 2,756.0
Short-term purchased funds:
Time deposits -- $100,000 and over......................... 172.0 (120.3) (41) 292.3 (489.7) (63) 782.0
Federal funds purchased and securities sold under 231.3 (94.5) (29) 325.8 (275.2) (46) 601.0
repurchase agreements....................................
Other short-term funds borrowed............................ 10.7 (3.9) (27) 14.6 .1 -- 14.5
Mortgages payable.......................................... 26.3 26.3 NM -- -- -- --
--------- ------- --- -------- --------- ----- --------
Total short-term purchased funds......................... 440.3 (192.4) (30) 632.7 (764.8) (55) 1,397.5
Other liabilities............................................ 34.8 11.5 49 23.3 (9.9) (30) 33.2
Shareholders' equity......................................... 297.5 70.3 31 227.2 (87.2) (28) 314.4
--------- ------- --- -------- --------- ----- --------
Total liabilities and shareholders' equity................. $3,066.8 $(268.4) (8) $3,335.2 $(1,165.9) (26) $4,501.1
--------- ------- --- -------- --------- ----- --------
--------- ------- --- -------- --------- ----- --------
</TABLE>
- ------------------
(1) Before deduction of allowance for credit losses.
19
<PAGE> 15
CAPITAL
At December 31, 1993, the Company's and the Bank's Tier 1 capital, which is
comprised of common shareholders' equity, amounted to $298.1 million and $279.8
million, respectively. At December 31, 1992, the Company's and the Bank's Tier 1
capital amounted to $227.9 million and $221.9 million, respectively. At December
31, 1993, the Company had a Tier 1 risk-based capital ratio of 15.75% and a Tier
1 leverage ratio of 9.95%.
On November 18, 1992, the Bank entered into the Agreement, which required
the Bank to generate a minimum of $65 million in Tier 1 capital by June 30,
1993, so as to maintain Tier 1 capital of at least 10% of risk-weighted assets,
and Tier 1 capital of at least 7% of adjusted total assets. In June 1993, the
Corporation, after completing the Offering, contributed $65 million to the Bank
as Tier 1 capital. At December 31, 1993, the Bank's Tier 1 capital was 14.78% of
risk-weighted assets and 9.38% of adjusted total assets, which exceeded the
capital levels required under the Agreement. Early in 1994, both the Agreement
and the MOU were lifted.
The following table presents the capital ratios for the Company and the
Bank at December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
CITY NATIONAL CORPORATION (CONSOLIDATED)
Tier 1 leverage................................................... 9.95% 6.49% 6.46%
Tier 1 risk-based capital......................................... 15.75 9.17 9.21
Total risk-based capital.......................................... 17.06 10.47 10.49
CITY NATIONAL BANK
Tier 1 leverage................................................... 9.38% 6.32% 6.34%
Tier 1 risk-based capital......................................... 14.78 8.90 9.00
Total risk-based capital.......................................... 16.09 10.20 10.28
</TABLE>
On December 23, 1992, the Federal Financial Institutions Examinations
Council issued a statement that federally supervised banks and thrift
institutions should follow the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," for regulatory reporting
purposes, and recommended that the federal banking and thrift regulatory
agencies amend their capital standards to limit deferred tax assets that could
be used to meet capital requirements. On March 29, 1993, the OCC issued a
temporary guideline, pending adoption of a final rule, that would limit the
amount of deferred tax assets that could be included in a bank's regulatory
capital to the lesser of the amount expected to be realized within one year,
based on the bank's projections of future taxable income, or 10% of Tier 1
capital. However, there generally would be no limit on deferred tax assets that
could be realized from taxes paid in prior carry-back years and from future
reversals of existing taxable temporary differences. Based on the Company's
ability to carry back and recover taxes paid in prior years, and the expected
level of reversing taxable temporary differences as well as projected income for
1994 but not beyond, management believes that the recorded deferred tax asset
balance of $18.1 million is fully includable in regulatory capital at December
31, 1993.
The Corporation ceased paying dividends in the third quarter of 1991. It is
expected that dividend payments will resume, based on achieved earnings, and
when the Board of Directors determines that they are consistent with the
long-term objectives of the Company.
20
<PAGE> 16
LIQUIDITY
A fundamental aspect of the asset/liability management strategy of a
financial institution is adequate liquidity -- the ability to meet the
requirements of customers for loans and deposit withdrawals in the most timely
and economical manner.
For most financial institutions, the most manageable sources of liquidity
are comprised of liabilities, especially core deposits. Average core deposits
increased to 83.9% of total funding in December 1993 compared with 79.5% in
December 1992. Although the Bank experienced a substantial decline in core
deposits in the first half of 1993, particularly during the first two months,
deposit levels stabilized thereafter, and average core deposits in December 1993
were 6.4% below those in December 1992.
Liquidity is also provided by assets such as federal funds sold, securities
purchased under resale agreements and trading account securities that may be
immediately converted to cash at minimal cost. The aggregate of these assets
averaged $384.2 million in December 1993, up $76.7 million, or 24.9%, from the
prior year.
Liquidity may also be provided by maturing investment securities. At
December 31, 1993, investment securities maturing within one year amounted to
$386.9 million, or 42.9% of the investment portfolio. See page 24 for a table on
maturity distribution of investment securities at December 31, 1993. Maturing
loans also provide liquidity, and $1,019.2 million of the Bank's loans are
scheduled to mature in 1994. See page 26 for a table on maturity distribution of
loans at December 31, 1993.
INTEREST RATE SENSITIVITY MANAGEMENT
Interest sensitivity is related to liquidity because both are affected by
the interrelationships of maturing assets and liabilities. Interest rate
sensitivity management, however, is concerned with the timing and magnitude of
repricing assets compared with liabilities. It is the objective of interest rate
sensitivity management to control the risks associated with interest rate
movement.
The interest rate sensitivity gap is defined as the difference between
interest-earning assets and interest-bearing liabilities maturing or repricing
within a given time period. A gap is considered positive when the amount of
interest rate-sensitive assets exceeds the amount of interest rate-sensitive
liabilities. A gap is considered negative when the amount of interest
rate-sensitive liabilities exceeds interest rate-sensitive assets. During a
period of rising interest rates, a negative gap would tend to adversely affect
net interest income, while a positive gap would tend to result in an increase in
net interest income. During a period of falling interest rates, a negative gap
would tend to result in an increase in net interest income, while a positive gap
would tend to affect net interest income adversely.
The following table shows that the Company's positive interest rate
sensitivity gap increased from $847.1 million at December 31, 1992 to $1,076.9
million at December 31, 1993. The Company's increased positive interest rate
sensitivity gap resulted from the decline in certificates of deposit and the
increased proportion of funding from noninterest-bearing deposits. The Company's
increased asset sensitive position in this period of low interest rates had a
negative effect on net interest income in 1993. While the interest rate
sensitivity gap is a useful measure and contributes toward effective asset and
liability management, it is difficult to predict the net interest margin solely
on that measure.
21
<PAGE> 17
At December 31, 1993 and 1992, the Company's distribution of rate-sensitive
assets and rate-sensitive liabilities was as follows:
<TABLE>
<CAPTION>
MATURING OR REPRICING IN
-------------------------------------------------------------
AFTER 3 AFTER 1 YEAR
3 MONTHS MONTHS BUT BUT WITHIN AFTER
OR LESS WITHIN 1 YEAR 5 YEARS 5 YEARS TOTAL
-------- ------------- ------------ -------- --------
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993
Rate-sensitive assets:
Interest-bearing deposits in other banks............... $ .6 $ -- $ -- $ -- $ .6
Loans.................................................. 1,308.4 82.8 140.4 17.9 1,549.5
Taxable investment securities.......................... 259.8 123.4 328.7 184.1 896.0
Securities available for sale.......................... -- -- -- 2.0 2.0
Nontaxable investment securities....................... 1.1 2.5 2.8 .1 6.5
Trading account securities............................. 39.8 -- -- -- 39.8
Federal funds sold and securities purchased under
resale agreements.................................... 265.0 -- -- -- 265.0
-------- ------------- ------------ -------- --------
Total rate-sensitive assets........................ 1,874.7 208.7 471.9 204.1 2,759.4
-------- ------------- ------------ -------- --------
Rate-sensitive liabilities:(1)
Interest checking deposits............................. 324.0 -- -- -- 324.0
Money market accounts.................................. 742.4 -- -- -- 742.4
Savings deposits....................................... 107.2 -- -- -- 107.2
Time deposits.......................................... 153.1 73.6 37.0 1.4 265.1
Federal funds purchased and securities sold under
repurchase agreements................................ 202.5 -- -- -- 202.5
Other short-term borrowings............................ 15.0 -- -- -- 15.0
Mortgages payable...................................... 26.3 -- -- -- 26.3
-------- ------------- ------------ -------- --------
Total rate-sensitive liabilities................... 1,570.5 73.6 37.0 1.4 1,682.5
-------- ------------- ------------ -------- --------
Interest rate sensitivity gap............................ $ 304.2 $ 135.1 $434.9 $ 202.7 $1,076.9
-------- ------------- ------------ -------- --------
-------- ------------- ------------ -------- --------
Cumulative interest rate sensitivity gap................. $ 304.2 $ 439.3 $874.2 $1,076.9
-------- ------------- ------------ -------- --------
-------- ------------- ------------ -------- --------
Cumulative ratio of rate-sensitive assets to
rate-sensitive liabilities............................. 119% 127% 152% 164% 164%
-------- ------------- ------------ -------- --------
-------- ------------- ------------ -------- --------
</TABLE>
22
<PAGE> 18
<TABLE>
<CAPTION>
MATURING OR REPRICING IN
------------------------------------------------------------
AFTER 3 AFTER 1 YEAR
3 MONTHS MONTHS BUT BUT WITHIN AFTER
OR LESS WITHIN 1 YEAR 5 YEARS 5 YEARS TOTAL
-------- ------------- ------------ ------- --------
DOLLARS IN MILLIONS
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1992
Rate-sensitive assets:
Interest-bearing deposits in other banks................. $ 15.0 $ -- $ -- $ -- $ 15.0
Loans.................................................... 1,680.3 78.8 130.3 25.5 1,914.9
Taxable investment securities............................ 62.7 140.7 177.2 33.0 413.6
Securities available for sale............................ 2.7 17.1 9.8 .7 30.3
Trading account securities............................... 10.2 -- -- -- 10.2
Federal funds sold and securities purchased under resale
agreements............................................. 468.9 -- -- -- 468.9
-------- ------------- ------------ ------- --------
Total rate-sensitive assets....................... 2,239.8 236.6 317.3 59.2 2,852.9
-------- ------------- ------------ ------- --------
Rate-sensitive liabilities:(1)
Interest checking deposits............................... 349.8 -- -- -- 349.8
Money market accounts.................................... 825.8 -- -- -- 825.8
Savings deposits......................................... 95.7 -- -- -- 95.7
Time deposits............................................ 247.4 91.7 41.3 -- 380.4
Federal funds purchased and securities sold under
repurchase agreements.................................. 339.1 -- -- -- 339.1
Other short-term borrowings.............................. 15.0 -- -- -- 15.0
-------- ------------- ------------ ------- --------
Total rate-sensitive liabilities.................. 1,872.8 91.7 41.3 -- 2,005.8
-------- ------------- ------------ ------- --------
Interest rate sensitivity gap.............................. $ 367.0 $ 144.9 $276.0 $ 59.2 $ 847.1
-------- ------------- ------------ ------- --------
-------- ------------- ------------ ------- --------
Cumulative interest rate sensitivity gap................... $ 367.0 $ 511.9 $787.9 $ 847.1
-------- ------------- ------------ ------- --------
-------- ------------- ------------ ------- --------
Cumulative ratio of rate-sensitive assets to rate-sensitive
liabilities.............................................. 120% 126% 139% 142% 142%
-------- ------------- ------------ ------- --------
-------- ------------- ------------ ------- --------
</TABLE>
- ---------------
(1) Customer deposits which are subject to immediate withdrawal are presented as
repricing within 3 months or less. The distribution of other time deposits
is based on scheduled maturities.
23
<PAGE> 19
SECURITIES
The carrying amounts of investment securities at the dates indicated are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
CATEGORY OF INVESTMENT 1993 1992
------------------------------------------------------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C>
U.S. government and federal agency obligations......... $880,180 $403,973
State and political subdivisions....................... 6,475 --
Other securities....................................... 15,826 9,672
-------- --------
Total........................................ $902,481 $413,645
-------- --------
-------- --------
</TABLE>
The following table shows the maturities of investment securities at
December 31, 1993.
<TABLE>
<CAPTION>
OVER 1 YEAR OVER 5 YEARS
ONE YEAR OR LESS THRU 5 YEARS THRU 10 YEARS OVER 10 YEARS TOTAL
CATEGORY OF ------------------- ------------------- ------------------ ------------------- -------------------
INVESTMENT AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1)
- ------------- -------- -------- -------- -------- ------- -------- -------- -------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.
government
and federal
agency
obligations...$380,042 4.13% $322,449 4.51% $ 9,989 4.37% $167,700 5.74% $880,180 4.58%
State and
political
subdivisions... 3,624 8.69 2,751 9.10 100 9.72 6,475 8.88
Other
securities... 3,207 4.72 6,287 5.08 500 7.00 5,832 5.88 15,826 5.36
-------- --- -------- --- ------- --- -------- --- -------- ---
Total.... $386,873 4.18% $331,487 4.56% $10,589 4.54% $173,532 5.75% $902,481 4.63%
-------- --- -------- --- ------- --- -------- --- -------- ---
-------- --- -------- --- ------- --- -------- --- -------- ---
</TABLE>
- ---------------
(1) Fully taxable equivalent.
Investment securities at year end were up $488.8 million, or 118.2%, from
1992. U.S. government and federal agency obligations increased $476.2 million,
or 117.9%, due to the investment of the Company's excess liquidity in the second
half of 1993 in these securities. State and municipal securities totaled $6.5
million at December 31, 1993 compared with $30.3 million at December 31, 1992,
when these securities were categorized as securities available for sale. Due to
the Company's improved liquidity and profitability, the remaining balance of
state and municipal securities was transferred back to the investment portfolio
during the third quarter of 1993. Other securities increased $6.2 million, or
63.6%, due primarily to purchases of bonds during 1993.
The average maturity of total investment securities was 3.5 years at
December 31, 1993 compared to 2.8 years at the end of 1992. The increase in the
average maturity of the portfolio was largely due to purchases of
mortgage-backed agency securities during the year.
At December 31, 1993, 1992 and 1991, the Company did not have investments
in securities issued by any one nonfederal issuer that exceeded 10% of its
shareholders' equity.
24
<PAGE> 20
At December 31, 1993, securities available for sale consisted of $2.0
million of 7.5% convertible preferred stock. At December 31, 1992 securities
available for sale consisted of state and municipal obligations with a carrying
value of $20.4 million in the one year or less maturity category, $9.8 million
in the over one through five years maturity category, and $.1 million in the
over five years through ten years category. The weighted average yields on these
securities, computed on a fully taxable equivalent basis, were 9.94% in the one
year or less maturity category, 8.79% in the over one through five years
maturity category, and 9.72% in the over five through ten years maturity
category.
The Company adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," as of December 31, 1993. The impact on
shareholders' equity or the results of operations was not material.
LOAN PORTFOLIO
The amounts of loans outstanding at the indicated year ends are shown in
the following table according to the type of loan. The Company's lending
activities are predominantly in Southern California. The Bank has no
agricultural or foreign loans.
Loans by Type
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Commercial(1)........................ $ 939,719 $1,177,948 $1,485,766 $1,746,152 $1,573,419
Real estate loans -- construction.... 11,699 105,467 322,121 450,271 396,897
Real estate loans -- mortgage(2)..... 623,653 731,234 735,606 784,051 688,817
Installment loans.................... 45,485 60,553 71,708 77,261 78,962
---------- ---------- ---------- ---------- ----------
Total loans, gross......... $1,620,556 $2,075,202 $2,615,201 $3,057,735 $2,738,095
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
- ---------------
(1) Commercial included unsecured loans to real estate developers and customers
involved in real estate investments and commercial loans where real estate
partially secures the borrowing.
(2) Equity lines of credit totaling $157,913 designated as held for sale at
December 31, 1992, were included in real estate loans -- mortgage.
Gross loans at December 31, 1993 were $1,620.6 million, down 21.9%, or
$454.6 million, from the previous year end. The decrease in loans resulted
from a decline in loan demand because of the recession and the Bank's efforts to
achieve a more conservative and diversified risk profile in its loan portfolio.
Commercial loans continue to constitute the major portion of the Bank's lending
activity, 58.0% and 56.8% at 1993 and 1992 year ends, respectively. Real estate
construction loans decreased $93.8 million, or 88.9%, between year ends because
of the transfer of certain construction loans to the real estate mortgage
category after completion of construction and because the Bank curtailed new
construction lending beginning in late 1990. Real estate mortgage loans
decreased $107.6 million, or 14.7%, primarily due to the sale of $73.7 million
of ELC loans in April 1993.
At December 31, 1993, 85.7% of commercial loans, 81.7% of real estate loans
and 13.1% of installment loans outstanding were floating interest rate loans.
Floating rate loans comprised 82.1% of the total loan portfolio at December 31,
1993. Total loans at December 31, 1993 were comprised of 62.9% due in one year
or less, 33.1% due in over one through five years and 4.0% due after 5 years.
25
<PAGE> 21
Loan Maturities
<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------------------------------------------------------
REAL ESTATE-- REAL ESTATE--
COMMERCIAL CONSTRUCTION MORTGAGE INSTALLMENT TOTAL
---------- ------------- ------------- ----------- ----------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Aggregate maturities of loan
balances due:
In one year or less
Interest rates -- floating........ $657,047 $ 6,217 $ 223,658 $ 5,485 $ 892,407
Interest rates -- fixed........... 97,233 1,361 16,551 11,641 126,786
After one year but within five years
Interest rates -- floating........ 132,800 4,121 256,460 338 393,719
Interest rates -- fixed........... 35,022 -- 91,148 16,283 142,453
After five years
Interest rates -- floating........ 15,166 -- 28,470 143 43,779
Interest rates -- fixed........... 2,451 -- 7,366 11,595 21,412
---------- ------------- ------------- ----------- ----------
Total..................... $939,719 $11,699 $ 623,653 $45,485 $1,620,556
---------- ------------- ------------- ----------- ----------
---------- ------------- ------------- ----------- ----------
</TABLE>
The loan maturities shown in the table above are based on contractual
maturities. As is customary in the banking industry, loans that meet sound
underwriting criteria can be renewed by mutual agreement between the Bank and
the borrower. In addition, the Bank has preapproved up to four renewal options
of two to five years for loans comprising approximately 15% of real estate
mortgage loans. These renewal options provided for interest at specified spreads
over applicable two-, three-or five-year U.S. Treasury securities, fixed for the
term of the renewal. Renewal options are cancelled if the borrower is in default
under the terms of the loan agreement. Because the Bank is unable to estimate
the extent to which its borrowers will exercise their preapproved renewal
options, the table is based on contractual maturities excluding renewal options.
Credit Risk Management
The Company assesses and manages credit risk on an ongoing basis through
diversification, lending limits, credit review and approval policies and
internal monitoring. As part of the control process, an independent credit
review function regularly examines the Company's loan portfolio. In addition to
this internal credit process, the Company's loan portfolio is subject to
examination by external regulators in the normal course of business. Credit
quality will be influenced by underlying trends in the economic and business
cycle. The Company seeks to manage and control its risk through diversification
of the portfolio by type of loan, industry concentration and type of borrower.
The Company has taken, and continues to take, steps intended to address the
Bank's lending policies and procedures, improve the internal loan approval,
review and classification processes and increase the accountability of lending
personnel at all levels.
Real Estate Lending
The Company engages in real estate lending in the form of construction
loans and permanent loans secured by deeds of trust. Management believes that
the Southern California real estate market is currently undergoing the most
difficult real estate cycle since the end of World War II, and, accordingly,
this portfolio continues to be monitored closely.
At year-end 1993, real estate loans totaled $635.4 million, or 39.2% of
total loans, compared with 40.3% and 40.4% at year-end 1992 and 1991. Real
estate loans decreased 20.9% from 1991 to 1992 and 24.1% from 1992 to 1993. In
addition to real estate outstandings, the Company had open but unused
commitments, excluding those under ELC loans to lend against real estate at
December 31, 1993, of $7.5 million, down from $15.9 million at December 31,
1992. Such commitments, a portion of which typically expires unused, reflected
diversification by project type comparable with that of related outstandings.
26
<PAGE> 22
On January 17, 1994 and during the days thereafter, Los Angeles, California
was struck by a series of strong earthquakes. The Bank is currently in the
process of accumulating data on the collateral securing its loans in the
affected areas. Based on the information currently available, the Bank does not
believe earthquake related losses, including those related to its facilities,
will be material to the Bank's financial condition.
REAL ESTATE CONSTRUCTION LOANS BY TYPE
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1993 1992
-------- --------
DOLLARS IN THOUSANDS
<S> <C> <C>
Condo/apartment........................................ $ -- $ 19,517
Shopping centers....................................... -- 30,690
1 -- 4 family (includes land).......................... 594 12,900
Office building........................................ 7,282 24,129
Industrial............................................. -- 7,140
Other.................................................. 3,823 11,091
-------- --------
$ 11,699 $105,467
-------- --------
-------- --------
</TABLE>
REAL ESTATE MORTGAGE LOANS BY TYPE
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1993 1992
-------- --------
DOLLARS IN THOUSANDS
<S> <C> <C>
Equity lines of credit................................. $ 47,279 $157,913
Industrial............................................. 123,594 152,439
Office building........................................ 110,183 112,486
Shopping centers....................................... 68,236 66,307
Other 1 -- 4 family.................................... 37,347 55,945
Condo/apartment........................................ 54,040 49,885
Land, nonresidential................................... 32,885 36,870
Other.................................................. 150,089 99,389
-------- --------
$623,653 $731,234
-------- --------
-------- --------
</TABLE>
The Bank's exposure to real estate construction loans has declined
significantly. During 1994, the Bank plans to re-enter the construction loan
market on a limited basis.
The decrease in real estate mortgage loans between 1992 and 1993 was
primarily due to the $110.6 million decrease in ELC loans, which resulted from
sale of $73.7 million of ELC loans in April 1993 in addition to pay downs and
refinancings. Included in the Other category are loans totaling $56.0 million
that resulted from the financing of the sale of the assets in the Disposition
Program. Management believes that these loans do not pose risks significantly
greater than the Bank's existing real estate mortgage loan portfolio.
Nonaccrual real estate loans totaled $48.0 million, or 7.56% of related
loans outstanding, at December 31, 1993, down from $96.3 million, or 11.5% of
related loans outstanding at December 31, 1992, and from $82.0 million, or 7.8%,
at December 31, 1991. The decrease in nonaccrual real estate loans at December
31, 1993 compared with the two prior year ends is due to the sale of
nonperforming loans as part of the Disposition Program and the decrease in the
amount of loans placed on nonaccrual status in 1993.
Real estate net credit losses in 1993 totaled $25.5 million, or 3.74% of
related average outstandings, and represented 47.2% of total 1993 net credit
losses. Real estate net credit losses in 1992 totaled $20.4 million, or 2.18% of
related average outstandings.
27
<PAGE> 23
RISK ELEMENTS
Nonaccrual, Past Due and Restructured Loans
The following table presents information concerning nonaccrual loans, ORE,
accruing loans that are contractually past due 90 days or more as to interest or
principal payments and still accruing, and restructured loans:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------
1993 1992 1991 1990 1989
------- -------- -------- ------- -------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Real estate construction....................... $ -- $ 21,219 $ 51,455 $ -- $ --
Real estate mortgage........................... 48,016 75,128 30,522 22,639 578
Commercial..................................... 23,040 63,592 69,799 45,451 11,290
Installment.................................... -- 360 779 318 3,942
------- -------- -------- ------- -------
Total..................................... 71,056 160,299 152,555 68,408 15,810
ORE............................................ 5,559 94,065 64,510 2,130 --
------- -------- -------- ------- -------
Total nonaccrual loans and ORE................. $76,615 $254,364 $217,065 $70,538 $15,810
------- -------- -------- ------- -------
------- -------- -------- ------- -------
Total nonaccrual loans as a percentage of total 4.38% 7.72% 5.83% 2.24% .58%
loans........................................
Total nonaccrual loans and ORE as a percentage 4.71 11.73 8.10 2.31 .58
of total loans and ORE.......................
Allowance for credit losses to nonaccrual 155.51 84.90 82.44 87.83 231.59
loans........................................
Assets held for accelerated disposition........ $17,450 $ -- $ -- $ -- $ --
------- -------- -------- ------- -------
------- -------- -------- ------- -------
In-substance foreclosures -- intangible $ 4,740 $ 7,362 $ 8,734 $ -- $ --
assets.......................................
------- -------- -------- ------- -------
------- -------- -------- ------- -------
Loans past due 90 days or more on accrual
status:
Real estate.................................... $17,412 $ 25,458 $ 42,956 $17,079 $17,241
Commercial..................................... 11,382 1,464 26,492 16,798 21,790
Installment.................................... 155 36 3,587 491 3,099
------- -------- -------- ------- -------
Total..................................... $28,949 $ 26,958 $ 73,035 $34,368 $42,130
------- -------- -------- ------- -------
------- -------- -------- ------- -------
Restructured loans:
On accrual status.............................. $ 958 $ 1,144 $ -- $ -- $ 691
On nonaccrual status........................... -- -- -- 8,210 7,555
------- -------- -------- ------- -------
Total..................................... $ 958 $ 1,144 $ -- $ 8,210 $ 8,246
------- -------- -------- ------- -------
------- -------- -------- ------- -------
</TABLE>
28
<PAGE> 24
The table below summarizes the approximate changes in nonaccrual loans for
the years ended December 31, 1993 and 1992.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
1993 1992
-------- --------
DOLLARS IN THOUSANDS
<S> <C> <C>
Balance, beginning of year............................. $160,299 $152,555
Loans placed on nonaccrual............................. 105,695 262,273
Charge offs............................................ (66,834) (96,603)
Loans returned to accrual status....................... (43,052) (43,181)
Repayments (including interest applied to principal)... (56,462) (52,978)
Transfers to ORE....................................... (13,892) (60,735)
Transfers to assets held for accelerated disposition,
net.................................................. (14,698) --
Transfers to in-substance foreclosures -- intangible
assets............................................... -- (1,032)
-------- --------
Balance, end of year................................... $ 71,056 $160,299
-------- --------
-------- --------
</TABLE>
The additional interest income that would have been recorded from
nonaccrual loans if the loans had not been on nonaccrual status was $8.5
million, $12.6 million and $12.3 million for the years ended December 31, 1993,
1992 and 1991, respectively. Interest payments received on nonaccrual loans are
applied to principal unless there is no doubt as to ultimate full repayment of
principal, in which case, the interest payment is recognized as interest income.
Interest income includes $3.9 million, $3.2 million and $5.1 million for the
years ended December 31, 1993, 1992, and 1991, respectively, from collection of
interest related to nonaccrual loans. Interest income not recognized on
nonaccrual loans reduced the net interest margin by 33, 36, and 30 basis points
for the years ended December 31, 1993, 1992, and 1991, respectively.
It is the Bank's policy that a loan will be placed on nonaccrual status if
either principal or interest payments are past due in excess of 90 days unless
the loan is both well secured and in process of collection, or if full
collection of interest or principal becomes uncertain, regardless of the time
period involved.
At December 31, 1993, in addition to loans disclosed above as past due,
nonaccrual or restructured, management also identified $40.0 million of loans
about which it had serious doubts as to the ability of the borrowers to comply
with the present loan payment terms in the future. This amount was determined
based on analysis of information known to management about the borrower's
financial condition and current and expected economic conditions. Unfunded loan
commitments pertaining to these potential problem loans total $1.5 million. If
economic conditions change, adversely or otherwise, or if additional facts on
borrowers' financial condition come to light, then the amount of such potential
problem loans may change, possibly significantly. Estimated potential losses
from these potential problem loans have been provided for in determining the
allowance for credit losses.
At December 31, 1993, the allowance for credit losses was 6.82% of gross
loans, compared with 6.56% at December 31, 1992. The allowance at December 31,
1993 was equal to 155.51% of total nonaccrual loans, as compared with 84.90% at
December 31, 1992.
29
<PAGE> 25
The following table summarizes average loans outstanding at year end and
changes in the allowance for credit losses for the five-year period 1989 to
1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Average amount of loans
outstanding................ $1,737,401 $2,315,285 $2,852,311 $2,875,154 $2,527,224
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Balance of allowance for
credit losses, beginning of
year....................... $ 136,095 $ 125,766 $ 60,083 $ 36,615 $ 28,522
---------- ---------- ---------- ---------- ----------
Loans charged off:
Commercial loans........... 56,012 97,751 47,600 21,707 10,020
Real estate loans --
construction............ 3,183 11,321 6,219 1,000 --
Real estate
loans -- mortgage....... 23,149 9,209 3,212 -- --
Installment loans.......... 621 1,460 779 668 1,993
---------- ---------- ---------- ---------- ----------
Total loans charged
off................... 82,965 119,741 57,810 23,375 12,013
---------- ---------- ---------- ---------- ----------
Recoveries of loans
previously charged off:
Commercial loans........... 27,842 15,243 5,242 3,727 2,346
Real estate loans --
construction............ 20 167 20 -- --
Real estate
loans -- mortgage....... 767 6 98 -- 1,300
Installment loans.......... 215 154 133 116 1,314
---------- ---------- ---------- ---------- ----------
Total recoveries........ 28,844 15,570 5,493 3,843 4,960
---------- ---------- ---------- ---------- ----------
Net loans charged off........ 54,121 104,171 52,317 19,532 7,053
Additions to allowance
charged to operating
expense.................... 30,000 114,500 118,000 43,000 15,146
Other(1)..................... (1,475) -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance, end of year......... $ 110,499 $ 136,095 $ 125,766 $ 60,083 $ 36,615
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of net charge offs to
average loans.............. 3.12% 4.50% 1.83% .68% .28%
</TABLE>
- ---------------
(1) Allowance for credit losses allocated to $73.7 million of ELC loans sold in
April 1993.
The following table reflects management's allocation of the allowance for
credit losses by loan category and the ratio of loans in each category to total
loans at December 31 for each of the last five years.
<TABLE>
<CAPTION>
ALLOWANCE AMOUNT PERCENT OF LOANS TO TOTAL LOANS
-------------------------------------------------- --------------------------------
1993 1992 1991 1990 1989 1993 1992 1991 1990 1989
-------- -------- -------- ------- ------- ---- ---- ---- ---- ----
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial............................. $ 53,110 $ 72,029 $ 77,780 $45,933 $33,060 58% 57% 57% 57% 57%
Real estate -- construction............ 1,410 10,500 24,926 8,000 804 1 5 12 15 15
Real estate -- mortgage................ 55,120 52,323 21,560 4,700 1,307 38 35 28 26 25
Installment............................ 859 1,243 1,500 1,450 1,444 3 3 3 2 3
-------- -------- -------- ------- ------- ---- ---- ---- ---- ----
Total.............................. $110,499 $136,095 $125,766 $60,083 $36,615 100% 100% 100% 100% 100%
-------- -------- -------- ------- ------- ---- ---- ---- ---- ----
-------- -------- -------- ------- ------- ---- ---- ---- ---- ----
</TABLE>
The allowance allocated to the loan categories shown above is based on
previous loan loss experience, management's evaluation of the current loan
portfolio, and anticipated economic conditions. While amounts are allocated to
specific loans and to portfolio segments, the allowance is general in nature and
is available for the portfolio in its entirety.
30
<PAGE> 26
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan." SFAS No. 114 is
effective January 1, 1995; earlier implementation is encouraged.
A loan is considered impaired when it is probable that a creditor will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. Once a loan is determined to be impaired, SFAS No. 114 requires that
the impairment be measured based on the present value of the expected future
cash flows discounted at the loan's effective interest rate, except that as a
practical expedient, the impairment may be measured by using the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent.
If the measurement of the impaired loan is less than the recorded amount of
the loan, an impairment will be recognized by creating a valuation allowance
with a corresponding charge to the provision for credit losses or by adjusting
an existing valuation allowance for the impaired loan with a corresponding
charge or credit to the provision for credit losses.
The change in estimated present value of the expected future cash flows is
to be reported in future periods either entirely as an adjustment to the
provision for credit losses or by separately increasing interest income for the
amount of the present value change attributable to the passage of time. For
impaired loans that are measured by using an observable market price or the fair
value of collateral, the change, if any, in market price or fair value is to be
reported in future periods as an adjustment of the valuation allowance and,
correspondingly, the provision for credit losses.
The Company has not yet determined when it will implement SFAS No. 114, but
believes that adoption of SFAS No. 114 will not have a material impact on its
results of operations or shareholders' equity.
Other Real Estate
The Company's ORE totaled $5.6 million at year end 1993, down from $94.1
million a year ago, and $64.5 million at December 31, 1991. The decrease in ORE
resulted from the transfer of $91.1 million of ORE during 1993 to the
Disposition Program. The Company's policy is to record these properties at the
estimated fair value, net of selling expenses, at the time they are transferred
into ORE, thereby tying future gains or losses from sale or potential additional
writedowns to underlying changes in the market. The fair value of the ORE is
based on a current appraisal. As a result of writedowns, including the $36.5
million taken upon adoption of the Disposition Program in March 1993, net costs
of other real estate totaled $25.7 million in 1993, up from $20.8 million in
1992 and $2.5 million in 1991. Net ORE expense for 1993 included a $12.8 million
gain recorded in the fourth quarter upon the sale of a portion of the assets in
the Disposition Program.
ORE BY TYPE
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1993 1992
------ -------
DOLLARS IN THOUSANDS
<S> <C> <C>
Shopping centers........................................ $ -- $24,835
Industrial.............................................. -- 17,545
1 -- 4 family........................................... 1,938 15,662
Land (excluding 1 -- 4 family).......................... 3,200 14,941
Apartments.............................................. -- 8,553
Office buildings........................................ -- 5,962
Other................................................... 421 6,567
------ -------
Total................................................. $5,559 $94,065
------ -------
------ -------
</TABLE>
31
<PAGE> 27
The following table summarizes the changes in ORE balances:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
1993 1992
------- -------
DOLLARS IN THOUSANDS
<S> <C> <C>
Balance, beginning of year............................................. $94,065 $64,510
Additions.............................................................. 17,298 72,813
Sales.................................................................. (5,639) (16,037)
Writedowns............................................................. (40,283) (18,388)
Payments and other reductions.......................................... (5,496) (8,833)
Transfers to assets held for accelerated disposition, net.............. (54,386) --
------- -------
Balance, end of year................................................... $ 5,559 $94,065
------- -------
------- -------
</TABLE>
Assets Held for Accelerated Disposition
In March 1993, the Bank adopted an accelerated asset disposition program to
aggressively dispose of ORE and certain problem loans with an aggregate book
value before the Disposition Program of $119.5 million.
The Bank signed a definitive agreement to sell, as of November 1, 1993, all
six asset pools in its Accelerated Asset Disposition Program to WHC-THREE
Investors, L.P. ("WHC-THREE"), a limited partnership. The sale of the loans
contained in the Disposition Program for $48.3 million closed concurrently with
the signing of the definitive agreement and a gain of $12.8 million was
recognized at that time, net of disposition expenses and reserves. The sale of
the Disposition Program ORE, which is carried at $17.5 million at December 31,
1993, is expected to close in the first part of 1994 at which time a pretax gain
of approximately $3.5 million is expected to be recognized. From November 17,
1993 until closing, WHC-THREE has provided interim mortgages totaling $26.3
million which will be cancelled in exchange for title to the ORE properties at
the closing of the sale of these properties.
The Bank provided loans totaling $56.0 million (75% financing) for this
sale at terms comparable with other real estate loans in its portfolio. The
terms of the notes require annual pay downs and payment of the remaining
principal in five years, in addition to payments when individual real estate
assets securing the loans are sold or refinanced.
DEPOSITS
Maturity distribution of time deposits of $100,000 or more at December 31,
1993 is as follows:
<TABLE>
<CAPTION>
PUBLIC
TIME CERTIFICATES
DEPOSITS OF DEPOSITS TOTAL
-------- ------------- ---------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Under 3 months.............................................. $1,400 $ 113,565 $ 114,965
3 to 6 months............................................... -- 24,338 24,338
6 to 12 months.............................................. 120 15,026 15,146
Over 12 months.............................................. -- 13,984 13,984
-------- ------------- ---------
Total.................................................. $1,520 $ 166,913 $ 168,433
-------- ------------- ---------
-------- ------------- ---------
</TABLE>
Deposits
At December 31, 1993 and 1992, the aggregate amount of deposits by foreign
depositors in domestic offices totaled approximately $27.0 million and $33.0
million, respectively, the majority of which was interest bearing. The Bank had
no brokered deposits at December 31, 1993 or 1992.
32
<PAGE> 28
SHORT-TERM BORROWINGS
The following table summarizes short-term borrowings and weighted average
rates.
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------- -------------------------------- --------------------------------
BALANCE AT AVERAGE AVERAGE BALANCE AT AVERAGE AVERAGE BALANCE AT AVERAGE AVERAGE
YEAR END BALANCE RATE YEAR END BALANCE RATE YEAR END BALANCE RATE
----------- -------- -------- ----------- -------- ------- ----------- -------- -------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds purchased
and securities sold
under repurchase
agreements............ $ 202,459 $265,082 2.83% $ 339,149 $488,520 3.32% $ 579,326 $531,590 5.37%
Other short-term
borrowings............ 15,000 14,000 3.17 15,000 14,279 3.66 15,000 14,561 5.96
</TABLE>
The maximum amount of federal funds purchased and securities sold with
agreements to repurchase at any month end was $422,964, $622,308 and $679,862 in
1993, 1992 and 1991.
The maximum amount of other short-term borrowings at any month end was
$15,000 during the three years ended December 31, 1993, 1992 and 1991.
MARKET DATA ON SHARES OF COMMON STOCK
Principal Market: NYSE
Stock Symbol: CYN
<TABLE>
<CAPTION>
1993 1992
-------------- --------------
TRADING PRICES TRADING PRICES
-------------- --------------
<S> <C> <C>
First quarter................................. Hi 11 1/8 Hi 15 1/8
Lo 6 5/8 Lo 11 1/2
Second quarter................................ Hi 10 1/2 Hi 13 1/4
Lo 6 5/8 Lo 10 7/8
Third quarter................................. Hi 8 3/4 Hi 12
Lo 6 5/8 Lo 6 3/8
Fourth quarter................................ Hi 8 3/8 Hi 8 3/8
Lo 7 1/8 Lo 4 3/4
</TABLE>
Market prices based on the sales prices during quarter as reported in The Wall
Street Journal.
The number of shareholders of record as of December 31, 1993 was 2,629.
No dividends were declared in 1993 or 1992.
FORM 10-K
For shareholders and others interested in information beyond that shown in
this report, the Company's Annual Report on Form 10-K for 1993, required to be
filed with the Securities and Exchange Commission, may be obtained without
charge by writing to:
Heng Chen, Senior Vice President
Finance Division, City National Bank
400 North Roxbury Drive,
Beverly Hills, CA 90210.
33
<PAGE> 29
QUARTERLY OPERATING RESULTS
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- -------- ------------ ------------ ---------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
1993
Interest income
From loans.................................... $ 36,118 $ 32,489 $ 30,528 $ 32,015 $ 131,150
From investments.............................. 8,451 8,211 10,072 11,908 38,642
-------- -------- ------------ ------------ ---------
44,569 40,700 40,600 43,923 169,792
Interest expense................................ (12,122) (10,320) (9,965) (9,589) (41,996)
-------- -------- ------------ ------------ ---------
Net interest income............................. 32,447 30,380 30,635 34,334 127,796
Provision for credit losses..................... (11,500) (7,500) (5,500) (5,500) (30,000)
-------- -------- ------------ ------------ ---------
Net interest income after provision for credit
losses........................................ 20,947 22,880 25,135 28,834 97,796
Noninterest income.............................. 11,679 14,559 10,307 9,265 45,810
Noninterest expense............................. (72,763) (32,134) (30,430) (31,573) (166,900)
-------- -------- ------------ ------------ ---------
Income (loss) before taxes from continuing
operations.................................... (40,137) 5,305 5,012 6,526 (23,294)
Income taxes (benefit).......................... (14,283) 1,543 1,537 1,943 (9,260)
-------- -------- ------------ ------------ ---------
Income (loss) from continuing operations........ (25,854) 3,762 3,475 4,583 (14,034)
Income from discontinued operations............. -- 7,128 -- -- 7,128
-------- -------- ------------ ------------ ---------
Net income (loss)............................... $(25,854) $ 10,890 $ 3,475 $ 4,583 $ (6,906)
-------- -------- ------------ ------------ ---------
-------- -------- ------------ ------------ ---------
Income (loss) per share from continuing
operations.................................... $ (.80) $ .11 $ .08 $ .10 $ (.35)
-------- -------- ------------ ------------ ---------
-------- -------- ------------ ------------ ---------
Net income (loss) per share(1).................. $ (.80) $ .30 $ .08 $ .10 $ (.17)
-------- -------- ------------ ------------ ---------
-------- -------- ------------ ------------ ---------
</TABLE>
- ---------------
(1) Because of the higher number of shares outstanding due to the Offering, the
net loss per share for 1993 does not equal the sum of the net income (loss)
per share for each of the quarters.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- -------- ------------ ------------ ---------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
1992
Interest income
From loans.................................... $ 49,579 $ 45,513 $ 41,446 $ 38,644 $ 175,182
From investments.............................. 16,512 16,045 14,428 10,882 57,867
-------- -------- ------------ ------------ ---------
66,091 61,558 55,874 49,526 233,049
Interest expense................................ (26,219) (23,476) (19,913) (14,825) (84,433)
-------- -------- ------------ ------------ ---------
Net interest income............................. 39,872 38,082 35,961 34,701 148,616
Provision for credit losses..................... (4,500) (95,000) (7,500) (7,500) (114,500)
-------- -------- ------------ ------------ ---------
Net interest income after provision for credit
losses........................................ 35,372 (56,918) 28,461 27,201 34,116
Noninterest income.............................. 10,954 11,493 11,370 13,177 46,994
Noninterest expense............................. (39,795) (49,568) (44,226) (40,123) (173,712)
-------- -------- ------------ ------------ ---------
Income (loss) before taxes from continuing
operations.................................... 6,531 (94,993) (4,395) 255 (92,602)
Income taxes (benefit).......................... 2,014 (32,146) (1,824) (494) (32,450)
-------- -------- ------------ ------------ ---------
Income (loss) from continuing operations........ 4,517 (62,847) (2,571) 749 (60,152)
Income from discontinued operations............. 189 235 241 139 804
-------- -------- ------------ ------------ ---------
Net income (loss)............................... $ 4,706 $(62,612) $ (2,330) $ 888 $ (59,348)
-------- -------- ------------ ------------ ---------
-------- -------- ------------ ------------ ---------
Income (loss) per share from continuing
operations.................................... $ .14 $ (1.95) $ (.08) $ .02 $ (1.87)
-------- -------- ------------ ------------ ---------
-------- -------- ------------ ------------ ---------
Net income (loss) per share..................... $ .14 $ (1.94) $ (.07) $ .03 $ (1.84)
-------- -------- ------------ ------------ ---------
-------- -------- ------------ ------------ ---------
</TABLE>
34
<PAGE> 30
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation of the Company's consolidated
financial statements and related information appearing in this annual report.
Management believes that the consolidated financial statements fairly reflect
the form and substance of transactions, and that the financial statements
reasonably present the Company's financial position and results of operations in
conformity with generally accepted accounting principles. Management also has
included in the Company's financial statements amounts that are based on
estimates and judgments that it believes are reasonable under the circumstances.
The independent auditors audit the Company's consolidated financial
statements in accordance with generally accepted auditing standards and provide
an objective, independent review of the fairness of reported operating results
and financial position.
The Board of Directors of the Corporation has an Audit Committee composed
solely of three nonmanagement Directors. The Committee meets periodically with
financial management, the internal auditors and the independent auditors to
review accounting, control, auditing and financial reporting matters.
Bram Goldsmith Frank P. Pekny
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick
To the Board of Directors and Shareholders of
City National Corporation:
We have audited the accompanying consolidated balance sheet of City
National Corporation and subsidiaries as of December 31, 1993, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of City National Corporation and subsidiaries
for the year ended December 31, 1992 and for each of the years in the two-year
period ended December 31, 1992, were audited by other auditors whose report
dated January 13, 1993 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurances about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1993 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of City
National Corporation and subsidiaries at December 31, 1993 and the results of
their operations and their cash flows for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Notes 1 and 3, the Company changed its method of accounting
for investments as of December 31, 1993 to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." As
discussed in Notes 1 and 9, the Company changed its method of accounting for
income taxes as of January 1, 1993 to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
KPMG PEAT MARWICK
Los Angeles, California
January 21, 1994
35
<PAGE> 31
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1993 1992
---------- ----------
DOLLARS IN THOUSANDS
<S> <C> <C>
ASSETS
Cash and due from banks............................................. $ 234,504 $ 390,967
Interest-bearing deposits in other banks............................ 649 14,956
Federal funds sold and securities purchased under resale
agreements........................................................ 265,000 468,850
Investment securities (market value $902,738 in 1993 and $420,367 in
1992)............................................................. 902,481 413,645
Securities available for sale (market value $2,000 in 1993 and
$30,662 in 1992).................................................. 2,000 30,277
Trading account securities.......................................... 39,765 10,258
Loans............................................................... 1,620,556 2,075,202
Less allowance for credit losses.................................... (110,499) (136,095)
---------- ----------
Net loans......................................................... 1,510,057 1,939,107
Leveraged leases.................................................... 13,852 14,365
Premises and equipment, net......................................... 20,359 23,519
Customers' acceptance liability..................................... 5,150 7,020
Other real estate................................................... 5,559 94,065
Deferred tax asset.................................................. 18,050 37,120
Assets held for accelerated disposition............................. 17,450 --
Other assets........................................................ 65,750 69,953
---------- ----------
Total assets...................................................... $3,100,626 $3,514,102
---------- ----------
---------- ----------
LIABILITIES
Demand deposits..................................................... $1,088,026 $1,259,590
Interest checking deposits.......................................... 324,034 349,803
Money market deposits............................................... 742,381 825,824
Savings deposits.................................................... 107,221 95,705
Time deposits -- under $100,000..................................... 96,672 119,082
Time deposits -- $100,000 and over.................................. 168,433 261,272
---------- ----------
Total deposits.................................................... 2,526,767 2,911,276
---------- ----------
Federal funds purchased and securities sold under repurchase
agreements........................................................ 202,459 339,149
Other short-term borrowings......................................... 15,000 15,000
Mortgages payable................................................... 26,319 --
Other liabilities................................................... 26,857 13,713
Acceptances outstanding............................................. 5,150 7,020
---------- ----------
Total liabilities................................................. 2,802,552 3,286,158
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, authorized -- 5,000,000 shares in 1993, none
outstanding....................................................... --
Common Stock, par value $1.00, authorized -- 75,000,000 shares in
1993 and 50,000,000 shares in 1992................................
Outstanding -- 45,027,417 shares in 1993 and 32,239,714 shares in
1992.............................................................. 45,027 32,240
Additional paid in capital.......................................... 262,471 198,222
Accumulated deficit................................................. (9,424) (2,518)
---------- ----------
Total shareholders' equity........................................ 298,074 227,944
---------- ----------
Total liabilities and shareholders' equity........................ $3,100,626 $3,514,102
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
36
<PAGE> 32
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------
1993 1992 1991
---------- ---------- ----------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans......................................... $ 131,150 $ 175,182 $ 273,628
Interest on interest-bearing deposits in other banks............... 30 67 297
Interest on federal funds sold and securities purchased under
resale agreements................................................ 9,357 19,592 33,450
Interest on investment securities:
U.S. treasury and federal agency securities...................... 26,190 30,127 38,982
Municipal securities............................................. 122 5,488 8,367
Other securities................................................. 783 941 2,428
Interest on securities available for sale.......................... 1,001 74 --
Interest on trading account........................................ 1,159 1,578 3,682
---------- ---------- ----------
Total.......................................................... 169,792 233,049 360,834
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits............................................... 33,974 67,690 150,901
Interest on federal funds purchased and securities sold under
repurchase agreements............................................ 7,499 16,220 28,550
Interest on other short-term borrowings............................ 523 523 868
---------- ---------- ----------
Total.......................................................... 41,996 84,433 180,319
---------- ---------- ----------
Net interest income................................................ 127,796 148,616 180,515
Provision for credit losses........................................ 30,000 114,500 118,000
---------- ---------- ----------
Net interest income after provision for credit losses.............. 97,796 34,116 62,515
---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts................................ 11,570 10,618 9,305
Trust fees......................................................... 7,390 7,480 7,087
Customer trading account income.................................... 6,288 6,439 5,141
Credit card merchant fees.......................................... -- 4,537 4,142
Gain on sale of selected ELC loans................................. 4,460 -- --
Gain on sale of merchant draft business............................ 1,941 -- --
Net gain on securities available for sale.......................... -- 1,629 --
All other income................................................... 14,161 16,291 17,657
---------- ---------- ----------
Total.......................................................... 45,810 46,994 43,332
---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and other employee benefits............................... 69,783 83,563 83,211
Net occupancy of premises.......................................... 11,828 11,546 11,286
Data processing.................................................... 7,757 8,007 7,857
Professional....................................................... 7,348 8,437 7,921
FDIC insurance..................................................... 7,202 7,504 7,867
Office supplies.................................................... 4,994 5,951 6,122
Depreciation....................................................... 4,516 4,725 4,883
Equipment.......................................................... 1,996 2,283 2,674
Promotion.......................................................... 1,900 3,012 3,598
Other operating.................................................... 11,902 17,859 12,883
Consolidation charge............................................... 12,000 -- --
ORE................................................................ 25,674 20,825 2,548
---------- ---------- ----------
Total.......................................................... 166,900 173,712 150,850
---------- ---------- ----------
Loss from continuing operations before taxes....................... (23,294) (92,602) (45,003)
Income taxes (benefit)............................................. (9,260) (32,450) (22,387)
---------- ---------- ----------
Loss from continuing operations.................................... (14,034) (60,152) (22,616)
Income from discontinued operations................................ 7,128 804 1,396
---------- ---------- ----------
Net loss........................................................... $ (6,906) $ (59,348) (21,220)
---------- ---------- ----------
---------- ---------- ----------
Loss per share from continuing operations............................ $ (.35) $ (1.87) $ (.70)
---------- ---------- ----------
---------- ---------- ----------
Loss per share..................................................... $ (.17) $ (1.84) $ (.66)
---------- ---------- ----------
---------- ---------- ----------
Shares used to compute loss per share.............................. 39,580,069 32,239,714 32,214,230
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
37
<PAGE> 33
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------------------
1993 1992 1991
--------- ---------- ----------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss....................................................... $ (6,906) $ (59,348) $ (21,220)
Adjustments to net loss:
Provision for credit losses.................................. 30,000 114,500 118,000
Writedown on ORE............................................. 40,283 18,388 1,531
(Gain)/loss on sales of ORE and disposition program.......... (15,568) (365) 352
Depreciation................................................. 4,516 4,725 4,883
Net (increase) decrease in trading account securities........ (29,507) 102,029 (579)
Net (increase) decrease in deferred tax benefits............. 19,070 (3,972) (31,380)
Increase (decrease) in accrued liabilities, net.............. 11,879 2,734 58
Other, net................................................... (5,287) (17,170) (6,612)
--------- ---------- ----------
Net cash provided by operating activities.................... 48,480 161,521 65,033
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in short-term investments......................... 14,307 15,044 20,001
Securities sold................................................ -- 34,615 4,395
Maturities of investment securities............................ 230,357 522,641 424,872
Maturities of securities available for sale.................... 18,928 -- --
Purchase of investment securities.............................. (711,798) (271,608) (533,986)
Loan originations and principal collections, net............... 354,191 363,017 322,043
Proceeds from sales of ORE and disposition program assets...... 41,639 16,402 3,928
Proceeds from sales of loans................................... 76,684 -- --
Other, net..................................................... 9,450 11,647 (3,327)
--------- ---------- ----------
Net cash provided by (used in) investing activities..... 33,758 691,758 237,926
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements.................. (136,690) (240,177) 91,057
Net decrease in deposits....................................... (384,509) (752,943) (437,879)
Proceeds from issuance of stock................................ 76,989 -- --
Cash dividends paid............................................ -- -- (15,434)
Other, net..................................................... 1,659 (1,963) (1,142)
--------- ---------- ----------
Net cash provided by (used in) financing activities..... (442,551) (995,083) (363,398)
--------- ---------- ----------
Net increase (decrease) in cash and cash equivalents........... (360,313) (141,804) (60,439)
Cash and cash equivalents at beginning of year................. 859,817 1,001,621 1,062,060
--------- ---------- ----------
Cash and cash equivalents at end of year................ $ 499,504 $ 859,817 $1,001,621
--------- ---------- ----------
--------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest..................................................... $ 42,771 $ 88,700 $ 184,400
Income taxes................................................. (30,018) (6,909) 20,000
Noncash investing activities:
Transfer from loans to foreclosed assets..................... 28,590 72,813 68,191
Transfers from (to) investment securities to/from securities
available for sale......................................... (8,201) 30,277 --
Loan to facilitate sale of disposition program assets........ 55,955 -- --
Noncash financing activities:
Proceeds from mortgages payable................................ 26,319 -- --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
38
<PAGE> 34
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
SHARES COMMON PAID IN ACCUMULATED SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL DEFICIT EQUITY
----------- ------- ---------- ----------- -------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1990.............. 32,125,565 $32,126 $ 197,218 $ 88,344 $ 317,688
Net loss................................. -- -- -- (21,220) (21,220)
Stock options exercised.................. 88,665 88 637 -- 725
Tax benefit from stock options........... -- -- 165 -- 165
Cash dividends -- $.32 per share......... --......... -- -- (10,294) (10,294)
----------- ------- ---------- ----------- -------------
Balances, December 31, 1991.............. 32,214,230 32,214 198,020 56,830 287,064
Net loss................................. -- -- -- (59,348) (59,348)
Stock options exercised.................. 25,484 26 164 -- 190
Tax benefit from stock options........... -- -- 38 -- 38
----------- ------- ---------- ----------- -------------
Balances, December 31, 1992.............. 32,239,714 32,240 198,222 (2,518) 227,944
Net loss................................. -- -- -- (6,906) (6,906)
Stock options exercised.................. 70,892 71 417 -- 488
Proceeds from rights offering............ 12,716,811 12,716 63,785 -- 76,501
Tax benefit from stock options........... -- -- 47 -- 47
----------- ------- ---------- ----------- -------------
Balances, December 31, 1993.............. 45,027,417 $45,027 $ 262,471 $ (9,424) $ 298,074
----------- ------- ---------- ----------- -------------
----------- ------- ---------- ----------- -------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
39
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of City National Corporation (the
Corporation) and of City National Bank (the Bank) and its subsidiaries conform
to generally accepted accounting principles and to prevailing practices within
the banking industry.
Basis of Presentation
The consolidated financial statements of the Company include the accounts
of the Corporation, the Bank (100% owned), and its wholly owned subsidiaries
after elimination of all material intercompany transactions. The Bank also has,
through its subsidiaries, a 32% interest in a real estate partnership. The
Bank's equity in the net income and capital of this partnership is included in
the consolidated financial statements. Certain prior years' data have been
reclassified to conform to current year presentation.
Securities
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," which requires classification of securities as
investment securities, available-for-sale securities or trading account
securities. The Company had previously classified securities as investment
securities (recorded at amortized cost), available-for-sale securities (recorded
at the lower of cost or market) or trading account securities (recorded at
market).
Securities held for investment are classified as investment securities.
Because the Company has the ability and management has the intent to hold
investment securities until maturity, investment securities are stated at cost
adjusted for amortization of premiums and accretion of discounts. Trading
account securities are stated at market value. Investments not classified as
trading securities nor as investment securities are classified as
available-for-sale securities and recorded at fair value. Unrealized holding
gains or losses for available-for-sale securities are excluded from earnings and
reported as a net amount, after taxes, in a separate component of shareholders'
equity until realized. Customer trading account income consists of fees,
commissions and markups on securities transactions with customers.
Loans
Loans are generally carried at amounts advanced less principal payments
collected and unamortized nonrefundable fees. Interest income is accrued as
earned. Loans held for sale are recorded at the lower of cost or market value.
Loans are placed on nonaccrual status when a loan becomes 90 days past due
as to interest or principal unless the loan is both well secured and in process
of collection. Loans are also placed on nonaccrual status when the full
collection of interest or principal becomes uncertain. When a loan is placed on
nonaccrual status, the accrued and unpaid interest receivable is reversed.
Thereafter, interest collected on the loan is accounted for on the cash or cost
recovery method until it qualifies for return to accrual status. Generally, a
loan may be returned to accrual status when all delinquent principal and
interest is brought current in accordance with the terms of the loan agreement
and certain performance criteria have been met.
Allowance for Credit Losses
The provision for credit losses charged to operations reflects management's
judgment of the adequacy of the allowance for credit losses and is determined
through periodic analytical reviews of the loan portfolio, consideration of the
Bank's loan loss experience, trends in problem loans, concentrations of credit
risk, current and expected future economic conditions as well as the results of
the Company's ongoing examination process and that of its regulators.
Leveraged Leases
Income from leveraged leases is recognized over the terms of the leases
based upon the unrecovered equity investment.
40
<PAGE> 36
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed generally on a
straight-line basis over the estimated useful life of each type of asset. Gains
and losses on dispositions are reflected in current operations. Maintenance and
repairs are charged to operating expenses.
Other Real Estate (ORE)
Other real estate is comprised of real estate acquired in satisfaction of
loans and in-substance foreclosures. In-substance foreclosures are properties in
which a borrower with little or no equity in the collateral effectively abandons
control of the property or has no economic interest to continue involvement in
the property. The borrower's ability to rebuild equity, based on current
financial conditions, is considered doubtful. Property acquired by foreclosure
or deed in lieu of foreclosure and properties classified as in-substance
foreclosures are transferred to ORE and are recorded at fair value, less
estimated costs to sell, at the date of transfer of the property constructively
or actually received. The fair value of the ORE property is based upon a current
appraisal. Losses that result from the ongoing periodic valuation of these
properties are charged against ORE expense in the period in which they are
identified. Expenses for holding costs are charged to operations as incurred.
Income Taxes
The Company has adopted SFAS No. 109, "Accounting for Income Taxes," which
mandates the asset and liability method of accounting for deferred taxes
effective January 1, 1993. The Company had previously accounted for deferred
taxes under the deferral method required by Accounting Principles Board (APB)
Opinion 11. Pursuant to the deferral method, which was applied in 1992 and prior
years, deferred income taxes were recognized for income and expense items that
were reported in different years for financial reporting purposes and income tax
purposes using the tax rate applicable for the year of the calculation. Under
the deferral method, deferred taxes were not adjusted for subsequent changes in
tax rates.
Deferred tax assets and liabilities are recognized for the expected future
tax consequences of existing differences between financial reporting and tax
reporting basis of assets and liabilities, as well as for operating losses and
tax credit carry forwards, using enacted tax laws and rates. Deferred tax assets
will be reduced through a valuation allowance whenever it becomes more likely
than not that all, or some portion, will not be realized. Deferred income taxes
(benefit) represents the net change in the deferred tax asset or liability
balance during the year. This amount, together with income taxes currently
payable or refundable in the current year, represents the total income taxes
(benefit) for the year.
Income Per Share
Income per share is computed on the basis of the average number of common
shares outstanding during each period plus the common stock equivalents that
would arise from exercise of common stock options in periods when there is a
dilutive effect.
Other
The Corporation and its subsidiaries are on the accrual basis of accounting
for income and expenses. In accordance with the usual practice of banks, assets
and liabilities of individual trust, agency and fiduciary funds have not been
included in the accounts.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, federal funds sold and securities
purchased under resale agreements. Generally, federal funds are purchased and
sold for one day periods.
Discontinued Operations
In December 1992, the Bank entered into an agreement with Systematics, Inc.
to sell its data processing business, City National Information Services (CNIS).
Accordingly, all income and expenses related to CNIS have been removed from
continuing operations and are now included in the Consolidated Statement of
Operations under the caption "Income from discontinued operations." Prior
periods have been restated. Except where noted, footnote disclosures relate
solely to continuing operations.
41
<PAGE> 37
NOTE 2 -- INVESTMENT SECURITIES
The following is a summary of data for the major categories of investment
securities:
<TABLE>
<CAPTION>
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
DECEMBER 31 VALUE GAINS LOSSES VALUE
-------- ---------- ---------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C>
1993
U.S. Government and federal agency securities......... $880,180 $ 2,883 $ 2,807 $880,256
State and municipal securities........................ 6,475 182 -- 6,657
Other securities...................................... 15,826 4 5 15,825
-------- ---------- ---------- --------
Total....................................... $902,481 $ 3,069 $ 2,812 $902,738
-------- ---------- ---------- --------
-------- ---------- ---------- --------
1992
U.S. Government and federal agency securities......... $403,973 $ 6,722 $ -- $410,695
Other securities...................................... 9,672 -- -- 9,672
-------- ---------- ---------- --------
Total....................................... $413,645 $ 6,722 $ -- $420,367
-------- ---------- ---------- --------
-------- ---------- ---------- --------
</TABLE>
There were no sales of investment securities in 1993. Investment securities
gains (losses) amounted to $1.6 million and none during 1992 and 1991,
respectively.
The carrying values and estimated market values of investment securities at
December 31, 1993, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
CARRYING VALUE MARKET VALUE
-------------- ------------
DOLLARS IN THOUSANDS
<S> <C> <C>
Due in one year or less.............................. $386,873 $388,263
Due after one year through five years................ 331,487 331,233
Due after five years through ten years............... 10,589 10,600
Due after ten years.................................. 167,700 166,810
Federal Reserve Bank and other securities............ 5,832 5,832
-------------- ------------
Total...................................... $902,481 $902,738
-------------- ------------
-------------- ------------
</TABLE>
Securities totaling $249.4 million at December 31, 1993 were pledged to
secure trust funds, public deposits and for other purposes required or permitted
by law.
NOTE 3 -- SECURITIES AVAILABLE FOR SALE
The Company adopted SFAS No. 115 as of December 31, 1993. The impact on
shareholders' equity or the results of operations was not material. Prior years'
financial statements have not been restated to apply the provisions of SFAS No.
115.
At December 31, 1993, securities available for sale consisted of
convertible preferred stock with a carrying value, which approximates market
value, of $2.0 million. At December 31, 1992, securities available for sale
consisted of state and municipal securities with a carrying value and an
estimated market value of $20.4 million and $20.6 million, respectively, in the
one year or less maturity category, $9.8 million and $9.9 million, respectively,
in the over one through five years maturity category and $.1 million and $.1
million, respectively, in the over five years through ten years category.
42
<PAGE> 38
NOTE 4 -- LOANS AND ALLOWANCE FOR CREDIT LOSSES
The following is a summary of the major categories of loans:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1993 1992
----------- -----------
DOLLARS IN THOUSANDS
<S> <C> <C>
Commercial.......................................................... $ 939,719 $ 1,177,948
Real estate -- construction......................................... 11,699 105,467
Real estate -- mortgage............................................. 623,653 573,321
Equity lines of credit, held for sale............................... -- 157,913
Installment......................................................... 45,485 60,553
----------- -----------
Total loans............................................... $ 1,620,556 $ 2,075,202
----------- -----------
----------- -----------
</TABLE>
Equity lines of credit are carried as loans held for sale at December 31,
1992. In the second quarter of 1993, the Bank sold $73.7 million of ELC loans
and reclassified the remaining balance to real estate mortgage loans due to the
Bank's improved liquidity. At December 31, 1993, ELC loans totaled $47.3
million.
The Company has a significant amount of credit exposure to the commercial
real estate industry, particularly in Southern California.
In the normal course of business, the Bank has loans to officers and
directors as well as loans to companies and individuals affiliated with or
guaranteed by officers and directors of the Corporation and the Bank. These
loans were made in the ordinary course of business at rates and terms no more
favorable than those offered to other customers with a similar credit standing.
The aggregate dollar amounts of these loans were $17.5 million and $40.1 million
(excluding $8.5 million in loans to a director who resigned in 1992), at
December 31, 1993 and 1992, respectively. During 1993, advances and repayments
totaled $1.0 million and $8.4 million, respectively. In addition, a $15.2
million loan is no longer reported as a loan to a director, as a result of the
director's resignation in October 1993. Interest income recognized on these
loans amounted to $2.3 million, $3.5 million and $8.1 million during 1993, 1992
and 1991, respectively. At December 31, 1993, none of these loans were on
nonaccrual status. Based on analysis of information presently known to
management about the loans to officers and directors and their affiliates,
management believes all such borrowers have the ability to comply with the
present loan repayment terms.
Loans past due 90 days or more and still accruing interest totaled $28.9
million, $27.0 million and $73.0 million at December 31, 1993, 1992 and 1991,
respectively. Restructured loans totaled $1.0 million, $1.1 million and none at
December 31, 1993, 1992 and 1991, respectively. In-substance foreclosures of
intangible assets totaling $4.7 million and $7.4 million at December 31, 1993
and 1992, respectively, are included in Other Assets in the Consolidated Balance
Sheet.
43
<PAGE> 39
The following is a summary of activity in the allowance for credit losses:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Balance, January 1......................................... $136,095 $125,766 $ 60,083
Provision charged to expense............................... 30,000 114,500 118,000
Charge offs................................................ (82,965) (119,741) (57,810)
Recoveries................................................. 28,844 15,570 5,493
-------- -------- --------
Net credit losses.......................................... (54,121) (104,171) (52,317)
Other(1)................................................... (1,475) -- --
-------- -------- --------
Balance, December 31....................................... $110,499 $136,095 $125,766
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------------
(1) Allowance for credit losses allocated to $73.7 million of ELC loans sold in
April 1993.
The following is a summary of nonperforming loans and related interest
forgone:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1993 1992 1991
-------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Nonaccrual loans........................................... $ 71,056 160,299 $152,555
-------- -------- --------
-------- -------- --------
Contractual interest due................................... $ 12,356 15,841 $ 17,375
-------- -------- --------
Interest recognized........................................ 3,871 3,208 5,073
-------- -------- --------
Net interest forgone....................................... $ 8,485 $ 12,633 $ 12,302
-------- -------- --------
-------- -------- --------
</TABLE>
The following is a summary of forgone interest on nonaccrual loans at
December 31, assuming such loans were on nonaccrual status throughout the year.
The forgone interest based on loans outstanding at year end does not include
interest forgone on loans on nonaccrual status that were either charged off
prior to year end or transferred to ORE prior to year end.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1993 1992 1991
-------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Contractual interest due................................... $ 7,975 $ 16,944 $ 17,980
Interest recognized........................................ 2,632 9,536 8,977
-------- -------- --------
Net interest forgone....................................... $ 5,343 $ 7,408 9,003
-------- -------- --------
-------- -------- --------
</TABLE>
NOTE 5 -- ASSETS HELD FOR ACCELERATED DISPOSITION
In March 1993, the Bank adopted an accelerated asset disposition program
(the Disposition Program) to aggressively dispose of ORE and certain problem
loans with an aggregate book value before the Disposition Program of $119.5
million.
The Bank signed a definitive agreement, as of November 1, 1993, to sell all
six asset pools in the Disposition Program to WHC-THREE Investors, L.P.
("WHC-THREE"), a limited partnership. The sale of the loans contained in the
Disposition Program for $48.3 million closed concurrently with the signing of
the definitive agreement and a gain of $12.8 million was recognized at that time
net of disposition expenses and reserves. This gain is included in other real
estate expense in the Consolidated Statement of Operations. The sale of the
Disposition Program ORE, which is carried at $17.5 million at December 31, 1993,
is expected to close in the first part of 1994 at which time a pretax gain of
approximately $3.5 mil-
44
<PAGE> 40
lion is expected to be recognized. From November 17, 1993 until closing,
WHC-THREE has provided interim mortgages totaling $26.3 million which will be
cancelled in exchange for title to the ORE properties at the closing of the sale
of these properties. These interim mortgages are included in Mortgages Payable
in the Consolidated Balance Sheet.
The Bank provided $56.0 million (75% financing) for this sale at terms
comparable to other real estate loans in its portfolio. The terms of the notes
require annual pay downs and payment of the remaining principal in five years,
in addition to payments when individual real estate assets securing the loans
are sold or refinanced.
NOTE 6 -- NET INVESTMENT IN LEVERAGED LEASES
The following is a summary of the net investment in leveraged leases:
<TABLE>
<CAPTION>
1993 1992
------- -------
DOLLARS IN THOUSANDS
<S> <C> <C>
Net rental receivables................................................. $ 9,100 $ 9,633
Estimated residual values (ranging from 5% to 20% of original asset
cost)................................................................ 6,660 6,660
Deferred expenses...................................................... 175 296
Less: deferred income.................................................. (2,083) (2,224)
------- -------
Investment in leveraged leases......................................... 13,852 14,365
Less: deferred taxes arising from leveraged leases..................... (7,799) (12,713)
------- -------
Net investment in leveraged leases..................................... $ 6,053 $ 1,652
------- -------
------- -------
</TABLE>
The Bank is the lessor of transportation and other equipment under
leveraged lease agreements expiring in various years extending to the year 2006.
The equity investment represents between 27% and 38% of the purchase price; the
remaining amount was furnished by third-party financing in the form of
nonrecourse long-term debt and is secured by the property. For federal income
tax purposes, the Bank, as an equity participant, is entitled to allowable
investment tax credits, deductions for depreciation of asset cost, and related
debt service costs, based on its share of the investment.
On January 14, 1994, the Bank closed the sale of its interest in two
leveraged leases with a carrying value of $3.2 million at December 31, 1993. The
gain on the sale of $1.3 million will be recognized in the first quarter of
1994.
NOTE 7 -- PREMISES AND EQUIPMENT
The following is a summary of data for the major categories of premises and
equipment:
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION AND CARRYING
COST AMORTIZATION VALUE
------- ---------------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
DECEMBER 31, 1993
Premises, including land of $2,490....................... $34,313 $ 20,715 $13,598
Furniture, fixtures and equipment........................ 31,730 24,969 6,761
------- -------- -------
Total.......................................... $66,043 $ 45,684 $20,359
------- -------- -------
------- -------- -------
DECEMBER 31, 1992
Premises, including land of $2,490....................... $33,662 $ 19,003 $14,659
Furniture, fixtures and equipment........................ 31,623 22,763 8,860
------- -------- -------
Total.......................................... $65,285 $ 41,766 $23,519
------- -------- -------
------- -------- -------
</TABLE>
45
<PAGE> 41
Depreciation and amortization expense was $4.5 million in 1993, $4.7
million in 1992 and $4.9 million in 1991. Net rental payments on operating
leases included in net occupancy of premises in the Consolidated Statement of
Operations were $8.9 million in 1993, $8.4 million in 1992 and $8.7 million in
1991. The future net minimum rental commitments were as follows at December 31,
1993:
<TABLE>
<CAPTION>
NET MINIMUM RENTAL COMMITMENTS
-------------------------------
DOLLARS IN THOUSANDS
<S> <C>
1994...................................... $ 6,442
1995...................................... 4,783
1996...................................... 4,608
1997...................................... 3,759
1998...................................... 3,077
1999-2003................................. 9,245
2004-2008................................. 1,512
After 2008................................ 1,379
-------
Total........................... $34,805
-------
-------
</TABLE>
A majority of the leases provide for the payment of taxes, maintenance,
insurance and certain other expenses applicable to the leased premises. Many of
the leases contain extension provisions and escalation clauses. Future net
minimum rental commitments at December 31, 1993 exclude lease commitments that
the Company intends to settle. The estimated costs of settlement have been
accrued as part of the consolidation charge for the branch consolidation plan.
The Bank paid $.9 million, $.5 million and $.5 million during 1993, 1992 and
1991, respectively, for rent and operating expense pass throughs to a real
estate partnership in which the Bank owns a 32% interest, and Mr. Bram
Goldsmith, Chairman and Chief Executive Officer, indirectly owns a 14% interest.
NOTE 8 -- CONSOLIDATION CHARGE
In November 1993, the Bank announced a consolidation plan to improve
efficiency and operational productivity in its branch network. Six branches will
be closed and the number of lending locations reduced. To cover the costs
associated with this action, the Bank recorded a consolidation charge of $12.0
million in the fourth quarter of 1993, comprised of $7.5 million for disposition
of lease commitments, $1.5 million for disposition of fixed assets and $3.0
million for severance costs and other expenses directly related to the
consolidation. At December 31, 1993, the balance in the consolidation reserve
totaled $12.0 million and is included in Other Liabilities in the Consolidated
Balance Sheet.
NOTE 9 -- INCOME TAXES
The Company adopted SFAS No. 109, effective January 1, 1993. Adopting this
Statement did not have a material impact on the financial position or results of
operations of the Company. Under SFAS No. 109, deferred tax assets will be
reduced through a valuation allowance whenever it becomes more likely than not
that all, or some portion, will not be realized. The Company established
valuation reserves of $17.1 million, primarily against deferred state income tax
benefits, upon adoption of SFAS No. 109 as of January 1, 1993. The Company had
previously accounted for deferred taxes under the deferred method required by
APB Opinion 11. Under APB Opinion 11, deferred taxes were recognized for income
and expense items that were reported in different years for financial statement
purposes and income tax purposes using the tax rate
46
<PAGE> 42
applicable for the year of the calculation. Under the deferral method, deferred
taxes were not adjusted for subsequent changes in tax rates.
Income tax (benefit) in the Consolidated Statement of Operations includes
the following amounts:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
1993
Federal.................................................... $(25,250) $ 15,990 $ (9,260)
State...................................................... -- -- --
-------- -------- --------
Total............................................ $(25,250) $ 15,990 $ (9,260)
-------- -------- --------
-------- -------- --------
1992
Federal.................................................... $(28,478) $ (3,972) $(32,450)
State...................................................... -- -- --
-------- -------- --------
Total............................................ $(28,478) $ (3,972) $(32,450)
-------- -------- --------
-------- -------- --------
1991
Federal.................................................... $ 5,968 $(30,700) $(24,732)
State...................................................... 3,025 (680) 2,345
-------- -------- --------
Total............................................ $ 8,993 $(31,380) $(22,387)
-------- -------- --------
-------- -------- --------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1993 are presented below:
<TABLE>
<CAPTION>
1993
--------------------
DOLLARS IN THOUSANDS
<S> <C>
Deferred tax assets:
Allowance for credit losses...................... $ 29,925
Accrued expenses................................. 5,340
State income taxes............................... 15,020
ORE writedowns................................... 898
Other............................................ 485
--------
Total gross deferred tax assets........ 51,668
Valuation allowance.............................. (18,426)
--------
33,242
--------
Deferred tax liabilities:
Leveraged leases................................. 7,799
Installment sales................................ 6,437
Depreciation..................................... 221
Loan fees........................................ 320
Other............................................ 415
--------
Total gross deferred tax liabilities... 15,192
--------
Net deferred tax assets.......................... $ 18,050
--------
--------
</TABLE>
It is more likely than not that the reversing deductible temporary
differences, net of the recorded valuation allowance, at December 31, 1993 will
be realized by the availability of reversing taxable temporary differences,
recovery of taxes paid in applicable carryback years, and projected taxable
income for 1994.
47
<PAGE> 43
The following is a listing of the elements of deferred tax benefits for
1992 and 1991:
<TABLE>
<CAPTION>
1992 1991
------- --------
DOLLARS IN THOUSANDS
<S> <C> <C>
Lower credit loss deduction for tax return purposes..................... $(4,413) $(34,784)
Higher income for tax return purposes from leveraged leases............. (880) (2,219)
Higher state tax deduction for tax return purposes...................... 1,263 1,833
Lower depreciation for tax return purposes.............................. (106) 70
Lower loss from ORE for tax return purposes............................. (1,306) --
Higher income from investments for return purposes...................... (2,136) --
Unrealized net operating losses......................................... 4,754 3,066
All other -- net........................................................ (1,148) 654
------- --------
Total......................................................... $(3,972) $(31,380)
------- --------
------- --------
</TABLE>
Income tax benefit resulted in effective tax rates that differ from the
statutory federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
% OF PRETAX LOSS
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Statutory benefit................................................ (35.0)% (34.0)% (34.0)%
Net state income tax............................................. -- -- 3.4
Tax exempt income................................................ (3.5) (2.7) (8.4)
Realized net operating loss carry back........................... (1.1) -- (9.3)
All other -- net................................................. (.2) 1.7 (1.4)
----- ----- -----
Effective tax benefit............................................ (39.8) (35.0) (49.7)
----- ----- -----
----- ----- -----
</TABLE>
At December 31, 1993, the Company had an income tax refund receivable
(included in other assets) of $24.5 million resulting from carry back of the
1993 federal income tax loss to prior years.
The Company had California net operating loss carry forwards of $40.1
million on a tax-return basis, of which $29.8 million will expire in 1997 and
$10.3 million will expire in 1998.
NOTE 10 -- RETIREMENT PLAN
The Company has a profit sharing retirement plan covering all employees
with at least one year of continuous service. Contributions are made on an
annual basis into a trust fund and are allocated to the participants based on
their salaries and length of service. The contribution requirement is based on a
percentage of annual operating income before security gains or losses. Due to
the Company's losses, no contributions were made for 1993, 1992 or 1991.
Effective January 1, 1992, the Company amended the profit sharing
retirement plan to include an IRS Section 401(k) feature. Employees may
contribute up to 10% of their pretax salary, but not more than the maximum
allowed under IRS regulations. The Bank matches 10% of the first four percent of
covered compensation contributed using forfeitures. For 1993 and 1992, the
Bank's matching contribution was $122,000 and $123,000, respectively.
The Company does not provide for any post-retirement employee benefits
beyond the profit sharing retirement plan.
48
<PAGE> 44
NOTE 11 -- STOCK OPTION PLANS
Under the 1985 Stock Option Plan, 5,614,530 shares of the Corporation's
common stock were reserved for grant of stock options. The Corporation's 1983
Stock Option Plan has expired but options granted thereunder remain outstanding.
The grants will be at prices at least equal to the market price of the
Corporation's stock on the effective date of the grant. In each succeeding year
following the date of grant, 25% of the options become exercisable. After ten
years from grant, all unexercised options will expire.
The Corporation on January 31, 1990 (in connection with a five year
Employment Agreement), granted to Mr. Bram Goldsmith, Chairman of the Board and
Chief Executive Officer, a nonqualified stock option for 400,000 shares of the
Corporation's common stock at the market price at the date of the grant, $21.25,
together with tax offset bonus rights. Such options are exercisable 25% per year
beginning at the end of the first year of such employment contract. In November
1993, the stock option was adjusted to 436,080 shares at an exercise price of
$19.50 per share to reflect the effect of the Corporation's rights offering in
May 1993. The tax offset bonus rights entitle Mr. Goldsmith to receive an amount
in cash equal to 11.1% of the excess of the fair market value of each share on
the date of exercise over the option price per share multiplied by the number of
shares exercised.
The following is a summary of the transactions under the Stock Option Plans
described above:
<TABLE>
<CAPTION>
1993 1992
----------------------- -----------------------
NUMBER(1) NUMBER(1)
OF OF
SHARES OPTION PRICE SHARES OPTION PRICE
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Options outstanding, January 1............ 3,936 $5.50--23.75 4,042 $6.51--23.75
Granted................................... 1,587 6.31-- 6.99 193 5.50--13.13
Exercised................................. (71) 5.50-- 9.13 (25) 6.61--11.90
Cancelled................................. (564) 6.88--23.75 (274) 7.44--11.63
----- ------------ ----- ------------
Options outstanding, December 31.......... 4,888 $5.05--21.79 3,936 $5.50--23.75
----- ------------ ----- ------------
----- ------------ ----- ------------
</TABLE>
- ---------------
(1) In thousands
At December 31, 1993, nonqualified and incentive stock options covering
843,433 and 2,008,848 shares, respectively, of the Corporation's common stock
were exercisable under the Plans. At December 31, 1993, 805,189 shares were
available for future grants.
In November 1993, as provided under the Stock Option Plans, the exercise
prices of options awarded before June 1993 and the number of shares under option
were adjusted by approximately 8% and 9%, respectively, to reflect the effect of
the Corporation's rights offering in May 1993.
The Corporation also grants annually to each director stock options with a
value of $3,000 at an exercise price of $1 per share. Such options fully vest
six months after grant. During 1993 and 1992, 3,267 and 2,580 shares,
respectively, were granted to directors.
NOTE 12 -- AVAILABILITY OF FUNDS FROM SUBSIDIARIES; RESTRICTIONS ON CASH
BALANCES; CAPITAL
Historically, the majority of the funds for the payment of dividends by the
Corporation have been obtained from its subsidiary, City National Bank. Under
federal banking law, dividends declared by national banks in any calendar year
may not, without the approval of the OCC, exceed net profits (as defined), for
that year combined with its retained net profits for the preceding two calendar
years. Federal banking law also prohibits the Corporation from borrowing from
its bank subsidiaries on less than a fully secured basis.
Federal Reserve Board regulations require that the Bank maintain certain
minimum reserve balances. Cash balances maintained to meet reserve requirements
are not available for use by the Bank or the Corporation. During 1993 and 1992,
reserve balances averaged approximately $49.9 million and $60.3 million,
respectively.
49
<PAGE> 45
The minimum Tier 1 and total capital ratios are 4.00% and 8.00%,
respectively. The minimum leverage ratio capital requirement is from 3.00% to
5.00% depending on an institution's composite rating by its primary regulator.
The capital ratios for the Company and the Bank were in excess of all these
minimum capital requirements as of December 31, 1993.
NOTE 13 -- AGREEMENT WITH OCC
On November 18, 1992, the Bank entered into a written agreement with the
Office of the Comptroller of the Currency (OCC). Among the requirements in the
agreement was a requirement that the Bank raise $65 million in new Tier 1
capital so as to maintain Tier 1 capital of at least 10% of risk-weighted assets
and Tier 1 capital of at least 7% of adjusted average total assets. The
Agreement also required the Bank to develop a three-year capital plan and a
three-year business plan and continue to improve its policies and procedures in
the lending and credit administration areas. Each of these requirements was
successfully met prior to December 31, 1993. As a result, on January 21, 1994,
the OCC lifted the Agreement.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is a party to financial
instruments with off-balance sheet risk. These financial instruments include
commitments to extend credit, letters of credit and financial guarantees. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount reflected in the Consolidated Balance Sheet.
Exposure to credit loss in the event of non-performance by the other party
to the financial instrument for commitments to extend credit, letters of credit
and financial guarantees written, is represented by the contractual notional
amount of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
The Company had outstanding loan commitments aggregating $681.4 million and
$863.8 million at December 31, 1993 and 1992, respectively. In addition, the
Company had $94.1 million and $120.6 million outstanding in bankers acceptances
and letters of credit, of which $58.2 million and $80.2 million related to
standby letters of credit at December 31, 1993 and 1992, respectively.
Substantially all of the Company's loan commitments are on a variable rate basis
and are comprised of real estate and commercial loan commitments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since a portion of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's credit worthiness on a case-by-case basis.
The Corporation and its subsidiaries are defendants in various pending
lawsuits claiming substantial amounts. Based upon present knowledge, management
and in-house counsel are of the opinion that the final outcome of such lawsuits
will not have a material adverse effect upon the financial position of the
Company or the future results of its operations.
NOTE 15 -- DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Due from Banks and Federal Funds Sold
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
50
<PAGE> 46
Securities and Trading Account
For securities held as investments or available for sale, fair value equals
quoted market price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities. For
trading account securities, fair values are based on quoted market prices or
dealer quotes.
Loans
For certain homogeneous categories of loans, such as some residential
mortgages, and other consumer loans, fair value is estimated using dealer
quotes, adjusted for differences in loan characteristics. The fair value of
other types of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. In establishing the credit
risk component of the fair value calculations for loans, the Company concluded
that the allowance for credit losses represented a reasonable estimate of the
credit risk component of the fair value of loans at December 31, 1993 and 1992.
Deposits
The fair value of demand and interest checking deposits, savings deposits,
and certain money market accounts is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated using the rates currently offered for deposits of similar remaining
maturities.
Other Short-term Borrowings
For short-term borrowings, the carrying amount is a reasonable estimate of
fair value.
Mortgages Payable
The fair value of mortgages payable approximates the carrying value as the
mortgages mature in the first quarter of 1994.
Commitments to Extend Credit, Standby Letters of Credit, and Financial
Guarantees Written
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the present credit worthiness of the counterparties. The Company
does not make fixed-rate loan commitments. The fair value of guarantees and
letters of credit is based on fees currently charged for similar agreements, or
on the estimated cost to terminate them or otherwise settle the obligations with
the counterparties at the reporting date.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
----------------------- -------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------- ----------- ----------- -----------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks....................... $235,153 $ 235,153 $ 405,923 $ 405,923
Federal funds sold and securities purchased
under resale agreements..................... 265,000 265,000 468,850 468,850
Investment securities......................... 902,481 902,738 413,645 420,367
Securities available for sale................. 2,000 2,000 30,277 30,662
Trading account assets........................ 39,765 39,765 10,258 10,258
Loans, net of allowance for credit losses..... 1,510,057 1,511,398 1,939,107 1,942,545
Financial liabilities:
Deposits...................................... 2,526,767 2,528,895 2,911,276 2,912,549
Federal funds purchased and securities sold
under repurchase agreements................. 202,459 202,459 339,149 339,149
Other short-term borrowings................... 15,000 15,000 15,000 15,000
Mortgages payable............................. 26,319 26,319 -- --
Commitments to extend credit.................. (3,850) (3,850) (1,303) (1,303)
</TABLE>
51
<PAGE> 47
NOTE 16 -- DISCONTINUED OPERATIONS
in December 1992, the Bank entered into an agreement to sell its data
processing business, City National Information Services (CNIS), to Systematics,
Inc. for $12.0 million. The closing of the sale occurred on June 1, 1993. A
pretax gain of $10.8 million, which is net of certain software licensing
payments and programming expenses shared with Systematics, Inc., was recognized
at closing.
The Company has reclassified the prior years' operations of CNIS and
presented them as "Income from discontinued operations" on the Consolidated
Statement of Operations. Included in other assets at December 31, 1993 was a
receivable of $8.8 million for a portion of the purchase price which was paid on
January 4, 1994.
Selected financial data for the discontinued operation are summarized
below:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Revenues...................................................... $ -- $36,547 $39,344
Gain from sale of CNIS........................................ 10,800 -- --
Expenses...................................................... -- 35,303 37,021
------- ------- -------
Income before income taxes.................................... 10,800 1,244 2,323
Income taxes.................................................. 3,672 440 927
------- ------- -------
Income from discontinued operations........................... $ 7,128 $ 804 $ 1,396
------- ------- -------
------- ------- -------
</TABLE>
Billings to the Bank by CNIS amounted to $6.8 million, $7.0 million and
$6.9 million for 1993, 1992 and 1991, respectively, and are included in Data
Processing expenses. Under the Bank's 1991 contract with Systematics, the
minimum annual purchases for data processing services were $5.4 million per
year. This obligation will continue until December 31, 2000 and will increase
annually at 80% of the increase in the Consumer Price Index.
NOTE 17 -- PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
Condensed Balance Sheet
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
DOLLARS IN THOUSANDS
<S> <C> <C>
Assets:
Cash................................................................. $ 57 $ 15
Short-term investments............................................... 5,500 3,289
Investments at equity................................................ -- 399
Other investments.................................................... 12,443 2,000
Other assets......................................................... 373 217
Deferred tax benefits................................................ -- 93
Investment in City National Bank..................................... 279,785 221,941
-------- --------
Total assets................................................. $298,158 $227,954
-------- --------
-------- --------
Liabilities:
Other liabilities.................................................... $ 84 $ 10
Total shareholders' equity........................................... 298,074 227,944
-------- --------
Total liabilities and shareholders' equity................... $298,158 $227,954
-------- --------
-------- --------
</TABLE>
52
<PAGE> 48
Condensed Statement of Operations:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Income:
Dividends from Bank............................................ $ -- $ -- $ 4,950
Interest and dividend income................................... 634 238 417
-------- -------- --------
Total income......................................... 634 238 5,367
Expenses....................................................... 269 255 201
-------- -------- --------
Income before income taxes (benefit) and equity in
undistributed loss of Bank................................... 365 (17) 5,166
Income taxes (benefit)......................................... 115 (40) 2
-------- -------- --------
Income before equity in undistributed loss of Bank............. 250 23 5,164
Equity in loss of Bank......................................... (7,156) (59,371) (26,384)
-------- -------- --------
Net loss....................................................... $ (6,906) $(59,348) $(21,220)
-------- -------- --------
-------- -------- --------
</TABLE>
Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Operating Activities:
Net loss....................................................... $ (6,906) $(59,348) $(21,220)
Adjustments to net loss:
Equity in undistributed loss of Bank......................... 7,156 59,371 26,384
Decrease in dividend receivable from Bank.................... -- -- 5,400
Other, net................................................... 11 (82) 98
-------- -------- --------
Net cash provided by (used in) operating activities....... 261 (59) 10,662
-------- -------- --------
Investing Activities:
Capital contributed to Bank.................................... (65,000) -- --
Net decrease (increase) in short-term investments.............. (2,211) (2,379) 2,886
Sale (purchase) of other investments........................... (10,443) 2,200 1,000
Other, net..................................................... 399 -- --
-------- -------- --------
Net cash provided by (used in) investing activities.......... (77,255) (179) 3,886
-------- -------- --------
Financing Activities:
Cash dividends paid............................................ -- -- (15,434)
Sale of common stock (net of expenses)......................... 76,501 -- --
Stock options exercised........................................ 488 190 725
Other, net..................................................... 47 37 165
-------- -------- --------
Net cash provided by (used in) financing activities.......... 77,036 227 (14,544)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........... 42 (11) 4
Cash and cash equivalents at beginning of year................. 15 26 22
-------- -------- --------
Cash and cash equivalents at end of year....................... $ 57 $ 15 $ 26
-------- -------- --------
-------- -------- --------
</TABLE>
NOTE 18 -- SUBSEQUENT EVENT (UNAUDITED)
On January 17, 1994 and during the days thereafter, Los Angeles, California
was struck by a series of strong earthquakes. The Bank is currently accumulating
data on the collateral securing its loans in the effected areas. Based on
information currently available, the Bank does not believe earthquake related
losses, including those related to its facilities, will be material to the
Bank's financial condition.
53
<PAGE> 1
EXHIBIT 13.1
Report of Price Waterhouse,
dated January 13, 1993
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
City National Corporation
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of changes in shareholders' equity and of cash flows
as of and for each of the two years in the period ended December 31, 1992
(appearing on pages 36 through 39 of the City National Corporation 1993 Annual
Report to Shareholders which has been incorporated by reference in this Form
10-K Annual Report) present fairly, in all material respects, the financial
position, results of operations and cash flows of City National Corporation and
its subsidiaries as of and for each of the two years in the period ended
December 31, 1992, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of City National Corporation for any period subsequent to December
31, 1992.
PRICE WATERHOUSE
Los Angeles, California
January 13, 1993
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
<PAGE> 2
Parent and Subsidiaries
CITY NATIONAL CORPORATION
CITY NATIONAL BANK
CITY NATIONAL CITINATIONAL CITY NATIONAL
FINANCIAL SERVICES, BANCORPORATION MORTGAGE
INC. COMPANY
[Graphic chart above showing City National Bank as wholly-owned subsidiary of
City National Corporation, and City National Financial Services, Inc.,
Citinational Bancorporation and City National Mortgage Company as wholly-owned
subsidiaries of City National Bank]
City National Corporation is a corporation organized under the laws of the
State of Delaware. City National Bank is a national banking association
organized under the laws of the United States of America. Each of the other
above-named subsidiaries is a corporation organized under the laws of the State
of California. Registrant owns 100% of the outstanding capital stock of City
National Bank ("Bank"). The Bank owns 100% of the outstanding common stock of
Citinational Bancorporation, City National Mortgage Company and City National
Financial Services. The consolidated financial statements in the Registrant's
Annual Report to Shareholders include Registrant, Bank, City National Financial
Services, Inc., Citinational Bancorporation and City National Mortgage Company.
<PAGE> 1
EXHIBIT 23.1
Consent of KPMG Peat Marwick
<PAGE> 2
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
City National Corporation:
We consent to incorporation by reference in the registration statements (Nos.
33-32543, 33-38029 and 33-60668) on Form S-8 of City National Corporation of
our report dated January 21, 1994, relating to the consolidated balance sheet
of City National Corporation and subsidiaries (the Company) as of December 31,
1993, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the year then ended, which report
appears in the December 31, 1993 Annual Report on Form 10-K of City National
Corporation.
Our report on the consolidated financial statements of the Company dated
January 21, 1994, contains an explanatory paragraph which states that, as
discussed in Notes 1 and 3, the Company changed its method of accounting for
investments as of December 31, 1993, to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." As
discussed in Notes 1 and 9, the Company changed its method of accounting for
income taxes as of January 1, 1993, to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
Los Angeles, California KPMG Peat Marwick
March 30, 1994
<PAGE> 1
EXHIBIT 23.2
Consent of Price Waterhouse
<PAGE> 2
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-8 (Nos. 33- 32543,
33-38029 and 33-60668) of City National Corporation of our report dated January
13, 1993 appearing as Exhibit 13.1 to this Annual Report on Form 10-K.
PRICE WATERHOUSE
Los Angeles, California
March 30, 1994
